Exam 12: The Aggregate Demand and Supply Model

AD - AS Shocks -On the graph above,suppose the economy has moved from point H to point G.If the shock was temporary and inflation expectations are adaptive,the economy will next ________.

Unlike either the United States or the United Kingdom,________ did not occur in China's economy between 2007 and 2009.

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.Which of the following is an appropriate description had Mr.Volker conducted an expansionary monetary policy instead?

If the unemployment rate is below its natural rate,then ________.

Under a favorable business environment and if the economic outlook of the future looked promising ________.

The short-run aggregate supply curve shows how ________ cause output to rise.

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

If the unemployment rate is above its natural rate,then ________.

An autonomous increase in net exports for any given inflation rate ________.

The aggregate demand curve shifts to the right when there is ________.

Picture an economy that is in general equilibrium.What would happen if the natural rate of unemployment were to experience an increase?

The Volcker Disinflation (1980-1986)was costly in terms of output and unemployment.Would it not have been better to reduce inflation with a positive supply shock,rather than a negative demand shock?

According to the "self-correcting mechanism" in the AD-AS framework,________.

By the time Paul Volcker took office as the new Federal Reserve chairman in 1979,the inflation rate exceeded 10%.By 1982 the unemployment rate soared to 9.7% and inflation was cut to 6.2%.By the end of 1986 the unemployment rate was brought down to 7% and the inflation rate was brought further down to 1.9%.Which of the following is an appropriate description of the mechanism behind the Volcker Disinflation?

Suppose that households and businesses increase autonomous expenditures,driving output well above potential.Describe,in detail,how monetary policy might react to minimize the increase in inflation.

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

If a new government adopted some ill-advised regulations causing the economy to be less efficient ________.

If the unemployment rate is above its natural rate,then ________.

If the adoption of a new technology led to gains in productivity ________.

Suppose there is a temporary supply shock because of a war in the Middle East,then ________.