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

In 1979, the Federal Reserve decided to tighten monetary policy in order to reduce inflation, which had risen to double-digit levels. The AD/AS model framework suggests that the short-run effect of this policy was to reduce:

If the U.S. government increased taxes without changing spending, the U.S. AD curve would:

A change in which of the following will shift the long-run aggregate supply curve?

An example of countercyclical fiscal policy is:

If total income remains the same but profits fall and real wages rise, the aggregate demand curve will most likely:

Potential income is that level of income that:

Most economists agree that the aggregate demand curve is:

As prices fall, the value of people's existing assets rises and people increase expenditures. This occurs as a result of the:

From 1975 to 1995, the value of the dollar in terms of yen fell from over 300 yen per dollar to about 100 yen per dollar. Considering the impact of this alone, this would likely:

Refer to the graph shown. From 1938 to 1943 the Federal deficit rose from $1.0 billion to $53.8 billion due to increased defense spending. The effect of this on the AD curve can be shown by a movement from:

If productivity increases by 2 percent but wages increase by 3 percent, then it is most likely that the:

Refer to the graph shown. If the price level is P₀, then:

If potential output exceeds actual output, the economy:

The short-run aggregate supply curve is upward sloping for all of the following reasons except:

Demonstrate graphically and explain verbally the role the multiplier effect has in the shape of the aggregate demand curve.

World War II created a:

The short-run aggregate supply curve is most likely to shift down (to the right)when actual output is:

The shapes of the curves in the AS/AD model are based upon the:

Suppose prices in the United States are expected to decline in the future. The effect today is likely to:

An increase in real money balances resulting from a lower price level will: