Exam 10: Introduction to Economic Fluctuations

If a short-run equilibrium occurs at a level of output below the natural rate, then in the transition to the long run prices will ______ and output will ______.

Starting from long-run equilibrium, if the velocity of money increases (due to, for example, the invention of automatic teller machines) and no action is taken by the government:

All of the following are suggested by the results of Alan Blinder's survey of firms except:

An adverse supply shock ______ the short-run aggregate supply curve ______ the natural level of output.

If the short-run aggregate supply curve is horizontal, an increase in union aggressiveness that pushes wages and prices up will result in ______ prices and ______ output in the short run.

Explain aggregate supply. Why is the aggregate supply curve vertical in the long run and horizontal in the short run?

Assume that the long-run aggregate supply curve is vertical at Y = 3,000 while the short-run aggregate supply curve is horizontal at P = 1.0. The aggregate demand curve is Y = 2(M/P) and M = 1,500. a. If the economy is initially in long-tun equilibrium, what are the values of $P$ and $Y$ ? b. What is the velocity of money in this case? c. Suppose because banks start paying interest on checking accounts, the aggregate demand function shifts to $Y = ( 1.5 ) ( M / P )$ . What are the short-run values of $P$ and $Y$ ? d. What is the velocity of money in this case? e. With the new aggregate demand function, once the economy adjusts to long-tun equilibrium, what are $P$ and $Y$ ? f. What is the velocity now?

Looking at the aggregate demand curve alone, one can tell ______ that will prevail in the economy.

The long-run and short-run aggregate supply curves reflect fundamental differences between long-run and short-run macroeconomic analysis. a. Graphically illustrate the long-tun and short-run aggregate supply curves. Be sure to label the axes. b. What determines the level of output in the long run versus the short run? c. How do prices behave differently in the long run and the short run?

In the short run an adverse supply shock causes:

In the aggregate demand-aggregate supply model, short-run equilibrium occurs at the combination of output and prices where:

Which of the following is an example of a demand shock?

The natural level of output is:

A decline in the Index of Supplier Deliveries is typically an indicator of a future _____ in economic production, and a narrowing of the interest rate spread between the 10-year Treasury note and 3-month Treasury bill is typically an indicator of a future _____ in economic production.

Most economists believe that the classical dichotomy:

If the short-run aggregate supply curve is horizontal and the Fed increases the money supply, then:

The vertical long-run aggregate supply curve satisfies the classical dichotomy because the natural rate of output does not depend on:

If a short-run equilibrium occurs at a level of output above the natural rate, then in the transition to the long run prices will ______ and output will ______.

The economic response to the overnight reduction in the French money supply by 20 percent in 1724,

A 5 percent reduction in the money supply will, according to most economists, reduce prices 5 percent: