Chapter 9

Question 1

Business cycles are:

Answer 1

Economic fluctuations, movements of GDP away from potential output, and periods in which real GDP grows too slow or top fast

Question 2

In the macroeconomic short run prices (do/don’t) fully adjust to changes in demand

Answer 2

Do not

Question 3

A period when economic growth is negative for at least six months is called a

Answer 3

Recession

Question 4

Economic measure that is countercyclical

Answer 4

Unemployment

Question 5

Real business cycle theory emphasizes the role of

Answer 5

Technology shocks as a cause of economic fluctuations

Question 6

Suppose consumer tastes and preferences shift from a desire to go skiing to an interest in snowboarding. If skiis and snowboards are produced by dif firms, the firms that produce snowboards will experience

Answer 6

A rise in prices, which will lead them to increase production and increase number of workers

Question 7

What is a problem with the price system that can lead to a breakdown in the coordination of economic activity?

Answer 7

Prices can be slow to adjust

Question 8

Prices for industrial commodities such as steel Rods or machine tools are

Answer 8

Custom and sticky prices

Question 9

If prices are sticky, economic activity (will/won’t) be coordinated efficiently

Answer 9

Wont

Question 10

The short run in macroeconomics is the period in which

Answer 10

Prices don’t change, or don’t change very much, and demand determines output

Question 11

Keynesian economics means that

Answer 11

Demand determines output in short run

Question 12

Aggregate demand refers to relationship between

Answer 12

The price level and the quantity of real GDP demanded

Question 13

Increase of GDP in France equals

Answer 13

An increase in aggregate demand

Question 14

Long run: decrease in money supple

Answer 14

No change in output and decrease in prices

Question 15

______________________ influences the position of the long run aggregate supply curve

Answer 15

The level of full employment output

Question 16

Short run Keynesian aggregate supply/ increase in gov spending

Answer 16

Increase in output and slight increase in prices

Question 17

Keynesian agg supply curve: reflects idea in short run prices are _________ and firms _______________

Answer 17

Sticky; adjust production to meet demand

Question 18

As purchasing power of money changes, aggregate demand curve is affected in 3 different ways

Answer 18

Wealth effect, interest rate effect, international trade effect

Question 19

Wealth effect

Answer 19

The increase in spending that occurs because the real value of money increase when the price level dalls

Question 20

Interest rate effect

Answer 20

With a given supply of money in economy, a lower price level wil lead to lower interest rates

Question 21

International trade effect

Answer 21

Lower price level equals domestic goods become cheaper relative to foreign goods do the demand for domestic goods will increase