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

How might feedback effects cause a fall in housing prices (like the one that set off the crisis in the U.S.economy in 2008)to cause a worse result than the one predicted by the standard AS/AD model?

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

An increase in aggregate demand:

Explain why the long-run aggregate supply (LAS)curve is vertical.

An increase in the price level:

What are feedback effects,and how does the AS/AD model incorporate them?

Keynes believed the economy was:

Suppose the Brazilian currency, the real, depreciates significantly. The AS/AD model predicts that this would cause a trade:

An inflationary gap exists when:

Explain why the long-run aggregate supply (LAS)curve is vertical.What determines the position of the LAS curve?

Refer to the graph shown. A decrease in input prices in the short run is likely to cause a movement from:

What is deflation? What could deflation do during a recession?

Keynes believed that an increase in savings would:

Refer to the following graph. The massive increase in defense spending is best represented by the:

An increase in production costs is most likely to shift the:

The theoretical proposition that the price level is just a numeraire and should not affect aggregate expenditures suggests the AD curve is:

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

If total income in Sweden remains the same but the wage share of income rises, the Swedish AD curve will most likely:

A fall in the value of the dollar relative to other currencies will:

Why would one expect the AD curve to be vertical?