Midterm 4 Macro
Refer to the figure below. If the economy starts at Y, then an expansion occurs at ...
V
Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. The Fed should aim at shifting ...
aggregate demand to the right.
Which of the following shifts the short-run aggregate supply curve to the left?
an increase in the expected price level
Refer to the figure below. Suppose the economy is initially at point A. The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the Federal Reserve?
an open market purchase of government bonds
An increase in household saving causes consumption to ...
fall and aggregate demand to decrease.
Which of the following things would you NOT expect to happen in a recession?
increased real GDP
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.
When the dollar appreciates, U.S. ...
net exports fall, which decreases the aggregate quantity of goods and services demanded.
The goal of monetary policy and fiscal policy is to ...
offset short-run economic fluctuations and thereby stabilize the economy.
If the price level rises above what was expected and wages are sticky, then ...
production becomes more profitable so firms will hire more workers.
Which of the following is NOT included in aggregate demand?
purchases of stocks and bonds
Which of the following is most commonly used to monitor short-run changes in economic activity?
real GDP
Potential GDP refers to the level of ...
real GDP in the long run
A decrease in short-run aggregate supply results in a(n) ________ in the ________.
recession; short run
Suppose the economy is at a short-run equilibrium GDP that lies below (to the left of) potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?
reduce interest rates, increasing investment and aggregate demand.
When the price of oil rises unexpectedly, the equilibrium price level ________ and the unemployment rate ________ in the short run
rises; rises
Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. This alone would initially ...
shift aggregate demand to the left.
Which of the following would cause prices to fall and output to rise in the short run?
short-run aggregate supply shifts right
The aggregate demand and aggregate supply model helps explain ...
short-term fluctuations in real GDP and the price level in the economy.
Monetary policy is determined by ...
the Federal Reserve and involves changing the money supply.
Which of the following is NOT a determinant of the long-run level of real GDP?
the price level
The aggregate supply curve is ...
vertical in the long run and slopes upward in the short run.
Which of the following shifts aggregate demand to the left?
Net exports fall.
Which of the following decreases in response to the interest-rate effect from an increase in the price level?
investment
