Exam 7: Putting All Markets Together: the Asad Model

At the current level of output, suppose the actual price level is less than the price level that individuals expect. We know that:

Assume that the economy is initially operating at the natural level of output. An increase in taxes will cause which of the following?

Which of the following events will not cause a decrease in the aggregate price level?

Which of the following events will cause the largest rightward shift (as measured horizontally) of the AD curve?

Assume that the economy is initially operating at the natural level of output. An increase in firm confidence will cause:

In the aggregate supply relation, an increase in current output causes:

Assume the economy is initially operating at the natural level of output. Which of the following events will initially cause a shift of the aggregate supply curve?

Assume that the economy is initially operating at the natural level of output. An increase in government spending will cause:

Suppose that the current price level is equal to the expected price level. Given this information, we know with certainty that:

Assume the economy is initially operating at the natural level of output. Now suppose a budget is passed that calls for a tax cut. This fiscal expansion will, in the short run, cause an increase in:

Assume the economy is initially operating at the natural level of output. Now suppose a budget is passed that calls for a tax cut. This fiscal expansion will, in the medium run, have no effect on which of the following?

Based on your understanding of the AS- AD model and the IS- LM model, graphically illustrate and explain what effect a decrease in the price target will have on the economy. In your graphs, clearly illustrate the short- run and medium- run equilibria.

Assume that the economy is initially operating at the natural level of output. An increase in the minimum wage will cause:

Results obtained from the Taylor model suggest that the output effects of a change in the money supply are greatest after approximately how long?

Which of the following events will cause an increase in the aggregate price level?

Discuss the possible explanations as to why the oil price effect on inflation and output has been muted in the 2000s compared to the 1970s.

The aggregate demand curve has its particular shape because of which of the following explanations?

An increase in the aggregate price level will cause:

Explain what is meant by the neutrality of money.

Results obtained from the Taylor model suggest that the effects of changes in the nominal money supply are neutral after: