Exam 26: The Keynesian Short-Run Policy Model: Demand-Side Policies

Why is the short-run aggregate supply (SAS)curve upward sloping?

A fiscal policy that increases government spending or cuts taxes is most appropriate when the economy is in:

A sharp increase in oil prices along with a decline in labor productivity decline will likely shift the:

Most economists agree that fiscal policy:

The shape of the short-run aggregate supply (SAS)curve reflects two different types of microeconomic markets (auction markets and the posted price markets).How is the price level linked to the level of output in each market? List five factors that might cause an upward shift of the SAS curve.

Suppose the economy is in a recessionary gap. In the absence of any policy intervention, the short-run aggregate supply curve will eventually shift:

Which of the following factors will not shift the long-run aggregate supply curve?

Demonstrate graphically and explain verbally a recessionary gap.Describe two solutions for closing the gap.

Some economists believe that the good times of the early 2000s were not sustainable because they were creating a dangerous financial bubble and trade deficit.

What is the paradox of thrift?

Refer to the graph shown. An economy is in short-run equilibrium at point(s):

Canada is the largest trading partner of the U.S.Suppose the U.S.economy keeps growing.What will happen to the AD curve for Canada?

If businesses expect future demand to increase, this will cause a:

Refer to the graph shown. A movement from D to B is most likely to be caused by:

Refer to the graph shown. The economy is in a short-run equilibrium at:

If the U.S. government increases its expenditures (without any change in taxes)and at the same time the Federal Reserve Bank increases the money supply, the AD curve would:

Suppose the economy is in an inflationary gap,as illustrated by point A in the diagram below: Suppose that everyone knows that inflationary gaps lead to cost pressures that will eventually result in the price level rising.Since people expect the price level to rise soon,suppose they increase their buying now (before prices rise).Demonstrate graphically and explain verbally how this will complicate the economy's adjustment story described in the text.

An expansionary fiscal policy would be countercyclical if it was enacted after:

Using an AS/AD diagram,demonstrate graphically and explain verbally the short-run impact on the price level and real output of an increase in the labor productivity schedule.

In 2001,the U.S.economy suffered a mild recession.As a result,the Fed implemented expansionary monetary policy several times,and expanded the money supply to stimulate the economy.Explain the intention of such monetary policy.