47. Following a temporary adverse supply shock, demand management (stabilization policy) can be employed to sustainably...
47. Following a temporary adverse supply shock, demand management (stabilization policy) can be employed to sustainably restore the original (pre-shock) level of GDP. True or False?
Homework Answers
This statement is false
If there is an adverse supply shock, price level increases and GDP decreases when compared to their pre-shock values. Now if stabilization policy is used by the demand side factors, it will increase the aggregate demand and will shift the aggregate demand curve to the right. Price level will increase further although real GDP will be back to its full employment level. This implies that original equilibrium is not achieved by stabilization policy.
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47. Following a temporary adverse supply shock, demand
management (stabilization policy) can be employed to sustainably...
Briefly explain with a graph whether given statement is true or false. “An adverse supply shock...
Briefly explain with a graph whether given statement is true or false. “An adverse supply shock causes the short-run aggregate supply curve to shift left, increasing the price level.”
165 9. Which of the following should not be considered to be a supply side policy?...
165 9. Which of the following should not be considered to be a supply side policy? a. a decrease in the deficit b. a reduction of the tax on consumption c. a middle class tax cut d. none of the above 10. Whenever the aggregate supply curve shifts, the short rur aggregate supply curve also shifts. However, it is not the case that whenever the short run aggregate supply curve shifts, the long run aggregate supply curve also shifts. a....
1. Inflationary pressure in the AS-AD model can be shown as a a) supply shock that...
1. Inflationary pressure in the AS-AD model can be shown as
a
a) supply shock that shifts the AD to the left.
b) rise in input prices affecting most firms across the economy
shifting AS curve to the right.
c) rise in input prices affecting most firms across the economy
shifting AS curve to the left.
2. Which of the following would cause a positive demand shock
(shift to the right) in aggregate demand?
a) decreased availability of capital stock....
When the money demand curve shifts right and the money supply is unchanged, the equilibrium price...
When the money demand curve shifts right and the money supply is unchanged, the equilibrium price level decreases and the equilibrium value of money increases. true false The money supply in Grayfield is $8 billion. Nominal GDP is $32 billion and real GDP is $24 billion. The central bank of Grayfield has instituted a policy of zero inflation. Assuming that velocity is stable, if real GDP grows by 2.5 percent this year then the central bank of Grayfield will increase...
Section B B22 Expansionary demand management policy measures tend to… [1] raise the real GDP and...
Section B
B22 Expansionary demand management policy measures tend
to…
[1] raise the real GDP and inflation.
[2] increase price level and decrease real output.
[3] increase both inflation and the level of unemployment.
[4] Increase the production cost, which will decrease total
production.
B24 Which of the following is NOT the cause of
demand-pull inflation?
[1] increase in consumption spending.
[2] a decrease in interest rates.
[3] increase in net exports.
[4] rising commodity (e.g. oil) price.
B25 Cost-push...
Unit 3: Aggregate Demand, Aggregate Supply, and Fiscal Policy AD, AS, and LRAS Short Run vs....
Unit 3: Aggregate Demand, Aggregate Supply, and Fiscal Policy AD, AS, and LRAS Short Run vs. Long Run Aggregate Supply Draw the economy at full employment 1. In the short run, wages and resource prices will as price levels increase 2. In the long run, wages and resource prices will as price levels increase Shifters of AD and AS Shifters of Aggregate Demand Shifters of Aggregate Supply imi Recessionary Gap Draw an economy in a recession Inflationary Gap Draw an...
poten may Ft et the nepastive inpact on agsregate demand of a alling oney supply A)...
poten may Ft et the nepastive inpact on agsregate demand of a alling oney supply A) By decressing mo B) By inereasing C) By reducing tax tax D) By increasing ta E) By imposing tarift on innpon 13. What is the main argumet of the ecosomists who want governmwest imervention during recession a. Market can never fix the problem h Nominal wage is dow nward rigid and it will take long time for market to fix u. c. Market will...
1. Which of the following is not a property of the aggregate demand curve? It shows...
1. Which of the following is not a property of the aggregate demand curve? It shows the relationship between the overall price level and level consumption. It shows the price level on the vertical axis and output on the horizontal axis. The aggregate demand curve slopes downward. It shows the relationship between the overall price level and the level of total demand. 2. When the price level increases people: feel more wealthy. have the same real value of assets, regardless...
4. The 1974-1975 period experienced a recession caused by a supply shock. In particular following the...
4. The 1974-1975 period experienced a recession caused by a supply shock. In particular following the Arab-Israeli War of 1973, the Organization of the Petroleum Exporting Countries (OPEC) took actions that increased the price of a barrel of oil from less than $3 to more than S10 (Hubbard and O'Brien, 2015). This is illustrated in the aggregate supply-aggregate demand figure below. Assume that the aggregate demand curve did not shift between 1974 and 1975. LRAS1974 LRAS1975 SRAC1975 ? SRAS:974 Price...
1- Which of the following is a characteristic of the Policy-Activism view of economic thought? The...
1- Which of the following is a characteristic of the Policy-Activism view of economic thought? The economy is inherently stable. All of these answers are characteristics of Laissez-Faire. Competition is the driving force in economic progress. Government has a responsibility to manage the economy. 2- Use statements 1 and 2 to choose the correct answer. In the short run, aggregate demand factors are more important to determining GDP than aggregate supply factors are. In the long run, aggregate supply factors...
165 9. Which of the following should not be considered to be a supply side policy? a. a decrease in the deficit b. a reduction of the tax on consumption c. a middle class tax cut d. none of the above 10. Whenever the aggregate supply curve shifts, the short rur aggregate supply curve also shifts. However, it is not the case that whenever the short run aggregate supply curve shifts, the long run aggregate supply curve also shifts. a....
1. Inflationary pressure in the AS-AD model can be shown as
a
a) supply shock that shifts the AD to the left.
b) rise in input prices affecting most firms across the economy
shifting AS curve to the right.
c) rise in input prices affecting most firms across the economy
shifting AS curve to the left.
2. Which of the following would cause a positive demand shock
(shift to the right) in aggregate demand?
a) decreased availability of capital stock....
Section B
B22 Expansionary demand management policy measures tend
to…
[1] raise the real GDP and inflation.
[2] increase price level and decrease real output.
[3] increase both inflation and the level of unemployment.
[4] Increase the production cost, which will decrease total
production.
B24 Which of the following is NOT the cause of
demand-pull inflation?
[1] increase in consumption spending.
[2] a decrease in interest rates.
[3] increase in net exports.
[4] rising commodity (e.g. oil) price.
B25 Cost-push...
Unit 3: Aggregate Demand, Aggregate Supply, and Fiscal Policy AD, AS, and LRAS Short Run vs. Long Run Aggregate Supply Draw the economy at full employment 1. In the short run, wages and resource prices will as price levels increase 2. In the long run, wages and resource prices will as price levels increase Shifters of AD and AS Shifters of Aggregate Demand Shifters of Aggregate Supply imi Recessionary Gap Draw an economy in a recession Inflationary Gap Draw an...
poten may Ft et the nepastive inpact on agsregate demand of a alling oney supply A) By decressing mo B) By inereasing C) By reducing tax tax D) By increasing ta E) By imposing tarift on innpon 13. What is the main argumet of the ecosomists who want governmwest imervention during recession a. Market can never fix the problem h Nominal wage is dow nward rigid and it will take long time for market to fix u. c. Market will...
4. The 1974-1975 period experienced a recession caused by a supply shock. In particular following the Arab-Israeli War of 1973, the Organization of the Petroleum Exporting Countries (OPEC) took actions that increased the price of a barrel of oil from less than $3 to more than S10 (Hubbard and O'Brien, 2015). This is illustrated in the aggregate supply-aggregate demand figure below. Assume that the aggregate demand curve did not shift between 1974 and 1975. LRAS1974 LRAS1975 SRAC1975 ? SRAS:974 Price...
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