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

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 output multiplier is largest when the aggregate demand curve shifts from

Since 1970,the Fed generally ________ the interest rate when inflation was ________.

Since the end of 2008,there has been a zero interest rate bound in the U.S.economy.

The aggregate demand curve would shift to the left if

If the economy is on the flat portion of the AS curve,

Refer to the information provided in Figure 13.2 below to answer the questions that follow. Figure 13.2 -Refer to Figure 13.2.In response to an increase in government spending,the Fed would increase the interest rate by the greatest amount when the aggregate demand curve shifts from

In a binding situation,an increase in government spending

In a binding situation,a positive cost shock will cause ________ in output and ________ in the price level.

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

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

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

Economic policies are effective at changing output when

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

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

In a binding situation,

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 at Point A.Higher oil prices shift the aggregate supply curve to AS2.If the government decides to counter the effects of higher oil prices by increasing government spending,then the price level will be ________ than P2 and output will be ________ than Y2.

A binding situation occurred during the recession of

The objective of an expansionary fiscal policy is to

An increase in inflationary expectations that causes firms to increase their prices shifts the

If the long-run aggregate supply curve is vertical,the multiplier effect of a change in net taxes on aggregate output in the long run