Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ___ and eventually to a long-run equilibrium at point ____, if left to self-correcting tendencies.

A) D; B B) D; C C) B; C D) A; B A) D; B B) D; C C) B; C D) A; B

A) a substantial reduction in the rate of inflation. B) a negative inflation rate C) the same as hyper inflation D) a sudden change in the normal behavior of inflation, unrelated to the nation's output gap A) a substantial reduction in the rate of inflation. B) a negative inflation rate C) the same as hyper inflation D) a sudden change in the normal behavior of inflation, unrelated to the nation's output gap

Exam 12: Inflation and Aggregate Supply

Based on the figure below, the economy is initially at point A on the monetary policy reaction function (RF₁) and the aggregate demand curve (AD₁). The actual rate of inflation is $\pi$ ' and the Federal Reserve's target inflation rate is $\pi$ ₁. $Based on the figure below, the economy is initially at point A on the monetary policy reaction function (RF1) and the aggregate demand curve (AD1). The actual rate of inflation is \pi ' and the Federal Reserve's target inflation rate is \pi 1. If the Federal Reserve raises its target inflation rate to \pi 3, then the Federal Reserve's monetary policy reaction function will ___ and the aggregate demand curve will _.$ If the Federal Reserve raises its target inflation rate to $\pi$ ₃, then the Federal Reserve's monetary policy reaction function will _ and the aggregate demand curve will ___.

(Multiple Choice)

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Question 21

Refer to the figure below. In response to gradually falling inflation, this economy will eventually move from its short-run equilibrium to its long-run equilibrium. Graphically, this would be seen as

(Multiple Choice)

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Question 22

When an expansionary gap exists, actual output _ potential output and the rate of inflation will tend to __.

(Multiple Choice)

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Question 23

The long-run aggregate supply line is:

(Multiple Choice)

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Question 24

Starting from long-run equilibrium, an increase in autonomous consumption results in output in the short run and _ output in the long run.

(Multiple Choice)

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Question 25

At a constant rate of exchange between currencies, higher inflation makes domestic goods sold abroad expensive and, hence, short-run equilibrium output.

(Multiple Choice)

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Question 26

If the Fed's monetary policy reaction function does not change, then when inflation increases the Fed responds by ___ the real interest rate, which _ consumption and investment spending, which ___ output.

(Multiple Choice)

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Question 27

Changes in the expected rate of inflation will:

(Multiple Choice)

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Question 28

Graphically the intersection of the aggregate demand curve, the short-run and long-run aggregate supply curves determines:

(Multiple Choice)

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Question 29

In the figure below, the economy is initially in long-run equilibrium at pointA. If there is an adverse supply shock that reduces potential output and shifts the long-run aggregate supply curve from LRAS to LRAS', then the new long-run equilibrium is reached at point:

(Multiple Choice)

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Question 30

Starting from long-run equilibrium, a large tax cut will result in a(n) _ gap in the short-run and inflation and output in the long-run.

(Multiple Choice)

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Question 31

When there is an expansionary gap, inflation will __, in response to which the Federal Reserve will real interest rates, and output will _.

(Multiple Choice)

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Question 32

Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD¹ to AD will lead to a short-run equilibrium at point _ and eventually to a long-run equilibrium at point __, if left to self-correcting tendencies.

(Multiple Choice)

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Question 33

If the Federal Reserve raises its target inflation rate, the monetary policy reaction function _ and the aggregate demand curve _.

(Multiple Choice)

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Question 34

Disinflation is

(Multiple Choice)

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Question 35

In the figure below, the economy is initially in long-run equilibrium at point A If there is an adverse supply shock that reduces potential output and shifts the long-run aggregate supply curve from LRAS to LRAS', then there is initially _ gap and the short-run aggregate supply curve will _.

(Multiple Choice)

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Question 36

An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) in the inflation rate, leading to a(n) in output.

(Multiple Choice)

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Question 37

Starting from long-run equilibrium, a decrease in autonomous investment results in output in the short run and _ output in the long run.

(Multiple Choice)

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Question 38

When actual output exceeds potential output, there is __ output gap and the inflation rate will .

(Multiple Choice)

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Question 39

If policymakers attempt to offset a favorable inflation shock with monetary _, the resulting long-run equilibrium will be at _ inflation rate compared to allowing the self-correcting mechanism return the economy to potential output.

(Multiple Choice)

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Question 40

Showing 21 - 40 of 163

Refer to the figure below. In response to gradually falling inflation, this economy will eventually move from its short-run equilibrium to its long-run equilibrium. Graphically, this would be seen as

When an expansionary gap exists, actual output _ potential output and the rate of inflation will tend to __.

The long-run aggregate supply line is:

Starting from long-run equilibrium, an increase in autonomous consumption results in output in the short run and _ output in the long run.

At a constant rate of exchange between currencies, higher inflation makes domestic goods sold abroad expensive and, hence, short-run equilibrium output.

If the Fed's monetary policy reaction function does not change, then when inflation increases the Fed responds by ___ the real interest rate, which _ consumption and investment spending, which ___ output.

Changes in the expected rate of inflation will:

Graphically the intersection of the aggregate demand curve, the short-run and long-run aggregate supply curves determines:

In the figure below, the economy is initially in long-run equilibrium at pointA. If there is an adverse supply shock that reduces potential output and shifts the long-run aggregate supply curve from LRAS to LRAS', then the new long-run equilibrium is reached at point:

Starting from long-run equilibrium, a large tax cut will result in a(n) _ gap in the short-run and inflation and output in the long-run.

When there is an expansionary gap, inflation will __, in response to which the Federal Reserve will real interest rates, and output will _.

Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD¹ to AD will lead to a short-run equilibrium at point _ and eventually to a long-run equilibrium at point __, if left to self-correcting tendencies.

If the Federal Reserve raises its target inflation rate, the monetary policy reaction function _ and the aggregate demand curve _.

Disinflation is

In the figure below, the economy is initially in long-run equilibrium at point A If there is an adverse supply shock that reduces potential output and shifts the long-run aggregate supply curve from LRAS to LRAS', then there is initially _ gap and the short-run aggregate supply curve will _.

An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) in the inflation rate, leading to a(n) in output.

Starting from long-run equilibrium, a decrease in autonomous investment results in output in the short run and _ output in the long run.

When actual output exceeds potential output, there is __ output gap and the inflation rate will .

If policymakers attempt to offset a favorable inflation shock with monetary _, the resulting long-run equilibrium will be at _ inflation rate compared to allowing the self-correcting mechanism return the economy to potential output.

Thinking Like an Economist

Supply and Demand

International Trade and Trade Policy

Macroeconomics: the Birds-Eye View of the Economy

Measuring Economic Activity: GDP, Unemployment, and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money, The Federal Reserve, and Global Financial Markets

Short-Term Economic Fluctuations and Fiscal Policy

Stabilizing the Economy: The Role of the Fed

Exchange Rates and the Open Economy

Filters

Exam 12: Inflation and Aggregate Supply

Refer to the figure below. In response to gradually falling inflation, this economy will eventually move from its short-run equilibrium to its long-run equilibrium. Graphically, this would be seen as

When an expansionary gap exists, actual output _____ potential output and the rate of inflation will tend to ______.

The long-run aggregate supply line is:

Starting from long-run equilibrium, an increase in autonomous consumption results in ____ output in the short run and _____ output in the long run.

At a constant rate of exchange between currencies, higher inflation makes domestic goods sold abroad ____expensive and, hence, ____ short-run equilibrium output.

If the Fed's monetary policy reaction function does not change, then when inflation increases the Fed responds by _____ the real interest rate, which _____ consumption and investment spending, which _____ output.

Changes in the expected rate of inflation will:

Graphically the intersection of the aggregate demand curve, the short-run and long-run aggregate supply curves determines:

In the figure below, the economy is initially in long-run equilibrium at pointA. If there is an adverse supply shock that reduces potential output and shifts the long-run aggregate supply curve from LRAS to LRAS', then the new long-run equilibrium is reached at point:

Starting from long-run equilibrium, a large tax cut will result in a(n) _____ gap in the short-run and ____ inflation and ____ output in the long-run.

When there is an expansionary gap, inflation will ______, in response to which the Federal Reserve will ____ real interest rates, and output will _____.

Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ___ and eventually to a long-run equilibrium at point ____, if left to self-correcting tendencies.

If the Federal Reserve raises its target inflation rate, the monetary policy reaction function _____ and the aggregate demand curve _____.

Disinflation is

An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ______ in the inflation rate, leading to a(n) ______ in output.

Starting from long-run equilibrium, a decrease in autonomous investment results in ____ output in the short run and _____ output in the long run.

When actual output exceeds potential output, there is ______ output gap and the inflation rate will ____.

If policymakers attempt to offset a favorable inflation shock with monetary _____, the resulting long-run equilibrium will be at _____ inflation rate compared to allowing the self-correcting mechanism return the economy to potential output.

Thinking Like an Economist

Supply and Demand

International Trade and Trade Policy

Macroeconomics: the Birds-Eye View of the Economy

Measuring Economic Activity: GDP, Unemployment, and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money, The Federal Reserve, and Global Financial Markets

Short-Term Economic Fluctuations and Fiscal Policy

Stabilizing the Economy: The Role of the Fed

Exchange Rates and the Open Economy

Filters

When an expansionary gap exists, actual output _ potential output and the rate of inflation will tend to __.

Starting from long-run equilibrium, an increase in autonomous consumption results in output in the short run and _ output in the long run.

At a constant rate of exchange between currencies, higher inflation makes domestic goods sold abroad expensive and, hence, short-run equilibrium output.

If the Fed's monetary policy reaction function does not change, then when inflation increases the Fed responds by ___ the real interest rate, which _ consumption and investment spending, which ___ output.

Starting from long-run equilibrium, a large tax cut will result in a(n) _ gap in the short-run and inflation and output in the long-run.

When there is an expansionary gap, inflation will __, in response to which the Federal Reserve will real interest rates, and output will _.

Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD¹ to AD will lead to a short-run equilibrium at point _ and eventually to a long-run equilibrium at point __, if left to self-correcting tendencies.

If the Federal Reserve raises its target inflation rate, the monetary policy reaction function _ and the aggregate demand curve _.

An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) in the inflation rate, leading to a(n) in output.

Starting from long-run equilibrium, a decrease in autonomous investment results in output in the short run and _ output in the long run.

When actual output exceeds potential output, there is __ output gap and the inflation rate will .

If policymakers attempt to offset a favorable inflation shock with monetary _, the resulting long-run equilibrium will be at _ inflation rate compared to allowing the self-correcting mechanism return the economy to potential output.