Exam 13: Business Fluctuations: Aggregate Demand and Supply

Use the following to answer questions: Figure: Two SRAS Curves -(Figure: Two SRAS Curves) The figure shows the AD-AS model with two SRAS curves. Which of the following is TRUE of Point A?

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Question 1

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What assumptions about wage and price flexibility are possible in the AD-AS model? What do these different assumptions imply about the slopes of the long-run and short-run aggregate supply curves?

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Question 2

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One possible assumption is that wages and prices are perfectly flexible. When wages and prices are perfectly flexible, the actual growth rate of real GDP will be equal to the economy's potential growth rate. As the diagram shows, the potential growth rate, or the Solow growth rate, is 6%. Because the Solow growth rate does not depend on the rate of inflation, the long-run aggregate supply curve is vertical. Another possible assumption is that wages and prices are sticky-or not perfectly flexible in the short run. In this case, the short-run aggregate supply curve (SRAS) slopes upward, as shown in the diagram. The upward-sloped SRAS curve implies that higher than expected inflation will increase output growth and lower than expected inflation will decrease output growth.

Which of the following most likely causes a shift of the long-run aggregate supply curve to the right?

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Question 3

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Sticky wages amplify negative shocks if:

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Question 4

In the AD-AS model, changes in the growth rates of C, I, G, and NX are interpreted as changes in:

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Question 5

In the AD-AS model with a long-run potential growth rate of 2%, a 6 percentage point increase in the money supply growth rate will cause the economy's growth rate to be _____ in the long run.

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Question 6

Sticky wages and prices:

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Question 7

Use the following to answer questions: Figure: Three AD Curves -(Figure: Three AD Curves) Beginning at Point A in the accompanying diagram, a positive money shock could result in a short-run growth rate of:

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Question 8

Which of the following occurs in the long run?

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Question 9

Why is the SRAS curve steeper above its intersection with the long-run aggregate supply curve?

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Question 10

We would expect a negative real shock, such as a severe countrywide drought, to result in:

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Question 11

Use the following to answer questions: Figure Real Shocks -(Figure: Real Shocks) From Point X in the accompanying graph, a negative real shock could cause the economy to move to Point:

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Question 12

If prices are completely flexible, then an increase in spending growth will lead to an immediate:

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Question 13

The short-run aggregate supply curve is upward-sloping because:

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Question 14

The effect of a shock on the economy is larger when:

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Question 15

When the economy grows slowly:

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Question 16

For an aggregate demand curve with $\vec { M }$ = 10% and $\vec { v }$ = 0%, if inflation is 6%, then real growth is:

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Question 17

An increase in spending growth will cause the aggregate demand curve to:

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Question 18

An unexpected increase in money growth increases both inflation and real growth in the long run.

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Question 19

Which of the following is NOT a shock that could shift the long-run aggregate supply curve?

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Question 20

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Exam 13: Business Fluctuations: Aggregate Demand and Supply

Use the following to answer questions: Figure: Two SRAS Curves -(Figure: Two SRAS Curves) The figure shows the AD-AS model with two SRAS curves. Which of the following is TRUE of Point A?

What assumptions about wage and price flexibility are possible in the AD-AS model? What do these different assumptions imply about the slopes of the long-run and short-run aggregate supply curves?

Which of the following most likely causes a shift of the long-run aggregate supply curve to the right?

Sticky wages amplify negative shocks if:

In the AD-AS model, changes in the growth rates of C, I, G, and NX are interpreted as changes in:

In the AD-AS model with a long-run potential growth rate of 2%, a 6 percentage point increase in the money supply growth rate will cause the economy's growth rate to be _____ in the long run.

Sticky wages and prices:

Use the following to answer questions: Figure: Three AD Curves -(Figure: Three AD Curves) Beginning at Point A in the accompanying diagram, a positive money shock could result in a short-run growth rate of:

Which of the following occurs in the long run?

Why is the SRAS curve steeper above its intersection with the long-run aggregate supply curve?

We would expect a negative real shock, such as a severe countrywide drought, to result in:

Use the following to answer questions: Figure Real Shocks -(Figure: Real Shocks) From Point X in the accompanying graph, a negative real shock could cause the economy to move to Point:

If prices are completely flexible, then an increase in spending growth will lead to an immediate:

The short-run aggregate supply curve is upward-sloping because:

The effect of a shock on the economy is larger when:

When the economy grows slowly:

For an aggregate demand curve with M⃗\vec { M }M = 10% and v⃗\vec { v }v = 0%, if inflation is 6%, then real growth is:

An increase in spending growth will cause the aggregate demand curve to:

An unexpected increase in money growth increases both inflation and real growth in the long run.

Which of the following is NOT a shock that could shift the long-run aggregate supply curve?

The Big Ideas

The Power of Trade and Comparative Advantage

Supply and Demand

Equilibrium: How Supply and Demand Determine Prices

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

For an aggregate demand curve with $\vec { M }$ = 10% and $\vec { v }$ = 0%, if inflation is 6%, then real growth is: