Question 1

Which of the following is (are)linked to (an)adverse supply shock(s)?

Accepted Answer

A) the Arab-Israeli war of 1973 
B) the Iranian revolution of 1979 
C) the wage renegotiations that followed the termination of U.S.wage and price controls in 1973 
D) all of the above 
E) none of the above 
A) the Arab-Israeli war of 1973 
B) the Iranian revolution of 1979 
C) the wage renegotiations that followed the termination of U.S.wage and price controls in 1973 
D) all of the above 
E) none of the above D

Question 2

A likely result of the September 11,2001 terrorist attacks was ________.

Accepted Answer

A) weaker consumer confidence 
B) lower business confidence 
C) a leftward shift of the AD curve 
D) all of the above 
E) none of the above 
A) weaker consumer confidence 
B) lower business confidence 
C) a leftward shift of the AD curve 
D) all of the above 
E) none of the above D

Question 3

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?

Accepted Answer

A) The increase in the price of oil immediately shifted the AS curve to the left. 
B) The financial crisis did not take hold right away so the AD curve did not immediately shift. 
C) Eventually,the Lehman Brothers bankruptcy caused a negative demand shock leading to a further fall in output and an increase in the unemployment rate. 
D) all of the above 
E) none of the above 
A) The increase in the price of oil immediately shifted the AS curve to the left. 
B) The financial crisis did not take hold right away so the AD curve did not immediately shift. 
C) Eventually,the Lehman Brothers bankruptcy caused a negative demand shock leading to a further fall in output and an increase in the unemployment rate. 
D) all of the above 
E) none of the above D

Question 4

In the short run,as output rises above potential ________.

Accepted Answer

A) inflation will fall from its current level which explains the upward-sloping nature of the Phillips curve 
B) inflation will rise from its current level which explains the upward-sloping nature of the aggregate supply curve 
C) unemployment will rise above the natural rate which explains the upward-sloping nature of both the Phillips curve and the AS curve 
D) all of the above 
E) none of the above 
A) inflation will fall from its current level which explains the upward-sloping nature of the Phillips curve 
B) inflation will rise from its current level which explains the upward-sloping nature of the aggregate supply curve 
C) unemployment will rise above the natural rate which explains the upward-sloping nature of both the Phillips curve and the AS curve 
D) all of the above 
E) none of the above

Question 5

12.2 Equilibrium in Aggregate Demand and Supply Analysis
AD - AS Equilibrium  
-On the graph above,consider a point A on the aggregate supply curve and above the aggregate demand curve.At this point,________.

Accepted Answer

A) quantity demanded equals output,but the inflation rate will fall,so output will rise 
B) quantity demanded is greater than quantity supplied,so the inflation rate will rise 
C) output is greater than the quantity demanded,so output will fall 
D) the aggregate demand curve will shift to the right until quantity demanded is equal to quantity supplied 
E) none of the above 
A) quantity demanded equals output,but the inflation rate will fall,so output will rise 
B) quantity demanded is greater than quantity supplied,so the inflation rate will rise 
C) output is greater than the quantity demanded,so output will fall 
D) the aggregate demand curve will shift to the right until quantity demanded is equal to quantity supplied 
E) none of the above

Question 6

What is the main difference between a temporary and permanently negative supply shock?

Accepted Answer

A) The real interest rate immediately decreases after a temporary shock while it eventually increases after a permanent shock. 
B) Output increases right away after a temporary shock but the impact does not last whereas for a permanent shock output permanently decreases. 
C) A temporary shock will see a permanent increase in inflation while inflation will only rise temporarily after a permanent shock. 
D) all of the above 
E) none of the above 
A) The real interest rate immediately decreases after a temporary shock while it eventually increases after a permanent shock. 
B) Output increases right away after a temporary shock but the impact does not last whereas for a permanent shock output permanently decreases. 
C) A temporary shock will see a permanent increase in inflation while inflation will only rise temporarily after a permanent shock. 
D) all of the above 
E) none of the above

Question 7

By the time Paul Volcker took office as the new Federal Reserve chairman in 1979,both the inflation and unemployment rates were higher than during most of the 1950s,60s and early 70s.The Federal Reserve implemented an autonomous tightening of monetary policy that resulted in the famous Volker Disinflation which was successful in bringing both problems under control.What would have been a likely short-run result had Mr.Volker conducted an expansionary monetary policy instead?

Accepted Answer

A) Inflation would have been made worse right away but unemployment would have been lowered. 
B) Both inflation and unemployment would have declined. 
C) Both inflation and unemployment would have been made worse. 
D) There would have been no effect on the unemployment and inflation rates. 
E) none of the above 
A) Inflation would have been made worse right away but unemployment would have been lowered. 
B) Both inflation and unemployment would have declined. 
C) Both inflation and unemployment would have been made worse. 
D) There would have been no effect on the unemployment and inflation rates. 
E) none of the above

Question 8

The endogenous variable in the aggregate supply curve is ________.

Accepted Answer

A) output 
B) the real interest rate 
C) inflation 
D) planned expenditure 
E) none of the above 
A) output 
B) the real interest rate 
C) inflation 
D) planned expenditure 
E) none of the above

Question 9

How does the aggregate demand curve differ from a demand curve for,say,bananas?

Accepted Answer

The demand for bananas expresses the qua

Question 10

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 an appropriate description of the mechanism that would have ensued?

Accepted Answer

A) The increase in the price of oil would have immediately shifted the AS curve to the right. 
B) The financial crisis would have led to a sharp contraction in spending shifting the AD curve to the right. 
C) Shifts in both the AD and the AS curve would have ensued in the short-run but as long as neither shock had an impact on potential output,ultimately unemployment will have been unaffected in the long run. 
D) all of the above 
E) none of the above 
A) The increase in the price of oil would have immediately shifted the AS curve to the right. 
B) The financial crisis would have led to a sharp contraction in spending shifting the AD curve to the right. 
C) Shifts in both the AD and the AS curve would have ensued in the short-run but as long as neither shock had an impact on potential output,ultimately unemployment will have been unaffected in the long run. 
D) all of the above 
E) none of the above

Question 11

The aggregate demand curve is Y = 75 - 3π,and the short-run aggregate supply curve is π = 6.2 + 0.8(Y - 70).Assuming adaptive expectations,calculate the inflation rate and output for the next period.

Accepted Answer

These curves intersect with Y = 66 and π

Question 12

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 Chinese experience?

Accepted Answer

A) The worldwide decline in demand led to a collapse of Chinese exports. 
B) Instead of relying solely on the economy's self-correcting mechanism,much more aggressive fiscal expansions than those of the U.S.(in addition to a substantial monetary easing)served to shift the AD curve back to general equilibrium relatively quickly. 
C) The Chinese economy was better able than the U.S.economy to weather the financial crisis with output growth starting to grow earlier and more quickly than that of the U.S. 
D) all of the above 
E) none of the above 
A) The worldwide decline in demand led to a collapse of Chinese exports. 
B) Instead of relying solely on the economy's self-correcting mechanism,much more aggressive fiscal expansions than those of the U.S.(in addition to a substantial monetary easing)served to shift the AD curve back to general equilibrium relatively quickly. 
C) The Chinese economy was better able than the U.S.economy to weather the financial crisis with output growth starting to grow earlier and more quickly than that of the U.S. 
D) all of the above 
E) none of the above

Question 13

As of 2009,China's economy had recovered from the global recession that began in 2008.Use aggregate demand and aggregate supply analysis to explain why,and to explain the likely consequences for China of an increase in the growth rate of the global economy.

Accepted Answer

Policy in China reversed the decline in

Question 14

AD - AS Shocks  
-On the graph above,suppose the economy is at point F when there is a temporary negative supply shock.The new long-run equilibrium is at point ________.

Accepted Answer

A) H 
B) I 
C) F 
D) G 
E) none of the above 
A) H 
B) I 
C) F 
D) G 
E) none of the above

Question 15

AD - AS Shocks  
-On the graph above (and considering the short run only),a combination of a negative demand shock and a negative supply shock may be represented by the movement from point ________ to point ________.

Accepted Answer

A) G;I 
B) H;F 
C) H;I 
D) G;F 
E) G;H 
A) G;I 
B) H;F 
C) H;I 
D) G;F 
E) G;H

Question 16

If the Federal Reserve raises the real interest rate for any given inflation rate ________.

Accepted Answer

A) investment spending would increase 
B) it would lead to higher consumption spending and net exports 
C) the aggregate demand curve would shift to the left 
D) all of the above 
E) none of the above 
A) investment spending would increase 
B) it would lead to higher consumption spending and net exports 
C) the aggregate demand curve would shift to the left 
D) all of the above 
E) none of the above

Question 17

Which equation is a plausible aggregate supply curve?

Accepted Answer

A) Y = 50 - 1.25π 
B) π = 2 + 0.3 (Y - 75) 
C) Y = 250 - 80r 
D) π = 5 - 0.4 (U - 6) 
E) none of the above 
A) Y = 50 - 1.25π 
B) π = 2 + 0.3 (Y - 75) 
C) Y = 250 - 80r 
D) π = 5 - 0.4 (U - 6) 
E) none of the above

Question 18

AD - AS Shocks  
-On the graph above,an example of a negative demand shock is the movement from point ________ to point ________.

Accepted Answer

A) F;G 
B) H;I 
C) F;H 
D) H;F 
E) none of the above 
A) F;G 
B) H;I 
C) F;H 
D) H;F 
E) none of the above

Question 19

In the long run,we typically assume that ________.

Accepted Answer

A) capital,labor,and technology are independent of the level of inflation 
B) the natural rate of unemployment is independent of the level of inflation 
C) aggregate supply is fixed and independent of the level of inflation 
D) all of the above 
E) none of the above 
A) capital,labor,and technology are independent of the level of inflation 
B) the natural rate of unemployment is independent of the level of inflation 
C) aggregate supply is fixed and independent of the level of inflation 
D) all of the above 
E) none of the above

Question 20

AD - AS Shocks  
-On the graph above,a movement from point ________ to point ________ might represent a negative supply shock.

Accepted Answer

A) H;G 
B) H;F 
C) F;I 
D) F;G 
E) none of the above 
A) H;G 
B) H;F 
C) F;I 
D) F;G 
E) none of the above

Exam 12: The Aggregate Demand and Supply Model

Which of the following is (are)linked to (an)adverse supply shock(s)?

A likely result of the September 11,2001 terrorist attacks was ________.

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?

In the short run,as output rises above potential ________.

12.2 Equilibrium in Aggregate Demand and Supply Analysis AD - AS Equilibrium -On the graph above,consider a point A on the aggregate supply curve and above the aggregate demand curve.At this point,________.

What is the main difference between a temporary and permanently negative supply shock?

The endogenous variable in the aggregate supply curve is ________.

How does the aggregate demand curve differ from a demand curve for,say,bananas?

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 an appropriate description of the mechanism that would have ensued?

The aggregate demand curve is Y = 75 - 3π,and the short-run aggregate supply curve is π = 6.2 + 0.8(Y - 70).Assuming adaptive expectations,calculate the inflation rate and output for the next period.

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 Chinese experience?

As of 2009,China's economy had recovered from the global recession that began in 2008.Use aggregate demand and aggregate supply analysis to explain why,and to explain the likely consequences for China of an increase in the growth rate of the global economy.

AD - AS Shocks -On the graph above,suppose the economy is at point F when there is a temporary negative supply shock.The new long-run equilibrium is at point ________.

AD - AS Shocks -On the graph above (and considering the short run only),a combination of a negative demand shock and a negative supply shock may be represented by the movement from point ________ to point ________.

If the Federal Reserve raises the real interest rate for any given inflation rate ________.

Which equation is a plausible aggregate supply curve?

AD - AS Shocks -On the graph above,an example of a negative demand shock is the movement from point ________ to point ________.

In the long run,we typically assume that ________.

AD - AS Shocks -On the graph above,a movement from point ________ to point ________ might represent a negative supply shock.

The Policy and Practice of Macroeconomics

Measuring Macroeconomic Data

Aggregate Production and Productivity

Saving and Investment in Closed and Open Economies

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, policy, and Institutions

Business Cycles: an Introduction

The Is Curve

Monetary Policy and Aggregate Demand

Aggregate Supply and the Phillips Curve

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, employment, and Unemployment

The Role of Expectations in Macroeconomic Policy

Modern Business Cycle Theory

Filters

AD - AS Shocks -On the graph above (and considering the short run only),a combination of a negative demand shock and a negative supply shock may be represented by the movement from point to point .

AD - AS Shocks -On the graph above,an example of a negative demand shock is the movement from point to point .

AD - AS Shocks -On the graph above,a movement from point to point might represent a negative supply shock.