Inflation Insights

Play an AI-generated podcast conversation about this lesson

Which factor can shift the short-run aggregate supply (SRAS) curve to the left?

Higher business taxes (correct)

Changes in the exchange rate

Business subsidies

Increases in labor supply

What happens to the long-run aggregate supply (LRAS) curve when there is an increase in the supply of natural resources?

It becomes steeper

It remains unchanged

It shifts to the right (correct)

It shifts to the left

What is the effect of strong growth in business investment on the LRAS curve?

It remains unchanged

It shifts to the right (correct)

It shifts to the left

It becomes steeper

What factor can increase the productive capacity of a country by improving the quality of the labor force?

Improvement in the quality of the labor force Signup and view all the answers

Which factor can cause a leftward shift in the short-run aggregate supply (SRAS) curve?

Higher input prices Signup and view all the answers

What is the impact of lower input prices on the SRAS curve?

Rightward shift Signup and view all the answers

How do changes in expected future prices affect the SRAS curve?

They have no effect on the SRAS curve Signup and view all the answers

What happens to the interest rate when there is a rightward shift in the aggregate demand (AD) curve?

It increases Signup and view all the answers

What happens to European exports when the euro weakens relative to other currencies?

European exports increase Signup and view all the answers

What happens to the AD curve in Japan when there is rapid GDP growth in ASEAN member countries?

The AD curve shifts to the right Signup and view all the answers

What effect does a decline in the growth rates of ASEAN members' economies have on the Japanese economy?

Exports decrease Signup and view all the answers

What happens to interest rates when there is an increase in the money supply?

Interest rates decline Signup and view all the answers

Which of the following is true about an inflationary gap?

It occurs when the economy's short-run level of equilibrium GDP is above potential GDP Signup and view all the answers

What happens when the aggregate demand curve shifts to the right?

The equilibrium level of GDP increases Signup and view all the answers

Which of the following is an implication of an increase in aggregate demand resulting in an inflationary gap?

Inflationary pressures will build Signup and view all the answers

What is stagflation?

High inflation and high unemployment Signup and view all the answers

According to Exhibit 16, what effect does an increase in the cost of natural resource inputs have on the LRAS curve?

It has no effect on the LRAS curve. Signup and view all the answers

In the AD and AS model, equilibrium occurs when

AD and AS curves intersect. Signup and view all the answers

What happens when the price level is above the equilibrium price level in the AD and AS model?

There is a reduction in production and prices. Signup and view all the answers

What type of macroeconomic equilibrium occurs when the economy operates at potential real GDP?

Long-run full employment Signup and view all the answers

Which of the following is NOT a possible cause of a recession according to the text?

Lower equity and housing prices Signup and view all the answers

What is the recessionary gap?

The amount by which equilibrium output is below potential GDP Signup and view all the answers

What is the main difference between the automatic self-correcting mechanism and government action in returning the economy to full employment?

The time it takes for the mechanism to work Signup and view all the answers

What is the suggested investment strategy in an economic slowdown caused by a decline in aggregate demand?

Increase investments in defensive companies Signup and view all the answers

During the stagflation period in the mid-1970s and early 1980s, both unemployment and inflation soared. What was the main cause of this problem?

A sharp decline in aggregate supply Signup and view all the answers

What happened to the price of oil in 1973?

It quadrupled Signup and view all the answers

What was the impact of higher energy prices on the SRAS curve?

It shifted the curve to the left Signup and view all the answers

What was unusual about the recession in the mid-1970s?

Prices rose Signup and view all the answers

What was the impact of the Federal Reserve's decision to tighten monetary policy during the stagflation period?

It decreased aggregate demand Signup and view all the answers

When did the global recession caused by higher oil prices occur?

Late 1979 to early 1981 Signup and view all the answers