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The vertical curve through the natural rate of output to which the economy will return in the long run

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The vertical curve through the natural rate of output to which the economy will return in the long run, regardless of the price level, is called the

  1. long run aggregate supply curve. c. short run aggregate supply curve.
  2. aggregate supply curve. d. aggregate demand curve.

 

  1. An increase in aggregate demand will initially tend to lead firms to
  2. increase production. c. decrease employment.
  3. cut prices. d. decrease production.

 

  1. A curve showing the direct relationship between the overall price level and the level of real output supplied, ceteris paribus, in response to changes in demand before full adjustment of relative prices has taken place is called the
  2. long-run aggregate supply curve. c. aggregate supply curve.
  3. short-run aggregate supply curve. d. aggregate demand curve.

The vertical curve through the natural rate of output to which the economy will return in the long run, regardless of the price level

  1. Aggregate demand changes in response to which of the following factors?
  2. changes in input prices
  3. changes in the number of firms in an industry
  4. changes in transfer payments
  5. changes in monetary and fiscal policies

 

  1. Consumer spending is directly (positively) related to which of the following?
  2. wealth and income c. the interest rate
  3. the unemployment rate d. apprehensions about the job market

 

  1. Which of these are excluded from the aggregate expenditures of the government sector?
  2. expenditures for roads and bridges c. national defense spending
  3. Social Security benefits d. spending on primary education

The vertical curve through the natural rate of output to which the economy will return in the long run, regardless of the price level

  1. Which of the following is likely to lead to a decrease in aggregate demand?
  2. a decrease in interest rates
  3. an increase in income
  4. an increase in imports
  5. an increase in government spending on goods and services

 

  1. The economy is in long-run equilibrium when
  2. optimal mix is reached
  3. input prices have fully adjusted to changes in output prices
  4. few input and output prices have adjusted
  5. change is the leading characteristic of the production factors.

 

  1. Sustained increases in the overall price level due to high levels of aggregate demand are called which of the following?
  2. booming aggregate demand c. cost-push inflation
  3. demand-pull inflation d. stagflation

The vertical curve through the natural rate of output to which the economy will return in the long run, regardless of the price level

  1. The productivity of capital is thought to depend on which of the following?
  2. the size of the labor force c. personal income
  3. the level of education d. resources devoted to research and development

 

  1. How do adverse supply shocks affect economic performance?
  2. They increase both real prices and real output.
  3. They increase real prices and decrease real output.
  4. They increase real output and decrease real prices.
  5. They decrease both real prices and real output.

 

  1. The inconvenience associated with reducing money holdings to avoid the inflation tax is called
  2. menu costs c. shoeleather costs
  3. redistribution costs d. uncertainty costs

 

  1. Unexpected inflation hurts lenders and benefits borrowers because
  2. the borrowed money increases in purchasing power over the life of the loan.
  3. the lender’s real rate of return will be higher as a result of the inflation.
  4. the dollars that are paid back are worth less in terms of expected purchasing power.
  5. the borrower is able to pay back the money over a longer time period.

The vertical curve through the natural rate of output to which the economy will return in the long run, regardless of the price level

  1. What could the Fed do to offset an unexpected increase in aggregate demand?
  2. It could lower the discount rate. c. It could lower reserve requirements.
  3. It could raise interest rates. d. It could increase marginal tax rates.

 

  1. If input prices are higher than firms expect
  2. output prices will have to decrease to get the firms to produce
  3. demand will likely increase
  4. the SRAS curve will shift to the left
  5. the LRAS curve will shift to the left

 

  1. The goals of monetary policy include all of the following except:
  2. sustainable economic growth c. full employment
  3. stable prices d. a balanced federal budget

 

  1. Which of the following is false?
  2. Inflation causes a redistribution of income in arbitrary and unpredictable ways.
  3. Expected inflation is much worse than unexpected inflation.
  4. Borrowers benefit from unexpected inflation while lenders are hurt by it.
  5. Inflation can hurt our international competitiveness.

 

  1. Which of the following choices correctly lists the three lags in the policy process in the order in which they are expected to occur?
  2. the policy lag, the recognition lag and the impact lag
  3. the impact lag, the recognition lag and the policy lag
  4. the recognition lag, the policy lag and the impact lag
  5. the recognition lag, the impact lag and the policy lag

 

  1. The ____________ refers to the time that elapses from the point when the need for action is recognized and when a legislative solution is decided upon and set in motion.
  2. impact lag c. recognition lag
  3. policy lag d. operating lag

 

  1. The Fed can use which of the following as an intermediate target?
  2. the level of real GDP
  3. the level of nominal GDP
  4. both an interest rate and a monetary aggregate at the same time
  5. either a monetary aggregate or an interest rate but not at the same time

The vertical curve through the natural rate of output to which the economy will return in the long run, regardless of the price level

  1. When the Fed uses an interest rate as an intermediate target, upward pressure on the interest rate is restricted by increasing the supply of reserves. This may lead to
  2. higher fed funds growth rates c. steady economic growth
  3. a downward slide into recession d. higher inflation in the future.

 

  1. A target that the Fed can control with its policy tools and which is correlated with the intermediate target is the
  2. policy target. c. policy directive.
  3. operating target. d. economic target.

 

  1. What will happen in the long-run if there is an unexpected increase in aggregate demand and the Fed does nothing?
  2. both output and prices will be higher
  3. only the price level will increase; real output will return to its natural level
  4. a recession will occur and the aggregate demand curve will shift back to its starting position
  5. the aggregate supply curve will shift rightward; this will return price to its initial level and further increase real output The vertical curve through the natural rate of output to which the economy will return in the long run, regardless of the price level