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

In the AS/AD model, the repercussion that a change in aggregate quantity demanded has on production and subsequently on income and expenditures is called the:

At the intersection of the short-run aggregate supply curve, the aggregate demand curve, and the long-run aggregate supply curve, the economy is in:

If a fall in the price level made people feel richer and initially increased aggregate expenditures by 20, the AD curve would:

An increase in real money balances resulting from a lower price level will:

An increase in the price level might cause:

A change in which of the following will shift the long-run aggregate supply curve?

During WWII, the U.S.government increased spending:

Refer to the graph shown.In the graph, an inflationary gap exists if the price level is:

Which of the following do economists generally agree is an unacceptable method of bringing aggregate demand and supply into equilibrium?

Refer to the graph shown.Given the price increase in the graph, we can infer that the international effect by itself:

Governments are said to fine-tune the economy when they attempt to use fiscal policy to:

In the early 1930s, U.S.government expenditures increased as part of the New Deal without any change in taxes.This:

Keynes believed that:

During the Vietnam War, Congress increased government expenditures while raising taxes.As a result we know that:

Housing prices in the United States fell sharply in 2007 and 2008, contributing to a severe recession as the AD curve shifted leftward.The ordinary AS/AD model would predict that falling short-run aggregate supply would bring deflation and move the economy back to potential output.Which of the following describes the impact of dynamic feedback effects on this return to potential output?

Suppose the target rate of unemployment is 5 percent but the actual rate of unemployment is 4 percent.Given this information, which of the following policies is most appropriate according to the AS/AD model?

Most economists agree that the aggregate demand curve is:

What of the following would be the best example of a posted-price market?

Suppose output exceeds potential output and contractionary fiscal policy is enacted.According to the AS/AD model, in the long run, this fiscal policy will produce:

From 2007 to 2012, the U.S.personal savings rate rose.If the additional savings were not translated into investment, Keynes would predict that aggregate income would: