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

When the ________, the Fed is willing to accept large changes in output to keep the price level stable.

________ corresponds to lower output and ________ corresponds to higher output.

The aggregate demand curve would shift to the left if

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 government purchases can cause a movement to Point

Inflation due to a decrease in aggregate demand is called demand-pull inflation.

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. An aggregate demand shift from AD¹ to AD² can be caused by

If the long-run aggregate supply curve is vertical, the multiplier effect of a change in net taxes on aggregate output in the long run

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. A decrease in inflationary expectations that causes firms to decrease their prices

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

A demand-side shock, such as a sharp decrease in consumer confidence, leads to inflation.

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 raising their prices when the aggregate demand curve shifts from

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

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 ________.

Which of the following would shift the aggregate demand curve to the left?

In a binding situation, changes in government spending do not shift the AD curve.

Related to the Economics in Practice on p. 558: A monsoon destroyed 80% of the Gregorian manufacturing base. The Gregorian government decided to use an expansionary fiscal policy to counter the effects of the monsoon on the economy. The use of the expansionary fiscal policy would have caused

A leftward shift in the aggregate supply curve generates a ________ inflation and ________ output.

An increase in the Z factors represents

An increase in AD will primarily increase output when the economy is on the flat part of the AS curve.

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 cause