Question

13) The short-run aggregate supply curve shifts to the right when

A) oil prices fall.

B) output gap falls.

C) expected inflation rate rises.

14) The time that it takes for policy makers to be sure of what the data are signaling about the future course of the economy is called

A) the data lag

B) the recognition lag

C) the legislative lag

D) the implementation lag

D) expected inflation rate falls.

15) Which of the following is NOT a feature of the New Keynesian model:

A) Full price flexibility  

B) Sticky prices

C) Agent optimization: households and firms optimize

D) Market clearing

E) Imperfect competition

Answer 1

Answer B) output gap falls

Short run supply curve shifts to the right when output gap falls. The reason is that output gap is difference in actual andpotential output.When gap falls actual output increases and therefore, supply curve shifts to the right.

Answer B) the recognition lag

The time that it takes for policy makers to be sure of what the data are signaling about the future course of the economy is called  the recognition lag.

Answer  A) Full price flexibility