Macroeconomics

A weather related incident that lowers crop yields is more likely to cause a cost shock in:

A. India. B. the United States. C. Japan. A. India

Which type of fiscal policy would cause the move of the AD curve represented in this graph?

Higher government spending

A cost shock will only occur if the product is used:

as an input into numerous other products.

When economic growth occurs, a nation's:

short-run and long-run AS curves shift rightward.

According to the graph, an increase in the money supply is best described by:

the shift in the AD curve

Since 1991 there have been economic recessions.

two

Expansionary fiscal policy works well when the economy is operating:

well below the full employment level of output.

is driven by rising input prices.

Cost-push inflation

A(n) in net taxes has the same qualitative impact as a(n) in government spending.

Decrease; increase

Which of these actions is the government likely to take if the economy is operating above the potential GDP?

Increase taxes

Historically the Federal Reserve interest rates during recessions and interest rates during expansions.

Lowers; raises

Some economists believe the wages can be "stuck" and not adjust downward during recessions. These economists advocate:

active fiscal stimulus to move the economy back to full employment.

When the Fed would like to push interest rates into negative territory but is unable to do so it is called a:

binding situation.

If the Fed is zero interest rate bound it means the Fed:

cannot push interest rates below zero.

Stagflation is a:

combination of inflation and recession

results from consumers bidding higher prices for goods and services while business are forced to pay higher wages to entice people to work.

demand-pull inflation

The American Recovery and Reinvestment Act of 2009 is a clear example of:

expansionary fiscal policy.

Government policies that increase aggregate demand are called __________.

expansionary policies

The Fed's practice of increasing or decreasing interest rates to keep inflation in some range is known as:

inflation targeting.

Looking at recent Fed policy it appears the Fed has:

not engaged in inflation targeting.

John Maynard Keynes referred to animal spirits which are:

optimistic views of investors that propel economic growth.

In the horizontal range of the short-run aggregate supply curve, if aggregate demand shifts to the left, then:

real GDP falls.

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

stagflation

When output is falling simultaneously with rising prices it is known as:

stagflation

Keynes maintained that the economy could remain long-term at levels of output below the full-employment level of output due to:

sticky wages and prices.