In an AD-AS model with an upward sloping AS-curve, what would happen if oil prices increased and the Fed responded by restricting money supply?
A. real output would increase and the price level would remain the same
B. real output would remain the same but the price level would decrease
C. real output would decrease and the price level would increase sharply
D. real output would decrease and the price level would decrease sharply
E. real output would decrease but we can't tell what would happen to the price level
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What sort of event could lead to a simultaneous decrease in the rates of inflation and unemployment?
A. a decrease in money supply
B. an increase in money supply
C. an adverse supply shock
D. a decrease in material prices
E. restrictive monetary policy following an adverse supply shock
In the static AD-AS model, what is the most likely long-run outcome of an oil price increase, if no policy change is implemented?
A. real wages will decline while the levels of output and prices will remain unchanged
B. the level of prices will increase while the level of output will remain unchanged
C. the natural unemployment rate and the price level will both increase
D. nominal wages and prices will increase, but real wages will remain unchanged
E. real money balances and real wages will decline while nominal wages will remain unchanged
In the AD-AS model with an upward-sloping AS-curve, a decrease in oil prices will
A. increase prices and output
B. decrease prices and increase output
C. increase prices and decrease output
D. decrease prices and output
E. decrease prices but have no effect on output
Which of the following is the most likely medium-run outcome of an adverse supply shock?
A. an increase in consumer prices and a higher level of real GDP
B. a decrease in real GDP
C. an increase in real wage rates
D. an increase in frictional unemployment
E. an increase in nominal GDP with real GDP remaining the same