Exam 15: Modern Macroeconomics: From the Short Run to the Long Run

If the economy is at full employment equilibrium, an increase in the money supply will cause a higher level of output and an increase in the price level.

Of the economists listed below, who is not considered a "classical" economist?

A decrease in government spending will lead to an increase in investment.

What is Say's Law?

In order for the long- run neutrality of money to hold, an increase in money supply must cause:

Classical economists believe that recessions are self correcting. In their view, how does the economy correct itself?

Money is neutral both in the short run and in the long run.

Suppose the economy is at full employment. An increase in the money supply will _______ in the short run and _______ in the long run.

Those who believe that wages adjust quickly to clear the labor market also believe that:

Increased government spending will not cause investments to not drop as much if:

A wage- price spiral can occur if an economy is producing at a level above full employment.

If the Say's Law holds true, then the economy would never experience a shortage of demand for goods and services.

Along a Keynesian short- run supply curve, when the price level rises, there is an increase in aggregate quantity supplied.

If the long- run neutrality of money holds, then an increase in the money supply will _______ investment and output in the long run.

Recall Application 2, "Elections, Political Parties, and Voter Expectations," to answer the following questions: -According to the application, which political party puts more emphasis on making the economy grow?

Recall Application 2, "Elections, Political Parties, and Voter Expectations," to answer the following questions: -According to the application, economic growth is expected to be _______ when a _______ is president.

What is the difference between the short run and the long run in macroeconomics?

Suppose that potential output is $5 trillion and real GDP is currently $5.5 trillion. In the long run, we would expect that:

According to classical economists, an increase in aggregate demand should result in:

If the equilibrium output is below potential output: