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Questions and Answers

(1071 solutions)

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Suppose a pandemic causes a reduction in consumer spending. If the Federal Reserve chooses to engage in activist stabilization policy, it should _______.

c. increase the money supply and decrease interest rates...

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Posted by Cleveland on September 17, 2024
The long-run effect of an increase in the money supply is to _______.

b. increase the price level...

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Posted by Cleveland on September 17, 2024
The initial effect of an increase in the money supply is to _______.

d. decrease the interest rate...

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Posted by Cleveland on September 17, 2024
In the market for real output, the initial effect of an increase in the money supply is to _______.


c. shift aggregate demand to the right...

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Posted by Cleveland on September 17, 2024
For the United States, the most important source of the downward slope of the aggregate-demand curve is _______.

d. the interest-rate effect...

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Posted by Cleveland on September 17, 2024
When the supply and demand for money are expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis, an increase in the price level _______.

a. shifts money demand to the right and increases the interest rate...

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Posted by Cleveland on September 17, 2024
When money demand is expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis, an increase in the interest rate _______.


c. decreases the quantity demanded of money...

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Posted by Cleveland on September 17, 2024
Keynes's liquidity preference theory of the interest rate suggests that the interest rate is determined by _______.

d. the supply and demand for money...

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Posted by Cleveland on September 17, 2024
The following graph shows the aggregate demand curve (AD), the short-run aggregate supply curve (AS), and the long-run aggregate supply curve (LRAS) for a hypothetical economy. Initially, the expected price level equals the actual price level, and the economy experiences long-run equilibrium at a natural level of output of $110 billion.
Suppose a bout of severe weather drives up agricultural costs, increases the costs of transporting goods and services, and increases the costs of producing goods and services.
Use the graph to help you answer the questions about the short-run and long-run effects of the increase in production costs that follow. (Note: You will not be graded on any adjustments made to the graph.)
Hint: For simplicity, ignore any possible impact of the severe weather on the natural level of output.
The short-run economic outcome resulting from the increase in production costs is known as    .
Suppose now that the government decides not to take any action in response to the short-run impact of the severe weather.
In the long run, given that the government does nothing, the output level in the economy will equal
billion and the price level will equal
.

The short-run economic outcome resulting from the increase in production costs is known asstagflation   .Points:1 / 1Close ExplanationExplanation:Firms experience higher production costs due to the severe weather. The increase in costs makes the sale of goods and services less profitable, ...

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Posted by Cleveland on September 16, 2024
The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $600 billion. Suppose firms become pessimistic about future business conditions and cut back on investment spending.
Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the business pessimism.
In the short run, the decrease in investment spending associated with business pessimism causes the price level to    the price level people expected and the quantity of output to    the natural level of output. The business pessimism will cause the unemployment rate to    the natural rate of unemployment in the short run.
Again, the following graph shows a hypothetical economy experiencing long-run equilibrium at the expected price level of 120 and natural output level of $600 billion, prior to the decrease in investment spending associated with business pessimism.
Along the transition from the short run to the long run, price-level expectations will    and the    curve will shift to the    .
Using the graph, illustrate the long-run impact of the business pessimism by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve in the appropriate directions.
In the long run, due to the business pessimism, the price level    , the quantity of output    the natural level of output, and the unemployment rate    the natural rate.

Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the business pessimism.Your AnswerADAS02004006008001000120024020016012080400PRICE LEVELOUTPUT (Billions of dollars)AD   AS   Cor...

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Posted by Cleveland on September 16, 2024