Exam 14: The Aggregate Model of the Macro Economy

Features of the U.S. federal government expenditure and taxation programs that tend to automatically slow the economy during times of high economic activity and boost the economy during periods of recession are called:

At a given price level, an increase in expected profits and business confidence will shift the aggregate demand curve:

Increases in autonomous spending cause leftward shifts of the aggregate demand and supply curves.

A decrease in government expenditure would shift the:

An appreciation of the U.S. dollar would shift the:

Depreciation of the U.S. dollar will shift the AD curve leftward.

An open market purchase, a decrease in the discount rate, and a decrease in the reserve requirement would shift the aggregate demand curve rightward.

An adverse oil price increase will shift the short-run aggregate supply curve:

A decrease in efficiency would shift the long-run aggregate supply curve:

An increase in the amount of resources would shift the long-run aggregate supply curve:

Industrial production is an example of a coincident indicator.

Using the aggregate demand-aggregate supply diagram, graphically illustrate and explain the impact of an escalating budget deficit on the price level and real income in the long-run.

Contractionary monetary policy should be used if:

Using the aggregate demand-aggregate supply diagram, graphically illustrate and explain the impact of an appreciation of the U.S. dollar on the price level and real income in the short.

The U.S. economy is experiencing a decrease in home prices and consumer wealth, a credit crisis in the financial markets, and declining consumer and business confidence. What components of aggregate demand are affected and the impact on real output and what are the policy options?

The horizontal portion of the short-run aggregate supply curve reflects the Keynesian assumption of "sticky" prices.

An increase in consumer wealth would shift the aggregate demand curve rightward.

An open market sale, an increase in the discount rate, and an increase in the reserve requirement would shift the aggregate demand curve leftward.

A decrease in consumer confidence would shift the:

An aggregate supply curve that is either horizontal or upward sloping, depending on whether the absolute price level increases as firms produce more output is called: