SOLVED

1) When a temporary shock in the economy involves a restriction in supply ________. A) we refer to it as a negative supply shock B) a rise in commodity prices typically follows C) a reduction in output typically ensues D) all of the above E) none of the above 2) A fall in import prices or an increase in productivity ________. A) constitute a positive supply shock B) typically leads to a rise in commodity prices C) typically comes with a reduction in output D) all of the above E) none of the above 3) Suppose there is a temporary supply shock because of a war in the Middle East, then ________. A) this would constitute a cost push shock due to a restriction in the supply of oil B) the AS curve would shift to the left C) this could theoretically lead to stagflation D) all of the above E) none of the above 4) Suppose there is a temporary supply shock because of a war in the Middle East, then, ceteris paribus, the ensuing cost push shock ________. A) would lead to a temporary increase in prices but a permanent reduction in output B) would lead to a temporary increase in output but a permanent increase in inflation C) would lead to a temporary decrease in output but a permanent increase in inflation D) all of the above E) none of the above 5) Suppose there is a temporary supply shock because of a war in the Middle East, then, ceteris paribus, the ensuing cost push shock ________. A) would lead to a temporary increase in prices due to a restriction in the supply of oil B) would lead to a temporary decrease in output as the AS curve would shift to the left C) would lead to a temporary shift in the AS curve but ultimately output and inflation would return to the original long-run values D) all of the above E) none of the above 6) In 1973, the Organization of Petroleum Exporting Countries (OPEC) engineered a quadrupling of oil prices by restricting oil production. Which of the following is an appropriate description of this negative supply shock? A) The AS curve likely shifted to the left and output likely fell because of this adverse shock B) In the short-run there was a movement out of general equilibrium leading to an increase in inflation as a likely result of this adverse shock C) In the short-run there was a movement out of general equilibrium leading to an increase in unemployment as a likely result of this adverse shock D) all of the above E) none of the above 7) Which of the following is (are) linked to (an) adverse supply shock(s)? A) The terrorist attacks of 2001 B) Collective bargaining that followed the termination of U.S. wage and price controls in 1973 C) The corporate scandals of 2002 D) all of the above E) none of the above 8) Which of the following is (are) linked to (an) adverse supply shock(s)? A) The Arab-Israeli war of 1973 B) the Iranian revolution of 1979 C) The wage renegotiations that followed the termination of U.S. wage and price controls in 1973 D) all of the above E) none of the above 9) If a new government adopted some ill-advised regulations causing the economy to be less efficient ________. A) the ensuing negative supply shock would lead to an immediate rise in inflation B) in the short-run this would create a negative output gap but eventually the previous general equilibrium would be restored by subsequent rightward shifts of the AS curve C) there would be no permanent changes in output and inflation D) all of the above E) none of the above 10) If the adoption of a new technology led to gains in productivity ________. A) the ensuing positive supply shock would lead to an immediate increase in output B) in the short-run, the ensuing increase in supply would lower inflation C) and if this new technology permanently altered the productive capacity of the economy then the increase in output and decrease in inflation would be permanent as well D) all of the above E) none of the above