Question 1

When the AD curve is vertical,

Accepted Answer

A) fiscal policy can be used to increase output. 
B) monetary policy can be used to increase output. 
C) both fiscal policy and monetary policy can be used to increase output. 
D) neither fiscal policy nor monetary policy can be used to increase output. 
A) fiscal policy can be used to increase output. 
B) monetary policy can be used to increase output. 
C) both fiscal policy and monetary policy can be used to increase output. 
D) neither fiscal policy nor monetary policy can be used to increase output.

Question 2

In a binding situation,

Accepted Answer

A) planned investment increases when the price level decreases. 
B) output increases when the price level decreases. 
C) planned investment and output both increase when the price level decreases. 
D) neither planned investment nor output change when the price level decreases. 
A) planned investment increases when the price level decreases. 
B) output increases when the price level decreases. 
C) planned investment and output both increase when the price level decreases. 
D) neither planned investment nor output change when the price level decreases.

Question 3

Since 1970,the United States has experienced ________ recessionary periods and ________ inflationary periods.

Accepted Answer

A) 3; 0 
B) 2; 4 
C) 8; 1 
D) 5; 2 
A) 3; 0 
B) 2; 4 
C) 8; 1 
D) 5; 2

Question 4

Demand-pull inflation is initiated by an increase in aggregate demand.

Accepted Answer

A) True 
 B)False

Question 5

If the economy is on the steep part of its aggregate supply curve,expansionary policy will mostly increase the price level.

Accepted Answer

A) True 
 B)False

Question 6

Demand-pull inflation can be the result of

Accepted Answer

A) a decrease in government spending. 
B) an increase in net taxes. 
C) a decrease in the Z factors. 
D) all of the above 
A) a decrease in government spending. 
B) an increase in net taxes. 
C) a decrease in the Z factors. 
D) all of the above

Question 7

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,a decrease in the price level can cause a movement to Point

Accepted Answer

A) E. 
B) B. 
C) C. 
D) D. 
A) E. 
B) B. 
C) C. 
D) D.

Question 8

The economy is in a binding situation when the Fed rule calls for a very high interest rate.

Accepted Answer

A) True 
 B)False

Question 9

An increase in AD will primarily increase output when the economy is on the flat part of the AS curve.

Accepted Answer

A) True 
 B)False

Question 10

In a binding situation,the interest rate is always zero.

Accepted Answer

A) True 
 B)False

Question 11

In a binding situation,

Accepted Answer

A) only changes in the price level change the interest rate. 
B) only changes in the Z factors change the interest rate. 
C) changes in both the price level and in the Z factors change the interest rate. 
D) the interest rate is always zero. 
A) only changes in the price level change the interest rate. 
B) only changes in the Z factors change the interest rate. 
C) changes in both the price level and in the Z factors change the interest rate. 
D) the interest rate is always zero.

Question 12

A decrease in net taxes at a given price level leads to

Accepted Answer

A) no change in aggregate demand. 
B) an increase in aggregate demand. 
C) a decrease in aggregate demand. 
D) a decrease in aggregate supply. 
A) no change in aggregate demand. 
B) an increase in aggregate demand. 
C) a decrease in aggregate demand. 
D) a decrease in aggregate supply.

Question 13

Refer to the information provided in Figure 13.2 below to answer the questions that follow.
   Figure 13.2
-Refer to Figure 13.2.An expansionary fiscal policy would be most effective in raising output with little or no inflation when the aggregate demand curve shifts from

Accepted Answer

A) AD1 to AD2. 
B) AD3 to AD4. 
C) AD5 to AD6. 
D) AD1 to AD6. 
A) AD1 to AD2. 
B) AD3 to AD4. 
C) AD5 to AD6. 
D) AD1 to AD6.

Question 14

In a binding situation,an increase in net taxes

Accepted Answer

A) shifts the AD curve to the right. 
B) shifts the AD curve to the left. 
C) does not shift the AD curve. 
D) causes the AD curve to become horizontal. 
A) shifts the AD curve to the right. 
B) shifts the AD curve to the left. 
C) does not shift the AD curve. 
D) causes the AD curve to become horizontal.

Question 15

If a decrease in the Z factors resulted in a very large change in the price level and a very small change in aggregate output,

Accepted Answer

A) then in the U.S.economy investment demand must not be sensitive to the interest rate. 
B) then the U.S.economy must have been on the very steep part of its short-run aggregate supply curve. 
C) then the U.S.economy must have been on the very flat part of its short-run aggregate supply curve. 
D) then the U.S.aggregate demand curve must be very steep. 
A) then in the U.S.economy investment demand must not be sensitive to the interest rate. 
B) then the U.S.economy must have been on the very steep part of its short-run aggregate supply curve. 
C) then the U.S.economy must have been on the very flat part of its short-run aggregate supply curve. 
D) then the U.S.aggregate demand curve must be very steep.

Question 16

If the Fed has a strong preference for stable prices relative to output,it responds to a price ________ with a ________ increase in the interest rate.

Accepted Answer

A) increase; large 
B) increase; small 
C) decrease; large 
D) decrease; small 
A) increase; large 
B) increase; small 
C) decrease; large 
D) decrease; small

Question 17

Aggregate demand increases if

Accepted Answer

A) the government decreases spending. 
B) the Fed sells government bonds. 
C) the government decreases taxes. 
D) the Fed increases the required reserve ratio. 
A) the government decreases spending. 
B) the Fed sells government bonds. 
C) the government decreases taxes. 
D) the Fed increases the required reserve ratio.

Question 18

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 AD2 to AD0 can be caused by

Accepted Answer

A) a decrease in the price level. 
B) an increase in the price level. 
C) a decrease in taxes. 
D) a decrease in money supply. 
A) a decrease in the price level. 
B) an increase in the price level. 
C) a decrease in taxes. 
D) a decrease in money supply.

Question 19

In a binding situation,there is ________ crowding out of planned investment when government spending increases.

Accepted Answer

A) complete 
B) partial 
C) no 
D) negative 
A) complete 
B) partial 
C) no 
D) negative

Question 20

A decrease in net taxes will result in consumption crowding out planned investment when the economy is on the steep part of the AS curve.

Accepted Answer

A) True 
 B)False

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

When the AD curve is vertical,

In a binding situation,

Since 1970,the United States has experienced ________ recessionary periods and ________ inflationary periods.

Demand-pull inflation is initiated by an increase in aggregate demand.

If the economy is on the steep part of its aggregate supply curve,expansionary policy will mostly increase the price level.

Demand-pull inflation can be the result of

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,a decrease in the price level can cause a movement to Point

The economy is in a binding situation when the Fed rule calls for a very high interest rate.

An increase in AD will primarily increase output when the economy is on the flat part of the AS curve.

In a binding situation,the interest rate is always zero.

In a binding situation,

A decrease in net taxes at a given price level leads to

Refer to the information provided in Figure 13.2 below to answer the questions that follow. Figure 13.2 -Refer to Figure 13.2.An expansionary fiscal policy would be most effective in raising output with little or no inflation when the aggregate demand curve shifts from

In a binding situation,an increase in net taxes

If a decrease in the Z factors resulted in a very large change in the price level and a very small change in aggregate output,

If the Fed has a strong preference for stable prices relative to output,it responds to a price ________ with a ________ increase in the interest rate.

Aggregate demand increases if

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 AD2 to AD0 can be caused by

In a binding situation,there is ________ crowding out of planned investment when government spending increases.

A decrease in net taxes will result in consumption crowding out planned investment when the economy is on the steep part of the AS curve.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand,supply,and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment,inflation,and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Money Supply and the Federal Reserve System

Money Demand and the Equilibrium Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

The Labor Market in the Macroeconomy

Financial Crises, stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing and Transitional Economies

Filters

Since 1970,the United States has experienced recessionary periods and inflationary periods.

If the Fed has a strong preference for stable prices relative to output,it responds to a price with a increase in the interest rate.

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 AD² to AD⁰ can be caused by