EC Final Exam

In the AD-AS framework, price and quantity are represented by _____, respectively.

the GDP deflator and the real GDP

Menu costs are the:

marginal costs of adjusting prices.

the average price level increases

there is movement up the AD curve

In order to be considered unemployed, a person must: (i) be part of the working-age population. (ii) be actively looking for work. (iii) not have been self-employed. (iv) must be noninstitutionalized.

(i), (ii), and (iv)

The higher the GDP deflator in an economy, the: (i) higher the purchasing power of the currency. (ii) lower the real wealth in the economy. (iii) higher the real wealth in an economy .(iv) more expensive the country's exports.

(ii) and (iv)

Expansionary monetary policy _____ consumption, investment, and net exports; _____ aggregate expenditures; and _____ aggregate demand. -increases; boosts; raises -increases; lowers; lowers -decreases; lowers; lowers -decreases; boosts; raises

-increases; boosts; raises

Contractionary monetary policy causes a: -right shift of the aggregate demand curve. -left shift of the aggregate demand curve. -movement along the same aggregate demand curve. -right shift of the aggregate supply curve

-left shift of the aggregate demand curve.

Which of the following is an investment? A. Fred pays a contractor to add two new rooms to his house. B. Dan purchases $6,800 worth of gold. C. Frank buys a used car. D. Ben's computer depreciates by 15%.

A.

Why does an anticipated change in income lead to no change in consumption for a consumption smoother?

Consumption is based on permanent income, which is already factored into anticipated future changes in income.

Which of the following changes will lead to a decrease in the price level but an increase in the quantity of output in an economy? -a rise in aggregate supply -a fall in aggregate demand -a fall in aggregate supply -a rise in aggregate demand

a rise in aggregate supply

If Marios is a consumption smoother and has just won a prize of $12,000, we can expect Marios to exhibit:

a small change in consumption.

If there is a temporary rise in income, a consumption smoother will exhibit _____ in consumption, and a hand-to-mouth consumer will exhibit _____ in consumption.

a small increase; a large increase

Credit constraints limit the:

amount of money that people can borrow.

Henry Ford's $5 per day wage is an example of:

an efficiency wage.

Aggregate expenditure is the sum of:

consumption, planned investment, government expenditure, and net exports.

if the average price level increases, the quantity of aggregate demand:

decreases

Equilibrium in the loanable funds market determines the:

equilibrium real interest rate.

Hyperinflation is:

extremely high rates of inflation.

The higher the minimum wage, as compared to the equilibrium wage, the:

higher the structural unemployment rate.

Holding everything else equal, the _____ the interest rate on saving, the _____ the future value of that saving.

higher; greater

If you see that inflation between last year and this year is 3%, this means that:

on average, prices went up across the economy by 3%.

The equilibrium unemployment rate is also known as the _____ unemployment rate.

long-run

The benefit of an extra dollar of consumption is called the:

marginal benefit of consumption.

A rise in prices leads to a:

movement up and to the left, along the same aggregate demand curve.

Changes in the price level lead AS to:

movements along the AS curve.

The real interest rate is the:

nominal interest rate minus the rate of inflation.

If you see that the consumer price index this year is lower than the consumer price index last year, this means that:

on average, prices went down across the economy.

The GDP deflator is an index that tracks the:

price of all goods and services produced domestically.

Contractionary fiscal policy _____ taxes, _____ government expenditure, _____ aggregate expenditures, and _____ aggregate demand.

raises; lowers; decreases; lowers

In macroeconomics, the difference between saving and investment is that:

saving is the money left over after paying for spending, and investment is the purchase of new capital.

Changes in production costs AS: shift the AS curve.

shift the AS curve.

A rise in production costs causes the aggregate supply curve to

shift to the left (or upward)

A fall in production costs causes the aggregate supply curve to

shift to the right (or downward)

If the frictional rate of unemployment is 1.45%, the structural rate of unemployment is 2.3%, and the total unemployment rate is 6%, then we can conclude that:

the equilibrium rate of unemployment is 3.75%.

When prices rise in the United States, what is the effect on consumption and aggregate expenditure?

The real value of wealth decreases, leading to a decrease in consumption and a decrease in aggregate expenditure.

Given your knowledge of how aggregate supply changes from the very short run to the long run, what is the LONG-RUN impact of a decrease in aggregate demand?

There is a sharp fall in prices in the economy as business hurriedly lower prices to try to boost sales.

A minimum wage that is above the equilibrium wage is:

an example of a price floor.

During the Great Recession, the United States Congress increased the length of time that unemployment benefits could be received from 52 weeks to 99 weeks. This change caused:

an increase in the costs for the government.

You are an analyst preparing a forecast of the effects of macroeconomic changes in the economy. What happens to prices and GDP when imported inputs become cheaper?

Prices decrease, and GDP increases.

An underemployed person is one who is:

working but whose skills are not fully utilized.

You are an analyst preparing a forecast of the effects of macroeconomic changes in the economy. What happens to prices and GDP when corporate taxes rise in the economy?

Both prices and GDP decrease.

The neutral interest rate occurs when the economy is:

at its potential.