Question 1

Illustrate with graphs the dynamic aggregate demand curve (DAD) and dynamic aggregate supply curve (DAS).

Accepted Answer

Dynamic Aggregate De

Question 2

According to the Phillips curve, the inflation rate depends on all of the following except:

Accepted Answer

A) previously expected inflation. 
B) an exogenous supply shock. 
C) the real interest rate. 
D) the deviation of output from its natural rate. 
A) previously expected inflation. 
B) an exogenous supply shock. 
C) the real interest rate. 
D) the deviation of output from its natural rate.

Question 3

All of the following are endogenous variables in the dynamic model of aggregate demand and aggregate supply except:

Accepted Answer

A) Yt, output. 
B) πt* the central bank's inflation target. 
C) rt, the real interest rate. 
D) Etπt + 1, expected inflation. 
A) Yt, output. 
B) πt* the central bank's inflation target. 
C) rt, the real interest rate. 
D) Etπt + 1, expected inflation.

Question 4

The dynamic aggregate demand curve is derived from each of the following equations of the model of aggregate demand and aggregate supply except:

Accepted Answer

A) the Fisher equation. 
B) the Phillips curve. 
C) adaptive expectations. 
D) the monetary policy rule. 
A) the Fisher equation. 
B) the Phillips curve. 
C) adaptive expectations. 
D) the monetary policy rule.

Question 5

The dynamic aggregate supply curve will shift if any of the following changes except the:

Accepted Answer

A) current inflation rate. 
B) past inflation rate. 
C) natural level of output. 
D) supply shock. 
A) current inflation rate. 
B) past inflation rate. 
C) natural level of output. 
D) supply shock.

Question 6

According to the Taylor principle, for inflation to be stable, the central bank must respond to an increase in inflation with _____ increase in the nominal interest rate.

Accepted Answer

A) no 
B) an equal 
C) a greater 
D) a smaller 
A) no 
B) an equal 
C) a greater 
D) a smaller

Question 7

For any level of inflation, long-run growth _____ the demand for goods and services.

Accepted Answer

A) increases 
B) decreases 
C) does not change 
D) may either increase or decrease 
A) increases 
B) decreases 
C) does not change 
D) may either increase or decrease

Question 8

In the dynamic model of aggregate demand and aggregate supply, one period in time is connected to the next period through:

Accepted Answer

A) the monetary policy rule. 
B) demand shocks. 
C) inflation expectation. 
D) the natural level of output. 
A) the monetary policy rule. 
B) demand shocks. 
C) inflation expectation. 
D) the natural level of output.

Question 9

How does the AD-AS model take a novel approach to explaining money supply effects on economic fluctuations?

Accepted Answer

The AD-AS model uses interest

Question 10

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the initial period after the policy change, output _____, and inflation _____.

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 11

At long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, which variables will equal the central bank's target rate of inflation?

Accepted Answer

A) the current inflation rate, but not the expected inflation rate 
B) the expected inflation rate, but not the current inflation rate 
C) both the current and expected rates of inflation 
D) neither the current nor the expected rates of inflation 
A) the current inflation rate, but not the expected inflation rate 
B) the expected inflation rate, but not the current inflation rate 
C) both the current and expected rates of inflation 
D) neither the current nor the expected rates of inflation

Question 12

The real interest rate at which, in the absence of any shock, the demand for goods and services equals the natural rate of output is called the _____ rate of interest.

Accepted Answer

A) ex ante 
B) ex post 
C) natural 
D) nominal 
A) ex ante 
B) ex post 
C) natural 
D) nominal

Question 13

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the first period after the policy change, the DAS curve _____, and the DAD curve _____.

Accepted Answer

A) shifts upward; shifts rightward 
B) does not shift; shifts leftward 
C) does not shift; does not shift 
D) shifts downward; shifts leftward 
A) shifts upward; shifts rightward 
B) does not shift; shifts leftward 
C) does not shift; does not shift 
D) shifts downward; shifts leftward

Question 14

The ex post real interest rate at time t equals:

Accepted Answer

A) it - Etπt. 
B) it - Etπt + 1. 
C) it - πt. 
D) it - πt + 1. 
A) it - Etπt. 
B) it - Etπt + 1. 
C) it - πt. 
D) it - πt + 1.

Question 15

Starting from long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, a five-period positive demand shock causes output to _____ until returning to the natural level in the long run.

Accepted Answer

A) remain continuously above the natural level of output 
B) move above and then below the natural level of output 
C) remain continuously below the natural level of output 
D) move below and then above the natural level of output 
A) remain continuously above the natural level of output 
B) move above and then below the natural level of output 
C) remain continuously below the natural level of output 
D) move below and then above the natural level of output

Question 16

Which of the following is an exogenous variable in the dynamic model of aggregate demand and aggregate supply?

Accepted Answer

A) Etπt + 1, expected inflation 
B) rt, the real interest rate 
C) πt, inflation 
D) υt, supply shock 
A) Etπt + 1, expected inflation 
B) rt, the real interest rate 
C) πt, inflation 
D) υt, supply shock

Question 17

The Taylor rule specifies that the Bank of Canada should increase the overnight rate as inflation _____ and the GDP gap _____.

Accepted Answer

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

Question 18

In the dynamic model of aggregate demand and aggregate supply, increases in the natural level of output lead to _____ in output and _____ in inflation.

Accepted Answer

A) increases; increases 
B) increases; no change 
C) no change; increases 
D) no change; no change 
A) increases; increases 
B) increases; no change 
C) no change; increases 
D) no change; no change

Question 19

The dynamic aggregate supply curve illustrates a short-run _____ relationship between output and _____.

Accepted Answer

A) positive; inflation 
B) positive; the price level 
C) negative; inflation 
D) negative; the price level 
A) positive; inflation 
B) positive; the price level 
C) negative; inflation 
D) negative; the price level

Question 20

Use the model of dynamic aggregate demand and aggregate supply to graphically illustrate the impact of a temporary four-period increase in taxes (a four-period negative demand shock) on output and inflation when the economy is initially at long-run equilibrium. Explain the time path of output and inflation in words.

Accepted Answer

​ @#IMG-DLM& Beginning at A in period t - 1, outpu

Illustrate with graphs the dynamic aggregate demand curve (DAD) and dynamic aggregate supply curve (DAS).

According to the Phillips curve, the inflation rate depends on all of the following except:

All of the following are endogenous variables in the dynamic model of aggregate demand and aggregate supply except:

The dynamic aggregate demand curve is derived from each of the following equations of the model of aggregate demand and aggregate supply except:

The dynamic aggregate supply curve will shift if any of the following changes except the:

According to the Taylor principle, for inflation to be stable, the central bank must respond to an increase in inflation with _____ increase in the nominal interest rate.

For any level of inflation, long-run growth _____ the demand for goods and services.

In the dynamic model of aggregate demand and aggregate supply, one period in time is connected to the next period through:

How does the AD-AS model take a novel approach to explaining money supply effects on economic fluctuations?

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the initial period after the policy change, output _, and inflation _.

At long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, which variables will equal the central bank's target rate of inflation?

The real interest rate at which, in the absence of any shock, the demand for goods and services equals the natural rate of output is called the _____ rate of interest.

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the first period after the policy change, the DAS curve _, and the DAD curve _.

The ex post real interest rate at time t equals:

Starting from long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, a five-period positive demand shock causes output to _____ until returning to the natural level in the long run.

Which of the following is an exogenous variable in the dynamic model of aggregate demand and aggregate supply?

The Taylor rule specifies that the Bank of Canada should increase the overnight rate as inflation _ and the GDP gap _.

In the dynamic model of aggregate demand and aggregate supply, increases in the natural level of output lead to _ in output and _ in inflation.

The dynamic aggregate supply curve illustrates a short-run _ relationship between output and _.

The Science of Macroeconomics

The Data of Microeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labour Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Islm Model

Aggregate Demand Ii: Applying the Islm Model

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

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

The Microfoundations of Consumption and Investment

Filters

Exam 15: A Dynamic Model of Economic Fluctuations

Illustrate with graphs the dynamic aggregate demand curve (DAD) and dynamic aggregate supply curve (DAS).

According to the Phillips curve, the inflation rate depends on all of the following except:

All of the following are endogenous variables in the dynamic model of aggregate demand and aggregate supply except:

The dynamic aggregate demand curve is derived from each of the following equations of the model of aggregate demand and aggregate supply except:

The dynamic aggregate supply curve will shift if any of the following changes except the:

According to the Taylor principle, for inflation to be stable, the central bank must respond to an increase in inflation with _____ increase in the nominal interest rate.

For any level of inflation, long-run growth _____ the demand for goods and services.

In the dynamic model of aggregate demand and aggregate supply, one period in time is connected to the next period through:

How does the AD-AS model take a novel approach to explaining money supply effects on economic fluctuations?

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the initial period after the policy change, output _____, and inflation _____.

At long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, which variables will equal the central bank's target rate of inflation?

The real interest rate at which, in the absence of any shock, the demand for goods and services equals the natural rate of output is called the _____ rate of interest.

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the first period after the policy change, the DAS curve _____, and the DAD curve _____.

The ex post real interest rate at time t equals:

Starting from long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, a five-period positive demand shock causes output to _____ until returning to the natural level in the long run.

Which of the following is an exogenous variable in the dynamic model of aggregate demand and aggregate supply?

The Taylor rule specifies that the Bank of Canada should increase the overnight rate as inflation _____ and the GDP gap _____.

In the dynamic model of aggregate demand and aggregate supply, increases in the natural level of output lead to _____ in output and _____ in inflation.

The dynamic aggregate supply curve illustrates a short-run _____ relationship between output and _____.

The Science of Macroeconomics

The Data of Microeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labour Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Islm Model

Aggregate Demand Ii: Applying the Islm Model

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

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

The Microfoundations of Consumption and Investment

Filters

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the initial period after the policy change, output _, and inflation _.

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the first period after the policy change, the DAS curve _, and the DAD curve _.

The Taylor rule specifies that the Bank of Canada should increase the overnight rate as inflation _ and the GDP gap _.

In the dynamic model of aggregate demand and aggregate supply, increases in the natural level of output lead to _ in output and _ in inflation.

The dynamic aggregate supply curve illustrates a short-run _ relationship between output and _.