Question 1

If the economy is on the steep part of its aggregate supply curve, expansionary policy will mostly increase the price level.

Accepted Answer

A) True 
 B)False

Question 2

With a cost shock, a large decrease in output relative to the increase in the price level would occur if the ________ curve is relatively ________.

Accepted Answer

A)  AS; flat 
B)  AS; steep 
C)  AD; flat 
D)  AD; steep 
A)  AS; flat 
B)  AS; steep 
C)  AD; flat 
D)  AD; steep

Question 3

The Fed will raise the interest rate by the greatest amount when the economy is on the ________ part of the AS curve and there is ________.

Accepted Answer

A)  flat; a decrease in government spending 
B)  flat; an increase in government spending 
C)  steep; a decrease in government spending 
D)  steep; an increase in government spending 
A)  flat; a decrease in government spending 
B)  flat; an increase in government spending 
C)  steep; a decrease in government spending 
D)  steep; an increase in government spending

Question 4

A decrease in net taxation increases aggregate demand.

Accepted Answer

A) True 
 B)False

Question 5

Refer to the information provided in Figure 12.2 below to answer the questions that follow.   Figure 12.2
-Refer to Figure 12.2. 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. 
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 6

Since 1970, the United States has experienced 5 ________ periods and 2 ________ periods.

Accepted Answer

A)  inflationary; expansionary 
B)  recessionary; inflationary 
C)  stagflationary; deflationary 
D)  recessionary; expansionary 
A)  inflationary; expansionary 
B)  recessionary; inflationary 
C)  stagflationary; deflationary 
D)  recessionary; expansionary

Question 7

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. 
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 8

When analyzing the effects of government spending, net taxes, and the Z factors, what primarily matters is the shape of

Accepted Answer

A)  the AD curve. 
B)  the AS curve. 
C)  both the AD curve and the AS curve. 
D)  neither the AD curve nor the AS curve. 
A)  the AD curve. 
B)  the AS curve. 
C)  both the AD curve and the AS curve. 
D)  neither the AD curve nor the AS curve.

Question 9

Refer to the information provided in Figure 12.1 below to answer the questions that follow.   Figure 12.1
-Refer to Figure 12.1. Suppose the economy is at Point A, a decrease in the price level can cause a movement to Point

Accepted Answer

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

Question 10

The Fed generally had high interest rates ________ as it fought inflation.

Accepted Answer

A)  in the 1970s and early 1980s 
B)  in the 1980s and 1990s 
C)  in the late-1990s 
D)  in the 2000s 
A)  in the 1970s and early 1980s 
B)  in the 1980s and 1990s 
C)  in the late-1990s 
D)  in the 2000s

Question 11

12.3 Shocks to the System
Refer to the information provided in Figure 12.3 below to answer the questions that follow.   Figure 12.3
-Refer to Figure 12.3. Assume the economy is currently at Point A on aggregate supply curve AS1. An increase in inflationary expectations that causes firms to increase their prices

Accepted Answer

A)  shifts the aggregate supply curve to AS0. 
B)  shifts the aggregate supply curve to AS2. 
C)  moves the economy to Point C on aggregate supply curve AS1. 
D)  moves the economy to Point B on aggregate supply curve AS1. 
A)  shifts the aggregate supply curve to AS0. 
B)  shifts the aggregate supply curve to AS2. 
C)  moves the economy to Point C on aggregate supply curve AS1. 
D)  moves the economy to Point B on aggregate supply curve AS1.

Question 12

The aggregate demand curve would shift to the right if

Accepted Answer

A)  government spending were decreased. 
B)  net taxes were decreased. 
C)  the money supply were decreased. 
D)  the cost of energy were to increase. 
A)  government spending were decreased. 
B)  net taxes were decreased. 
C)  the money supply were decreased. 
D)  the cost of energy were to increase.

Question 13

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

Accepted Answer

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

Question 14

If the government increases taxes, the

Accepted Answer

A)  aggregate demand increases. 
B)  aggregate demand decreases. 
C)  aggregate supply increases. 
D)  aggregate supply decreases. 
A)  aggregate demand increases. 
B)  aggregate demand decreases. 
C)  aggregate supply increases. 
D)  aggregate supply decreases.

Question 15

Refer to the information provided in Figure 12.1 below to answer the questions that follow.   Figure 12.1
-Refer to Figure 12.1. Suppose the economy is at Point A a(n) ________ can cause a movement to Point C.

Accepted Answer

A)  increase in government purchases 
B)  decrease in government purchases 
C)  decrease in aggregate demand 
D)  increase in aggregate demand 
A)  increase in government purchases 
B)  decrease in government purchases 
C)  decrease in aggregate demand 
D)  increase in aggregate demand

Question 16

A decrease in inflationary expectations that causes firms to decrease their prices shifts the

Accepted Answer

A)  aggregate supply curve to the left. 
B)  aggregate demand curve to the left. 
C)  aggregate supply curve to the right. 
D)  aggregate demand curve to the right. 
A)  aggregate supply curve to the left. 
B)  aggregate demand curve to the left. 
C)  aggregate supply curve to the right. 
D)  aggregate demand curve to the right.

Question 17

A decrease in net taxes will result in consumption crowding out planned investment when the economy is on the steep part of the AS curve.

Accepted Answer

A) True 
 B)False

Question 18

In a binding situation, the AD curve is vertical.

Accepted Answer

A) True 
 B)False

Question 19

Refer to the information provided in Figure 12.1 below to answer the questions that follow.   Figure 12.1
-Refer to Figure 12.1. An aggregate demand shift from AD2 to AD0 can be caused by

Accepted Answer

A)  a decrease in the price level. 
B)  an increase in the price level. 
C)  a decrease in taxes. 
D)  a decrease in money supply. 
A)  a decrease in the price level. 
B)  an increase in the price level. 
C)  a decrease in taxes. 
D)  a decrease in money supply.

Question 20

Refer to the information provided in Figure 12.1 below to answer the questions that follow.   Figure 12.1
-Refer to Figure 12.1. An aggregate demand shift from AD1 to AD2 can be caused by

Accepted Answer

A)  an increase in government spending. 
B)  a decrease in money supply. 
C)  an increase in the price level. 
D)  a decrease in the price level. 
A)  an increase in government spending. 
B)  a decrease in money supply. 
C)  an increase in the price level. 
D)  a decrease in the price level.

If the economy is on the steep part of its aggregate supply curve, expansionary policy will mostly increase the price level.

With a cost shock, a large decrease in output relative to the increase in the price level would occur if the curve is relatively .

The Fed will raise the interest rate by the greatest amount when the economy is on the part of the AS curve and there is .

A decrease in net taxation increases aggregate demand.

Refer to the information provided in Figure 12.2 below to answer the questions that follow. Figure 12.2 -Refer to Figure 12.2. Planned investment would experience the least amount of crowding out when the aggregate demand curve shifts from

Since 1970, the United States has experienced 5 periods and 2 periods.

Since 1970, the United States experienced stagflation

When analyzing the effects of government spending, net taxes, and the Z factors, what primarily matters is the shape of

Refer to the information provided in Figure 12.1 below to answer the questions that follow. Figure 12.1 -Refer to Figure 12.1. Suppose the economy is at Point A, a decrease in the price level can cause a movement to Point

The Fed generally had high interest rates ________ as it fought inflation.

The aggregate demand curve would shift to the right if

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

If the government increases taxes, the

Refer to the information provided in Figure 12.1 below to answer the questions that follow. Figure 12.1 -Refer to Figure 12.1. Suppose the economy is at Point A a(n) ________ can cause a movement to Point C.

A decrease in inflationary expectations that causes firms to decrease their prices shifts the

A decrease in net taxes will result in consumption crowding out planned investment when the economy is on the steep part of the AS curve.

In a binding situation, the AD curve is vertical.

Refer to the information provided in Figure 12.1 below to answer the questions that follow. Figure 12.1 -Refer to Figure 12.1. An aggregate demand shift from AD² to AD⁰ can be caused by

Refer to the information provided in Figure 12.1 below to answer the questions that follow. Figure 12.1 -Refer to Figure 12.1. An aggregate demand shift from AD¹ to AD² can be caused by

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Exam 12: Policy Effects and Cost Shocks in the Asad Model

If the economy is on the steep part of its aggregate supply curve, expansionary policy will mostly increase the price level.

With a cost shock, a large decrease in output relative to the increase in the price level would occur if the ________ curve is relatively ________.

The Fed will raise the interest rate by the greatest amount when the economy is on the ________ part of the AS curve and there is ________.

A decrease in net taxation increases aggregate demand.

Refer to the information provided in Figure 12.2 below to answer the questions that follow. Figure 12.2 -Refer to Figure 12.2. Planned investment would experience the least amount of crowding out when the aggregate demand curve shifts from

Since 1970, the United States has experienced 5 ________ periods and 2 ________ periods.

Since 1970, the United States experienced stagflation

When analyzing the effects of government spending, net taxes, and the Z factors, what primarily matters is the shape of

Refer to the information provided in Figure 12.1 below to answer the questions that follow. Figure 12.1 -Refer to Figure 12.1. Suppose the economy is at Point A, a decrease in the price level can cause a movement to Point

The Fed generally had high interest rates ________ as it fought inflation.

The aggregate demand curve would shift to the right if

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

If the government increases taxes, the

Refer to the information provided in Figure 12.1 below to answer the questions that follow. Figure 12.1 -Refer to Figure 12.1. Suppose the economy is at Point A a(n) ________ can cause a movement to Point C.

A decrease in inflationary expectations that causes firms to decrease their prices shifts the

A decrease in net taxes will result in consumption crowding out planned investment when the economy is on the steep part of the AS curve.

In a binding situation, the AD curve is vertical.

Refer to the information provided in Figure 12.1 below to answer the questions that follow. Figure 12.1 -Refer to Figure 12.1. An aggregate demand shift from AD2 to AD0 can be caused by

Refer to the information provided in Figure 12.1 below to answer the questions that follow. Figure 12.1 -Refer to Figure 12.1. An aggregate demand shift from AD1 to AD2 can be caused by

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

With a cost shock, a large decrease in output relative to the increase in the price level would occur if the curve is relatively .

The Fed will raise the interest rate by the greatest amount when the economy is on the part of the AS curve and there is .

Since 1970, the United States has experienced 5 periods and 2 periods.

Refer to the information provided in Figure 12.1 below to answer the questions that follow. Figure 12.1 -Refer to Figure 12.1. An aggregate demand shift from AD² to AD⁰ can be caused by

Refer to the information provided in Figure 12.1 below to answer the questions that follow. Figure 12.1 -Refer to Figure 12.1. An aggregate demand shift from AD¹ to AD² can be caused by