exam ch. 32

The Solow growth rate is the economy's:

potential growth rate

Menu Costs are the costs associated with changing:

prices

The "Solow" growth rate is the rate of economic growth that occurs when:

prices and wages are flexible.

According to the quantity theory of money, an increase in money supply causes an increase in:

prices.

A negative real shock causes:

a higher inflation rate and a lower real growth rate.

The cost a business faces when changing prices in response to an economic shock is called:

a menu cost

The aggregate demand curve shows the relationship between real GDP growth and the:

actual inflation rate.

All the combinations of inflation and real growth consistent with a specific rate of spending growth is called the:

aggregate demand curve.

The main reason(s) for the slope of SRAS is

both sticky prices and sticky wages

The Solow growth rate is the rate of economic growth given existing:

capital, labor, and technology.

The economy suffers an adverse (or negative) supply shock. As a result, in the short run Real GDP will __________ and the price level will __________.

fall; rise

Politicians and especially the general public worry about recessions because of:

high unemployment

Which of the following causes the AD curve to shift left?

increased import growth

The short-run aggregate supply curve shows the _____ relationship between the inflation rate and real growth during the period when prices and wages are _____.

positive; sticky

The "long run" is a period of time

long enough that prices and wages are fully flexible.

long enough that prices and wages are fully flexible.

long enough that prices and wages are fully flexible.

An increase in inflation will cause the long-run aggregate supply curve to:

not shift at all.

The expectation of higher future income is a

rightward shifter of the AD curve.

An increase in spending growth will cause the aggregate demand curve to:

shift outward

Sticky wages and prices are incorporated in the AD-AS model by the:

short run aggregate supply curve

A lower income tax rate __________ consumption, causing a __________ the AD curve.

stimulates; rightward shift of

The _________________________ shows the economy's potential growth rate as determined by the real factors of production and the technology or new ideas that allow these factors to become more productive over time

the long run aggregate supply curve

An increase in the rate of expected inflation causes:

the short-run aggregate supply curve to shift up.

The short-run aggregate supply curve is:

upward sloping.

In the AD-AS model, money is not neutral in the short run if:

wages and prices are sticky.