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1 Feb 2018

Suppose that the economy is currently at potential output. Also suppose that you are an economic policy maker and that a college economics student asks you to rank, if possible, your most preferred to least preferred type of shock: positive demand shock, negative demand shock, positive supply shock, negative supply shock. How would you rank them and WHY?

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It is stated that the equilibrium level of output is the most important concept in all of economics. The economy is at its best when short-run supply and aggregate demand intersect in the long-run aggregate supply curve. Suppose we are at this point. Now suppose that there is a positive aggregate demand shock that shifts out the aggregate demand curve in the short run.

What is the impact on both the quantity supplied and price?

How does the economy adjust back to the long run if the government takes NO corrective action?

What would be the impact if the government does take action to get the economy back to the long run?

azureguinea-pig380

Two fundamental problems that often arise in answering a macroeconomic question are: Hidden biathe ADE curve will be perfectly flat. the ADE curve will be perfectly vertical.

ses that keep one from honestly weighing arguments, and problems that restrict access to sufficient data. Confusion over how to sort out conflicting arguments and evidence, and working with flawed models. Hidden biases and a lack of intellectual courage. Hidden biases that keep one from honestly weighing arguments and evidence, and confusion over how to sort out conflicting arguments and evidence.

Question 2 5 pts Intellectual courage in a macroeconomic context is: the willingness to fairly assess material that we havenât previously thought about seriously despite a strong negative reaction to that material. valuable when one has strongly held beliefs about the macroeconomy. being aware of any potential conflicts that might compromise the critical-thinking process and bring those conflicts into that same critical-thinking process. all of the above.

Question 3 5 pts A useful method for sorting through a complex issue when sources conflict is: break the issue into smaller, more manageable subissues. use a matrix to present the conflicts in a clearer manner. both of the above. none of the above.

Question 4 5 pts Which of the following is not a standard for evaluating conflicting claims: Simplicity Relevancy Logicalness Clarity

Question 5 5 pts In terms of the ASR/ADE model, if one believes that the Classical Macroeconomic Model is the best explanation for how the macroeconomy functions: The ASR curve will be perfectly flat. The ASR curve will be perfectly vertical. The ADE curve will be perfectly flat. The ADE curve will be perfectly vertical.

Question 6 5 pts In terms of the ASR/ADE model, if one believes that the Keynesian Model is the best explanation for how the macroeconomy functions: the ASR curve will be perfectly flat. the ASR curve will be perfectly vertical.Question 7 5 pts Which curve in the ASR/ADE model essentially embodies the Phillips Curve? the Fed Reaction Rule the investment curve the ADE curve the ASR curve

Question 8 5 pts Using the ASR/ADE Model, suppose that GDP is below full-employment GDP and inflation is below the targeted inflation rate. In that case, a possible, desirable macroeconomic policy would focus on: generating a positive supply shock. shifting the ADE curve to the right. cutting taxes. All of the above.

Question 9 5 pts Using the ASR/ADE Model, suppose that GDP is above full-employment GDP and inflation is above the targeted inflation rate. In that case, a possible, desirable macroeconomic policy would focus on: generating a positive supply shock. shifting the ADE curve to the right. cutting taxes. All of the above.

Question 10 5 pts Using the ASR/ADE Model, suppose that GDP is below full-employment GDP and inflation is above the targeted inflation rate. In that case, a possible, desirable macroeconomic policy would focus on: raising taxes. shifting the ADE curve to the right. stimulatory monetary policy. None of the above.

Question 11 5 pts Using the ASR/ADE Model, suppose that GDP is above full-employment GDP and inflation is below the targeted inflation rate. In that case, a possible, desirable macroeconomic policy would focus on: generating a positive supply shock. shifting the ADE curve to the right. cutting taxes. None of the above.

Question 12 5 pts Using the ASR/ADE Model, suppose that GDP is below full-employment GDP and inflation is below the targeted inflation rate. In that case, a possible, desirable macroeconomic policy would be to adopt: a stimulatory fiscal policy. a stimulatory monetary policy. either of the above. None of the above.

Question 13 5 pts Using the ASR/ADE Model, suppose that GDP is above full-employment GDP and inflation is above the targeted inflation rate. In that case, a possible, desirable macroeconomic policy would focus on: a stimulatory fiscal policy. a stimulatory monetary policy. either of the above. None of the above.

Question 14 5 pts Using the ASR/ADE Model, what is a potential problem with a positive supply shock? It drives inflation down, possibly below the ideal level. It increases employment and drives the inflation rate up. It makes it harder for businesses to compete. It results in a loss of jobs to foreign countries.

Question 15 5 pts In terms of the ASR/ADE Model, fiscal policy: shifts the ASR curve. shifts the ADE curve. both of the above. none of the above.

Question 16 5 pts In terms of the ASR/ADE Model, monetary policy: shifts the ASR curve. shifts the ADE curve. both of the above. none of the above. Flag this

Question 17 5 pts In terms of the ASR/ADE Model, if the Fed decides that the ideal inflation rate should be higher: it will take actions that will shift the ASR curve vertically up. it will reduce the money supply to drive interest rates up. it will take actions that shift the ADE curve vertically up. none of the above.

Question 18 5 pts In terms of the ASR/ADE Model, if the nation is already at full employment and exports go up: GDP will fall. Inflation will rise. The ASR curve will shift to the right. Inflation will fall.

Question 19 5 pts In terms of the ASR/ADE Model, if business becomes more optimistic (that is, their animal spirits rise): GDP will fall. The ASR curve will shift to the right. Inflation will fall. the ADE curve will shift to the right.*

Question 20 5 pts In terms of the ASR/ADE Model, if there is an economic depression, which of the following would help get the economy back to full employment: a rise in business optimism. an increase in government spending. a rise in the money supply. all of the above.

lemonlocust357

Please help wtih these economics questions. I'll give the best answer to the person who justifies their answer.. or someone who does well in economics and knows the subject area well.

Which of the following statements is not true about Say's Law?

A. People produce more goods than they want for their own use only if they seek to trade them for other goods.

B. Markets would be regularly hit by severe shortages and surpluses.

C. Desired expenditures will equal actual expenditures.

D. Surpluses will be eliminated by falling prices and shortages will be eliminated by increasing prices.

Which of the following is not an assumption of the classical model?

A. Buyers and sellers react to changes in relative prices.

B. Households want to maximize economic well being.

C. Wages and prices will move freely in the upward direction but not the downward direction.

D. No single buyer or seller of a commodity can affect its price.

Money illusion is

A. when people think they are better off when their income increases even though prices have increased by the same amount.

B. when people are motivated by self-interest.

C. could not exist if the economy did not have competitive markets.

D. a basic condition that all classical economists assume people have.

Saving is not a problem in the classical model because

A. interest rates were flexible and savings were channeled into investment.

B. savers and investors were the same people.

C. the classical economists assumed that saving was beneficial to people for retirement.

D. saving would be spent by consumers eventually.

Which of the following statements is true?

A. There is an inverse relationship between investment and the interest rate.

B. There is no relationship between investment and the interest rate.

C. There is a direct relationship between investment and the interest rate.

D. Investment is always less than savings.

In the classical model, high unemployment due to either a demand or a supply shock

A. will return to its normal level quickly as wages adjust.

B. will persist if due to a supply shock but not if due to a demand shock.

C. can persist for an indefinite period of time.

D. never exists because unemployment can never deviate from its normal level.

The classical model makes little distinction between the long-run and short-run because

A. the model has not been fully developed yet.

B. prices adjust so fast that the economy is quickly moving towards the long-run.

C. the classical economists knew that we are always operating in the short run.

D. current changes influence the long run, so it is not possible to plan for the future.

In the classical model

A. the level of real GDP per year does not depend on the level of aggregate demand.

B. the level of GDP is demand determined.

C. the level of GDP determines prices independent of demand.

D. changes in aggregate supply affect the price level, not real GDP.

Which of the following is a true statement?

A. Classical economists believed output adjusted more than prices when aggregate demand fell while Keynes believed prices adjusted more than output.

B. Classical economists believed price adjusted more than output when aggregate demand fell while Keynes believed output adjusted more than prices.

C. A decrease in aggregate demand has no short-run effects according to the classical economists, but had significant effects according to Keynes.

D. A decrease in aggregate demand was not possible according to the classical economists, but was possible according to Keynes.

Which of the following is not a reason why GDP can be expanded beyond a level consistent with its long-run growth path in modern Keynesian analysis?

A. Prices and wages are flexible allowing for needed adjustments.

B. In the short-run existing workers can work more hours.

C. The existing capital stock can be used more intensively.

D. Higher prices induce firms to hire more workers.

A recessionary gap can be caused by

A. a decrease in aggregate supply holding aggregate demand constant.

B. an increase in aggregate demand holding aggregate supply constant.

C. an increase in the long run aggregate supply curve holding the aggregate demand constant.

D. a decrease in both aggregate demand and aggregate supply.