Question

The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase in world prices of oil and foodstuffs were affecting the economy.

Refer to The Economy in 2008. The effects of the housing and financial crises could be shown by shifting

• a. aggregate demand to the right.
• b. aggregate demand to the left.
• c. aggregate supply to the left.
• d. aggregate supply to the right.

There is a temporary adverse supply shock. Given the effects of this shock, if the central bank chooses to return unemployment closer to its previous rate it would

• a. raise the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve left.
• b. raise the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve right.
• c. reduce the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve right.
• d. reduce the rate at which it increases the money supply. In the long run this will shift the short-run Phillips curve left.

According to the Phillips curve, unemployment and inflation are positively related in

• a. neither the long run nor the short run.
• b. the short run and in the long run.
• c. the long run, but not in the short run.
• d. the short run, but not in the long run.

Which of the following shifts short-run aggregate supply left?

• a. a decrease in the money supply
• b. an increase in price expectations
• c. an increase in the actual price level
• d. a decrease in the price of oil.

If aggregate demand shifts left, then in the short run

• a. the price and real GDP both fall.
• b. the price level and real GDP both rise.
• c. the price level rises and real GDP falls.
• d. the price level falls and real GDP rises.

Answer 1