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- Which of the following would properly be classified as an unfavorable supply shock? a)The interest rate decreases, spurring investment spending. b) There is an increase in government spending. c)A hurricane hits a major city, destroying factories, roads, airports, and homes. Because the city was a major port and transportation hub, goods and services need to be rerouted, increasing transportation costs for firms nationwide. d)The government introduces a set of market reforms that strengthens property rights and makes it easier and safer for buyers and sellers to write contracts. e)There is a technological improvement that allows firms to reduce their costs of production permanently.Which of the following would properly be classified as an unfavorable supply shock? a)The interest rate decreases, spurring investment spending. b)The government introduces a set of market reforms that strengthens property rights and makes it easier and safer for buyers and sellers to write contracts. c)The world price of oil increases rapidly without warning and is expected to remain at the new high level for many years, making it more expensive for all firms to produce goods and services. d)There is a technological improvement that allows firms to reduce their costs of production permanently. e)There is an increase in government spending.Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers decreases, but producers are not affected. Which of the following is most likely to be the equilibrium change? a The equilibrium will be at point C before the change in expectations and point A after the change b The equilibrium will be at point A before the change in expectations and point B after the change c The equilibrium will be at point A before the change in expectations and point C after the change d The equilibrium will be at point E before the change in expectations and point C after the change
- Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers increases, but producers are not affected. Which of the following is most likely to be the equilibrium change? a The equilibrium will be at point C before the change in expectations and point A after the change b The equilibrium will be at point A before the change in expectations and point B after the change c The equilibrium will be at point A before the change in expectations and point C after the change d The equilibrium will be at point E before the change in expectations and point C after the changeWhich of the following is an example of a demand shock? 1) Hurricane Katrina knocks out oil drilling platforms in the Gulf of Mexico. 2) Consumers become worried about job loss and buy fewer goods and services than expected. 3) Floods in the Midwest destroy crops. 4) The Federal government unexpectedly requires automobile producers to raise fuel efficiency standards.Given the following circumstances, indicate whether or not the aggregate supply curve would shift and, if so, which way would it shift: The price of a barrel of oil doubles An advance in alternative energy technology significantly reduces its cost In order to maintain a relatively clean air quality, a carbon emissions tax is levied against firms with a carbon footprint As a result of fracking, the price of natural gas is significantly reduced Advances in technology increase the productivity of the American worker, on average, by 30%
- Which of the following events will not cause a supply shock that would shift the aggregate supply curve? a.Tax for energy use introduced to help reduce global emissions b.natural disasters which destroys agricultural products c.adjustments in the interest rates for housing d.The OPEC cartel for oil prices collapses due to political disagreementsIf there is a temporary decrease in Aggregate Supply due to supply chain problems, • Prices will fall and output will rise • Prices will rise and output will fall • Prices and output will rise • Prices and output will fall.What happened first was a major policy-induced supply shock. The lockdown forced firms in several directly affected sectors, from restaurants to hotels to airlines, to halt (or at least to drastically decrease) supply. In contrast to other supply shocks analyzed earlier in the book, many firms had no choice other than to stop or decrease production. As a result of sharply lower output, and thus lower income, and of increased uncertainty, this shock had a major effect on demand, not just in the sectors directly affected by the lockdown, but also in the non-affected sectors. Thus, the outcome was a combination of a supply shock and a sharp demand response. In that context, the role of macroeconomic policy was twofold. First: While it could not do much to increase output in the affected sectors, it needed to protect the firms in those sectors from going bankrupt and the workers who lost work from going hungry. Second: It needed to limit the effect of lower demand in the non-affected…
- Question 52 An increase in the amount of capital that firms purchase would initially shift: Question 52 options: a) aggregate supply to the right b) aggregate demand to the right c) aggregate demand to the left d) aggregate supply to the leftAn increase in the price level causes the aggregate supply curve to shift to another supply schedule. True or Falseeconomic forecasters had expected consumer spending to increase by 6 percent this year, but instead it increases by only 1 percent, this situation would be an example of a Group of answer choices negative demand shock positive demand shock negative supply shock positive supply shock
