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According to aggregate demand and supply analysis the rising oil prices coupled with the subprime financial crisis

According to aggregate demand and supply analysis, the rising oil prices coupled with the subprime financial crisis in 2007-2008 caused the unemployment rate to ________ and the level of real aggregate output to ________.

A) increase; increase

B) increase; decrease

C) decrease; increase

D) decrease; decrease

 

32) Using the aggregate demand-aggregate supply model, explain and demonstrate graphically the short-run and long-run effects of an increase in the money supply.

 

33) Explain and demonstrate graphically the effects of a negative supply shock in both the short-run and long-run.

 

 

22.4   APPENDIX: Aggregate Supply and the Phillips Curve

 

1) The Phillips curve indicates that when the labor market is ________, production costs will ________ and aggregate supply increases.

A) easy; rise

B) easy; fall

C) tight; fall

D) tight; rise

 

2) The Phillips curve indicates that when the labor market is ________, production costs will ________ and aggregate supply decreases.

A) easy; rise

B) easy; fall

C) tight; fall

D) tight; rise

 

3) The expectations-augmented Phillips curve implies that as expected inflation increases, nominal wages ________ to prevent real wages from ________.

A) fall; rising

B) fall; falling

C) rise; falling

D) rise; rising

4) The Lucas supply function indicates that deviations of unemployment from the natural rate level respond to

A) any increase in aggregate demand.

B) unanticipated inflation.

C) a supply shock.

D) expected changes in inflation.

Mar 14 2020 View more View Less

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