Macro chapter 20

In the long-run, when the government does nothing, the output in the economy will be __________billion and the price level will be ________

1.$110billion 2.$110billion

In the long-run, when the government pursues accommodative policy, the output in the economy will be_______ billion and the price level will be_________

1.90 Billion 2.100 Billion

During the transition from the short run to the long run, price-level expectations will___________Correct and _______________ Correct curve will shift to ___________Correct .

1.Adjust Upward 2. Short-Run Aggregate supply 3. Left

During the transition from the short run to the long run, price-level expectations will________ and the_________ curve will shift to the__________ .

1.Adjust downward 2.short-run aggregate supply 3.right

Fill in the table by indicating the changes in the determinants necessary to decrease short-run aggregate supply. 1.Input Prices 2.Tax rates 3.Burdensome regulations

1.Increase 2.Increase 3.Increase

In the long run, as a result of the increase in government spending, the price level___________Correct , the quantity of output___________ Correct the natural level of output, and the unemployment rate_______Correct the natural rate of unemployment.

1.Increases 2.Return to 3.Return to

Fill in the table by indicating the changes in the determinants necessary to increase short-run aggregate supply. 1.Inflation expectations 2.Human Capital 3.Technology

1.Lower 2.Increase 3.Increase

In the short run, the increase in government spending on infrastructure causes the price level ________ above Correct the price level people expected and the quantity of output ________ above Correct the natural level of output. The increase in government spending will cause the unemployment rate _______below Correct the natural rate of unemployment in the short run.

1.Rise Above 2.Rise Above 3.Fall Below

Which of the following probably occurred as the U.S. economy experienced increasing real GDP in 1954? Check all that apply.

1.The unemployment rate declined 2.retail sales increased 3. consumer spending increased

In the long run, as a result of the sharp increase in saving, the price level______ , the quantity of output_________Correct the natural level of output, and the unemployment rate__________Correct the natural rate of unemployment.

1.decrease 2.return to 3.return to

In the short run, the decrease in consumption spending associated with the increase in saving causes the price level to________ the price level people expected and the quantity of output to____________ the natural level of output. The sharp increase in saving will cause the unemployment rate to________ the natural rate of unemployment in the short run.

1.fall below 2.fall below 3.rise above

The aggregate________curve shows the quantity of output that households, firms, the government, and foreign customers want to buy at each price level.

Demand

A natural disaster destroys a significant amount of the economy's production facilities.

Direction of LRAS curve Left

For environmental and safety reasons, the government requires that the country's nuclear power plants be permanently shut down.

Direction of LRAS curve Left

Many workers leave to pursue more lucrative careers in foreign economies.

Direction of LRAS curve Left

This economy's primary source of foreign oil decides to cease exports for political reasons.

Direction of LRAS curve Left

An investment tax credit increases the rate at which firms acquire machinery and equipment.

Direction of LRAS curve Right

The government allows more immigration of working-age adults who find work.

Direction of LRAS curve Right

Suppose the government passes a law that reduces unemployment benefits in a way that causes unemployed workers to seek out new jobs more quickly. The policy will cause the natural rate of unemployment to_____,which will:

Fall Shift the long-run aggregate supply curve to the right

or example, an increase in the money supply, a _______variable, will cause the price level

Nominal

a _________variable, to increase but will have no long-run effect on the quantity of goods and services the economy can produce a ________ variable

Nominal real

The vertical axis of the aggregate demand and aggregate supply model measures the overall

Price Level

Additionally, as the price level rises, the impact on the domestic interest rate will cause the real value of the dollar to______in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore____________ and the number of foreign products purchased by domestic consumers and firms (imports) will_________Net exports will therefore________, causing the quantity of domestic output demanded to_____________.This phenomenon is known as the_________ effect

RISE FALL RISE. FALL FALL Exchange Rate

As the price level rises, the cost of borrowing money will ______, causing the quantity of output demanded to__________.This phenomenon is known as the ___________ Effect

Rise Fall interest rate

Suppose the government passes a law that significantly increases the minimum wage. The policy will cause the natural rate of unemployment to _____, which will:

Rise Sift the long-run aggregate supply curve to the left

Notice that real GDP tends upward over time but, experiences ups and downs in the short run, these These short-run fluctuations in real GDP are often referred to as

The business cycle

Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply.

The inflation rate The price Level

True or False: Short-term fluctuations in real GDP are irregular and unpredictable.

True

he short-run economic outcome resulting from the increase in production costs is known as _______

stagflation

The separation of real variables and nominal variables is known as

the classical dichotomy