Exam 9: Introduction to Economic Fluctuations

The long run refers to a period:

Stabilization policy:

If Central Bank A cares only about keeping the price level stable and Central Bank B cares only about keeping output at its natural level,then in response to an exogenous decrease in the velocity of money:

In the short run an adverse supply shock causes:

Most economists believe that prices are:

If the short-run aggregate supply curve is horizontal,an increase in union aggressiveness that pushes wages and prices up will result in ______ prices and ______ output in the short run.

Assume that the long-run aggregate supply curve is vertical at Y = 3,000 while the short-run aggregate supply curve is horizontal at P = 1.0.The aggregate demand curve is Y = 2(M/P)and M = 1,500.a.If the economy is initially in long-run equilibrium,what are the values of P and Y? b.If M increases to 2,000,what are the new short-run values of P and Y? c.Once the economy adjusts to long-run equilibrium at M = 2,000,what are P and Y?

Aggregate supply is the relationship between the quantity of goods and services supplied and the:

The assumption of constant velocity in the quantity equation is the equivalent of the assumption of a constant:

The long-run aggregate supply curve is vertical at the level of output:

If the short-run aggregate supply curve is horizontal,and,if each member of the general public chooses to hold a larger fraction of his or her income as cash balances,then:

When an aggregate demand curve is drawn with real GDP (Y)along the horizontal axis and the price level (P)along the vertical axis,if the money supply is decreased,then the aggregate demand curve will shift:

The price level decreases and output increases in the transition from the short run to the long run when the short-run equilibrium is ______ the natural rate of output in the short run.

An adverse supply shock ______ the short-run aggregate supply curve ______ the natural level of output.

Long-run growth in real GDP is determined primarily by ______,while short-run movements in real GDP are associated with ______.

The short-run aggregate supply curve is horizontal at:

Monetary policy can be either a stabilizing influence on the economy or a source of instability.Give an explanation for both possibilities.

On two occasions in the 1970s:

Starting from long-run equilibrium,if the velocity of money increases (due to,for example,the invention of automatic teller machines),the Bank of Canada might be able to stabilize output by:

When the Bank of Canada reduces the money supply,at a given price level the amount of output demanded is ______ and the aggregate demand curve shifts ______.