Macroeconomics Test 9 – Flashcards
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a coordination failure
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is a self fulfilling prophesy
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in the extended aggregate demand-aggregate supply model
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long-run equilibrium occurs at the intersection of the aggregate demand curve the short-run aggregate supply curve and the long run aggregate supply curve
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suppose laid off workers and other qualified unemployed workers offer to work for less than the wages being paid existing employed workers but employers do not hire these workers for fear that existing workers will refuse to cooperate with them, this situation best describes the
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inside-outsider theory
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the idea that an economy can get stuck in either an unemployment equilibrium or an inflation equilibrium is most closely associated with
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the idea of coordination failures
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monetarists believe that
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the economy is more stable when active fiscal and monetary policy are used prices and wages are inflexible or sticky velocity is relatively stable
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in terms of aggregate supply a period in which nominal wages and other resource prices are fully responsive to price-level changes is called the
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long-run
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refer to the diagram. the initial aggregate demand curve is AD1 and the initial aggregate supply curve is AS1. In the long run, demand-pull inflation is best shown as
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a shift of aggregate demand from AD1 to AD2 followed by a shift of aggregate supply from AS1 to AS2
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if government uses its stabilization policies to maintain full employment under conditions of cost-push inflation
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an inflationary spiral is likely to occur
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which of the following is a tenet of supply-side economics?
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high marginal tax rates severely discourage work, saving, and investment
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the equation underlying the mainstream view of macroeconomics is
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CA+LG+XN+G=GDP
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the real-business-cycle theory holds that business fluctuations are caused by
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significant changes in technology and resource availability
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an adverse aggregate supply shock
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can cause stagflation
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according to monetarists
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changes in the money supply are the primary cause of changes in the price level
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the basic problem portrayed by the traditional philips curve is
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that a level of aggregate demand sufficiently high to result in full employment may also cause inflation
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which of the following is a true statement?
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there is no trade-off between inflation and unemployment in the long run
