Question 1

In a binding situation, a positive cost shock decreases output.

Accepted Answer

A) True 
 B)False

Question 2

Fiscal policy affects the ________ market through changes in taxes and government spending.

Accepted Answer

A)   money
B)   goods
C)   federal funds
D)   bond

Question 3

A decrease in the Z factors represents an easing of monetary policy.

Accepted Answer

A) True 
 B)False

Question 4

If equilibria below potential output are self-correcting, the economy will spend a great deal of time on the horizontal part of the aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 5

The Fed generally had ________ interest rates in the 1970s and early 1980s to fight ________.

Accepted Answer

A)   high; inflation
B)   high; recession
C)   low; inflation
D)   low; recession

Question 6

In 2007, the Fed engaged in inflation targeting when it lowered the interest rate in anticipation of a recession.

Accepted Answer

A) True 
 B)False

Question 7

A binding situation occurred during the recession of

Accepted Answer

A)   1974-1975.
B)   1980-1982.
C)   1990-1991.
D)   2008-2009.

Question 8

Refer to the information provided in Figure 27.2 below to answer the question(s)  that follow. 1 to AD2. B)  AD3 to AD4. C)  AD5 to AD6. D)  The output multiplier is the same for all AD curve shifts shown in the figure." class="answers-bank-image d-inline" rel="preload" > Figure 27.2
-Refer to Figure 27.2. The output multiplier is largest when the aggregate demand curve shifts from

Accepted Answer

A)   AD1 to AD2.
B)   AD3 to AD4.
C)   AD5 to AD6.
D)   The output multiplier is the same for all AD curve shifts shown in the figure.

Question 9

If an increase in net taxes in the United States resulted in a very large decrease in aggregate output and a very small decrease in the price level, then the U.S. economy must have been

Accepted Answer

A)   on the very steep part of the short-run aggregate supply curve.
B)   on the very flat part of the short-run aggregate supply curve.
C)   on the very steep part of the short-run aggregate demand curve.
D)   on the very flat part of the short-run aggregate demand curve.

Question 10

Refer to the information provided in Figure 27.2 below to answer the question(s)  that follow. 1 to AD2. B)  AD3 to AD4. C)  AD5 to AD6. D)  The amount of crowding out is the same for all AD curve shifts shown in the figure." class="answers-bank-image d-inline" rel="preload" > Figure 27.2
-Refer to Figure 27.2. Planned investment would experience the least amount of crowding out when the aggregate demand curve shifts from

Accepted Answer

A)   AD1 to AD2.
B)   AD3 to AD4.
C)   AD5 to AD6.
D)   The amount of crowding out is the same for all AD curve shifts shown in the figure.

Question 11

In a binding situation

Accepted Answer

A)   only changes in the price level change the interest rate.
B)   only changes in the Z factors change the interest rate.
C)   changes in both the price level and in the Z factors change the interest rate.
D)   the interest rate is always zero.

Question 12

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

Accepted Answer

A)   consumption; planned investment
B)   government spending; planned investment
C)   planned investment; consumption
D)   planned investment; government spending

Question 13

Since 1970, the United States experienced stagflation

Accepted Answer

A)   only after the recession of 1990-1991.
B)   only in the 1970s and early 1980s.
C)   throughout the 2000s.
D)   only during the recession of 2008-2009.

Question 14

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 15

Expectations of higher future prices cause firms to lower prices today to sell their product before prices rise.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is an example of an expansionary fiscal policy?

Accepted Answer

A)   the Fed selling government securities in the open market
B)   the federal government increasing the marginal tax rate on incomes above $200,000
C)   the federal government increasing the amount of money spent on public health programs
D)   the federal government reducing pollution standards to allow firms to produce more output

Question 17

In a binding situation, the ________ curve is ________.

Accepted Answer

A)   AD; horizontal
B)   AD; vertical
C)   AS; horizontal
D)   AS; vertical

Question 18

Refer to the information provided in Figure 27.1 below to answer the question(s)  that follow.  Figure 27.1
-Refer to Figure 27.1. Suppose the economy is at Point A, a decrease in taxes can cause a movement to Point

Accepted Answer

A)   E.
B)   B.
C)   C.
D)   D.

Question 19

When the AD curve is vertical

Accepted Answer

A)   fiscal policy can be used to increase output.
B)   monetary policy can be used to increase output.
C)   both fiscal policy and monetary policy can be used to increase output.
D)   neither fiscal policy nor monetary policy can be used to increase output.

Question 20

In a binding situation,there is ________ crowding out of planned investment when government spending increases.

Accepted Answer

A)   complete
B)   partial
C)   no
D)   negative

Exam 27: Policy Effects and Cost Shocks in the Asad Model

Refer to the information provided in Figure 27.2 below to answer the question(s) that follow. Figure 27.2 -Refer to Figure 27.2. The output multiplier is largest when the aggregate demand curve shifts from

Correct AnswerverifiedShow Answer

If equilibria below potential output are self-correcting, the economy will spend a great deal of time on the horizontal part of the aggregate supply curve.

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A binding situation occurred during the recession of

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A decrease in the Z factors represents an easing of monetary policy.

Correct AnswerverifiedShow Answer

When the AD curve is vertical

Correct AnswerverifiedShow Answer

In a binding situation

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In 2007, the Fed engaged in inflation targeting when it lowered the interest rate in anticipation of a recession.

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Refer to the information provided in Figure 27.2 below to answer the question(s) that follow. Figure 27.2 -Refer to Figure 27.2. Planned investment would experience the least amount of crowding out when the aggregate demand curve shifts from

Correct AnswerverifiedShow Answer

The Fed generally had ________ interest rates in the 1970s and early 1980s to fight ________.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Fiscal policy affects the ________ market through changes in taxes and government spending.

Correct AnswerverifiedShow Answer

In a binding situation, the ________ curve is ________.

Correct AnswerverifiedShow Answer

In a binding situation,there is ________ crowding out of planned investment when government spending increases.

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 27.1 below to answer the question(s) that follow. Figure 27.1 -Refer to Figure 27.1. Suppose the economy is at Point A, a decrease in taxes can cause a movement to Point

Correct AnswerverifiedShow Answer

Which of the following is an example of an expansionary fiscal policy?

Correct AnswerverifiedShow Answer

Expectations of higher future prices cause firms to lower prices today to sell their product before prices rise.

Correct AnswerverifiedShow Answer

In a binding situation, a positive cost shock decreases output.

Correct AnswerverifiedShow Answer

If an increase in net taxes in the United States resulted in a very large decrease in aggregate output and a very small decrease in the price level, then the U.S. economy must have been

Correct AnswerverifiedShow Answer

Since 1970, the United States experienced stagflation

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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The Fed generally had interest rates in the 1970s and early 1980s to fight .

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

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In a binding situation, the curve is .

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