Exam 25: Using the Economic Fluctuations Model

According to the spending allocation model, what happens if there is an increase in the share of GDP allocated to government purchases? What happens to the other spending shares? According to the economic fluctuations model, what happens if there is an increase in government purchases as a share of GDP? What happens to the other spending shares? Are the two models the same? What additional insight does the economic fluctuations model introduce?

Graphically show the difference between what is meant by a growth slowdown as opposed to a recession.

What is meant by a baseline?

Which of the following was not a factor that led to the recession that began at the end of 2007?

Compared to the baseline, the short-run effect of a monetary policy change to lower inflation is for

When government purchases decrease, the short-run effect can be described as the period of time when

If the Fed is worried about inflation and raises interest rates, then in the short run

The IA line does not shift in the short run because

According to the economic fluctuations model, what would happen if real GDP went above potential GDP?

If ever real GDP is above potential real GDP, the inflation adjustment line (IA) must

The United States economy never recovered from the recession brought about by the Volcker disinflation.

A major that resulted in the leftward shift of the aggregate demand curve in late 2008 was

If government purchases decrease, in the short run

Changes in monetary policy can immediately affect the inflation rate in the economy.

Suppose government purchases have decreased and the economy has reached a new long-run equilibrium. Which of the following best describes the new equilibrium?

Suppose government purchases have increased and the economy has reached a new long-run equilibrium. Which of the following best describes the new equilibrium?

Exhibit 25-2 -According to Exhibit 25-2, which of the following best describes the path followed by the U.S. economy during recent economic fluctuations?

Suppose the economy is initially at point A in the diagram below, and oil prices suddenly fall. Which point best depicts where the economy will end up in the short run?

Answer the questions below:

A decrease in government purchases causes the interest-sensitive components of GDP to increase in the long run.