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

A decrease in inflationary expectations that causes firms to decrease their prices shifts the

If the long-run aggregate supply curve is vertical, fiscal policy will have no effect on the price level.

With a cost shock, a large decrease in output relative to the increase in the price level would occur if the ________ curve is relatively ________.

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. A(n) ________ can cause a movement to Point D.

In a binding situation,the Fed has no way to raise or lower the interest rate.

Other things equal, a decrease in the Z factors will ________ the equilibrium price level and ________ equilibrium output.

A decrease in net taxes will result in consumption crowding out planned investment when the economy is on the steep part of the AS curve.

When analyzing the effects of cost shocks, what primarily matters is the shape of

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. In response to a decrease in net taxes, the Fed would increase the interest rate by the least amount when the aggregate demand curve shifts from

During the recession of 1980-1982, the Fed raised the interest rate to fight inflation.

An increase in aggregate supply causes stagflation.

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. The tax multiplier is smallest (in absolute value) when the aggregate demand curve shifts from

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. Stagflation would not be caused by a

If the long-run aggregate supply curve is vertical, the ________ a change in net taxes on aggregate output in the long run is zero.

The Fed will raise the interest rate by the greatest amount when the economy is on the ________ part of the AS curve and there is ________.

An intended goal of contractionary fiscal policy and a tightening of monetary policy is

In a binding situation, equilibrium is where the IS curve crosses the interest rate at zero.

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. Cost-push inflation occurs if

In a binding situation, a positive cost shock will cause ________ in output and ________ in the price level.

An increase in inflationary expectations that causes firms to increase their prices shifts the