Macro Final Exam

According to the interest-rate effect, an increase in the price level will

if other factors are held constant, will lead to a reduction in total real spending on interest-rate-sensitive goods.

People will buy more if the price level

if the price level falls, the real value of a dollar rises

During the 2008-2009 unemployment rose from about 4.4% to about

unemployment rose 4.4% to 10.1%

If the MPC is 0.8 and there are no crowding-out or accelerator effects, then an initial increase in aggregate demand of $120 billion will eventually shift the aggregate demand curve to the right by

$600 billion.

For the U.S. economy, which of the following helps explain the slope of the aggregate-demand curve?

An increase in the price level increases the interest rate.

If the MPC = 4/5, then the government purchases multiplier is 5/4

False

According to liquidity preference theory, if the price level increases, then the equilibrium interest rate

Liquidity preference theory assumes the interest rate adjusts to bring the money market into equilibrium

When there is an excess supply of money

There is an excess demand for bonds, so those looking to borrow by selling bonds can do so at a lower interest rate

According to the classical model, an increase in the money supply causes

_______ prices and ______ in output. higher; no change

Which of the following events would shift money demand to the left?

a decrease in the price level

. During the last half of 2012, the U.S. unemployment rate was just under 8 percent. Historical experience suggests that this is

above the natural rate, so that real GDP growth was likely low

When the price level falls the quantity of

consumption goods demanded and the quantity of net exports demanded both rise

During recessions declines in investment account for about

d. 2/3 of the decline in real GDP

Other things the same, if the money supply rises by 2% and people were expecting it to rise by 5%, then some firms have

lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied

In the long run, an increase in the stock of human capital

makes the price level fall, while increases in the money supply make prices rise

When the Federal Reserve increases the Federal Funds target rate, it achieves this target by

selling Treasury bills, which decreases bank reserves

In order to understand how the economy works in the short run, we need to

study a model in which real and nominal variables interact

Other things the same, the aggregate quantity of goods demanded decreases if

the dollar depreciates