Macro Exam 3
The velocity of money is
the average number of times per year a dollar is spent.
Other things the same, as the price level falls,
the dollar depreciates.
Refer to Figure 30-1. When the money supply curve shifts from MS1 to MS2,
the equilibrium value of money decreases.
Unions contribute to
the natural rate of unemployment but not frictional unemployment.
Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then
the nominal interest rate rises, but the real interest rate does not.
Which of the following adjust to bring aggregate supply and demand into balance?
the price level and real output
The variables on the vertical and horizontal axes of the aggregate demand and supply graph are
the price level and real output.
The aggregate demand and aggregate supply graph has
the price level on the vertical axis. The price level can be measured by the GDP deflator.
Which of the following is not a determinant of the long-run level of real GDP?
the price level.
Aggregate demand includes
the quantity of goods and services the government, households, firms, and customers abroad want to buy.
Minimum-wage laws are most likely to affect the wages paid to
teenagers.
Which of the following would help explain why the aggregate demand curve slopes downward?
A lower price level reduces the interest rate, which encourages greater spending on investment goods.
Refer to Figure 33-4. In the short run, a favorable shift in aggregate supply would move the economy from
A to B.
Which of the following is an example of menu costs?
Advertising new prices
Wanda quit her job because she was unhappy at work. Arnold was laid off from his landscaping job because his company was downsizing. Who is eligible for unemployment insurance benefits?
Arnold but not Wanda
Refer to Figure 33-4. A decrease in taxes would move the economy from C to
B in the short run and A in the long run.
Refer to Figure 33-4. If the economy is in long-run equilibrium, then an adverse shift in aggregate supply would move the economy from
C to D.
On a given morning, Franco sold 40 pairs of shoes for a total of $800 at his shoe store.
The $800 is a nominal variable. The quantity of shoes is a real variable.
According to the classical dichotomy, which of the following increases when the money supply increases?
The nominal wage
Refer to Figure 33-3. The natural rate of output occurs at
Y2.
The natural rate of unemployment is the
amount of unemployment that the economy normally experiences.
Changes in the price level affect which components of aggregate demand?
consumption, investment, and net exports
Other things the same, continued increases in the money supply lead to
continued increases in the price level but not continued increases in real GDP.
The long-run aggregate supply curve would shift left if the amount of labor available
decreased or Congress made a substantial increase in the minimum wage.
The long-run aggregate supply curve shifts right if
either immigration from abroad increases or technology improves.
Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called
frictional unemployment.
Other things the same, if the price level rises by 2% and people were expecting it to rise by 5%, then some firms have
higher than desired prices, which depresses their sales.
The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change
in the price level, but not output.
Sectoral shifts in demand for output
increase unemployment due to job search.
The aggregate-demand curve shows that a decrease in the price level
increases the real value of goods and services demanded in the economy.
The effect of an increase in the price level on the aggregate-demand curve is represented by a
movement to the left along a given aggregate-demand curve.
Refer to Figure 33-4. If the economy is at A and there is a fall in aggregate demand, in the short run the economy
moves to D.
The labor force equals the
number of people employed plus the number of people unemployed.
The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,
production is more profitable and employment rises.
The aggregate-demand curve shows the
quantity of domestically produced goods and services that households, firms, the government, and customers abroad want to buy at each price level.
Refer to Figure 30-1. If the money supply is MS2 and the value of money is 5, then the quantity of money
supplied is greater than the quantity demanded; the price level will rise.
Refer to Figure 33-4. If the economy starts at A and there is a fall in aggregate demand, the economy moves
to C in the long run.
Sheila is on a temporary layoff from her automobile factory job but has not looked for work in the last four weeks. The Bureau of Labor Statistics counts Sheila as
unemployed and in the labor force.