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

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. If the economy is currently at the intersection of AS and AD, a decrease in AS with no change in AD will cause

In a binding situation, there is ________ crowding out of planned investment when net taxes decrease.

Other things equal, cost-push inflation results in output ________ and the price level ________.

Since 1970, the Fed generally ________ the interest rate when inflation was ________.

A sudden increase in aggregate demand causes a ________ inflation and ________ output.

If the economy is on the steep portion of the AS curve

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. Planned investment would experience the greatest amount of crowding out when the aggregate demand curve shifts from

When aggregate supply is vertical, economic policies concerning output are

A rightward shift in the aggregate demand curve generates a ________ inflation and ________ output.

If the aggregate supply curve is vertical in the long-run, then neither monetary nor fiscal policy will affect 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 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 net taxes, then the price level will be ________ than P₀ and output will be ________ than Y₀.

Since 1970, the United States experienced stagflation

If the Fed has a strong preference for stable output relative to prices, 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 B.

If wages adjust fully to price increases in the long run, the full effect of fiscal policy is on

Demand-pull inflation can be the result of

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 the price level can cause a movement to Point

If wages quickly adjust to price changes, the aggregate supply curve quickly becomes vertical.

A decrease in the Z factors shifts the aggregate demand curve to the left.

If the Fed has a strong preference for stable prices relative to output, it responds to a price ________ with a ________ decrease in the interest rate.