Ch10.2

Question 1

Which of the following is an example of a demand shock?

Answer 1

the introduction and greater availability of credit cards

Question 2

When the Federal Reserve increases the money supply, at a given price level the amount of output demanded is ______ and the aggregate demand curve shifts ______.

Answer 2

greater; outward

Question 3

supply shock

Answer 3

prices to fall and output to rise????NO

Question 4

The long run refers to a period:

Answer 4

during which prices are flexible

Question 5

Assume that the economy starts from long-run equilibrium. If the Federal Reserve increases the money supply, then ______ increase(s) in the short run and ______ increase(s) in the long run.

Answer 5

output; prices

Question 6

Exhibit: Shift in Aggregate Demand

Answer 6

c;b

Question 7

If a change in government regulations allows banks to start paying interest on checking accounts, this will

Answer 7

increase the demand for money.

Question 8

The price level decreases and output increases in the transition from the short run to the long run when the short-run equilibrium is _____ the natural rate of output in the short run.

Answer 8

below

Question 9

General Theory of Employment, Interest, and Money

Answer 9

John Maynard Keynes; 1936

Question 10

If Central Bank A cares only about keeping the price level stable and Central Bank B cares only about keeping output at its natural level, then in response to an exogenous decrease in the velocity of money:

Answer 10

both Central Bank A and Central Bank B should increase the quantity of money.

Question 11

If the short-run aggregate supply curve is horizontal, an increase in union aggressiveness that pushes wages and prices up will result in ______ prices and ______ output in the short run.

Answer 11

higher; lower