Exam 10: Introduction to Economic Fluctuations

Use the following to answer questions : Exhibit: Shift in Aggregate Demand -(Exhibit: Shift in Aggregate Demand) Assume that the economy is initially at point A with aggregate demand given by AD₂. A shift in the aggregate demand curve to AD₀ could be the result of either a(n) ______ in the money supply or a(n) ______ in velocity.

Long-run growth in real GDP is determined primarily by ______, while short-run movements in real GDP are associated with ______.

How does an economy make a transition from short run to long run?

If Central Bank A cares only about keeping the price level stable and Central Bank B cares only about keeping output at its natural level, then in response to an exogenous increase in the price of oil:

In the short run, a favorable supply shock causes:

Measures of average workweeks and of supplier deliveries (vendor performance) are included in the index of leading indicators, because shorter workweeks tend to indicate ______ future economic activity and slower deliveries tend to indicate ______ future economic activity.

An economy is initially in long-run equilibrium. The introduction of an electronic payments system dramatically reduces the demand for money in the economy. a. What is the short-iun impact on prices and output of the new system? b. What can the central bank do, if anything, to counteract the short-tun changes in output and prices? c. If the central bank does not take any policy actions, what will be the long-run impact of the electronic payments system on prices and output?

When an aggregate demand curve is drawn with real GDP (Y) along the horizontal axis and the price level (P) along the vertical axis, if the money supply is decreased, then the aggregate demand curve will shift:

Business cycles are:

Over the business cycle, investment spending ______ consumption spending.

Starting from long-run equilibrium, an increase in aggregate demand increases ______ in the short run, but only increases ______ in the long run.

Use the following to answer questions : Exhibit: Supply Shock -(Exhibit: Supply Shock) Assume that the economy is at point E. With no further shocks or policy moves, the economy in the long run will be at point:

If the demand for money increases, but the Fed keeps the money supply the same, then in the short run output will:

If the Fed accommodates an adverse supply shock, output falls ______ and prices rise ______.

The index of leading indicators compiled by the Conference Board includes 10 data series that are used to forecast economic activity about ______ in advance.

Monetary policy can be either a stabilizing influence on the economy or a source of instability. Give an explanation for both possibilities.

If the short-run aggregate supply curve is horizontal, then the:

Alan Blinder's survey of firms found that the typical firm adjusts its prices:

According to the quantity theory of money, if output is higher, ______ real balances are required, and for fixed M this means ______ P.

Define the terms: i) adverse supply shocks, ii) favorable supply shocks.