Exam 12: The Aggregate Demand and Supply Model

By the time Paul Volcker took office as the new Federal Reserve chairman in 1979,the inflation rate exceeded 10%.By the end of 1986 the inflation rate had been brought down to 1.9%.Which of the following is true about the Volcker Disinflation?

Which equation is a plausible aggregate demand curve?

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

12.2 Equilibrium in Aggregate Demand and Supply Analysis AD - AS Equilibrium -On the graph above,if inflation is rising,while the quantity demanded and output are rising,the economy may be at a point on ________.

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?

The March 2000 "tech bubble" burst caused the aggregate demand curve to shift to the left by ________.

The aggregate demand curve has a negative slope,because households and businesses respond to an increase in ________ by reducing their expenditures.

The assumption that in the long run prices and wages are fully flexible implies that the long-run aggregate supply curve is determined by ________.

A change in the output gap is likely to lead to ________.

Consider an economy in a long-run equilibrium with Y = 40 and π = 3.A demand shock in period one causes output to rise to 45 and inflation rises to 4.Then,the updating of expected inflation to equal 4 causes output in period two to decline to 43.85,and inflation to rise to 4.77.Assuming no further shocks,calculate the values of output and inflation for period three.