Macro Econ exam 4

Which of the following is correct concerning recessions?

They are associated with comparatively large declines in investment spending.

Other things the same, when the government spends more, the initial effect is that

aggregate demand shifts right.

Which of the following Fed actions would both increase the money supply?

buy bonds and lower the reserve requirement

If, at some interest rate, the quantity of money supplied is greater than the quantity of money demanded, people will desire to

buy interest-bearing assets, causing the interest rate to decrease

Other things the same, a decrease in the price level causes the interest rate to

decrease, the dollar to depreciate, and net exports to increase.

Part of the explanation for why the aggregate-demand curve slopes downward is that a decrease in the price level

decreases the interest rate.

short-run tradeoff between inflation and unemployment.

fall and unemployment rises

Which of the following is not a reason the aggregate-demand curve slopes downward? As the price level increases,

firms may believe the relative price of their output has risen.

In the short run, open-market purchasses

increase the price level and real GDP.

If taxes

increase, consumption decreases, aggregate demand shifts left.

People will want to hold more money if the price level

increases or if the interest rate decreases

According to the crowding-out effect, an increase in government spending

increases the interest rate and so decreases investment spending.

The quantity of aggregate goods and service demanded rises when the

price level falls, because the interest rate falls.

If policymakers increase aggregate demand, the price level

rises, but unemployment falls

If aggregate demand and short-run aggregate supply intersect at an output below natural rate of output, then in the long run

short-run aggregate supply will shift downward and the price level will fall.

There is a

short-run tradeoff between inflation and unemployment.

The natural rate of unemployment depends upon

the effectiveness of job search.

Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run?

the inflation rate, but not the natural rate of unemployment

In the long run, if there is an increase in the money supply growth rate, which of the following curves shifts right?

the short-run but not the long run Phillips curve

Which of the following typically rises during a recession?

unemployment

If the multiplier is 0.75 and government spending increased by $100, then the maximum increase in aggregate demand will be

$400.00

If the multiplier is 0.70 and government spending increased by $60, then the maximum increase in aggregate demand will be

$42.00