Macro Final (CH 22 review)
[Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.] Figure 35-9. The shift of the aggregate-supply curve from AS1 to AS2:
represents an adverse shock to aggregate supply.
A favorable supply shock causes output to
rise. To counter this a central bank would decrease the money supply.
When they are confronted with an adverse shock to aggregate supply, policymakers face a difficult choice in that:
All of the above are correct.
Which of the following results in higher inflation and higher unemployment in the short-run?
an adverse supply shock such as an increase in the price of oil
[Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.] Figure 35-9. Which of the following events could explain the shift of the aggregate-supply curve from AS1 to AS2?
an increase in the world price of oil
[Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.] Refer to Figure 35-9. A significant increase in the world price of oil could explain:
both the shift of the aggregate-supply curve from AS1 to AS2 and the shift of the Phillips curve from PC1 to PC2.
A favorable supply shock causes the price level to
fall. To counter this a central bank would increase the money supply.
A favorable supply shock shifts the short-run Phillips curve
left and inflation falls
The sacrifice ratio is the
number of percentage points annual output falls for each percentage point reduction in inflation
[Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.] Refer to Figure 35-9. A movement of the economy from point A to point B, and at the same time a movement from point C to point D, would be described as:
stagflation
Which of the following is not associated with an adverse supply shock?
the short-run Phillips curve shifts left
[Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves.] Figure 35-9. What is measured along the horizontal axis of the right-hand graph?
the unemployment rate
