Question 1

In a binding situation

Accepted Answer

A)  planned investment increases when the price level decreases. 
B)  output increases when the price level decreases. 
C)  planned investment and output both increase when the price level decreases. 
D)  neither planned investment nor output change when the price level decreases. 
A)  planned investment increases when the price level decreases. 
B)  output increases when the price level decreases. 
C)  planned investment and output both increase when the price level decreases. 
D)  neither planned investment nor output change when the price level decreases. D

Question 2

When analyzing the effects of ________, what primarily matters is the shape of the AD curve.

Accepted Answer

A)  government spending 
B)  net taxes 
C)  the Z factors 
D)  cost shocks 
A)  government spending 
B)  net taxes 
C)  the Z factors 
D)  cost shocks D

Question 3

When the economy is on the flat part of the AS curve, there is very little crowding out of planned investment.

Accepted Answer

A) True 
 B)False  True

Question 4

A(n) ________ in inflationary expectations that causes firms to decrease their prices shifts the aggregate supply curve to the ________.

Accepted Answer

A)  increase; right 
B)  increase; left 
C)  decrease; right 
D)  decrease; left 
A)  increase; right 
B)  increase; left 
C)  decrease; right 
D)  decrease; left

Question 5

Refer to the information provided in Figure 27.3 below to answer the question(s) that follow.   Figure 27.3
-Refer to Figure 27.3. Assume the economy is at Point A. Lower oil prices shift the aggregate supply curve to AS0. If the government decides to counter the effects of lower oil prices by decreasing government spending, then the price level will be ________ than P0 and output will be ________ than Y0.

Accepted Answer

A)  greater; greater 
B)  greater; less 
C)  less; less 
D)  less; greater 
A)  greater; greater 
B)  greater; less 
C)  less; less 
D)  less; greater

Question 6

Refer to the information provided in Figure 27.1 below to answer the question(s) that follow.   Figure 27.1
-Refer to Figure 27.1. Suppose the economy is at Point A. An increase in taxes can cause a movement to Point

Accepted Answer

A)  E. 
B)  B. 
C)  C. 
D)  D. 
A)  E. 
B)  B. 
C)  C. 
D)  D.

Question 7

In a binding situation,an increase in net taxes

Accepted Answer

A)  shifts the AD curve to the right. 
B)  shifts the AD curve to the left. 
C)  does not shift the AD curve. 
D)  causes the AD curve to become horizontal. 
A)  shifts the AD curve to the right. 
B)  shifts the AD curve to the left. 
C)  does not shift the AD curve. 
D)  causes the AD curve to become horizontal.

Question 8

Demand-pull inflation can be the result of

Accepted Answer

A)  an increase in government spending. 
B)  an increase in net taxes. 
C)  an increase in the Z factors. 
D)  all of the above. 
A)  an increase in government spending. 
B)  an increase in net taxes. 
C)  an increase in the Z factors. 
D)  all of the above.

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

Refer to the information provided in Figure 27.3 below to answer the question(s) that follow.   Figure 27.3
-Refer to Figure 27.3. Assume the economy is currently at Point A on aggregate supply curve AS1. An increase in inflationary expectations that causes firms to increase their prices

Accepted Answer

A)  shifts the aggregate supply curve to AS0. 
B)  shifts the aggregate supply curve to AS2. 
C)  moves the economy to Point C on aggregate supply curve AS1. 
D)  moves the economy to Point B on aggregate supply curve AS1. 
A)  shifts the aggregate supply curve to AS0. 
B)  shifts the aggregate supply curve to AS2. 
C)  moves the economy to Point C on aggregate supply curve AS1. 
D)  moves the economy to Point B on aggregate supply curve AS1.

Question 11

If a decrease in the Z factors resulted in a very large change in the price level and a very small change in aggregate output

Accepted Answer

A)  then in the U.S. economy investment demand must not be sensitive to the interest rate. 
B)  then the U.S. economy must have been on the very steep part of its short-run aggregate supply curve. 
C)  then the U.S. economy must have been on the very flat part of its short-run aggregate supply curve. 
D)  then the U.S. aggregate demand curve must be very steep. 
A)  then in the U.S. economy investment demand must not be sensitive to the interest rate. 
B)  then the U.S. economy must have been on the very steep part of its short-run aggregate supply curve. 
C)  then the U.S. economy must have been on the very flat part of its short-run aggregate supply curve. 
D)  then the U.S. aggregate demand curve must be very steep.

Question 12

An increase in the interest rate represents an easing of monetary policy.

Accepted Answer

A) True 
 B)False

Question 13

In a binding situation

Accepted Answer

A)  only changes in the price level change the interest rate. 
B)  only changes in the Z factors change the interest rate. 
C)  changes in neither the price level nor in the Z factors change the interest rate. 
D)  the interest rate is always negative. 
A)  only changes in the price level change the interest rate. 
B)  only changes in the Z factors change the interest rate. 
C)  changes in neither the price level nor in the Z factors change the interest rate. 
D)  the interest rate is always negative.

Question 14

If the economy is operating at capacity, an increase in government spending will ________ investment.

Accepted Answer

A)  minimally crowd out 
B)  partially crowd out 
C)  completely crowd out 
D)  have no crowding-out effect on 
A)  minimally crowd out 
B)  partially crowd out 
C)  completely crowd out 
D)  have no crowding-out effect on

Question 15

Refer to the information provided in Figure 27.2 below to answer the question(s) that follow.   Figure 27.2
-Refer to Figure 27.2. Firms respond to a decrease in net taxes by mostly increasing output when the aggregate demand curve shifts from

Accepted Answer

A)  AD1 to AD2. 
B)  AD3 to AD4. 
C)  AD5 to AD6. 
D)  AD6 to AD1. 
A)  AD1 to AD2. 
B)  AD3 to AD4. 
C)  AD5 to AD6. 
D)  AD6 to AD1.

Question 16

When analyzing the effects of government spending, net taxes, and the Z factors, what primarily matters is the shape of

Accepted Answer

A)  the AD curve. 
B)  the AS curve. 
C)  both the AD curve and the AS curve. 
D)  neither the AD curve nor the AS curve. 
A)  the AD curve. 
B)  the AS curve. 
C)  both the AD curve and the AS curve. 
D)  neither the AD curve nor the AS curve.

Question 17

A sudden increase in the price of oil causes a ________ inflation and ________ output.

Accepted Answer

A)  demand-pull; lower 
B)  cost-push; higher 
C)  demand-pull; higher 
D)  cost-push; lower 
A)  demand-pull; lower 
B)  cost-push; higher 
C)  demand-pull; higher 
D)  cost-push; lower

Question 18

An increase in net taxation increases aggregate supply.

Accepted Answer

A) True 
 B)False

Question 19

Supply-side inflation is caused by increases in aggregate supply.

Accepted Answer

A) True 
 B)False

Question 20

Refer to the information provided in Figure 27.4 below to answer the question(s) that follow.   Figure 27.4
-Refer to Figure 27.4. Higher price levels coupled with lower output are the result of

Accepted Answer

A)  deflation. 
B)  stagflation. 
C)  economic growth. 
D)  deflationary growth. 
A)  deflation. 
B)  stagflation. 
C)  economic growth. 
D)  deflationary growth.

Exam 27: Policy Effects and Cost Shocks in the Asad Model

In a binding situation

When analyzing the effects of ________, what primarily matters is the shape of the AD curve.

When the economy is on the flat part of the AS curve, there is very little crowding out of planned investment.

A(n) ________ in inflationary expectations that causes firms to decrease their prices shifts the aggregate supply curve to the ________.

Refer to the information provided in Figure 27.1 below to answer the question(s) that follow. Figure 27.1 -Refer to Figure 27.1. Suppose the economy is at Point A. An increase in taxes can cause a movement to Point

In a binding situation,an increase in net taxes

Demand-pull inflation can be the result of

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.

Refer to the information provided in Figure 27.3 below to answer the question(s) that follow. Figure 27.3 -Refer to Figure 27.3. Assume the economy is currently at Point A on aggregate supply curve AS1. An increase in inflationary expectations that causes firms to increase their prices

If a decrease in the Z factors resulted in a very large change in the price level and a very small change in aggregate output

An increase in the interest rate represents an easing of monetary policy.

In a binding situation

If the economy is operating at capacity, an increase in government spending will ________ investment.

Refer to the information provided in Figure 27.2 below to answer the question(s) that follow. Figure 27.2 -Refer to Figure 27.2. Firms respond to a decrease in net taxes by mostly increasing output when the aggregate demand curve shifts from

When analyzing the effects of government spending, net taxes, and the Z factors, what primarily matters is the shape of

A sudden increase in the price of oil causes a ________ inflation and ________ output.

An increase in net taxation increases aggregate supply.

Supply-side inflation is caused by increases in aggregate supply.

Refer to the information provided in Figure 27.4 below to answer the question(s) that follow. Figure 27.4 -Refer to Figure 27.4. Higher price levels coupled with lower output are the result of

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: The Labor and Land Markets

Input Demand: The Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

A(n) in inflationary expectations that causes firms to decrease their prices shifts the aggregate supply curve to the .

Refer to the information provided in Figure 27.3 below to answer the question(s) that follow. Figure 27.3 -Refer to Figure 27.3. Assume the economy is currently at Point A on aggregate supply curve AS₁. An increase in inflationary expectations that causes firms to increase their prices

A sudden increase in the price of oil causes a inflation and output.