28 Keynseian Model-Using Fiscal and Monetary Policy

Question 1

Cyclical unemployment equals this
value when actual output is equal to
potential output.

Answer 1

0

Question 2

In 1973, a shortage of petroleum and higher prices of gasoline shifted the short-run aggregate supply curve in this direction.

Answer 2

leftward

Question 3

In the United States, the aggregate price level has followed an upward trend since this historical event.

Answer 3

World War II

Question 4

In the Keynesian model, an increase in money supply shifts the aggregate demand curve in this direction.

Answer 4

Rightward

Question 5

This term refers to increased
government spending.

Answer 5

expansionary fiscal policy

Question 6

Fiscal policy can be used to increase spending through these types of actions.

Answer 6

tax cuts

Question 7

This economic organization can vary the money supply to control the interest rate.

Answer 7

Federal Reserve

Question 8

Economists can calculate initial estimates of GDP in about this number of months.

Answer 8

3

Question 9

Most economists believe that these types of policies are counterproductive
in mitigating the effects of a recession.

Answer 9

Activist

Question 10

At any point, the Keynseian model implies that the country’s aggregate production and price level are determined by

Answer 10

the intersection of AD and AS

Question 11

When is the output gap zero?

Answer 11

When actual output is equal to its potential

Question 12

Above potential output is a

Answer 12

positive aggregate demand shock

Question 13

Covid, an example of a negative aggregate demand schock occured in the US in

Answer 13

Febuary 2020

Question 14

After, consumption and business investment fell sharptly what was the response that moderates the impact of the shift in consumer sentiment.

Answer 14

Aggregate price level declines (some businesses lower their prices to get more business)

Question 15

The OPEC oil embargo occurred in

Answer 15

1973

Question 16

What are the two various of negative aggregate schocks

Answer 16

AD/AS

Question 17

Why do recessions and expansions occur?

Answer 17

The sequence of unpredictable shcocks to aggregate demand or aggregate supply that strike the economy and caus the equilbrium of production to move from its potential (sticky prices lead to slow adjustments)

Question 18

What is short run?

Answer 18

the period of time in which the performance of the economy deviates from the prediction from the long run model

Question 19

Approximately range of short run

Answer 19

1 to 3 years

Question 20

What odes it mean to draw recessions and expansions assuming thelevel of inlation in the economy was zero.

Answer 20

aggregate Price Level is stable

Question 21

In the Aggregate demand-Aggregate supply model, an increase in the money supply causes the AD curve to

Answer 21

shift to the right.

Question 22

What heppens to the AS curve if people have become accustomed to an increasing money supply and rising prices

Answer 22

price elvel will rise each year, and the AS^SR/SRAS will shift upward so that AD and SRAS intersect at the country’s potential output

Question 23

What did Lyndon Johnson do in the 1960s?

Answer 23

Started a military buildup, choosing to finance it through borrowing because it is afriad that increased taxes will be upopular. Roughly what happened in the 1960s un der President Lyndon Johnson.

Question 24

In AD/AS models, changes in aggregate prices it indicates are unaticipated deviations from the prevailing and expected rate of inflation.

Question 25

The main argument in faor using monetary or fiscal policy to stabilize the conomy is that deviations ot actual output from potential output are csotly. In recessions, when some resources are not fully employed, the economy froever loses the

Answer 25

output that these resources could have produced

Question 26

Two reasons why fiscal/monetary policy invterventions desriability are controversal

Answer 26

The difficulty of identifying preciesly what the conomy’s potential output is.

Also the praticality of carrying out such fiscal and monetary policy effectively

Question 27

It takes about (how long) to calculate the first estimates of GDP, which are subject to substatial revision over the next few months as addiitional data becomes available.

Answer 27

3 months