Question 1

A cost shock, such as a natural disaster, shifts the aggregate supply curve to the left.

Accepted Answer

A) True 
 B)False

Question 2

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 the price level 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 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, a decrease 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 4

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 increasing output 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 5

There is evidence that the Fed, under chairman Ben Bernanke, engaged in inflation targeting.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)  have no affect on the price level. 
B)  have no affect on output. 
C)  have no affect on either output or the price level. 
D)  affect both output and the price level. 
A)  have no affect on the price level. 
B)  have no affect on output. 
C)  have no affect on either output or the price level. 
D)  affect both output and the price level.

Question 7

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 not be caused by a

Accepted Answer

A)  decrease in AS. 
B)  higher price level with lower output. 
C)  higher price level with higher unemployment. 
D)  shift to the right of AD. 
A)  decrease in AS. 
B)  higher price level with lower output. 
C)  higher price level with higher unemployment. 
D)  shift to the right of AD.

Question 8

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 AD2 to AD1 can be caused by

Accepted Answer

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

Question 9

Economic policies are ineffective concerning quantities of output directly when

Accepted Answer

A)  the aggregate supply curve is flat. 
B)  the aggregate demand is flat. 
C)  the aggregate supply is vertical. 
D)  the economy is not producing at capacity. 
A)  the aggregate supply curve is flat. 
B)  the aggregate demand is flat. 
C)  the aggregate supply is vertical. 
D)  the economy is not producing at capacity.

Question 10

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

Accepted Answer

A)  3; 0 
B)  2; 4 
C)  8; 1 
D)  5; 2 
A)  3; 0 
B)  2; 4 
C)  8; 1 
D)  5; 2

Question 11

If wages adjust fully to price increases in the long run, the full effect of fiscal policy is on

Accepted Answer

A)  output. 
B)  the price level. 
C)  both output and the price level. 
D)  neither output nor the price level. 
A)  output. 
B)  the price level. 
C)  both output and the price level. 
D)  neither output nor the price level.

Question 12

During the recession of 1980-1982, the Fed raised the interest rate to fight inflation.

Accepted Answer

A) True 
 B)False

Question 13

Supply-side inflation is caused by increases in aggregate supply.

Accepted Answer

A) True 
 B)False

Question 14

A demand-side shock, such as a sharp decrease in consumer confidence, leads to inflation.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A)  government spending 
B)  net taxes 
C)  the Z factors 
D)  all of the above 
A)  government spending 
B)  net taxes 
C)  the Z factors 
D)  all of the above

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. A higher price level with higher unemployment would result in

Accepted Answer

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

Question 17

In a binding situation, a decrease 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 18

Since 1970, the Fed has usually raised interest rates to combat inflation, even when output was low.

Accepted Answer

A) True 
 B)False

Question 19

In a binding situation, there is no crowding out of planned investment when government spending increases or when taxes decrease.

Accepted Answer

A) True 
 B)False

Question 20

Demand-pull inflation can be the result of

Accepted Answer

A)  a decrease in government spending. 
B)  an increase in net taxes. 
C)  a decrease in the Z factors. 
D)  all of the above 
A)  a decrease in government spending. 
B)  an increase in net taxes. 
C)  a decrease in the Z factors. 
D)  all of the above

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

A cost shock, such as a natural disaster, shifts the aggregate supply 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 the price level 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. Suppose the economy is at Point A, a decrease in government purchases can cause a movement to Point

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 increasing output when the aggregate demand curve shifts from

There is evidence that the Fed, under chairman Ben Bernanke, engaged in inflation targeting.

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

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 not be caused by a

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 AD2 to AD1 can be caused by

Economic policies are ineffective concerning quantities of output directly when

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

If wages adjust fully to price increases in the long run, the full effect of fiscal policy is on

During the recession of 1980-1982, the Fed raised the interest rate to fight inflation.

Supply-side inflation is caused by increases in aggregate supply.

A demand-side shock, such as a sharp decrease in consumer confidence, leads to inflation.

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

Refer to the information provided in Figure 12.4 below to answer the questions that follow. Figure 12.4 -Refer to Figure 12.4. A higher price level with higher unemployment would result in

In a binding situation, a decrease in net taxes

Since 1970, the Fed has usually raised interest rates to combat inflation, even when output was low.

In a binding situation, there is no crowding out of planned investment when government spending increases or when taxes decrease.

Demand-pull inflation can be the result of

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

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 AD² to AD¹ can be caused by

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