Exam 13: Policy Effects and Costs Shocks in the Asad Model

Fiscal policy affects the goods market through

In a binding situation,an increase in government spending

An earthquake destroyed 50% of the Moldovian manufacturing base.The Moldovian government decided to use a contractionary fiscal policy to counter the effects of the earthquake on the economy.The use of the contractionary fiscal policy would have caused

With a cost shock,a large decrease in output relative to the increase in the price level would occur if the ________ curve is relatively ________.

The objective of a contractionary fiscal policy is to

For an economy to experience both a recession and inflation at the same time,

Economic policies are ineffective concerning quantities of output directly when

If a decrease in net taxes in the United States resulted in a very large increase in aggregate output and a very small increase in the price level,then the U.S.economy must have been

If wages adjust fully to price increases,fiscal policy will have no effect on output in the long run.

The Fed will raise the interest rate by the greatest amount when the economy is on the ________ part of the AS curve and there is ________.

When the economy is near capacity,the Fed would lower the interest rate in response to an increase in government spending.

Refer to the information provided in Figure 13.1 below to answer the questions that follow. Figure 13.1 -Refer to Figure 13.1.An aggregate demand shift from AD¹ to AD⁰ can be caused by

Refer to the information provided in Figure 13.1 below to answer the questions that follow. Figure 13.1 -Refer to Figure 13.1.Suppose the economy is at Point A an increase in government purchases can cause a movement to Point

Refer to the information provided in Figure 13.3 below to answer the questions that follow. Figure 13.3 -Refer to Figure 13.3.Assume the economy is currently at Point A on aggregate supply curve AS₁.An increase in inflationary expectations that causes firms to increase their prices

Refer to the information provided in Figure 13.2 below to answer the questions that follow. Figure 13.2 -Refer to Figure 13.2.The tax multiplier is smallest (in absolute value)when the aggregate demand curve shifts from

Expectations of higher future prices cause firms to lower prices today to sell their product before prices rise.

A(n)________ in inflationary expectations that causes firms to decrease their prices shifts the aggregate supply curve to the ________.

In a binding situation,an increase in the Z factors

If the Fed has a strong preference for stable prices relative to output,the ________ curve is relatively ________.

A decrease in the Z factors represents an easing of monetary policy.