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# Study_Guide_Final_Econ_3_-_Answers - Study Guide Final Econ...

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Study Guide Final Econ 3 – Answers Part I – Multiple Choice Chapter 25 25-1 4. All else equal, an increase in the rate of inflation ____ planned spending and ____ short-run equilibrium output. A. increases; increases B. increases; decreases C. decreases; decreases D. decreases; increases AACSB: Analytical Skills Bloom's: Understanding Learning Objective: 25-1 Section: The Aggregate Demand-Aggregate Supply Model: A Brief Overview 25- 2 27. If the Federal Reserve raises its target inflation rate, the monetary policy rule_____ and the aggregate demand curve _____. A. shifts upward to the left; shifts to the right B. shifts upward to the left; shifts to the left C. shifts downward to the right; shifts to the left D. shifts downward to the right; shifts to the right AACSB: Analytical Skills Bloom's: Application Learning Objective: 25-1 Section: Inflation, Spending, and Output: The Aggregate Demand Curve

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25-3 50. When actual output exceeds potential output there is ____ output gap and the rate of inflation will tend to ____. A. an expansionary; increase B. an expansionary; decrease C. no; remain the same D. a recessionary; increase AACSB: Analytical Skills Bloom's: Understanding Learning Objective: 25-3 Section: Aggregate Demand – Aggregate Supply Analysis 25-4 67. Refer to the figure above. If the Fed does not change its monetary policy rule, long- run equilibrium in this economy A. will be impossible to achieve. B. will occur when AD shifts upward and to the right. C. will occur when AS shifts downward and to the right. D. will occur when LRAS shifts to the left. AACSB: Analytical Skills Bloom's: Application Learning Objective: 25-3 Section: Aggregate Demand – Aggregate Supply Analysis
25-5 98. A large increase in oil prices is an example of: A. a favorable inflation shock. B. an adverse inflation shock C. inflation inertia. D. excessive aggregate spending. AACSB: Analytical Skills Bloom's: Knowledge Learning Objective: 25-5 Section: Sources of Inflation

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Chapter 26 26-1 3. If the Federal Reserve's target rate of inflation equals 5 percent, the target real interest rate equals 4 percent, and the actual inflation rate equals 5 percent, then the actual real interest rate equals: A. 4 percent. B. 5 percent. C. 9 percent. D. 1 percent. AACSB: Analytical Skills Bloom's: Application Learning Objective: 26-1 Section: Using Monetary Policy to Reduce High Inflation 26-2 9. Refer to the figure above. Suppose this economy had been at a long-run equilibrium in which AS 1 and AD 1 were the prevailing functions. Then suppose AD shifted to AD 2 . In the new long-run equilibrium, output would be ____ and inflation would be ___ A. Y 1 ; 1 B. Y 2 ; 3 C. Y 2 ; 1 D. Y 3 ; 2
AACSB: Analytical Skills Bloom's: Application Learning Objective: 26-1

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Study_Guide_Final_Econ_3_-_Answers - Study Guide Final Econ...

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