Question : 13.3   Shocks to the System Refer to the information provided in : 1381479

13.3   Shocks to the System

Refer to the information provided in Figure 13.3 below to answer the questions that follow.

Figure 13.3

1) Refer to Figure 13.3. The aggregate supply curve shifting from AS1 to AS2 will cause

A) deflation.

B) hyperinflation.

C) demand-pull inflation.

D) cost-push inflation.

2) Refer to Figure 13.3. Assume the economy is at Point A. Lower oil prices shift the aggregate supply curve to AS0. If the government decides to counter the effects of lower oil prices by decreasing government spending, then the price level will be ________ than P0 and output will be ________ than Y0.

A) greater; greater

B) greater; less

C) less; less

D) less; greater

3) Refer to Figure 13.3. Assume the economy is at Point A. Lower oil prices shift the aggregate supply curve to AS0. If the government decides to counter the effects of lower oil prices by decreasing net taxes, then the price level will be ________ than P0 and output will be ________ than Y0.

A) greater; greater

B) greater; less

C) less; less

D) less; greater

4) Refer to Figure 13.3. Assume the economy is currently at Point A on aggregate supply curve AS1. A decrease in inflationary expectations that causes firms to decrease their prices

A) shifts the aggregate supply curve to AS0.

B) shifts the aggregate supply curve to AS2.

C) moves the economy to Point C on aggregate supply curve AS1.

D) moves the economy to Point B on aggregate supply curve AS1.

5) A leftward shift in the aggregate supply curve generates a ________ inflation and ________ output.

A) demand-pull; lower

B) cost-push; higher

C) demand-pull; higher

D) cost-push; lower

6) A sudden increase in aggregate demand causes a ________ inflation and ________ output.

A) demand-pull; lower

B) cost-push; higher

C) demand-pull; higher

D) cost-push; lower

7) A monsoon destroyed 80% of the Gregorian manufacturing base. The Gregorian government decided to use a contractionary fiscal policy to counter the effects of the monsoon on the economy. The use of the contractionary fiscal policy would have caused

A) the price level to be lower and the output level to be higher than they would have been without the policy action.

B) both the price level and the output level to be higher than they would have been without the policy action.

C) both the price level and output level to be lower than what they would have been without the policy action.

D) the price level to be higher and the output level to be lower than they would have been without the policy action.

8) For an economy to experience both economic growth and inflation at the same time

A) the aggregate supply curve must shift to the right.

B) the aggregate supply curve must shift to the left.

C) the aggregate demand curve must shift to the left.

D) the aggregate demand curve must shift to the right.

9) A(n) ________ in inflationary expectations that causes firms to increase their prices shifts the aggregate supply curve to the ________.

A) decrease; right

B) increase; right

C) decrease; left

D) increase; left

10) A decrease in inflationary expectations that causes firms to decrease their prices shifts the

A) aggregate supply curve to the left.

B) aggregate demand curve to the left.

C) aggregate supply curve to the right.

D) aggregate demand curve to the right.