57. The aggregate supply curve will shift rightward in response to:
A. an increase in the expected rate of inflation.
B. a decrease in the expected rate of inflation.
C. an increase in potential GDP.
D. a decrease in potential GDP.
58. A sudden change in the normal behavior of inflation, unrelated to the nation's output gap, is
called:
A. short-run equilibrium.
B. long-run equilibrium.
C. an inflation shock.
D. inflation inertia.
59. An inflation shock is:
A. the level of inflation consistent with output in a recessionary gap.
B. the level of inflation consistent with output in an expansionary gap.
C. a sudden change in the normal behavior of inflation, unrelated to the nation's output gap.
D. a change in the inflation rate generated by excessive aggregate spending.
60. A large increase in oil prices is an example of:
A. a positive inflation shock.
B. a negative inflation shock.
C. inflation inertia.
D. excessive aggregate spending.
61.
A large decrease in oil prices is an example of:
A. a positive inflation shock.
B. a negative inflation shock.
C. inflation inertia.
D. excessive aggregate spending.
62. Starting from long-run equilibrium, a negative inflation shock results in a short-run equilibrium with
___ inflation and ____ output.
A. higher; higher
B. higher; lower
C. higher; potential
D. lower; lower
63. Starting from long-run equilibrium, a positive inflation shock results in a short-run equilibrium with
___ inflation and ____ output.
A. higher; higher
B. higher; lower
C. lower; higher
D. lower; lower
64. An example of a negative inflation shock is:
A. an increase in interest rates.
B. an increase in government purchases.
C. a significant rise in oil prices.
D. a tax increase.
65. When actual output equals potential output, there is ______ output gap and the inflation rate will
____.
A. an expansionary; exceed the expected rate of inflation
B. an expansionary; be lower than the expected rate of inflation
C. no; be equal to the expected rate of inflation
D. a recessionary; exceed the expected rate of inflation
66. When actual output exceeds potential output, there is ______ output gap and the inflation rate will
____.
A. an expansionary; exceed the expected rate of inflation
B. an expansionary; be lower than the expected rate of inflation
C. no; be equal to the expected rate of inflation
D. a recessionary; exceed the expected rate of inflation
67. When actual output is less than potential output, there is ______ output gap and the inflation rate
will ____.
A. an expansionary; exceed the expected rate of inflation
B. an expansionary; be lower than the expected rate of inflation
C. a recessionary; be lower than the expected rate of inflation
D. a recessionary; exceed the expected rate of inflation
68. When using the AD-AS model to understand business cycles, the question, \
fundamental causes of business cycles?\
A. \what factors move the economy away from long-run equilibrium?\
B. \what factors move aggregate demand and aggregate supply in different directions?\
C. \what factors increase or decrease potential GDP?\
D. \what factors increase or decrease the expected rate of inflation?\
69. Suppose the economy is currently operating at potential output; a recessionary gap may be
caused by each of the following except:
A. a negative demand shock.
B. a negative inflation shock.
C. a decrease in government spending.
D. a decrease in the inflation rate.
70. Suppose the economy is currently operating at potential output; a recessionary gap may be
caused by each of the following except:
A. a negative demand shock.
B. a positive inflation shock.
C. an increase in taxes.
D. a decrease in the money supply.
71. Suppose the economy is currently operating at potential output; an expansionary gap may be
caused by each of the following except:
A. a positive demand shock.
B. a positive inflation shock.
C. an increase in government spending.
D. an increase in the inflation rate.
72. Suppose the economy is currently operating at potential output; an expansionary gap may be
caused by each of the following except:
A. a positive demand shock.
B. a negative inflation shock.
C. a decrease in taxes.
D. an increase in the money supply.
73. Starting from potential output, if firms become more optimistic and decide to increase their
investment in new capital, then this will shift the ______ curve to the right and generate ______.
A. aggregate demand; a recessionary output gap
B. aggregate supply; a recessionary output gap
C. aggregate demand; an expansionary output gap
D. aggregate supply; an expansionary output gap
74. Starting from potential output, if firms become less optimistic and decide to decrease their
investment in new capital, then this will shift the ______ curve to the left and generate ______.
A. aggregate demand; a recessionary output gap
B. aggregate supply; a recessionary output gap
C. aggregate demand; an expansionary output gap
D. aggregate supply; an expansionary output gap
75. Starting from potential output, if consumer confidence increases and consumers decide to spend
more, then this will shift the ______ curve to the right and generate ______.
A. aggregate demand; a recessionary output gap
B. aggregate supply; a recessionary output gap
C. aggregate demand; an expansionary output gap
D. aggregate supply; an expansionary output gap