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

An increase in aggregate demand causes stagflation.

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

Cost-push inflation corresponds to ________ output and demand-pull inflation corresponds to ________ output.

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

In a binding situation,a positive cost shock decreases output.

Decreases in net taxes,increases in the Z factors,and increases in government spending are contractionary policies.

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

Aggregate demand increases if

Refer to the information provided in Figure 13.3 below to answer the questions that follow. Figure 13.3 -Refer to Figure 13.3.Cost-push inflation occurs if

Aggregate demand increases if

Refer to the information provided in Figure 13.4 below to answer the questions that follow. Figure 13.4 -Refer to Figure 13.4.Stagflation would cause

An intended goal of contractionary fiscal policy and a tightening of monetary policy is

In a binding situation,an increase in the Z factors

The objective of a contractionary fiscal policy is to

When analyzing the effects of cost shocks,what primarily matters is the shape of

Other things equal,a decrease in the Z factors will ________ the equilibrium price level and ________ equilibrium output.

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

If wages adjust fully to price increases in the long run,fiscal policy will

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

Other things equal,cost-push inflation results in output ________ and the price level ________.