Question 1

Short-run aggregate supply is greater than long-run aggregate supply in the misperceptions theory if

Accepted Answer

In the misperceptions theory, when the actual price level is greater than the expected price level, firms perceive the price of their product to have increased relative to other prices and thus increase production, leading to a short-run aggregate supply that is greater than the long-run aggregate supply.

Question 2

If producers believe that the increase in their relative prices is large relative to the increase in the general price level,then the slope of the short-run aggregate supply curve will be

Accepted Answer

The answer of If producers believe that the increase in...

Question 3

You are likely to think that the relative price of your good has risen and you should increase your output if you expected

Accepted Answer

If the inflation rate is 10% and the price of your good rose by 13%, it means your good's price increased more than the general price level, suggesting a relative price increase, which could justify increasing output.

Question 4

According to the misperceptions theory,the amount by which producers increase their output when the general price level rises depends on

Accepted Answer

The misperceptions theory suggests that producers may increase output in response to a rise in the general price level if they mistakenly believe that their relative prices have increased. Therefore, the amount by which they increase their output depends on their perception of how much their relative prices have increased. Choices A and B both relate to the slopes of aggregate demand and long-run aggregate supply curves, respectively, but they do not specifically address the misperceptions theory. The Solow residual (choice C) refers to a measure of technological progress and is not directly related to the misperceptions theory.

Question 5

According to the misperceptions theory,after an unanticipated increase in the money supply has occurred,the SRAS curve must shift ________ to restore general equilibrium; as it does so,the price level ________.

Accepted Answer

According to the misperceptions theory, after an unanticipated increase in the money supply, the short-run aggregate supply (SRAS) curve shifts upward as workers and firms adjust their perceptions and demand higher prices for goods and services, leading to a rise in the overall price level.

Question 6

Which of the following statements is true about the misperceptions theory?

Accepted Answer

The misperceptions theory suggests that unanticipated changes in the nominal money supply can have real effects on the economy because people may react to these changes in ways that affect their spending and investment decisions. Anticipated changes, on the other hand, are believed to have no real effects because people have already incorporated them into their expectations. Therefore, only C is true.

Question 7

The short-run aggregate supply curve can slope upward because

Accepted Answer

Producers may have misperceptions about the aggregate price level, leading them to adjust production levels based on incorrect assumptions about real prices, which can cause the short-run aggregate supply curve to slope upward.

Question 8

Which of the following equations is most likely to represent short-run aggregate supply according to the misperceptions theory?

Accepted Answer

The misperceptions theory suggests that in the short-run, producers may mistakenly perceive changes in the overall price level as changes in the relative price of their specific product. Therefore, the equation that includes a term for the difference between the actual price level and the expected price level (P^e) is the most likely to represent short-run aggregate supply according to this theory. Choice B includes this term, making it the best choice for the misperceptions theory.

Question 9

According to the misperceptions theory,when P < P^e,output is ________ its full-employment level and the short-run aggregate supply curve must shift ________ to restore full employment.

Accepted Answer

According to the misperceptions theory, when the actual price level (P) is below the expected price level (P^e), firms believe that their relative prices have decreased leading to a decrease in their output. This causes a decrease in aggregate supply and output below the full-employment level. Therefore, to restore full employment, the short-run aggregate supply curve must shift downward.

Question 10

According to the misperceptions theory,an unanticipated decrease in the money supply shifts the AD curve ________,causing output to ________ in the short run.

Accepted Answer

The misperceptions theory suggests that people may initially misperceive a decrease in the money supply as a decrease in relative prices. This leads to a fall in overall demand, causing a leftward shift of the aggregate demand (AD) curve. As a result, output decreases in the short run, as shown by a movement down and to the left along the aggregate supply curve. Therefore, the correct answer is D, down and to the left; fall.

Question 11

According to the misperceptions theory,an anticipated decline in the money supply leads to a shift of the AD curve ________ and a shift of the SRAS curve ________.

Accepted Answer

According to the misperceptions theory, an anticipated decline in the money supply leads to a shift of the AD curve down and to the left and a shift of the SRAS curve downward. This is because a decline in the money supply leads to a decrease in aggregate demand, which shifts the AD curve to the left. In addition, a decline in the money supply can lead to an increase in interest rates, which can lead to a decrease in aggregate supply, which shifts the SRAS curve downward.

Question 12

If the money supply grows 7% during the year,and people expected the money supply to grow by 5%,what happens to the short-run aggregate supply curve,according to the misperceptions theory?

Accepted Answer

According to the misperceptions theory, if people expect the money supply to grow at a certain rate but it actually grows at a different rate, they may temporarily misperceive changes in prices and adjust production based on those misperceptions. If the money supply grows more than people expected (in this case, 7% versus 5%), then producers will react as though there has been an increase in demand for goods and services, and will increase production accordingly. However, this increase in production will be unsustainable once people realize that there has not been a corresponding increase in demand, and will result in a temporary increase in output and a corresponding decrease in prices. As a result, the short-run aggregate supply curve will shift down.

Question 13

According to the misperceptions theory,when the aggregate price level is higher than expected,

Accepted Answer

When the aggregate price level is higher than expected, producers believe the price of their individual product has increased relative to others, leading them to increase production, thus raising the aggregate quantity of output supplied above the full-employment level.

Question 14

According to the misperceptions theory,when the price level falls below the expected price level

Accepted Answer

According to the misperceptions theory, if the price level falls below the expected price level, firms may mistakenly believe that the relative price of their goods has increased, leading them to increase production. As a result, the economy will move along its short-run aggregate supply (SRAS) curve, increasing output and decreasing the price level. This is because in the short run, firms may not adjust their expectations immediately, so they will produce more at the lower price level, causing an increase in output.

Question 15

The primary reason why the Fed cannot systematically surprise the public with its monetary policy is

Accepted Answer

Rational expectations mean that individuals make predictions about future economic variables based on all available information. Therefore, if the Fed were to systematically surprise the public with its monetary policy, people would quickly adjust their expectations and the surprise would no longer be effective in achieving the Fed's desired outcome.

Question 16

According to the misperceptions theory,an anticipated 10% decrease in the money supply leads to a short-run reduction in the price level of

Accepted Answer

The answer of According to the misperceptions theory,an anticipated 10%...

Question 17

The reason why some economists believe that attempts by the Fed to surprise the public in a systematic way cannot be successful is that

Accepted Answer

Even if the Fed attempts to surprise the public with its policies, the public would eventually figure out what the Fed's policies were, negating the Fed's surprise. This is because once the Fed implements its new policies, their effects on markets and the economy will become apparent, allowing the public to ascertain their nature.

Question 18

According to the misperceptions theory,if the Fed wanted to use monetary policy to influence the real economy it would have to

Accepted Answer

The misperceptions theory suggests that the effectiveness of monetary policy on the real economy depends on the public's beliefs about it. If the Fed wants to influence the real economy through monetary policy, it would have to surprise the public with unexpected changes in the money supply or interest rates. This would cause people to change their behavior and spending patterns, leading to a change in the real economy. Option A is incorrect as increasing the money supply only when the economy is in a recession may not be effective if people expect it. Option B is incorrect as decreasing money supply during an inflationary boom may lead to contraction in the real economy. Option D is incorrect as announcing monetary targets and abiding by them may not create any surprises in the economy.

Question 19

If producers believe that the increase in their relative prices is small relative to the increase in the general price level,then the slope of the short-run aggregate supply curve will be

Accepted Answer

The slope of the short-run aggregate supply curve will be large if producers believe that the increase in their relative prices is small relative to the increase in the general price level. This is because producers will be more willing to increase output if they believe that they will be able to maintain their profit margins.

Question 20

If you expect a general price increase of 5% this year and the price of the hamburgers you sell increases by 10%,you would conclude that the relative price of your good has

Accepted Answer

The relative price of your good has increased because the price of hamburgers increased by 10%, which is higher than the general price increase of 5%. This suggests that hamburgers have become relatively more expensive compared to other goods, potentially leading to an increase in revenue per unit sold, thus incentivizing an increase in output.

Quiz 10: Classical Business Cycle Analysis

Short-run aggregate supply is greater than long-run aggregate supply in the misperceptions theory if

If producers believe that the increase in their relative prices is large relative to the increase in the general price level,then the slope of the short-run aggregate supply curve will be

You are likely to think that the relative price of your good has risen and you should increase your output if you expected

According to the misperceptions theory,the amount by which producers increase their output when the general price level rises depends on

According to the misperceptions theory,after an unanticipated increase in the money supply has occurred,the SRAS curve must shift to restore general equilibrium; as it does so,the price level .

Which of the following statements is true about the misperceptions theory?

The short-run aggregate supply curve can slope upward because

Which of the following equations is most likely to represent short-run aggregate supply according to the misperceptions theory?

According to the misperceptions theory,when P < P^e,output is its full-employment level and the short-run aggregate supply curve must shift to restore full employment.

According to the misperceptions theory,an unanticipated decrease in the money supply shifts the AD curve ,causing output to in the short run.

According to the misperceptions theory,an anticipated decline in the money supply leads to a shift of the AD curve and a shift of the SRAS curve .

If the money supply grows 7% during the year,and people expected the money supply to grow by 5%,what happens to the short-run aggregate supply curve,according to the misperceptions theory?

According to the misperceptions theory,when the aggregate price level is higher than expected,

According to the misperceptions theory,when the price level falls below the expected price level

The primary reason why the Fed cannot systematically surprise the public with its monetary policy is

According to the misperceptions theory,an anticipated 10% decrease in the money supply leads to a short-run reduction in the price level of

The reason why some economists believe that attempts by the Fed to surprise the public in a systematic way cannot be successful is that

According to the misperceptions theory,if the Fed wanted to use monetary policy to influence the real economy it would have to

If producers believe that the increase in their relative prices is small relative to the increase in the general price level,then the slope of the short-run aggregate supply curve will be

If you expect a general price increase of 5% this year and the price of the hamburgers you sell increases by 10%,you would conclude that the relative price of your good has

Quiz 10: Classical Business Cycle Analysis

Short-run aggregate supply is greater than long-run aggregate supply in the misperceptions theory if

If producers believe that the increase in their relative prices is large relative to the increase in the general price level,then the slope of the short-run aggregate supply curve will be

You are likely to think that the relative price of your good has risen and you should increase your output if you expected

According to the misperceptions theory,the amount by which producers increase their output when the general price level rises depends on

According to the misperceptions theory,after an unanticipated increase in the money supply has occurred,the SRAS curve must shift ________ to restore general equilibrium; as it does so,the price level ________.

Which of the following statements is true about the misperceptions theory?

The short-run aggregate supply curve can slope upward because

Which of the following equations is most likely to represent short-run aggregate supply according to the misperceptions theory?

According to the misperceptions theory,when P < Pe,output is ________ its full-employment level and the short-run aggregate supply curve must shift ________ to restore full employment.

According to the misperceptions theory,an unanticipated decrease in the money supply shifts the AD curve ________,causing output to ________ in the short run.

According to the misperceptions theory,an anticipated decline in the money supply leads to a shift of the AD curve ________ and a shift of the SRAS curve ________.

If the money supply grows 7% during the year,and people expected the money supply to grow by 5%,what happens to the short-run aggregate supply curve,according to the misperceptions theory?

According to the misperceptions theory,when the aggregate price level is higher than expected,

According to the misperceptions theory,when the price level falls below the expected price level

The primary reason why the Fed cannot systematically surprise the public with its monetary policy is

According to the misperceptions theory,an anticipated 10% decrease in the money supply leads to a short-run reduction in the price level of

The reason why some economists believe that attempts by the Fed to surprise the public in a systematic way cannot be successful is that

According to the misperceptions theory,if the Fed wanted to use monetary policy to influence the real economy it would have to

If producers believe that the increase in their relative prices is small relative to the increase in the general price level,then the slope of the short-run aggregate supply curve will be

If you expect a general price increase of 5% this year and the price of the hamburgers you sell increases by 10%,you would conclude that the relative price of your good has

According to the misperceptions theory,after an unanticipated increase in the money supply has occurred,the SRAS curve must shift to restore general equilibrium; as it does so,the price level .

According to the misperceptions theory,when P < P^e,output is its full-employment level and the short-run aggregate supply curve must shift to restore full employment.

According to the misperceptions theory,an unanticipated decrease in the money supply shifts the AD curve ,causing output to in the short run.

According to the misperceptions theory,an anticipated decline in the money supply leads to a shift of the AD curve and a shift of the SRAS curve .