Question 1

Everything else held constant,an increase in government spending ________ aggregate ________.

Accepted Answer

A) increases;demand 
B) decreases;demand 
C) decreases;supply 
D) increases;supply 
A) increases;demand 
B) decreases;demand 
C) decreases;supply 
D) increases;supply

Question 2

Suppose the economy is producing at the natural rate of output.Assuming a fixed natural rate of output and everything else held constant,the development of a new,more productive technology will cause ________ in the unemployment rate in the long run and ________ in inflation in the short run.

Accepted Answer

A) an increase;an increase 
B) a decrease;a decrease 
C) no change;a decrease 
D) no change;no change 
A) an increase;an increase 
B) a decrease;a decrease 
C) no change;a decrease 
D) no change;no change

Question 3

An autonomous easing of monetary policy results in a ________ level of equilibrium output,shifting the aggregate demand curve to the ________.

Accepted Answer

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

Question 4

Which of the followings does NOT shift the short-run aggregate supply curve?

Accepted Answer

A) supply shocks. 
B) persistent positive output gap. 
C) changes in expected inflation. 
D) an increase in output gap. 
A) supply shocks. 
B) persistent positive output gap. 
C) changes in expected inflation. 
D) an increase in output gap.

Question 5

A negative supply shock causes ________ to ________.

Accepted Answer

A) aggregate demand;increase 
B) aggregate demand;decrease 
C) short-run aggregate supply;decrease 
D) short-run aggregate supply;increase 
A) aggregate demand;increase 
B) aggregate demand;decrease 
C) short-run aggregate supply;decrease 
D) short-run aggregate supply;increase

Question 6

The aggregate demand curve is the total quantity of an economy's

Accepted Answer

A) intermediate goods demanded at different inflation rates. 
B) intermediate goods demanded at a particular inflation rate. 
C) final goods and services demanded at a particular inflation rate. 
D) final goods and services demanded at different inflation rates. 
A) intermediate goods demanded at different inflation rates. 
B) intermediate goods demanded at a particular inflation rate. 
C) final goods and services demanded at a particular inflation rate. 
D) final goods and services demanded at different inflation rates.

Question 7

A central bank that does NOT follow the Taylor principle will fail to raise nominal interest rates by more than the increase in expected inflation.Therefore,higher inflation will lead to a ________ in real interest rates,resulting in ________-sloping monetary policy curves.

Accepted Answer

A) decline;downward 
B) rise;downward 
C) rise;upward 
D) decline;upward 
A) decline;downward 
B) rise;downward 
C) rise;upward 
D) decline;upward

Question 8

Suppose that the short-run aggregate supply curve is: π= 2 + 1.5 (Y-10),where π is inflation and Y is output;and the aggregate demand curve is Y= 11 - 0.5π.The equilibrium output is ________ and the equilibrium inflation rate is ________ %.

Accepted Answer

A) 10;2 
B) 17.5;2 
C) 2;10 
D) 10;7.5 
A) 10;2 
B) 17.5;2 
C) 2;10 
D) 10;7.5

Question 9

A theory of aggregate economic fluctuations called real business cycle theory holds that

Accepted Answer

A) changes in the real money supply are the only demand shocks that affect the natural rate of output. 
B) aggregate demand shocks do affect the natural rate of output. 
C) aggregate supply shocks do affect the natural rate of output. 
D) changes in net exports are the only demand shocks that affect the natural rate of output. 
A) changes in the real money supply are the only demand shocks that affect the natural rate of output. 
B) aggregate demand shocks do affect the natural rate of output. 
C) aggregate supply shocks do affect the natural rate of output. 
D) changes in net exports are the only demand shocks that affect the natural rate of output.

Question 10

Suppose the U.S.economy is producing at the natural rate of output.An appreciation of the U.S.dollar will cause ________ in real GDP in the short run and ________ in inflation in the long run,everything else held constant.(Assume the appreciation causes no effects in the supply side of the economy.)

Accepted Answer

A) an increase;an increase 
B) a decrease;a decrease 
C) no change;an increase 
D) no change;a decrease 
A) an increase;an increase 
B) a decrease;a decrease 
C) no change;an increase 
D) no change;a decrease

Question 11

A permanent negative supply shock leads to ________ inflation ________.

Accepted Answer

A) higher;in both the short and long runs 
B) higher;in the short run but not in the long run 
C) lower;in both the short and long runs 
D) lower;in the short run but not in the long run 
A) higher;in both the short and long runs 
B) higher;in the short run but not in the long run 
C) lower;in both the short and long runs 
D) lower;in the short run but not in the long run

Question 12

Suppose the economy is producing at the natural rate of output.An increase in consumer and business confidence will cause ________ in real GDP in the short run and ________ in inflation in the short run,everything else held constant.

Accepted Answer

A) an increase;an increase 
B) a decrease;a decrease 
C) no change;an increase 
D) no change;a decrease 
A) an increase;an increase 
B) a decrease;a decrease 
C) no change;an increase 
D) no change;a decrease

Question 13

Everything else held constant,a decrease in planned investment expenditure ________ aggregate ________.

Accepted Answer

A) increases;demand 
B) decreases;demand 
C) decreases;supply 
D) increases;supply 
A) increases;demand 
B) decreases;demand 
C) decreases;supply 
D) increases;supply

Question 14

Everything else held constant,a decrease in net exports ________ aggregate ________.

Accepted Answer

A) increases;demand 
B) decreases;demand 
C) decreases;supply 
D) increases;supply 
A) increases;demand 
B) decreases;demand 
C) decreases;supply 
D) increases;supply

Question 15

Everything else held constant,an autonomous monetary policy easing ________ aggregate ________.

Accepted Answer

A) increases;demand 
B) decreases;demand 
C) decreases;supply 
D) increases;supply 
A) increases;demand 
B) decreases;demand 
C) decreases;supply 
D) increases;supply

Question 16

Suppose the economy is producing at the natural rate of output.A decrease in consumer and business confidence will cause ________ in real GDP in the short run and ________ in inflation in the short run,everything else held constant.

Accepted Answer

A) an increase;an increase 
B) a decrease;a decrease 
C) no change;an increase 
D) no change;a decrease 
A) an increase;an increase 
B) a decrease;a decrease 
C) no change;an increase 
D) no change;a decrease

Question 17

The aggregate supply curve shows the relationship between

Accepted Answer

A) the level of inputs and aggregate output. 
B) the inflation rate and the level of inputs. 
C) the wage rate and the level of employment. 
D) the inflation rate and the level of aggregate output supplied. 
A) the level of inputs and aggregate output. 
B) the inflation rate and the level of inputs. 
C) the wage rate and the level of employment. 
D) the inflation rate and the level of aggregate output supplied.

Question 18

Everything else held constant,an increase in financial frictions ________ aggregate ________.

Accepted Answer

A) increases;demand 
B) decreases;demand 
C) decreases;supply 
D) increases;supply 
A) increases;demand 
B) decreases;demand 
C) decreases;supply 
D) increases;supply

Question 19

The short-run aggregate supply curve shifts to the right when

Accepted Answer

A) output gap is higher. 
B) output gap is lower. 
C) expected inflation is higher. 
D) expected inflation is lower. 
A) output gap is higher. 
B) output gap is lower. 
C) expected inflation is higher. 
D) expected inflation is lower.

Question 20

Suppose the economy is producing at the natural rate of output.An open market sale of bonds by the Fed will cause ________ in real GDP in the short run and ________ in inflation in the short run,everything else held constant.

Accepted Answer

A) an increase;an increase 
B) a decrease;a decrease 
C) no change;an increase 
D) no change;a decrease 
A) an increase;an increase 
B) a decrease;a decrease 
C) no change;an increase 
D) no change;a decrease

Exam 22: Aggregate Demand and Supply Analysis

Everything else held constant,an increase in government spending ________ aggregate ________.

Suppose the economy is producing at the natural rate of output.Assuming a fixed natural rate of output and everything else held constant,the development of a new,more productive technology will cause ________ in the unemployment rate in the long run and ________ in inflation in the short run.

An autonomous easing of monetary policy results in a ________ level of equilibrium output,shifting the aggregate demand curve to the ________.

Which of the followings does NOT shift the short-run aggregate supply curve?

A negative supply shock causes ________ to ________.

The aggregate demand curve is the total quantity of an economy's

A central bank that does NOT follow the Taylor principle will fail to raise nominal interest rates by more than the increase in expected inflation.Therefore,higher inflation will lead to a ________ in real interest rates,resulting in ________-sloping monetary policy curves.

Suppose that the short-run aggregate supply curve is: π= 2 + 1.5 (Y-10),where π is inflation and Y is output;and the aggregate demand curve is Y= 11 - 0.5π.The equilibrium output is ________ and the equilibrium inflation rate is ________ %.

A theory of aggregate economic fluctuations called real business cycle theory holds that

A permanent negative supply shock leads to ________ inflation ________.

Suppose the economy is producing at the natural rate of output.An increase in consumer and business confidence will cause ________ in real GDP in the short run and ________ in inflation in the short run,everything else held constant.

Everything else held constant,a decrease in planned investment expenditure ________ aggregate ________.

Everything else held constant,a decrease in net exports ________ aggregate ________.

Everything else held constant,an autonomous monetary policy easing ________ aggregate ________.

Suppose the economy is producing at the natural rate of output.A decrease in consumer and business confidence will cause ________ in real GDP in the short run and ________ in inflation in the short run,everything else held constant.

The aggregate supply curve shows the relationship between

Everything else held constant,an increase in financial frictions ________ aggregate ________.

The short-run aggregate supply curve shifts to the right when

Suppose the economy is producing at the natural rate of output.An open market sale of bonds by the Fed will cause ________ in real GDP in the short run and ________ in inflation in the short run,everything else held constant.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Web 1:financial Crises in Emerging Market Economies

Web 2:the Islm Model

Web 3:nonbank Finance

Web 4:financial Derivatives

Web 5:conflicts of Interest in the Financial Services Industry

Filters

Everything else held constant,an increase in government spending aggregate .

Suppose the economy is producing at the natural rate of output.Assuming a fixed natural rate of output and everything else held constant,the development of a new,more productive technology will cause in the unemployment rate in the long run and in inflation in the short run.

An autonomous easing of monetary policy results in a level of equilibrium output,shifting the aggregate demand curve to the .

A negative supply shock causes to .

A central bank that does NOT follow the Taylor principle will fail to raise nominal interest rates by more than the increase in expected inflation.Therefore,higher inflation will lead to a in real interest rates,resulting in -sloping monetary policy curves.

Suppose that the short-run aggregate supply curve is: π= 2 + 1.5 (Y-10),where π is inflation and Y is output;and the aggregate demand curve is Y= 11 - 0.5π.The equilibrium output is and the equilibrium inflation rate is %.

A permanent negative supply shock leads to inflation .

Suppose the economy is producing at the natural rate of output.An increase in consumer and business confidence will cause in real GDP in the short run and in inflation in the short run,everything else held constant.

Everything else held constant,a decrease in planned investment expenditure aggregate .

Everything else held constant,a decrease in net exports aggregate .

Everything else held constant,an autonomous monetary policy easing aggregate .

Suppose the economy is producing at the natural rate of output.A decrease in consumer and business confidence will cause in real GDP in the short run and in inflation in the short run,everything else held constant.

Everything else held constant,an increase in financial frictions aggregate .

Suppose the economy is producing at the natural rate of output.An open market sale of bonds by the Fed will cause in real GDP in the short run and in inflation in the short run,everything else held constant.