Macroeconomics Test 9 – Flashcards
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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
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