Exam 22: Aggregate Demand and Supply Analysis

The lon-run aggregate supply curve can be expressed by

An autonomous easing of monetary policy results in a ________ level of equilibrium output,shifting the aggregate demand curve to the ________.

Assuming the economy is starting at the natural rate of output and everything else held constant,the effect of ________ in aggregate ________ is a rise in both inflation and output in the short-run,but in the long-run the only effect is a rise in inflation.

According to aggregate demand and supply analysis,the negative supply shocks of 1973-1975 and 1978-1980 had the effect of

A central bank that does NOT follow the Taylor principle will fail to raise nominal interest rates by more than the increase in expected inflation. As a result,the monetary policy curve is ________ sloping and the aggregate demand curve is ________ sloping.

Everything else held constant,aggregate demand increases when

A permanent negative supply shock causes stock prices to ________ than they would if the supply shock were temporary.

Suppose the U.S. economy is operating at potential output. A negative supply shock that is accommodated by an open market purchase by the Federal Reserve will cause ________ in real GDP in the long run and ________ in inflation in the long run,everything else held constant.

According to aggregate demand and supply analysis,the favorable supply shock of 1995-1999 had the effect of

Everything else held constant,an increase in planned investment expenditure ________ aggregate ________.

The price of a barrel of oil doubled between 2007 and the middle of 2008. To make matters worse,a financial crisis hit the U.S. economy starting in August of 2007. Which of the following is TRUE of the United Kingdom's experience?

Everything else held constant,a balanced budget increase in government spending (that is,an increase in government spending that is matched by an identical increase in net taxes)will

A temporary negative supply shock ________ real interest rates and ________ output in the short run,thereby its effect on stock prices is ________.

Suppose the U.S. economy is producing at the natural rate of output. A depreciation of the U.S. dollar will cause ________ in real GDP in the short run and ________ in inflation in the short run,everything else held constant. (Assume the depreciation causes no effects in the supply side of the economy. )

If firms and households form their expectations about inflation by looking at past inflation,this form of expectations formation is known as ________ expectations.

Everything else held constant,a decrease in net taxes ________ aggregate ________.

Everything else held constant,an increase in financial frictions ________ aggregate ________.

Suppose the economy is producing below the natural rate of output and the government is suffering from large budget deficits. To deal with the deficit problem,suppose the government takes a policy action to reduce the size of the deficits. This policy action will cause ________ in the unemployment rate in the short run and ________ in inflation in the short run,everything else held constant.

Everything else held constant,when financial frictions increase,the real cost of borrowing ________ so that planned investment spending ________ at any given inflation rate.

With downward-sloping monetary policy and IS curves,the aggregate demand curve is