Question 1

In the long run,following a combination of a negative demand shock and a temporary negative supply shock,

Accepted Answer

The answer of In the long run,following a combination of...

Question 2

A decrease in the availability of raw materials that increases the price level is called a ________ shock

Accepted Answer

A decrease in the availability of raw materials would lead to a decrease in supply, thus causing a negative supply shock. This would result in an increase in prices due to a decrease in the quantity of available goods. Negative demand shocks occur when there is a decrease in demand, while positive demand shocks occur when there is an increase in demand. Positive supply shocks occur when the availability of raw materials increases, leading to an increase in supply and a decrease in price levels.

Question 3

According to aggregate demand and supply analysis,the favorable supply shock of 1995-1999 had the effect of

Accepted Answer

The favorable supply shock of 1995-1999 implies that the aggregate supply curve shifts to the right, which leads to an increase in aggregate output and a decrease in the price level. This shift also results in a decrease in unemployment as firms produce more and hire more workers to meet the increased demand. Therefore, option C is the correct choice as it states that the supply shock led to an increase in aggregate output, a decrease in unemployment, and a decrease in inflation. Option A is incorrect as it suggests that the supply shock led to an increase in inflation, which contradicts the idea of a favorable supply shock. Option B is incorrect as it suggests that the supply shock led to a decrease in output and an increase in unemployment, which is the opposite of the expected impact of a favorable supply shock. Option D is incorrect as it suggests that the supply shock led to a decrease in output and a decrease in inflation, which is again contradictory to the expected impact of a favorable supply shock.

Question 4

According to aggregate demand and supply analysis,America's involvement in the Vietnam War had the effect of

Accepted Answer

America's involvement in the Vietnam War led to increased government spending, which in turn increased aggregate demand. This increase in demand boosted aggregate output and lowered unemployment but also contributed to higher inflation rates.

Question 5

The price of a barrel of oil doubled between 2007 and the middle of 2008.To make matters worse,a financial crisis hit the U.S.economy starting in August of 2007.Which of the following is true of the Chinese experience?

Accepted Answer

The passage states that "The Chinese economy was better able than the U.S. economy to weather the financial crisis with output growth starting to grow earlier and more quickly than that of the U.S." and "Instead of relying solely on the economy's self-correcting mechanism, much more aggressive fiscal expansions than those of the U.S. (in addition to a substantial monetary easing) served to shift the AD curve back to general equilibrium relatively quickly." It also states that "The worldwide decline in demand led to a collapse of Chinese exports." So the correct answer is D.

Question 6

Because shifts in aggregate demand are not viewed as being particularly important to aggregate output fluctuations,they do not see much need for activist policy to eliminate high unemployment."They" refers to proponents of

Accepted Answer

Proponents of the real business cycle theory do not view shifts in aggregate demand as being particularly important to aggregate output fluctuations, and they do not see much need for activist policy to eliminate high unemployment.

Question 7

If workers demand and receive higher real wages (a successful wage push),the cost of production ________ and the short-run aggregate supply curve shifts ________.

Accepted Answer

When workers demand and receive higher real wages, the cost of production increases as firms have to pay higher wages. This leads to a leftward shift in the short-run aggregate supply curve, as higher costs result in lower levels of output being produced at any given price level.

Question 8

As of 2009,China's economy had recovered from the global recession that began in 2008.Use aggregate demand and aggregate supply analysis to explain why,and to explain the likely consequences for China of an increase in the growth rate of the global economy.

Accepted Answer

The answer of As of 2009,China's economy had recovered from...

Question 9

According to aggregate demand and supply analysis,the rising oil prices coupled with the global financial crisis in 2007-2008 caused the unemployment rate to ________ and the level of real aggregate output to ________.

Accepted Answer

Rising oil prices and the global financial crisis would lead to increased production costs and decreased spending, respectively. This would shift the aggregate supply curve to the left and the aggregate demand curve to the left as well, leading to higher unemployment and lower levels of real aggregate output.

Question 10

Explain and demonstrate graphically the effects of a negative supply shock in both the short-run and long-run.

Accepted Answer

The answer of Explain and demonstrate graphically the effects of...

Question 11

According to aggregate demand and supply analysis,the negative supply shocks of 1973-1975 and 1978-1980 had the effect of

Accepted Answer

Negative supply shocks lead to a decrease in aggregate supply, which in turn results in a decrease in aggregate output and an increase in price levels. This causes a decrease in consumer and business spending, resulting in higher unemployment levels. Therefore, option B is the correct answer.

Question 12

A positive supply shock causes ________ to ________.

Accepted Answer

A positive supply shock increases production and reduces the cost of production, leading to an increase in short-run aggregate supply. As a result, the economy can produce more output at a lower price level, which increases real GDP and lowers the price level, causing a movement along the aggregate demand curve to the right, thus increasing aggregate demand.

Question 13

Suppose the U.S.economy is operating at potential output. A negative supply shock that is accommodated by an open market purchase by the Federal Reserve will cause ________ in real GDP in the long run and ________ in inflation in the long run,everything else held constant.

Accepted Answer

A negative supply shock typically reduces output and increases prices. If the Federal Reserve accommodates this shock with an open market purchase (buying securities to inject money into the economy), it aims to offset the decrease in output by increasing the money supply. In the long run, this can lead to higher inflation due to the increased money supply, but it might not change the real GDP, which tends to return to its potential output level due to the economy's self-correcting mechanisms.

Question 14

The Phillips curve indicates that when the labor market is ________,production costs will ________ and aggregate supply increases.

Accepted Answer

The answer of The Phillips curve indicates that when the...

Question 15

Suppose the economy is producing at the natural rate of output and the government passes legislation that severely restricts a company's ability to reduce production costs via outsourcing. Everything else held constant,this policy action will cause ________ in the unemployment rate in the short run and ________ in inflation in the short run.

Accepted Answer

Restricting a company's ability to reduce production costs via outsourcing will likely lead to higher production costs domestically. In the short run, this can lead to higher prices (inflation) as companies pass these costs onto consumers. Additionally, companies facing higher production costs might reduce their workforce to cut expenses, leading to an increase in the unemployment rate.

Question 16

A negative supply shock causes ________ to ________.

Accepted Answer

A negative supply shock reduces the availability of resources, increases input prices, or decreases productivity, leading to a decrease in short-run aggregate supply. As a result, the economy will have less output at higher prices. A negative supply shock will not cause an increase in aggregate demand or short-run aggregate supply.

Question 17

This theory views shocks to tastes (workers' willingness to work,for example)and technology (productivity)as the major driving forces behind short-run fluctuations in the business cycle because these shocks lead to substantial short-run fluctuations in the natural rate of output.

Accepted Answer

The theory described is the core idea behind the Real Business Cycle theory, which asserts that fluctuations in economic output are primarily due to changes in technology and preferences, rather than monetary or fiscal policy. The natural rate hypothesis and Phillips curve model both focus on the relationship between inflation and unemployment, while hysteresis argues that short-term economic shocks can have long-term effects on the economy.

Question 18

The price of a barrel of oil doubled between 2007 and the middle of 2008.To make matters worse,a financial crisis hit the U.S.economy starting in August of 2007.Which of the following is an appropriate description of the mechanism that would have ensued?

Accepted Answer

The increase in the price of oil would have led to a shift in the AS curve to the left, increasing the price level and decreasing real GDP in the short-run. The financial crisis would have led to a contraction in AD, decreasing both price level and real GDP in the short-run. Both shocks would have caused shifts in both curves in the short-run. However, as long as neither shock had a lasting impact on potential output, unemployment will not be affected in the long-run. Therefore, option C is the most appropriate description of the mechanism that would have ensued.

Question 19

The price of a barrel of oil doubled between 2007 and the middle of 2008.To make matters worse,a financial crisis hit the U.S.economy starting in August of 2007.Which of the following is true of the United Kingdom's experience?

Accepted Answer

A) The increase in the price of oil would have led to a decrease in Aggregate Supply, shifting it to the left.
B) The financial crisis did not have an immediate impact on the AD curve, but it would have eventually caused a negative demand shock, shifting the AD curve to the left.
C) The Lehman Brothers bankruptcy in September 2008 led to a severe negative demand shock, lowering aggregate demand and output, and increasing the unemployment rate.

Question 20

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

Accepted Answer

Real business cycle theory holds that aggregate supply shocks affect the natural rate of output, which is determined by the level of technology, the quantity and quality of factors of production, and institutions. This theory suggests that business cycles are the result of changes in the production capabilities of the economy, rather than changes in aggregate demand.

Quiz 22: Aggregate Demand and Supply Analysis

In the long run,following a combination of a negative demand shock and a temporary negative supply shock,

A decrease in the availability of raw materials that increases the price level is called a ________ shock

According to aggregate demand and supply analysis,the favorable supply shock of 1995-1999 had the effect of

According to aggregate demand and supply analysis,America's involvement in the Vietnam War had the effect of

The price of a barrel of oil doubled between 2007 and the middle of 2008.To make matters worse,a financial crisis hit the U.S.economy starting in August of 2007.Which of the following is true of the Chinese experience?

Because shifts in aggregate demand are not viewed as being particularly important to aggregate output fluctuations,they do not see much need for activist policy to eliminate high unemployment."They" refers to proponents of

If workers demand and receive higher real wages (a successful wage push) ,the cost of production and the short-run aggregate supply curve shifts .

As of 2009,China's economy had recovered from the global recession that began in 2008.Use aggregate demand and aggregate supply analysis to explain why,and to explain the likely consequences for China of an increase in the growth rate of the global economy.

According to aggregate demand and supply analysis,the rising oil prices coupled with the global financial crisis in 2007-2008 caused the unemployment rate to and the level of real aggregate output to .

Explain and demonstrate graphically the effects of a negative supply shock in both the short-run and long-run.

According to aggregate demand and supply analysis,the negative supply shocks of 1973-1975 and 1978-1980 had the effect of

A positive supply shock causes to .

Suppose the U.S.economy is operating at potential output. A negative supply shock that is accommodated by an open market purchase by the Federal Reserve will cause in real GDP in the long run and in inflation in the long run,everything else held constant.

The Phillips curve indicates that when the labor market is ,production costs will and aggregate supply increases.

A negative supply shock causes to .

This theory views shocks to tastes (workers' willingness to work,for example) and technology (productivity) as the major driving forces behind short-run fluctuations in the business cycle because these shocks lead to substantial short-run fluctuations in the natural rate of output.

The price of a barrel of oil doubled between 2007 and the middle of 2008.To make matters worse,a financial crisis hit the U.S.economy starting in August of 2007.Which of the following is an appropriate description of the mechanism that would have ensued?

The price of a barrel of oil doubled between 2007 and the middle of 2008.To make matters worse,a financial crisis hit the U.S.economy starting in August of 2007.Which of the following is true of the United Kingdom's experience?

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

Quiz 22: Aggregate Demand and Supply Analysis

In the long run,following a combination of a negative demand shock and a temporary negative supply shock,

A decrease in the availability of raw materials that increases the price level is called a ________ shock

According to aggregate demand and supply analysis,the favorable supply shock of 1995-1999 had the effect of

According to aggregate demand and supply analysis,America's involvement in the Vietnam War had the effect of

The price of a barrel of oil doubled between 2007 and the middle of 2008.To make matters worse,a financial crisis hit the U.S.economy starting in August of 2007.Which of the following is true of the Chinese experience?

Because shifts in aggregate demand are not viewed as being particularly important to aggregate output fluctuations,they do not see much need for activist policy to eliminate high unemployment."They" refers to proponents of

If workers demand and receive higher real wages (a successful wage push) ,the cost of production ________ and the short-run aggregate supply curve shifts ________.

As of 2009,China's economy had recovered from the global recession that began in 2008.Use aggregate demand and aggregate supply analysis to explain why,and to explain the likely consequences for China of an increase in the growth rate of the global economy.

According to aggregate demand and supply analysis,the rising oil prices coupled with the global financial crisis in 2007-2008 caused the unemployment rate to ________ and the level of real aggregate output to ________.

Explain and demonstrate graphically the effects of a negative supply shock in both the short-run and long-run.

According to aggregate demand and supply analysis,the negative supply shocks of 1973-1975 and 1978-1980 had the effect of

A positive supply shock causes ________ to ________.

Suppose the U.S.economy is operating at potential output. A negative supply shock that is accommodated by an open market purchase by the Federal Reserve will cause ________ in real GDP in the long run and ________ in inflation in the long run,everything else held constant.

The Phillips curve indicates that when the labor market is ________,production costs will ________ and aggregate supply increases.

A negative supply shock causes ________ to ________.

This theory views shocks to tastes (workers' willingness to work,for example) and technology (productivity) as the major driving forces behind short-run fluctuations in the business cycle because these shocks lead to substantial short-run fluctuations in the natural rate of output.

The price of a barrel of oil doubled between 2007 and the middle of 2008.To make matters worse,a financial crisis hit the U.S.economy starting in August of 2007.Which of the following is an appropriate description of the mechanism that would have ensued?

The price of a barrel of oil doubled between 2007 and the middle of 2008.To make matters worse,a financial crisis hit the U.S.economy starting in August of 2007.Which of the following is true of the United Kingdom's experience?

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

If workers demand and receive higher real wages (a successful wage push) ,the cost of production and the short-run aggregate supply curve shifts .

According to aggregate demand and supply analysis,the rising oil prices coupled with the global financial crisis in 2007-2008 caused the unemployment rate to and the level of real aggregate output to .

A positive supply shock causes to .

Suppose the U.S.economy is operating at potential output. A negative supply shock that is accommodated by an open market purchase by the Federal Reserve will cause in real GDP in the long run and in inflation in the long run,everything else held constant.

The Phillips curve indicates that when the labor market is ,production costs will and aggregate supply increases.

A negative supply shock causes to .