Chapter 24 Flashcards
Which of these shifts the aggregate demand curve to the right?
Falling exports
A change in costs of production
A fall in the price level
Lower interest rates
Lower interest rates
The eventual effect of a positive AD shock, after all adjustment has occurred, is to:
raise the price level and leave real GDP unchanged
The eventual effect of a negative AS shock, after all adjustment has occurred, is to:
leave the price level and real GDP unchanged
New classical theorists believe that the economy is normally:
at the potential level of real GDP
The 2008-2009 recession was a clear example of the impact:
that a decrease in aggregate demand can have on the economy
Following the end of the housing bubble, spending on residential construction sharply declined. The collapse of the housing market in the U.S. then led to a financial crisis which caused a credit crunch that led to declines in consumption and business investment. The overall impact was a large decline in aggregate demand that found its way to Canada and the global economy
Which of these factors will cause the aggregate demand curve to shift?
A change in the price level
A change in the expectations of households and firms
An increase in productivity
A change in costs of production
A change in the expectations of households and firms
Which of these factors will shift the short-run aggregate supply to the left? A decrease in the cost of production A decrease in the price level A decrease in the size of the labour An improvement in technology
A decrease in the size of the labour
If firms reduce investment spending and the economy enters a recession, what contributes to the adjustment that causes the economy to return to its long-run equilibrium?
The decision by workers to accept lower wages
During the 1960s, many economists believed the government could do a good job regulating the level of inflation and unemployment. These policies were referred to as:
fine-tuning the economy
There are internal lags, such as the __________ lag, which refers to the time it takes to formulate a policy, and external lags, also called __________ lags, which refer to the time it takes for the policy to actually work.
recognition; impact
If the economy is initially in long-run equilibrium, an upward shift of the AS curve or a leftward shift of the AD curve will:
open a recessionary gap
A reduction in the net tax rate is a clear example of:
expansionary fiscal policy
What is true about using fiscal policy to stabilize the economy?
The law-making lag is typically longer for fiscal policy than for monetary policy.
The lower the net tax rate, __________ the simple multiplier and __________ real GDP is in response to shocks to autonomous spending.
the larger; the less stable
The convexity of the Phillips curve implies that an inflationary gap will cause the AS curve to __________ more quickly than a recessionary gap will cause the AS curve to __________.
shift up; shift down
