Question 1

When GDP growth declines, investment spending typically and consumption spending typically .

Accepted Answer

A) .increases; increases. 
B) increases; decreases. 
C) decreases; decreases. 
D) decreases; increases. 
A) .increases; increases. 
B) increases; decreases. 
C) decreases; decreases. 
D) decreases; increases.

Question 2

Assume that the long-run aggregate supply curve is vertical at Y = 3,000 while the short-run aggregate supply curve is horizontal at P = 1.0. The aggregate demand curve is Y = 3(M/P) and M = 1,000.
a. If the economy is initially in long-run equilibrium, what are the values of P and Y?
b. Now suppose a supply shock moves the short-run aggregate supply curve to P = 1.5. What are the new short-run P and Y?
c. If the aggregate demand curve and long-run aggregate supply curve are unchanged, what are the long-run equilibrium P and Y after the supply shock?
d. Suppose that after the supply shock the Fed wanted to hold output at its long-run level. What level of M
would be required? If this level of M were maintained, what would be long-run equilibrium P and Y?

Accepted Answer

a. P = 1.0; Y = 3,0

Question 3

Suppose you are an economist working for the Federal Reserve when droughts in the Southeast and floods in the Midwest substantially reduce food production in the United States. Use the aggregate demand-aggregate supply model to illustrate graphically your policy recommendation to accommodate this adverse supply shock, assuming that your top priority is maintaining full employment in the economy. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; and v. the terminal equilibrium values. State in words what happens to prices and output as a combined result of the supply shock and the recommended Federal Reserve accommodation.

Accepted Answer

@#IMG-DLM& The accommodation policy mea

Question 4

A difference between the economic long run and the short run is that:

Accepted Answer

A) the classical dichotomy holds in the short run but not in the long run. 
B) monetary and fiscal policy affect output only in the long run. 
C) demand can affect output and employment in the short run, whereas supply is the ruling force in the long run. 
D) prices and wages are sticky in the long run only. 
A) the classical dichotomy holds in the short run but not in the long run. 
B) monetary and fiscal policy affect output only in the long run. 
C) demand can affect output and employment in the short run, whereas supply is the ruling force in the long run. 
D) prices and wages are sticky in the long run only.

When GDP growth declines, investment spending typically and consumption spending typically .

A difference between the economic long run and the short run is that:

The Science of Macroeconomics

The Data of Macroeconomics

National Income Where It Comes From and Where It Goes

Money and Inflation

The Open Economy

Unemployment

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand II: Applying the Is-Lm Model

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

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Exam 10: Aggregate Demand I: Building the Is-Lm Model

When GDP growth declines, investment spending typically and consumption spending typically .

A difference between the economic long run and the short run is that:

The Science of Macroeconomics

The Data of Macroeconomics

National Income Where It Comes From and Where It Goes

Money and Inflation

The Open Economy

Unemployment

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand II: Applying the Is-Lm Model

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

Filters