A. Prices to rise and output to rise
B. Price to fall and output to remain unchanged
C. Prices to fall and output to fall
D. prices to rise and output to remain unchanged
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Refers to Exhibit 4. Suppose the economy is operating in a recession such as point B in Exhibit 4. If policy makers wished to move output to its long run natural rate they should attempt to ?
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Stagflation occurs when the economy experiences ?
A. Shift aggregate demand to the left
B. Shift short run aggregate supply to the left
C. shift aggregate demand to the right
D. shift short-run aggregate supply to the right
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Suppose the economy is initially is long run equilibrium Then suppose there is a drought that destroys much of the wheat crop According to the model of aggregate demand and aggregate supply, what happens of prices and output in the short run ?
A. rising prices and rising output
B. rising prices and falling output
C. falling prices and falling output
D. falling prices and rising output
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Suppose the economy is initially in long-run equilibrium Then suppose there is an increase in military spending due to rising international tensions According to the model of aggregate demand and aggregate supply what happens to prices and output in the short run ?
A. Price rise; output falls
B. Price fall; output rises
C. Price rise; output rises
D. Price fall; output falls
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Suppose the price level falls but because of fixed nominal wage contracts the real wage rises and firms cut back on production This is a demonstration of the ?
A. Price fall; output rises
B. Price fall; output falls
C. Price rise; output fall
D. Price rise; output rise
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According to the wealth effect aggregate demand slopes downward (negatively) because ?
A. sticky-wage theory of the short-run aggregate supply curve
B. classical dichotomy theory of the short-run aggregate supply curve
C. misperceptions theory of the short-run aggregate supply curve
D. sticky-price theory of the short run aggregate supply curve
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Which of the following is not a reason why the aggregate demand curve slopes downward ?
A. lower prices increase the value of money holding and consumers spending increase
B. lower prices decrease the value of money holding and consumers spending decrease
C. lower prices reduce money holding increase lending, interest rates fall and investment spending increase
D. lower prices increase money holding decrease lending, interest rates rise and investment spending falls
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According to the interest rate effect aggregate demand slopes downward (negatively) because ?
A. The exchange-rate effect
B. The wealth effect
C. The classical dichotomy/monetary neutrality effect
D. The interest-rate effect
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Policy makers are said to “accommodate” an adverse supply shock if they ?
A. lower prices increase money holdings decrease lending interest rates rise, and investment spending falls
B. lower prices increase the value of money holding and consumer spending increases
C. lower prices decrease the value of money holdings and consumers spending decreases
D. lower prices reduce money holdings increase lending interest rates fall, and investment spending increase
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A. fail to respond to the adverse supply shock and allow the economy to adjust on its own.
B. respond to the adverse supply shock by decreasing aggregate demand which lower prices
C. respond to the adverse supply shock by decreasing short run aggregate supply
D. respond to the adverse supply shock by increasing aggregate demand, which further raises prices