Question 1

Which of the following is an example of a contractionary fiscal policy?

Accepted Answer

A)  the Fed buying government securities in the open market 
B)  the federal government decreasing the marginal tax rate on incomes below $200,000 
C)  the federal government decreasing the amount of money spent on public health programs 
D)  the federal government reducing pollution standards to allow firms to produce more output 
A)  the Fed buying government securities in the open market 
B)  the federal government decreasing the marginal tax rate on incomes below $200,000 
C)  the federal government decreasing the amount of money spent on public health programs 
D)  the federal government reducing pollution standards to allow firms to produce more output

Question 2

A decrease in the Z factors shifts the aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 3

Refer to the information provided in Figure 12.1 below to answer the questions that follow.   Figure 12.1
-Refer to Figure 12.1. Suppose the economy is at Point A. An increase in taxes 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 4

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 5

An economic condition characterized by high unemployment and excessive inflation is called

Accepted Answer

A)  stagflation. 
B)  recessionary downturn. 
C)  expansionary growth. 
D)  depression. 
A)  stagflation. 
B)  recessionary downturn. 
C)  expansionary growth. 
D)  depression.

Question 6

In a binding situation,the Fed has no way to raise or lower the interest rate.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A)  increase; right 
B)  increase; left 
C)  decrease; right 
D)  decrease; left 
A)  increase; right 
B)  increase; left 
C)  decrease; right 
D)  decrease; left

Question 8

Refer to the information provided in Figure 12.2 below to answer the questions that follow.   Figure 12.2
-Refer to Figure 12.2. The output multiplier is largest when the aggregate demand curve shifts from

Accepted Answer

A)  AD1 to AD2. 
B)  AD3 to AD4. 
C)  AD5 to AD6. 
D)  The output multiplier is the same for all AD curve shifts shown in the figure. 
A)  AD1 to AD2. 
B)  AD3 to AD4. 
C)  AD5 to AD6. 
D)  The output multiplier is the same for all AD curve shifts shown in the figure.

Question 9

Refer to the information provided in Figure 12.2 below to answer the questions that follow.   Figure 12.2
-Refer to Figure 12.2. Firms respond to a decrease in net taxes by mostly raising their prices when the aggregate demand curve shifts from

Accepted Answer

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

Question 10

A rightward shift in the aggregate demand curve generates a ________ inflation and ________ output.

Accepted Answer

A)  demand-pull; lower 
B)  cost-push; higher 
C)  demand-pull; higher 
D)  cost-push; lower 
A)  demand-pull; lower 
B)  cost-push; higher 
C)  demand-pull; higher 
D)  cost-push; lower

Question 11

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 12

Refer to the information provided in Figure 12.1 below to answer the questions that follow.   Figure 12.1
-Refer to Figure 12.1. Suppose the economy is at Point A an increase in government purchases 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 13

Refer to the information provided in Figure 12.1 below to answer the questions that follow.   Figure 12.1
-Refer to Figure 12.1. An aggregate demand shift from AD1 to AD0 can be caused by

Accepted Answer

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

Question 14

When analyzing the effects of cost shocks, the shape of the aggregate demand curve is irrelevant.

Accepted Answer

A) True 
 B)False

Question 15

Refer to the information provided in Figure 12.4 below to answer the questions that follow.   Figure 12.4
-Refer to Figure 12.4. Higher price levels coupled with lower output are the result of

Accepted Answer

A)  deflation. 
B)  stagflation. 
C)  economic growth. 
D)  deflationary growth. 
A)  deflation. 
B)  stagflation. 
C)  economic growth. 
D)  deflationary growth.

Question 16

Refer to the information provided in Figure 12.4 below to answer the questions that follow.   Figure 12.4
-Refer to Figure 12.4. Stagflation would cause

Accepted Answer

A)  a higher price level and lower output. 
B)  a higher price level and higher output. 
C)  a lower price level and lower output. 
D)  a lower price level and higher output. 
A)  a higher price level and lower output. 
B)  a higher price level and higher output. 
C)  a lower price level and lower output. 
D)  a lower price level and higher output.

Question 17

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

Question 18

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

Accepted Answer

A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower 
A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower

Question 19

Refer to the information provided in Figure 12.2 below to answer the questions that follow.   Figure 12.2
-Refer to Figure 12.2. In response to a decrease in net taxes, the Fed would increase the interest rate by the least amount 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 20

Inflation due to an increase in aggregate supply is called cost-push inflation.

Accepted Answer

A) True 
 B)False

Exam 12: Policy Effects and Cost Shocks in the Asad Model

Which of the following is an example of a contractionary fiscal policy?

A decrease in the Z factors shifts the aggregate demand curve to the left.

Refer to the information provided in Figure 12.1 below to answer the questions that follow. Figure 12.1 -Refer to Figure 12.1. Suppose the economy is at Point A. An increase in taxes can cause a movement to Point

In a binding situation,

An economic condition characterized by high unemployment and excessive inflation is called

In a binding situation,the Fed has no way to raise or lower the interest rate.

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

Refer to the information provided in Figure 12.2 below to answer the questions that follow. Figure 12.2 -Refer to Figure 12.2. The output multiplier is largest when the aggregate demand curve shifts from

Refer to the information provided in Figure 12.2 below to answer the questions that follow. Figure 12.2 -Refer to Figure 12.2. Firms respond to a decrease in net taxes by mostly raising their prices when the aggregate demand curve shifts from

A rightward shift in the aggregate demand curve generates a ________ inflation and ________ output.

When the AD curve is vertical,

Refer to the information provided in Figure 12.1 below to answer the questions that follow. Figure 12.1 -Refer to Figure 12.1. 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 12.1 below to answer the questions that follow. Figure 12.1 -Refer to Figure 12.1. An aggregate demand shift from AD1 to AD0 can be caused by

When analyzing the effects of cost shocks, the shape of the aggregate demand curve is irrelevant.

Refer to the information provided in Figure 12.4 below to answer the questions that follow. Figure 12.4 -Refer to Figure 12.4. Higher price levels coupled with lower output are the result of

Refer to the information provided in Figure 12.4 below to answer the questions that follow. Figure 12.4 -Refer to Figure 12.4. Stagflation would cause

An increase in net taxes at a given price level leads to

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

Refer to the information provided in Figure 12.2 below to answer the questions that follow. Figure 12.2 -Refer to Figure 12.2. In response to a decrease in net taxes, the Fed would increase the interest rate by the least amount when the aggregate demand curve shifts from

Inflation due to an increase in aggregate supply is called cost-push inflation.

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

Money, the Federal Reserve, and the 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 Economies

Critical Thinking About Research

Filters

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

A rightward shift in the aggregate demand curve generates a inflation and output.

Refer to the information provided in Figure 12.1 below to answer the questions that follow. Figure 12.1 -Refer to Figure 12.1. 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.