The AD-AS supply model considers _____ of the economy. - answer✔both the producer
(supply) side and the spending (demand) of the economy
The AD-AS model seek to explain: - answer✔the business cycle and the inflation rate
The level of AS in the long run is NOT affected by - answer✔changes in the price level
The level of AS in the long run is affected by - answer✔changes in technology
changes in the number of workers
changes in the capitol stock
Suppose a developing country receives more machinery and capital equipment as foreign
entrepreneurs increase the amount of investment in the economy. As a result, -
answer✔The LRAS curve will shift to the right
As an economy moves out and up along a given SRAS curve, - answer✔cyclical
unemployment decreases
The invention of a cotton gin ushered in the industrial revolution and began a long period
of technological innovation. What did this technological change do to the SRAS curve? -
answer✔It shifted the SRAS curve to the right
Workers and firms both expect that prices will be 2.5% higher next year than they are this
year. As a result, - answer✔The SRAS will shift left as wages increase
Which of the following is one explanation as to why the AD curve slopes downward -
answer✔Decreases in the price level raise real wealth and increase consumption spending
The SRAS curve has a _______ slope because as prices of ______ rise, prices of ______ rise more
slowly. - answer✔Positive
Final Goods and Services
Inputs
Spending on the war in Afghanistan is essentially categorized as government purchases.
How do increases in spending on the war in Afghanistan affect the AD curve? - answer✔The
AD curve would have shifted to the right
German luxury car exports were hurt in 2009 as a result of the recession. How would this
decrease in exports have affected Germany's AD curve? - answer✔The AD curve would
have shifted left
Dollar bills in the modern economy serve as money because - answer✔people have
confidence that others will accept them as money
A bank holds its reserves as ______ and ______. - answer✔vault cash
deposits at the federal reseve
Which of the following are the two new monetary policy tools for the federal reserve? -
answer✔Interest rate on the bank reserve deposits at the Fed and the interest on funds
deposited at the Fed for more than one day (Term Deposit Facility)
A central bank can help stop a bank panic by: - answer✔acting as a lender of last resort
By increasing the interest rate on bank reserve deposits, the fed can ______ the level of
reserves are willing to hold, thereby ______ bank lending - answer✔Increasing
Decreasing
During bank panics, banks have liquidity problems because of - answer✔the maturity
mismatch between their deposits and loans
If households in the economy decide to take money out of checking account deposits and
put money into savings accounts, this will intially - answer✔Decrease M1 and not change
M2
During the 2007-2009 financial crisis, the 'bank panic' occurred in the _____ which ______
federal deposit insurance - answer✔Shadow banking system
does not have
The quantity equation states that - answer✔M * V = P * Y
The quantity theory of money implies that the price level will be stable (no inflation or
deflation) in the long run when the growth rate of the money supply equals - answer✔the
growth rate of the real GDP
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