Econ CH 13

Which of these shifts the aggregate demand curve to the right

Lower interest rates

Which of these policies affects the economy through intended changes in the money supply

Monetary policy

The aggregate demand curve shows the relationship between

The price level and the quantity of real GDP demanded

The 1974-1975 recession was a result of a

supply shock that caused a leftward shift of the short-run aggregate supply curve

The 2007-2009 recession was a clear example of the impact

that a decrease in aggregate demand can have on the economy

In the long-run, the level of output is

the full-employment level of output

If the price level​ increases, then

there will be a movement up along a stationary aggregate demand curve

The wealth effect refers to the fact that

when the price level falls, the real value of household wealth rises, and so will consumption

Indicate which of the following would cause a shift in the aggregate demand curve from point A to point C

1. Increased consumer optimism 2. Decrease in the US exchange rate relative to other currencies 3. Lower taxes 4. Lower interest rates

According to the dynamic​ AD-AS model, what is the most common cause of​ inflation

A and B only.

Which of these factors will cause the aggregate demand curve to shift

A change in the expectations of households and firms

Which of these factors will shift the short-run aggregate supply to the left

A decrease in the size of the labor force

Suppose that​ initially, the economy is in​ long-run macroeconomic equilibrium at point A. If there is increased pessimism about the future of the​ economy, the AD curve will shift from ____________________ The new​ short-run macroeconomic equilibrium occurs at ________________ ​Long-run adjustment will shift the SRAS curve from _____________________ as workers adjust to​ lower-than-expected prices. The new​ long-run macroeconomic equilibrium occurs at ___________________

AD0 to AD1. Point B SRAS0 to SRAS1 Point C

Consider the figure to the right. Why does the​ short-run aggregate supply curve​ (SRAS) slope​ upward

All of the above

Which of the following are views new classical macroeconomists​ hold

All of the above

Which of the following factors will cause the​ long-run aggregate supply curve to shift to the​ right

All of the above

Why does the failure of workers and firms to accurately predict the price level result in an​ upward-sloping aggregate supply​ curve

All of the above

How can government policies shift the aggregate demand curve to the right

By increasing government purchases

How does a decrease in the price level affect the quantity of real GDP supplied in the long​ run

Changes in the price level do not affect the level of GDP in the long run

The Austrian school is best known for arguing the superiority of government economic planning over the market system

False

The real business cycle model focuses on changes in the quantity of money to explain fluctuations in real GDP.

False

Which of the following statements is​ true

In the long​ run, changes in the price level do not affect the level of real GDP

According to the graph, an increase in government spending, all else equal, will shift the AD curve from the initial AD curve to the curve labeled

Increased AD

A change in the price level causes a ___________ the​ short-run aggregate supply​ (SRAS) curve. In the​ figure, this is shown by moving from point _________ A change in any other factor causes a __________ the SRAS curve. In the​ figure, this is shown by moving from point __________

Movement along, A to B Shift in, B to C

Why does the​ short-run aggregate supply curve slope​ upward

Profits rise when the prices of the goods and services firms sell rise more rapidly than the prices they pay for inputs

An increase in the labor force or capital stock is illustrated as a __________________ An increase in the expected price of an important natural resource is indicated by ___________________ An improvement in technology is shown as a ____________________ An increase in the expected future price level causes ____________

Shift from A to B A shift from B to A Shift from A to B a shift from B to A

Moving from point A to point C is referred to as a ______ the AD curve

Shift in

Which of these factors will cause the long-run aggregate supply curve to shift to the right

The accumulation of more machinery and equipment

Which of these factors contributed to the recession of 2007-2009

The end of the housing bubble

If firms reduce investment spending and the economy enters a recession, which of these contributes to the adjustment that causes the economy to return to its long-run equilibrium

The eventual agreement by workers to accept lower wages

Which of these best represents the impact of a decrease in government spending through the multiplier process

The shift from c to b, and then to a

Consider the​ downward-sloping aggregate demand​ (AD) curve to the right. Which of the following results in a movement from point A to point B​ (a movement up along the AD​ curve) or from point A to point C​ (a movement down along the AD​ curve)?

Wealth effect Interest rate effect

Which of the following factors does not cause the aggregate demand curve to​ shift

a change in the price level

Fiscal stimulus can take the form of increased government spending or _______ in taxes

a decrease

The​ international-trade effect refers to the fact that an increase in the price level will result in

a decrease in exports and a increase in imports

What is the effect of an increase in the price level on the​ short-run aggregate supply​ curve

a movement up along a stationary curve

Which of the following causes the​ short-run aggregate supply curve to shift to the​ right

a positive technological change

If the economy adjusts through the automatic​ mechanism, then a decline in aggregate demand causes

a recession in the short run and a decline in the price level in the long run

An unexpected change in the price of oil would be called __________ by economists.

a supply shock

Which of the following is usually the cause of​ stagflation

a supply shock as a result of an unexpected increase in the price of a natural resource

Which of the following causes the​ short-run aggregate supply curve to shift to the​ left

an increase in the expected price of an important natural resource

If the economy is initially at​ full-employment equilibrium, then an increase in aggregate demand causes​ _____________ in real GDP in the short run and​ ___________ in the price level in the long run

an​ increase; an increase

According to the graph, in this economy there will be a tendency for

both wages and prices to rise over time

How can government policies shift the aggregate demand curve to the​ right

by increasing government purchases

How does the dynamic model of aggregate supply and aggregate demand explain​ inflation

by showing that if total spending in the economy grows faster than total​ production, prices will rise

Stagflation is a

combination of inflation and recession

In the short run, a supply shock as a result of an unexpected decrease in oil prices will

decrease the price level but increase real GDP

Which of these is an example of fiscal​ stimulus

governments building transportation infrastructure

A higher domestic price level will result in

higher imports

The interest rate effect refers to the fact that a higher price level results in

higher interest rates and lower investment.

An increase in interest rates will cause a _________ the aggregate demand curve

leftward shift of

An increase in state income taxes will cause a ______ the aggregate demand curve

leftward shift of

Milton Friedman argued that the Federal Reserve should adopt a​ ________ to reduce fluctuations in real​ GDP, employment, and inflation

monetary growth rule

In the diagram to the​ right, moving from point A to point B is called a _______ the AD curve

movement along

An increase in the price level will cause a _______ the aggregate demand curve

movement up along

The economy is in long-run equilibrium when the short-run aggregate supply and the aggregate demand curve intersect at a point

on the long-run aggregate supply curve

A faster income growth in other countries will cause a_________ the U.S. aggregate demand curve

rightward shift of

An increase in government purchases will cause a ______ the aggregate demand curve

rightward shift of

The long-run aggregate supply curve

shifts to the right as technological change occurs

The aggregate demand and aggregate supply model explains

short-run fluctuations in real GDP and the price level

According to the graph, the situation of this economy after the supply shock can be called

stagflation

The fact that wages and prices may not rapidly adjust to changes in demand or supply is called

sticky wages and prices