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

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 tax multiplier is smallest (in absolute value) when the aggregate demand curve shifts from

If the economy is on the flat part of the aggregate supply curve, expansionary fiscal policy works well to increase output with little increase in the price level.

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. Cost-push inflation occurs if

A decrease in net taxes at a given price level leads to

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. The aggregate supply curve shifting from AS₁ to AS₂ will cause

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 government spending, then the price level will be ________ than P₀ and output will be ________ than Y₀.

________ corresponds to lower output and ________ corresponds to higher output.

When the ________, the Fed is willing to accept large changes in output to keep the price level stable.

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

If the economy is on the steep portion of the AS curve,

Demand-pull inflation can be the result of

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

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

Refer to the information provided in Figure 12.2 below to answer the questions that follow. Figure 12.2 -Refer to Figure 12.2. Planned investment would experience the greatest amount of crowding out when the aggregate demand curve shifts from

Aggregate demand increases if

For an economy to experience both economic growth and inflation at the same time

Of the following recessionary periods in the United States, in which was the inflation rate the lowest?

If the economy is on the steep portion of the AS curve and government spending increases, ________ crowds out ________.

In a binding situation, a positive cost shock will cause ________ in output and ________ in the price level.

Aggregate demand increases if