Question 1

If the economy is on the flat portion of the AS curve,

Accepted Answer

A)  there is little crowding out of planned investment.
B)  there is almost complete crowding out of planned investment.
C)  consumption,but not government spending,crowds out planned investment.
D)  government spending,but not consumption,crowds out planned investment.E) A) and B)
F) All of the above

Question 2

Refer to the information provided in Figure 13.2 below to answer the questions that follow.  Figure 13.2
-Refer to Figure 13.2.An expansionary fiscal policy would be most effective in raising output with little or no inflation when the aggregate demand curve shifts from

Accepted Answer

A)  AD1 to AD2.
B)  AD3 to AD4.
C)  AD5 to AD6.
D)  AD1 to AD6.E) A) and B)
F) A) and D)

Question 3

Since 1970,the Fed generally ________ the interest rate when inflation was ________.

Accepted Answer

A)  raised;high
B)  raised;low
C)  lowered;high
D)  The Fed has maintained a stable interest rate since 1970.E) B) and C)
F) C) and D)

Question 4

Refer to the information provided in Figure 13.2 below to answer the questions that follow.  Figure 13.2
-Refer to Figure 13.2.In response to an increase in government spending,the Fed would increase the interest rate by the greatest amount when the aggregate demand curve shifts from

Accepted Answer

A)  AD1 to AD2.
B)  AD3 to AD4.
C)  AD5 to AD6.
D)  AD6 to AD1.E) C) and D)
F) All of the above

Question 5

The aggregate demand curve would shift to the left if

Accepted Answer

A)  government spending were increased.
B)  net taxes were increased.
C)  the money supply were increased.
D)  the cost of energy were to decrease.E) A) and B)
F) C) and D)

Question 6

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 7

Economic policies are effective at changing output when

Accepted Answer

A)  the economy is not producing at capacity.
B)  the economy is producing at its potential output.
C)  the unemployment rate is at the natural rate.
D)  the aggregate supply curve is vertical.E) A) and B)
F) B) and D)

Question 8

Refer to the information provided in Figure 13.3 below to answer the questions that follow.  Figure 13.3
-Refer to Figure 13.3.Assume the economy is at Point A.Higher oil prices shift the aggregate supply curve to AS2.If the government decides to counter the effects of higher oil prices by increasing government spending,then the price level will be ________ than P2 and output will be ________ than Y2.

Accepted Answer

A)  greater;greater
B)  greater;less
C)  less;less
D)  less;greaterE) C) and D)
F) B) and D)

Question 9

Refer to the information provided in Figure 13.1 below to answer the questions that follow.  Figure 13.1
-Refer to Figure 13.1.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.E) B) and C)
F) A) and B)

Question 10

The objective of an expansionary fiscal policy is to

Accepted Answer

A)  reduce unemployment.
B)  reduce inflation.
C)  reduce growth in output.
D)  reduce growth in international trade.E) B) and C)
F) C) and D)

Question 11

Refer to the information provided in Figure 13.2 below to answer the questions that follow.  Figure 13.2
-Refer to Figure 13.2.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.E) A) and B)
F) A) and C)

Question 12

Since the end of 2008,there has been a zero interest rate bound in the U.S.economy.

Accepted Answer

A) True 
 B)False

Question 13

If the long-run aggregate supply curve is vertical,the multiplier effect of a change in net taxes on aggregate output in the long run

Accepted Answer

A)  depends on the price level.
B)  is one.
C)  is zero.
D)  is infinitely large.E) B) and C)
F) A) and D)

Question 14

A(n) ________ in inflationary expectations that causes firms to decrease their prices shifts the aggregate supply curve to the ________.

Accepted Answer

A)  increase;right
B)  increase;left
C)  decrease;right
D)  decrease;leftE) B) and D)
F) B) and C)

Question 15

For an economy to experience both a recession and inflation at the same time,

Accepted Answer

A)  the aggregate supply curve must shift to the right.
B)  the aggregate supply curve must shift to the left.
C)  the aggregate demand curve must shift to the left.
D)  the aggregate demand curve must shift to the right.E) C) and D)
F) All of the above

Question 16

A binding situation occurred during the recession of

Accepted Answer

A)  1974-1975.
B)  1980-1982.
C)  1990-1991.
D)  2008-2009.E) A) and C)
F) All of the above

Question 17

In a binding situation,a positive cost shock will cause ________ in output and ________ in the price level.

Accepted Answer

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

Question 18

An increase in inflationary expectations that causes firms to increase 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.E) A) and C)
F) A) and B)

Question 19

In a binding situation,

Accepted Answer

A)  planned investment increases when the price level decreases.
B)  output increases when the price level decreases.
C)  planned investment and output both increase when the price level decreases.
D)  neither planned investment nor output change when the price level decreases.E) A) and B)
F) A) and C)

Question 20

In a binding situation,an increase in government spending

Accepted Answer

A)  shifts the AD curve to the right.
B)  shifts the AD curve to the left.
C)  does not shift the AD curve.
D)  causes the AD curve to become horizontal.E) All of the above
F) C) and D)

Exam 13: Policy Effects and Costs Shocks in the Asad Model

Refer to the information provided in Figure 13.1 below to answer the questions that follow. Figure 13.1 -Refer to Figure 13.1.An aggregate demand shift from AD2 to AD0 can be caused by

Correct Answer
verified

In a binding situation,an increase in government spending

Correct Answer
verified

In a binding situation,a positive cost shock will cause in output and in the price level.

Correct Answer
verified

The aggregate demand curve would shift to the left if

Correct Answer
verified

A binding situation occurred during the recession of

Correct Answer
verified

A(n) in inflationary expectations that causes firms to decrease their prices shifts the aggregate supply curve to the .

Correct Answer
verified

The objective of an expansionary fiscal policy is to

Correct Answer
verified

Refer to the information provided in Figure 13.2 below to answer the questions that follow. Figure 13.2 -Refer to Figure 13.2.An expansionary fiscal policy would be most effective in raising output with little or no inflation when the aggregate demand curve shifts from

Correct Answer
verified

If the long-run aggregate supply curve is vertical,the multiplier effect of a change in net taxes on aggregate output in the long run

Correct Answer
verified

An increase in inflationary expectations that causes firms to increase their prices shifts the

Correct Answer
verified

Since the end of 2008,there has been a zero interest rate bound in the U.S.economy.

Correct Answer
verified

If the economy is on the flat portion of the AS curve,

Correct Answer
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In a binding situation,

Correct Answer
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Economic policies are effective at changing output when

Correct Answer
verified

For an economy to experience both a recession and inflation at the same time,

Correct Answer
verified

Refer to the information provided in Figure 13.2 below to answer the questions that follow. Figure 13.2 -Refer to Figure 13.2.The output multiplier is largest when the aggregate demand curve shifts from

Correct Answer
verified

Refer to the information provided in Figure 13.2 below to answer the questions that follow. Figure 13.2 -Refer to Figure 13.2.In response to an increase in government spending,the Fed would increase the interest rate by the greatest amount when the aggregate demand curve shifts from

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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Since 1970,the Fed generally the interest rate when inflation was .

Correct Answer
verified

Exam 13: Policy Effects and Costs Shocks in the Asad Model

Refer to the information provided in Figure 13.1 below to answer the questions that follow. Figure 13.1 -Refer to Figure 13.1.An aggregate demand shift from AD2 to AD0 can be caused by

Correct AnswerverifiedShow Answer

In a binding situation,an increase in government spending

Correct AnswerverifiedShow Answer

In a binding situation,a positive cost shock will cause ________ in output and ________ in the price level.

Correct AnswerverifiedShow Answer

The aggregate demand curve would shift to the left if

Correct AnswerverifiedShow Answer

A binding situation occurred during the recession of

Correct AnswerverifiedShow Answer

A(n) ________ in inflationary expectations that causes firms to decrease their prices shifts the aggregate supply curve to the ________.

Correct AnswerverifiedShow Answer

The objective of an expansionary fiscal policy is to

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 13.2 below to answer the questions that follow. Figure 13.2 -Refer to Figure 13.2.An expansionary fiscal policy would be most effective in raising output with little or no inflation when the aggregate demand curve shifts from

Correct AnswerverifiedShow Answer

If the long-run aggregate supply curve is vertical,the multiplier effect of a change in net taxes on aggregate output in the long run

Correct AnswerverifiedShow Answer

An increase in inflationary expectations that causes firms to increase their prices shifts the

Correct AnswerverifiedShow Answer

Since the end of 2008,there has been a zero interest rate bound in the U.S.economy.

Correct AnswerverifiedShow Answer

If the economy is on the flat portion of the AS curve,

Correct AnswerverifiedShow Answer

In a binding situation,

Correct AnswerverifiedShow Answer

Economic policies are effective at changing output when

Correct AnswerverifiedShow Answer

For an economy to experience both a recession and inflation at the same time,

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 13.2 below to answer the questions that follow. Figure 13.2 -Refer to Figure 13.2.The output multiplier is largest when the aggregate demand curve shifts from

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 13.2 below to answer the questions that follow. Figure 13.2 -Refer to Figure 13.2.In response to an increase in government spending,the Fed would increase the interest rate by the greatest amount when the aggregate demand curve shifts from

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Since 1970,the Fed generally ________ the interest rate when inflation was ________.

Correct AnswerverifiedShow Answer

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In a binding situation,a positive cost shock will cause in output and in the price level.

Correct Answer
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A(n) in inflationary expectations that causes firms to decrease their prices shifts the aggregate supply curve to the .

Correct Answer
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Since 1970,the Fed generally the interest rate when inflation was .

Correct Answer
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