Macroeconomics || Chapter 11

According to modern Keynesian​ analysis, the​ short-run aggregate supply curve is...

• upward sloping.

• downward sloping.

• horizontal.

In the Classical​ Model, an increase in aggregate demand will result in...

• an increase in the price level and no change in output.

• an increase in both the price level and output.

• a decrease in both the price level and output.

• a decrease in the price level and an increase in output.

According to the classical​ economists...

• the interest rate will ensure that the amount households plan to save will equal the amount businesses desire to invest.

• increasing government spending is the most reliable method of restoring full employment.

• the amount households plan to save is determined primarily by their wage.

In modern Keynesian​ analysis, an increase in aggregate demand will result in...

• an increase in both the price level and output.

• an increase in the price level and no change in output.

• an increase in output and no change in the price level.

Suppose that there is a​ temporary, but significant increase in oil prices in an economy with an​ upward-sloping SRAS curve. As a policy response to this​ short-lived but sudden increase in oil​ prices, a central bank...

• cannot stabilize both the price level and the real GDP simultaneously.

• can stabilize both the price level and the real GDP simultaneously.

• has no responsibility to stabilize the real GDP.

According to classical​ economists, aggregate demand primarily determines...

• the price level.

• levels of national output and income.

• total production in the economy.

• aggregate supply at full employment.

Which of the following will occur when aggregate supply remains stable but aggregate demand increases in the short​ run?

• The unemployment rate rises.

• A recessionary gap is created.

• An inflationary gap is created.

Which of the following is a possible explanation for sticky prices?

• Labor contracts cause wages to be fixed over the contract period.

• All firms act as a cartel and maintain a constant​ non-competitive price.

• It is illegal for firms to lower prices without the consent of the courts.

Modern Keynesian analysis assumes that the​ short-run aggregate supply curve is...

• upward sloping.

• horizontal.

• vertical.

• downward sloping.

The Modern Keynesian​ short-run aggregate supply curve is best described by which of the following​ statements?

• It is very flat at low levels of real​ GDP; increases slightly as real GDP​ grows; and becomes very steep as real GDP surpasses full employment.

• It is very flat at low levels of real​ GDP; increases slightly as real GDP​ grows; and becomes horizontal at full employment.

• It is very steep at low levels of real​ GDP; decreases slightly as real GDP​ grows; and becomes horizontal at full employment.

• It is very steep at low levels of real​ GDP; decreases slightly as real GDP​ grows; and becomes very flat as real GDP surpasses full employment.