Question 1

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.

Accepted Answer

A)   higher; lower
B)   lower; higher
C)   higher; higher
D)   lower; lower

Question 2

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

Accepted Answer

Aggregate supply is the relationship bet...

Question 3

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

Accepted Answer

A)   in both the short and long runs.
B)   in neither the short nor long run.
C)   in the short run but lead to unemployment in the long run.
D)   in the long run but lead to unemployment in the short run.

Question 4

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?

Accepted Answer

a. <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> b. In the long fun, output is determ...

Question 5

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

Accepted Answer

A)   there is only one theory of price stickiness.
B)   coordinating wage and price setting could improve welfare.
C)   reasons for price stickiness vary by industry.
D)   activist monetary policy can be used to cure recessions.

Question 6

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

Accepted Answer

A)   aggregate demand equals long-run aggregate supply.
B)   aggregate demand equals short-run aggregate supply.
C)   aggregate demand equals short-run and long-run aggregate supply.
D)   short-run aggregate supply equals long-run aggregate supply.

Question 7

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

Accepted Answer

A)   the quantity of output and the price level
B)   the quantity of output
C)   the price level
D)   neither the quantity of output nor the price level

Question 8

Most economists believe that the classical dichotomy:

Accepted Answer

A)   holds approximately in both the short run and the long run.
B)   holds approximately in the long run but not at all in the short run.
C)   holds approximately in the short run but not at all in the long run.
D)   does not hold even approximately in either the long run or the short run.

Question 9

In the short run an adverse supply shock causes:

Accepted Answer

A)   both prices and output to rise.
B)   prices to rise and output to fall.
C)   prices to fall and output to rise.
D)   both prices and output to fall.

Question 10

The natural level of output is:

Accepted Answer

A)   affected by aggregate demand.
B)   the level of output at which the unemployment rate is zero.
C)   the level of output at which the unemployment rate is at its natural level.
D)   permanent and unchangeable.

Question 11

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

Accepted Answer

A)   the labor supply.
B)   the supply of capital.
C)   the money supply.
D)   technology.

Question 12

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

Accepted Answer

A)   a large oil-price increase
B)   the introduction and greater availability of credit cards
C)   a drought that destroys agricultural crops
D)   unions obtain a substantial wage increase

Question 13

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:

Accepted Answer

A)   prices will rise in both the short run and the long run.
B)   output will rise in both the short run and the long run.
C)   prices will rise in the short run and output will rise in the long run.
D)   output will rise in the short run and prices will rise in the long run.

Question 14

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

Accepted Answer

A)   raises; but cannot affect
B)   raises; and may also lower
C)   lowers; but cannot affect
D)   lowers; and may also lower

Question 15

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

Accepted Answer

A)   output and employment will increase in the short run.
B)   output and employment will decrease in the short run.
C)   prices will increase in the short run.
D)   prices will decrease in the short run.

Question 16

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?

Accepted Answer

a.

b. velocity

c. ...

Question 17

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 ______.

Accepted Answer

A)   increase; increase
B)   decrease; decrease
C)   increase; decrease
D)   decrease; increase

Question 18

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.

Accepted Answer

A)   increase; slowdown
B)   increase; increase
C)   slowdown; increase
D)   slowdown; slowdown

Question 19

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

Accepted Answer

A)   confirmed the neutrality of money because no real variables were affected by this nominal change.
B)   confirmed the quantity theory by leading to an immediate 20 percent reduction in the price level.
C)   confirmed that money is not neutral in the short run because both output and prices dropped.
D)   contradicted Okun's law because decreases in output were not associated with increases in unemployment.

Question 20

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 ______.

Accepted Answer

A)   increase; increase
B)   decrease; decrease
C)   increase; decrease
D)   decrease; increase

Exam 10: Introduction to Economic Fluctuations

The natural level of output is:

Correct Answer
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Correct Answer
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a.
b. velocity
c. ...
View Answer

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

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Most economists believe that the classical dichotomy:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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 .

Correct Answer
verified

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

Correct Answer
verified
Aggregate supply is the relationship bet...
View Answer

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

Correct Answer
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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 .

Correct Answer
verified

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.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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.

Correct Answer
verified

Correct Answer
verified
a. b. In the long fun, output is determ...
View Answer

In the short run an adverse supply shock causes:

Correct Answer
verified

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:

Correct Answer
verified

Exam 10: Introduction to Economic Fluctuations

The natural level of output is:

Correct AnswerverifiedShow Answer

Correct Answerverifieda. b. velocity c. ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Most economists believe that the classical dichotomy:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 ______.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedAggregate supply is the relationship bet...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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 ______.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Correct Answerverifieda. b. In the long fun, output is determ...View AnswerShow Answer

In the short run an adverse supply shock causes:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
a.
b. velocity
c. ...
View Answer

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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 .

Correct Answer
verified

Correct Answer
verified
Aggregate supply is the relationship bet...
View Answer

Correct Answer
verified

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 .

Correct Answer
verified

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.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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.

Correct Answer
verified

Correct Answer
verified
a. b. In the long fun, output is determ...
View Answer

Correct Answer
verified

Correct Answer
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