661 662 664 Stagflation is a combination of increasing unemployment and increasing inflation True Answer Correct decreasing unemployment and decreasing inflation Incorrect increasing unemployment and decreasing inflation Incorrect decreasing unemployment and increasing inflation Incorrect The 1979 1982 recession looked different from the slump at the beginning of the Great Depression because it was the result of a lack of confidence that led businesses and consumers to spend less Incorrect largely caused by events in the Middle East that led to sudden cuts in world oil production and soaring prices for oil True Answer Correct the direct result of a contractionary monetary policy Incorrect the result solely of a negative demand shock Incorrect 663 In 2008 Ben Bernanke the Federal Reserve Chairman faced the threat of stagflation and had a difficult time stabilizing the economy as stabilization policies are less effective in managing negative supply shocks True Answer Correct hyperinflation and used strong disinflationary policies to bring the rise in prices under control Incorrect a healthy booming economy and used fine tuning methods to keep the growing economy on track Incorrect a deep recession with falling prices and used stabilization policies to take the economy out of the slump Incorrect The statement in the text Sometimes it s not easy being Ben refers to Ben Bernanke the Federal Reserve Chairman In 2008 Ben Bernanke was facing an awfully high rate of inflation known as hyper inflation that can be reversed only with disinflationary policies Incorrect a potentially dreadful combination of high inflation and high unemployment known as stagflation that can not be reversed easily True Answer Correct 665 666 shocks and the the deepest recession since the great depression combined with rapidly falling prices Incorrect a very severe deflation rare in the history which was experienced only by Japan Incorrect The Great Depression was caused by recession of 1979 82 was caused by shocks demand demand Incorrect demand supply True Answer Correct supply demand Incorrect supply supply Incorrect Which of the following represent the three consequences of the decline in demand during the Great Depression falling prices declining output and a surge in unemployment True Answer Correct falling prices increasing output and a surge in unemployment Incorrect rising prices increasing output and a surge in unemployment Incorrect rising prices declining output and a surge in unemployment Incorrect 667 Figure Aggregate Demand Reference Ref 27 1 Figure Aggregate Demand Using the accompanying figure the quantity of output demanded if the price level is 120 is 9 trillion Incorrect 10 trillion True Answer Correct 11 trillion Incorrect 12 trillion Incorrect The negative relationship between the aggregate price level and aggregate output demanded gives the aggregate demand curve an upward slope Incorrect a vertical slope Incorrect a horizontal slope Incorrect a downward slope True Answer Correct The aggregate demand curve shows the relationship between the aggregate price level and aggregate productivity Incorrect the aggregate unemployment rate Incorrect the aggregate quantity of output demanded by households businesses the government and the rest of the world True Answer Correct the aggregate quantity of output demanded by businesses only Incorrect According to the aggregate demand curve when the aggregate price level the quantity of rises aggregate output supplied falls Incorrect falls aggregate output demanded falls Incorrect rises aggregate output demanded falls True Answer Correct rises aggregate output demanded does not change Incorrect The relationship between the aggregate price level and the quantity of aggregate output demanded by households businesses the government and the rest of the world is called market demand Incorrect surplus demand Incorrect aggregate demand True Answer Correct simple demand Incorrect 668 669 670 671 672 674 675 676 A graphical representation of the relationship between the total quantity of goods and services demanded and the price level is the aggregate demand curve True Answer Correct average price level Incorrect circular flow model Incorrect GDP curve Incorrect 673 The aggregate demand curve slopes downward True Answer Correct slopes upward Incorrect is horizontal at potential output Incorrect is vertical at potential output Incorrect In general a change in the price level all other things unchanged causes a movement along the aggregate demand curve True Answer Correct a shift of the aggregate demand curve Incorrect both a movement along the aggregate demand curve and a shift in the curve Incorrect no change in the purchasing power of assets Incorrect The curve shows the negative relationship between the aggregate price level and the quantity of aggregate output demanded in the economy aggregate demand True Answer Correct short run aggregate supply Incorrect long run aggregate supply Incorrect investment demand Incorrect When the aggregate price level increases the purchasing power of many assets falls causing a decrease in consumer spending This is known as the effect and is a reason why the curve slopes interest rate aggregate demand downward Incorrect wealth aggregate demand downward True Answer Correct interest rate investment demand downward Incorrect wealth short run aggregate supply upward Incorrect 679 The wealth effect suggests 677 678 680 681 According to the wealth effect when prices decrease the purchasing power of assets decreases and consumer spending decreases Incorrect increases and consumer spending decreases Incorrect decreases and consumer spending increases Incorrect increases and consumer spending increases True Answer Correct The components of aggregate demand are C consumption and I investment expenditures Incorrect C consumption I investment and G government expenditures Incorrect C consumption I investment expenditures and X IM net exports Incorrect C consumption I investment G government expenditures and X IM net exports True Answer Correct a positive relationship between the price level and consumption spending Incorrect that price level changes do not affect real wealth Incorrect a negative relationship between the price level and consumption spending True Answer Correct that when the price level increases the real value of money increases also Incorrect The aggregate demand curve is negatively sloped in part because of the impact of
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