Question 1

In a binding situation, changes in government spending do not shift the AD curve.

Accepted Answer

A) True 
 B)False

Question 2

If the long-run aggregate supply curve is vertical, the ________ a change in net taxes on aggregate output in the long run is zero.

Accepted Answer

A)  absolute value of 
B)  additional tax revenue resulting from 
C)  multiplier effect of 
D)  change in government spending based on 
A)  absolute value of 
B)  additional tax revenue resulting from 
C)  multiplier effect of 
D)  change in government spending based on

Question 3

A decrease in the Z factors represents an easing of monetary policy.

Accepted Answer

A) True 
 B)False

Question 4

Rising output coupled with falling prices is called stagflation.

Accepted Answer

A) True 
 B)False

Question 5

The views of the new classical economists are consistent with a vertical aggregate supply curve in both the short run and the long run.

Accepted Answer

A) True 
 B)False

Question 6

An increase in the Z factors represents

Accepted Answer

A)  a tightening of monetary policy. 
B)  an easing of monetary policy. 
C)  an expansionary fiscal policy. 
D)  a contractionary fiscal policy. 
A)  a tightening of monetary policy. 
B)  an easing of monetary policy. 
C)  an expansionary fiscal policy. 
D)  a contractionary fiscal policy.

Question 7

Related to the Economics in Practice on p. 238: An earthquake destroyed 50% of the Moldovian manufacturing base. The Moldovian government decided to use a contractionary fiscal policy to counter the effects of the earthquake on the economy. The use of the contractionary fiscal policy would have caused

Accepted Answer

A)  the price level to be lower and the output level to be higher than they would have been without the policy action. 
B)  both the price level and the output level to be higher than they would have been without the policy action. 
C)  both the price level and output level to be lower than what they would have been without the policy action. 
D)  the price level to be higher and the output level to be lower than they would have been without the policy action. 
A)  the price level to be lower and the output level to be higher than they would have been without the policy action. 
B)  both the price level and the output level to be higher than they would have been without the policy action. 
C)  both the price level and output level to be lower than what they would have been without the policy action. 
D)  the price level to be higher and the output level to be lower than they would have been without the policy action.

Question 8

Refer to the information provided in Figure 12.4 below to answer the questions that follow.   Figure 12.4
-Refer to Figure 12.4. If the economy is currently at the intersection of AS and AD, a decrease in AS with no change in AD will cause

Accepted Answer

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

Question 9

In a binding situation,an increase in government spending

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 10

In a binding situation,an increase in the Z factors

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 11

An increase in AD will primarily increase the price level when the economy is on the steep part of the AS curve.

Accepted Answer

A) True 
 B)False

Question 12

An increase in government spending will completely crowd out investment if

Accepted Answer

A)  money supply is increased at the same time. 
B)  money demand is not sensitive to the interest rate. 
C)  the economy is operating at capacity. 
D)  the economy is operating well below capacity. 
A)  money supply is increased at the same time. 
B)  money demand is not sensitive to the interest rate. 
C)  the economy is operating at capacity. 
D)  the economy is operating well below capacity.

Question 13

A sudden increase in the price of oil causes 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 14

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, a decrease 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 15

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. 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.

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 16

When aggregate supply is vertical, economic policies concerning output are

Accepted Answer

A)  largely effective. 
B)  marginally effective. 
C)  ineffective. 
D)  completely effective. 
A)  largely effective. 
B)  marginally effective. 
C)  ineffective. 
D)  completely effective.

Question 17

In a binding situation, there is ________ crowding out of planned investment when net taxes decrease.

Accepted Answer

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

Question 18

If the Fed has a strong preference for stable prices relative to output, it responds to a price ________ with a ________ decrease 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 19

With a cost shock, a small decrease in output relative to the increase in the price level would occur if the ________ curve is relatively ________.

Accepted Answer

A)  AS; flat 
B)  AS; steep 
C)  AD; flat 
D)  AD; steep 
A)  AS; flat 
B)  AS; steep 
C)  AD; flat 
D)  AD; steep

Question 20

When analyzing the effects of ________, what primarily matters is the shape of the AD curve.

Accepted Answer

A)  government spending 
B)  net taxes 
C)  the Z factors 
D)  cost shocks 
A)  government spending 
B)  net taxes 
C)  the Z factors 
D)  cost shocks

In a binding situation, changes in government spending do not shift the AD curve.

If the long-run aggregate supply curve is vertical, the ________ a change in net taxes on aggregate output in the long run is zero.

A decrease in the Z factors represents an easing of monetary policy.

Rising output coupled with falling prices is called stagflation.

The views of the new classical economists are consistent with a vertical aggregate supply curve in both the short run and the long run.

An increase in the Z factors represents

Refer to the information provided in Figure 12.4 below to answer the questions that follow. Figure 12.4 -Refer to Figure 12.4. If the economy is currently at the intersection of AS and AD, a decrease in AS with no change in AD will cause

In a binding situation,an increase in government spending

In a binding situation,an increase in the Z factors

An increase in AD will primarily increase the price level when the economy is on the steep part of the AS curve.

An increase in government spending will completely crowd out investment if

A sudden increase in the price of oil causes 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. Suppose the economy is at Point A, a decrease in taxes can cause a movement to Point

When aggregate supply is vertical, economic policies concerning output are

In a binding situation, there is ________ crowding out of planned investment when net taxes decrease.

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

With a cost shock, a small decrease in output relative to the increase in the price level would occur if the curve is relatively .

When analyzing the effects of ________, what primarily matters is the shape of the AD 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

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

In a binding situation, changes in government spending do not shift the AD curve.

If the long-run aggregate supply curve is vertical, the ________ a change in net taxes on aggregate output in the long run is zero.

A decrease in the Z factors represents an easing of monetary policy.

Rising output coupled with falling prices is called stagflation.

The views of the new classical economists are consistent with a vertical aggregate supply curve in both the short run and the long run.

An increase in the Z factors represents

Refer to the information provided in Figure 12.4 below to answer the questions that follow. Figure 12.4 -Refer to Figure 12.4. If the economy is currently at the intersection of AS and AD, a decrease in AS with no change in AD will cause

In a binding situation,an increase in government spending

In a binding situation,an increase in the Z factors

An increase in AD will primarily increase the price level when the economy is on the steep part of the AS curve.

An increase in government spending will completely crowd out investment if

A sudden increase in the price of oil causes 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. Suppose the economy is at Point A, a decrease in taxes can cause a movement to Point

When aggregate supply is vertical, economic policies concerning output are

In a binding situation, there is ________ crowding out of planned investment when net taxes decrease.

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

With a cost shock, a small decrease in output relative to the increase in the price level would occur if the ________ curve is relatively ________.

When analyzing the effects of ________, what primarily matters is the shape of the AD 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

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 sudden increase in the price of oil causes a inflation and output.

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

With a cost shock, a small decrease in output relative to the increase in the price level would occur if the curve is relatively .