Exam 13: Spending and Output in the Short Run

Starting from potential output, if firms become more optimistic about the future and decide to increase their investment in new capital, then this will shift the ______ curve to the right and generate ______.

The tendency for inflation to change relatively slowly from year to year in industrial countries is called:

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

Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ______ gap in the short-run and ____ inflation and ____ output in the long-run

If the interest rate in the U.S. falls, U.S. financial assets become ______ attractive to buyers and the ______ U.S. dollars will fall.

For a given inflation rate, if a rise in the stock market makes consumers more willing to spend, then the ______ shifts _____.

Due to menu costs, many firms in the economy will increase their output:

An increase in the interest rate directly affects ______, but also has an indirect effect on ______ because of its effect on exchange rates.

When the economy is in short-run equilibrium, there will be ______ output gap.

When actual output equals potential output and the inflation rate is equal to the expected rate of inflation, the economy is said to be in ______ equilibrium.

The AD curve slopes downward because an increase in ______ causes ______ to fall, which in turn causes real GDP to fall.

When actual output is less than potential output, there is ____ output gap and the rate of inflation will tend to ____.

Technological improvements:

For a given inflation rate, if concerns about future weakness in the economy cause businesses to reduce their spending on new capital, then the ______ shifts _____.

When actual output exceeds potential output there is ____ output gap and the rate of inflation will tend to ____.

Starting from potential output, if consumer confidence decreases and consumers decide to spend less, then this will shift the ______ curve to the left and generate ______.

As the quality of available resources becomes worse:

A negative demand shock will shift the ______ curve to the ______.

Inflation inertia is the tendency for inflation to:

Inflation inertia is the result of the behavior of ____ and the existence of ______.