Question 1

The endogenous variable in the aggregate supply curve is ________.

Accepted Answer

A)  output 
B)  the real interest rate 
C)  inflation 
D)  planned expenditure 
E)  none of the above 
A)  output 
B)  the real interest rate 
C)  inflation 
D)  planned expenditure 
E)  none of the above

Question 2

AD - AS Shocks
  
-On the graph above, suppose the economy is at point F when there is a temporary positive supply shock. The new long-run equilibrium is at point ________.

Accepted Answer

A)  H 
B)  I 
C)  F 
D)  G 
E)  none of the above 
A)  H 
B)  I 
C)  F 
D)  G 
E)  none of the above

Question 3

If a new government adopted some ill-advised regulations causing the economy to be less efficient ________.

Accepted Answer

A)  the ensuing negative supply shock would lead to an immediate rise in inflation 
B)  in the short-run this would create a negative output gap but eventually the previous general equilibrium would be restored by subsequent rightward shifts of the AS curve 
C)  there would be no permanent changes in output and inflation 
D)  all of the above 
E)  none of the above 
A)  the ensuing negative supply shock would lead to an immediate rise in inflation 
B)  in the short-run this would create a negative output gap but eventually the previous general equilibrium would be restored by subsequent rightward shifts of the AS curve 
C)  there would be no permanent changes in output and inflation 
D)  all of the above 
E)  none of the above

Question 4

AD - AS Shocks
  
-In the long run, following a combination of a negative demand shock and a temporary negative supply shock, ________.

Accepted Answer

A)  both inflation and output return to the original long-run equilibrium values 
B)  inflation is permanently increased, while output returns to potential output 
C)  output returns to potential output, while inflation may be higher or lower than its initial value 
D)  inflation is permanently reduced, while output returns to potential output 
E)  none of the above 
A)  both inflation and output return to the original long-run equilibrium values 
B)  inflation is permanently increased, while output returns to potential output 
C)  output returns to potential output, while inflation may be higher or lower than its initial value 
D)  inflation is permanently reduced, while output returns to potential output 
E)  none of the above

Question 5

When a temporary shock in the economy involves a restriction in supply ________.

Accepted Answer

A)  we refer to it as a negative supply shock 
B)  a rise in commodity prices typically follows 
C)  a reduction in output typically ensues 
D)  all of the above 
E)  none of the above 
A)  we refer to it as a negative supply shock 
B)  a rise in commodity prices typically follows 
C)  a reduction in output typically ensues 
D)  all of the above 
E)  none of the above

Question 6

An autonomous increase in net exports for any given inflation rate ________.

Accepted Answer

A)  would add directly to planned expenditures 
B)  would raise the equilibrium level of output 
C)  the aggregate demand curve would shift to the right 
D)  all of the above 
E)  none of the above 
A)  would add directly to planned expenditures 
B)  would raise the equilibrium level of output 
C)  the aggregate demand curve would shift to the right 
D)  all of the above 
E)  none of the above

Question 7

-On the graph above, if inflation is falling, while the quantity demanded and output are rising, the economy may be at a point on ________.

Accepted Answer

A)  the aggregate supply curve above the aggregate demand curve 
B)  the aggregate supply curve below the aggregate demand curve 
C)  the aggregate demand curve above the aggregate supply curve 
D)  the aggregate demand curve below the aggregate supply curve 
E)  none of the above 
A)  the aggregate supply curve above the aggregate demand curve 
B)  the aggregate supply curve below the aggregate demand curve 
C)  the aggregate demand curve above the aggregate supply curve 
D)  the aggregate demand curve below the aggregate supply curve 
E)  none of the above

Question 8

If for any given inflation rate, the federal government lowered taxes, ________.

Accepted Answer

A)  it would have a similar qualitative result on output as an increase in government purchases 
B)  it would raise disposable income leading to higher consumption spending 
C)  the aggregate demand curve would shift to the right 
D)  all of the above 
E)  none of the above 
A)  it would have a similar qualitative result on output as an increase in government purchases 
B)  it would raise disposable income leading to higher consumption spending 
C)  the aggregate demand curve would shift to the right 
D)  all of the above 
E)  none of the above

Question 9

A change in the output gap is likely to lead to ________.

Accepted Answer

A)  a change in inflation 
B)  a change in expected inflation 
C)  a shift of the short-run aggregate supply curve 
D)  all of the above 
E)  none of the above 
A)  a change in inflation 
B)  a change in expected inflation 
C)  a shift of the short-run aggregate supply curve 
D)  all of the above 
E)  none of the above

Question 10

If the unemployment rate is above its natural rate, then ________.

Accepted Answer

A)  output is below its potential level 
B)  there is excess slack in the labor market which will dive down wages 
C)  inflation will decline until equilibrium output reaches its potential level 
D)  all of the above 
E)  none of the above 
A)  output is below its potential level 
B)  there is excess slack in the labor market which will dive down wages 
C)  inflation will decline until equilibrium output reaches its potential level 
D)  all of the above 
E)  none of the above

Question 11

Consider an economy in a long-run equilibrium with Y = 40 and π = 3. A demand shock in period one causes output to rise to 45 and inflation rises to 4. Then, the updating of expected inflation to equal 4 causes output in period two to decline to 43.85, and inflation to rise to 4.77. Assuming no further shocks, calculate the values of output and inflation for period three.

Accepted Answer

Moving from period one to period two, th

Question 12

AD - AS Shocks
  
-On the graph above, an example of a positive demand shock is the movement from point ________ to point ________.

Accepted Answer

A)  F; G 
B)  H; I 
C)  F; H 
D)  H; F 
E)  none of the above 
A)  F; G 
B)  H; I 
C)  F; H 
D)  H; F 
E)  none of the above

Question 13

The aggregate demand curve is Y = 75 - 3π, and the short-run aggregate supply curve is π = 6.2 + 0.8(Y - 70). Assuming adaptive expectations, calculate the inflation rate and output for the next period.

Accepted Answer

These curves intersect with Y = 66 and π

Question 14

How does the aggregate supply curve differ from a supply curve for, say, bananas?

Accepted Answer

The supply curve for bananas indicates t

Question 15

Suppose there is a temporary supply shock because of a war in the Middle East, then, ceteris paribus, the ensuing cost push shock ________.

Accepted Answer

A)  would lead to a temporary increase in prices but a permanent reduction in output 
B)  would lead to a temporary increase in output but a permanent increase in inflation 
C)  would lead to a temporary decrease in output but a permanent increase in inflation 
D)  all of the above 
E)  none of the above 
A)  would lead to a temporary increase in prices but a permanent reduction in output 
B)  would lead to a temporary increase in output but a permanent increase in inflation 
C)  would lead to a temporary decrease in output but a permanent increase in inflation 
D)  all of the above 
E)  none of the above

Question 16

If consumers suddenly became more optimistic ________.

Accepted Answer

A)  they would spend more at any given inflation rate 
B)  planned expenditures would decline 
C)  the aggregate demand curve would shift to the left 
D)  all of the above 
E)  none of the above 
A)  they would spend more at any given inflation rate 
B)  planned expenditures would decline 
C)  the aggregate demand curve would shift to the left 
D)  all of the above 
E)  none of the above

Question 17

The aggregate demand curve shifts to the right when there is ________.

Accepted Answer

A)  a negative price shock 
B)  a decrease in the nominal interest rate 
C)  a decrease in inflation 
D)  all of the above 
E)  none of the above 
A)  a negative price shock 
B)  a decrease in the nominal interest rate 
C)  a decrease in inflation 
D)  all of the above 
E)  none of the above

Question 18

By the time Paul Volcker took office as the new Federal Reserve chairman in 1979, both the inflation and unemployment rates were higher than during most of the 1950s, 60s and early 70s. The Federal Reserve implemented an autonomous tightening of monetary policy that resulted in the famous Volker Disinflation which was successful in bringing both problems under control. What would have been a likely long-run result had Mr. Volker conducted an expansionary monetary policy instead?

Accepted Answer

A)  Eventually, inflation would have been made worse and unemployment would not have been fixed 
B)  Eventually, both the inflation and unemployment rates would have declined 
C)  Eventually, inflation would have been fixed and unemployment would have been made worse 
D)  There would have been no effect on the unemployment and inflation rates 
E)  none of the above 
A)  Eventually, inflation would have been made worse and unemployment would not have been fixed 
B)  Eventually, both the inflation and unemployment rates would have declined 
C)  Eventually, inflation would have been fixed and unemployment would have been made worse 
D)  There would have been no effect on the unemployment and inflation rates 
E)  none of the above

Question 19

By the time Paul Volcker took office as the new Federal Reserve chairman in 1979, both the inflation and unemployment rates were higher than during most of the 1950s, 60s and early 70s. The Federal Reserve implemented an autonomous tightening of monetary policy that resulted in the famous Volker Disinflation which was successful in bringing both problems under control. What would have been a likely result had Mr. Volker conducted an expansionary monetary policy instead?

Accepted Answer

A)  Inflation would have been made worse right away but unemployment would have been permanently lowered 
B)  In the long run the unemployment problem would not have been fixed and the inflation problem would have been made much worse 
C)  In the short-run both inflation and unemployment would have declined but in the long-run unemployment would have been worse than before the Fed's action 
D)  In the short-run both inflation and unemployment would have been made worse but both would have been lowered in the long-run 
E)  none of the above 
A)  Inflation would have been made worse right away but unemployment would have been permanently lowered 
B)  In the long run the unemployment problem would not have been fixed and the inflation problem would have been made much worse 
C)  In the short-run both inflation and unemployment would have declined but in the long-run unemployment would have been worse than before the Fed's action 
D)  In the short-run both inflation and unemployment would have been made worse but both would have been lowered in the long-run 
E)  none of the above

Question 20

In the short run, ________.

Accepted Answer

A)  when expected inflation rises, there is a movement up along the AS curve 
B)  workers pushing for higher wages causes output to rise 
C)  the aggregate supply curve may shift to the right with increases in output 
D)  all of the above 
E)  none of the above 
A)  when expected inflation rises, there is a movement up along the AS curve 
B)  workers pushing for higher wages causes output to rise 
C)  the aggregate supply curve may shift to the right with increases in output 
D)  all of the above 
E)  none of the above

The endogenous variable in the aggregate supply curve is ________.

AD - AS Shocks -On the graph above, suppose the economy is at point F when there is a temporary positive supply shock. The new long-run equilibrium is at point ________.

If a new government adopted some ill-advised regulations causing the economy to be less efficient ________.

AD - AS Shocks -In the long run, following a combination of a negative demand shock and a temporary negative supply shock, ________.

When a temporary shock in the economy involves a restriction in supply ________.

An autonomous increase in net exports for any given inflation rate ________.

-On the graph above, if inflation is falling, while the quantity demanded and output are rising, the economy may be at a point on ________.

If for any given inflation rate, the federal government lowered taxes, ________.

A change in the output gap is likely to lead to ________.

If the unemployment rate is above its natural rate, then ________.

AD - AS Shocks -On the graph above, an example of a positive demand shock is the movement from point to point .

The aggregate demand curve is Y = 75 - 3π, and the short-run aggregate supply curve is π = 6.2 + 0.8(Y - 70). Assuming adaptive expectations, calculate the inflation rate and output for the next period.

How does the aggregate supply curve differ from a supply curve for, say, bananas?

Suppose there is a temporary supply shock because of a war in the Middle East, then, ceteris paribus, the ensuing cost push shock ________.

If consumers suddenly became more optimistic ________.

The aggregate demand curve shifts to the right when there is ________.

In the short run, ________.

The Policy and Practice of Macroeconomics

Measuring Macroeconomic Data

Aggregate Production and Productivity

Saving and Investment in Closed and Open Economies

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, Policy, and Institutions

Business Cycles: an Introduction

The Is Curve

Monetary Policy and Aggregate Demand

Aggregate Supply and the Phillips Curve

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, Employment, and Unemployment

The Role of Expectations in Macroeconomic Policy

Modern Business Cycle Theory

Filters

Exam 12: The Aggregate Demand and Supply Model

The endogenous variable in the aggregate supply curve is ________.

AD - AS Shocks -On the graph above, suppose the economy is at point F when there is a temporary positive supply shock. The new long-run equilibrium is at point ________.

If a new government adopted some ill-advised regulations causing the economy to be less efficient ________.

AD - AS Shocks -In the long run, following a combination of a negative demand shock and a temporary negative supply shock, ________.

When a temporary shock in the economy involves a restriction in supply ________.

An autonomous increase in net exports for any given inflation rate ________.

-On the graph above, if inflation is falling, while the quantity demanded and output are rising, the economy may be at a point on ________.

If for any given inflation rate, the federal government lowered taxes, ________.

A change in the output gap is likely to lead to ________.

If the unemployment rate is above its natural rate, then ________.

AD - AS Shocks -On the graph above, an example of a positive demand shock is the movement from point ________ to point ________.

The aggregate demand curve is Y = 75 - 3π, and the short-run aggregate supply curve is π = 6.2 + 0.8(Y - 70). Assuming adaptive expectations, calculate the inflation rate and output for the next period.

How does the aggregate supply curve differ from a supply curve for, say, bananas?

Suppose there is a temporary supply shock because of a war in the Middle East, then, ceteris paribus, the ensuing cost push shock ________.

If consumers suddenly became more optimistic ________.

The aggregate demand curve shifts to the right when there is ________.

In the short run, ________.

The Policy and Practice of Macroeconomics

Measuring Macroeconomic Data

Aggregate Production and Productivity

Saving and Investment in Closed and Open Economies

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, Policy, and Institutions

Business Cycles: an Introduction

The Is Curve

Monetary Policy and Aggregate Demand

Aggregate Supply and the Phillips Curve

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, Employment, and Unemployment

The Role of Expectations in Macroeconomic Policy

Modern Business Cycle Theory

Filters

AD - AS Shocks -On the graph above, an example of a positive demand shock is the movement from point to point .