Exam 14: The Aggregate Model of the Macro Economy

An increase in the nominal money supply would shift the:

Why did the Fed shift its policy target towards the federal funds rate.

Using the aggregate demand-aggregate supply diagram, graphically illustrate and explain the impact of an expansionary monetary policy on the price level and real income in the very short run.

Average duration of unemployment is an example of a:

Decreases in autonomous spending cause rightward shifts of the aggregate demand and supply curves.

An income tax system where higher tax rates are applied to increased amounts of income is called a:

Economic variables that generally turn down before a recession begins and turn back up before the recovery starts are called:

The level of potential GDP does not change because the factors determining potential output are fixed in the short run.

Expansionary fiscal policy will shift the AD curve leftward.

Business debt is an example of a lagging indicator.

The portion of the short-run aggregate supply that reflects the economy's resources are not fully employed is the:

An income tax system where higher tax rates are applied to increased amounts of income is called:

Explain how the aggregate demand curve is derived.

If there is an autonomous decrease in spending a leftward shift in the aggregate demand curve) and the Fed wishes to hold real income constant, then the Fed would:

The aggregate demand curve shows the alternative combinations of the price level and real income that result in simultaneous equilibrium in both the goods and money markets.

A decrease in the currency exchange rate would shift the aggregate demand curve rightward, resulting in a higher equilibrium income and price level in the long -run.

An open market purchase of government securities by the Fed would shift the aggregate demand curve leftward.

An increase in production costs will shift the:

Industrial production is an example of a:

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