ECO 252- Quiz 7 (Chapter 12) True/False
A decrease in net taxation increases aggregate demand.
True
A decrease in the Z factors represents an easing of monetary policy.
True
An increase in future price expectations may act like a cost shock, shifting the aggregate supply curve to the left.
True
Decreases in net taxes, decreases in the Z factors, and increases in government spending are expansionary policies.
True
If firms increase their prices because of a change in inflationary expectations, the AS curve will shift to the left.
True
If the AD curve is relatively flat, the Fed is willing to accept large changes in output to keep the price level stable.
True
If the aggregate supply curve is vertical in the long-run, then neither monetary nor fiscal policy will affect aggregate output in the long-run.
True
If the economy is on the steep part of its aggregate supply curve, expansionary policy will mostly increase the price level.
True
If the economy is on the steep part of the aggregate supply curve, the output multiplier is close to zero.
True
If wages adjust fully to price increases, fiscal policy will have no effect on output in the long run.
True
If wages quickly adjust to price changes, the aggregate supply curve quickly becomes vertical.
True
In a binding situation, the AD curve is vertical.
True
In a binding situation, the interest rate is always zero.
True
In a binding situation, there is no crowding out of planned investment when government spending increases or when taxes decrease.
True
When the economy is on the flat part of the AS curve, there is very little crowding out of planned investment.
True
Zero interest rate bound means the interest rate cannot go below zero.
True
A decrease in the Z factors shifts the aggregate demand curve to the left.
False
A demand-side shock, such as a sharp decrease in consumer confidence, leads to inflation.
False
An increase in net taxation increases aggregate supply.
False
Decreases in net taxes, increases in the Z factors, and increases in government spending are contractionary policies.
False
Demand-pull inflation and cost-push inflation both lead to a higher price level and lower output.
False
During the recession of 1980-1982, output, the inflation rate, and the interest rate all increased.
False
Expansionary economic policies are things the government can do to decrease aggregate demand or aggregate supply.
False
Expectations of higher future prices cause firms to lower prices today to sell their product before prices rise.
False
If equilibria below potential output are self-correcting, the economy will spend a great deal of time on the horizontal part of the aggregate supply curve.
False
If the economy is on the flat part of the aggregate supply curve, contractionary fiscal policy works well to decrease the price level with little decrease output.
False
If the long-run aggregate supply curve is vertical, fiscal policy will have no effect on the price level.
False
In a binding situation, a positive cost shock decreases output.
False
In a binding situation, changes in government spending do not shift the AD curve.
False
In a binding situation, changes in net taxes do not shift the AD curve.
False
In a binding situation, the Fed has no way to raise or lower the interest rate.
False
Rising output coupled with falling prices is called stagflation.
False
The views of the new classical economists are consistent with a vertical aggregate supply curve in both the short run and the long run.
False
There is evidence that the Fed, under chairman Ben Bernanke, engaged in inflation targeting.
False
When the economy is near capacity, the Fed would lower the interest rate in response to an increase in government spending.
False
