Question 1

When the AD curve is relatively flat, the Fed

Accepted Answer

A)  is only willing to accept small changes in output to keep the price level stable. 
B)  is willing to accept large changes in the price level to keep output stable. 
C)  is not willing to accept any changes in output to keep the price level stable. 
D)  is willing to accept large changes in output to keep the price level stable. 
A)  is only willing to accept small changes in output to keep the price level stable. 
B)  is willing to accept large changes in the price level to keep output stable. 
C)  is not willing to accept any changes in output to keep the price level stable. 
D)  is willing to accept large changes in output to keep the price level stable.

Question 2

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 3

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 4

An increase in net taxation increases aggregate supply.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

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

Question 6

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 an increase in government spending 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 7

A cost shock, such as a natural disaster, leads to stagflation.

Accepted Answer

A) True 
 B)False

Question 8

Since 1970, the United States experienced stagflation

Accepted Answer

A)  during all five recessionary periods. 
B)  during none of the five recessionary periods. 
C)  only during the first two recessionary periods. 
D)  only during the most recent recessionary period. 
A)  during all five recessionary periods. 
B)  during none of the five recessionary periods. 
C)  only during the first two recessionary periods. 
D)  only during the most recent recessionary period.

Question 9

Fiscal policy affects the goods market through

Accepted Answer

A)  changes in money supply. 
B)  changes in taxes and money supply. 
C)  changes in government spending and money supply. 
D)  changes in taxes and government spending. 
A)  changes in money supply. 
B)  changes in taxes and money supply. 
C)  changes in government spending and money supply. 
D)  changes in taxes and government spending.

Question 10

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

Accepted Answer

A)  an increase in interest rates. 
B)  an increase in the price level. 
C)  a decrease in the unemployment rate. 
D)  a decrease in the level of aggregate output. 
A)  an increase in interest rates. 
B)  an increase in the price level. 
C)  a decrease in the unemployment rate. 
D)  a decrease in the level of aggregate output.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

When the economy is not producing at capacity, economic policies are

Accepted Answer

A)  effective at changing output. 
B)  ineffective at changing output. 
C)  unrelated to output. 
D)  none of the above 
A)  effective at changing output. 
B)  ineffective at changing output. 
C)  unrelated to output. 
D)  none of the above

Question 13

An increase in the interest rate represents an easing of monetary policy.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

If equilibria below potential output are self-correcting, the economy will spend a great deal of time on the horizontal part of the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is an example of an expansionary fiscal policy?

Accepted Answer

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

Question 17

An intended goal of expansionary fiscal policy and an easing of monetary policy is

Accepted Answer

A)  an increase in interest rates. 
B)  an increase in the price level. 
C)  the equalization of the distribution of income. 
D)  an increase in the level of aggregate output. 
A)  an increase in interest rates. 
B)  an increase in the price level. 
C)  the equalization of the distribution of income. 
D)  an increase in the level of aggregate output.

Question 18

Expansionary economic policies are things the government can do to decrease aggregate demand or aggregate supply.

Accepted Answer

A) True 
 B)False

Question 19

12.3 Shocks to the System
Refer to the information provided in Figure 12.3 below to answer the questions that follow.   Figure 12.3
-Refer to Figure 12.3. Assume the economy is at Point A. Lower oil prices shift the aggregate supply curve to AS0. If the government decides to counter the effects of lower oil prices by decreasing net taxes, then the price level will be ________ than P0 and output will be ________ than Y0.

Accepted Answer

A)  greater; greater 
B)  greater; less 
C)  less; less 
D)  less; greater 
A)  greater; greater 
B)  greater; less 
C)  less; less 
D)  less; greater

Question 20

Refer to the information provided in Figure 12.2 below to answer the questions that follow.   Figure 12.2
-Refer to Figure 12.2. An expansionary fiscal policy would be least 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.

When the AD curve is relatively flat, the Fed

In a binding situation,an increase in net taxes

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

An increase in net taxation increases aggregate supply.

A(n) in inflationary expectations that causes firms to increase 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. Firms respond to an increase in government spending by mostly raising their prices when the aggregate demand curve shifts from

A cost shock, such as a natural disaster, leads to stagflation.

Since 1970, the United States experienced stagflation

Fiscal policy affects the goods market through

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

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

When the economy is not producing at capacity, economic policies are

An increase in the interest rate represents an easing of monetary policy.

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

If equilibria below potential output are self-correcting, the economy will spend a great deal of time on the horizontal part of the aggregate supply curve.

Which of the following is an example of an expansionary fiscal policy?

An intended goal of expansionary fiscal policy and an easing of monetary policy is

Expansionary economic policies are things the government can do to decrease aggregate demand or aggregate supply.

Refer to the information provided in Figure 12.2 below to answer the questions that follow. Figure 12.2 -Refer to Figure 12.2. An expansionary fiscal policy would be least effective in raising output with little or no inflation when the aggregate demand curve shifts from

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

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

When the AD curve is relatively flat, the Fed

In a binding situation,an increase in net taxes

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

An increase in net taxation increases aggregate supply.

A(n) ________ in inflationary expectations that causes firms to increase 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. Firms respond to an increase in government spending by mostly raising their prices when the aggregate demand curve shifts from

A cost shock, such as a natural disaster, leads to stagflation.

Since 1970, the United States experienced stagflation

Fiscal policy affects the goods market through

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

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

When the economy is not producing at capacity, economic policies are

An increase in the interest rate represents an easing of monetary policy.

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

If equilibria below potential output are self-correcting, the economy will spend a great deal of time on the horizontal part of the aggregate supply curve.

Which of the following is an example of an expansionary fiscal policy?

An intended goal of expansionary fiscal policy and an easing of monetary policy is

Expansionary economic policies are things the government can do to decrease aggregate demand or aggregate supply.

Refer to the information provided in Figure 12.2 below to answer the questions that follow. Figure 12.2 -Refer to Figure 12.2. An expansionary fiscal policy would be least effective in raising output with little or no inflation when the aggregate demand curve shifts from

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 increase their prices shifts the aggregate supply curve to the .