Macro 3

Ceteris Paribus , a decrease in government spending would be represented by a movement from

AD2 to AD1

Ceteris Paribus, a decrease in the capital stock would be represented by a moment from (13-2)

SRAS2 to SRAS1

Which of the following is an example of expansionary fiscal policy? a. Increase in taxes b. Stimulus package c. Increasing the money supply d.Lowering interest rates

Stimulus package

people chose to hold a larger quantity of money if

the interest rate falls, which causes the opportunity cost of holding money to fall

suppose the economy starts at Y. is there is a fall in aggregate demand, then the economy moves to (33-1)

z in the long run

what is the value of the multiplier if the marginal propensity to consume is 0.5

2

Suppose the economy is at point B in the figure above. The expected rate of inflation is ____

3 %

Which of the points in the above graph are possible short run equilibria but not long run equilibria? assume that Y1 represents potential GDP (13-3)

B and D

AS aggregate demand shifts left along the short run aggregate supply curve, Unemployment is ______ and inflation is __________

Higher, Lower

when the federal reserve conducts an open market purchase, the money supply ______ and aggregate demand _______

Increases, increases

_________ of unemployment during _______ make it easier for workers to ________ wages

Low levels, and expansion, negotiate higher

If stricter immigration laws are imposed and many foreign workers in the US are forced to go back to their countries

The long run aggregate supply curve will shift to the left

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. Which of the following will happen in the short run?

Unemployment will decline

Suppose the multiplier is 1.5. The federal government increases spending by 200 billion. What is the change in GDP, holding everything else constant?

a 300 billion increase in GDP

Suppose the economy is in long run equilibrium and there is an increase in government spending. To stabilize output, the federal reserve would

decrease the money supply

Suppose the economy starts at Z, If changes occur that move the economy to a new short run equilibrium of P1 and Y1, then it must be the case that aggregate demand has _______

decreased

A long run aggregate supply curve will shift to the right if the economy

experiences positive technological change

In the graph above, if the economy is at point A, an appropriate fiscal policy by the congress and the president would be to _______ government purchases

increase

The crowding out effect occurs because an increase in government spending _______ interest rates, causing ______ to fall

increases , investment

After a negative supply shock, which of the following would move unemployment back towards its natural rate? The government ______________

increases expenditures

A decrease in individual income taxes ______ disposable income, which ______ consumption spending

increases, increases

your roommate is having trouble grasping how monetary policy works. Which of the following explanations could you use to correctly describe the mechanism by which the fed can affect the economy through monetary policy? Increasing the money supply ...

lowers the interest rate, and firms increase investment spending

an increase in the price level will

move the economy up along the stationary aggregate demand curve

Expansionary fiscal policy will shift the aggregate demand curve to the

right

AN increase in the price of oil shifts the Short run philips curve _______ and the unemployment rate _______

right, rises

If the economy experiences a negative supply shock, Inflation will ______ and real GDP will ______

rise , fall