econ exam 4

When the perceived financial risk falls in an economy the

TED spread falls

If Y>AE

There will be a build-up of inventories in the economy

There is no long-run-off between inflation and output because:

allowing inflation doesn't lead to sustainably higher output

If managers expect inflation to approach the Federal Reserve's target they have _____ expectations

anchored

higher interest rates cause the US dollar to

appreciate

If a manager has an expectation of ongoing inflation, this means she believes that:

cost of inputs will rise

Lower interest rates cause the US dollar to

depreciate

consumption is the

expenditure by households on goods and services

The output gap is negative when

potential GPD exceeds actual GDP

tariffs on inputs lead to a _____ shock

supply

If a spending shock reduces aggregate expenditure by $600 millions and the multiplier is 2.5, then the IS curve will shift

left by $1,500 million

How do interest rates affect investment in the economy?

lower interest rates lower the cost of borrowing for firms and so investment rises

In the IS-MP analysis in the Fed model, a fall in the interest rate causes a:

movement to the right along is IS curve

In the IS-MP analysis in the Fed model, if the Federal Reserve lowers the federal funds rate, the

mp curve shifts down

If expected inflation is 3% and actual inflation is 4.2% then unexpected inflation is

1.2%

If government spending rises by $62 billions and GDP rises by $110 billion, then the multiplier in the economy is approximately

1.77

If the nominal rate of interest is 4.8%, the rate of inflation is 2%, and the risk premium is 0.75%, the MP curve is at

2.8%

If potential GDP is $26.5 trillion and actual GDP is $27.49 trillion, the output gap is

3.74%

From March 2018 to September 2019, turkeys consumer confidence index fell from 99.1 to 94.2. How would such a change impact the IS curve in Turkey?

Decreased consumer confidence about the future lowers current consumption, causing the IS curve to shift left

In the IS-MP analysis in the Fed model, a decrease in net exports in net exports will shift the

IS curve to the left

in the IS-MP analysis in the fed model, a fall in investment will shift the

IS curve to the left

The Fed model links the IS, MP, and Phillips curves. In the IS-MP analysis, and increase in exports will shift the

IS curve to the right

the fed model combines the _____ curve, the ____ curve and the _____ curve to link interest rates, the output gap and inflation

IS; MP; PHILIPS

In June 2019, India imposed a tariff on almonds from the United States. How does this affect the IS curve in the US?

Net exports decrease, leading to a left shift of the IS curve

a fall in nominal wage represents

a decrease in production costs

If you see a newspaper headline that says "Banks shut doors depositors scrambling to get their money back" this an example of _______ shock

a financial

If you see a newspaper headline that says "US exports plunge" this is an example of

a spending

The second step in analyzing a macroeconomic shock is to

find the output gap

the philips curve is upward-sloping because

the more positive the output gap, the higher inflation rises about expected inflation

what is excess demand?

too many buyers for too few goods

once you have connected the output gaps from the IS-MP model and the Phillips curve, the next step is to identify the

unemployment rate from the labor market

What is measured on the vertical axis on the Philips curve diagram?

unexpected inflation