ECO 202 Exam 2 Dellachiesa
if the per-worker production function shifts up
an economy can increase its real GDP per hour worked without changing the level of capital per hour worked
which of the following will shift the aggregate demand curve to the right?
an increase in foreign real GDP
in the basic aggregate demand -- aggregate supply model, an increase in the price of oil will in the short run lead to _____ in the unemplyment rate and _____ in the price level.
an increase, an increase
in the basic aggregate demand -- aggregate supply model, a descrease in the price of oil will in the short run lead to ____ in the employment rate and _____ in the price level.
an increase; a decrease
in economics, money is defined as
any asset people generally accept in exchange for goods and services
M2 includes (ignoring traveler's checkcs)
currency in circulations, checking account deposits, and savings-type account deposits
a bank is legally required to hold a fraction of its ____ as ______.
deposits, required reserves
the quantity theory of money seeks to explain the connection between money and
inflation
when the government runs a budget deficit, we could expect to see that
investment will fall
In the early 1900s, Henry Ford revolutionized the automotive manufacturing industry by instituting the assembly line. What impact did the assembly line method for producing automobiles have on the per-worker production function for Ford?
it shifted up
as a lender of last resort, a central bank like the federal reserve makes loans to "banks" that have
liquidity problems
on the 45-degree line diagram, for points that lie below the 45-degree line,
planned aggregate expenditure is less than GDP
the federal reserve systems four monetary policy goals are
price stability, high employment, economic growth, and stability of financial markets and institutions
as the economy nears the end of an expansion, which of the following do we typically see?
rising interest rates
an economy is described by the following equations: c=62+0.6(y-T); T=100; I^p=200; G=80; NX=-30; Y*=600. what policy should the government implement to eliminate the output gap (for Yto equal Y*)
sell bonds
Expansionary fiscal policy will
shift the aggregate demand curve to the right
if whole tomatoes were money, which of the following function would be hardest for tomatoes to satisfy?
store of value
which of the following characterizes the Fed's ability to prevent recessions
the Fed is able to keep a reccession shorter and milder than it would otherwise be
if there is an increase of $30 million as a result of an increase in autonomous consumption spending of $10 million, then the MPC is
the MPC is 0.66
if there is an increase of $50 million as a result of an increase in autonomous consumption spending of $10 million, then the MPC is
the MPS is 0.8
U.S. net export spending rises when
the growth rate of U.S. GDP is slower than the growth rate of GDP in other countries
in the recession of 2007-2009 made many pessimism affect the aggregate demand curve?
this will shift the aggregate demand curve to the left
Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. As a result of Kristy's deposit, Bank A can make a maximum loan of
$8,000
formula for output gap
((y-y*)/y*)*100
if government saving is negative, then
T-Tr<G
if the bank of waterloo receives $20,000 deposit and the reserve requirement is 20 percent, how much can the bank loan out? (assume that before the deposit this bank is just meeting its legal reserve requirement)
$16,000
consumption spending is $5 millio, planned investment spending is $8 million, actual investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million- what is the aggregate expenditure for this exconomy?
$25 million
if investment in an economy increases by $20 million and subsequently equilibrium GDP only increases by $5 million, the multiplier for this economy is _____.
0.25
multiplier formula
1/(1-MPC)
using the quantity equation expressed is growth rates, if the velocity of money grows at 3 percent, the money supply grows at 5 percent, and real GDP grows at 5 percent, then the inflation rate will be
3 percent
an economy is described by the following equations: c=62+0.6(y-T); T=100; I^p=200; G=80; NX=-30; Y*=600. Find the output gap
30
the formula for aggregate expenditure is
AE=C+I+G+NX
an increase in aggregate expenditure has what result on equilibrium GDP?
Equilibrium GDP rises
if an increase in investment spending of $50 million results in $400 million increase in equilibrium real GDP, then
MPC is 0.875
an unplanned increase in inventories result in
actual investment that is greater than planned investment
investment spending ____ during a recession and ______ during an expansion.
declines, increases
an economy is described by the following equations: c=62+0.6(y-T); T=100; I^p=200; G=80; NX=-30; Y*=600. what policy should the government implement to eliminate the output gap (for Y=Y*)
decrease g by 12
to combat inflation, the government should
decrease government spending
which of the following is one explanation as to why the aggregate demand curve slopes downward?
decreases in the price level raise real wealth and increase consumption spending
if the fed decreases the reserve requirement then this
encourages banks to make more loans, and increases the money supply
the interest rate that banks charge other banks for loans is the
federal funds rate
expansionary monetary policy refers to the ____ to increase real GDP
federal reserves increasing the money supply and decreasing interest rates
expansionary monetary policy refers to the _______ to increase real GDP
federal resserves increasing the money supply and decreasing interest rates
congress and the president carry out fiscal policy through changes in
government purchases and taxes
If the Fed buys U.S. Treasury securities, then this
increases reserves, encourages banks to make more loans, and increases the money supply
according to the quantity theory of money, (holding velocity constant) deflation will occur if the
money supply grows at a slower rate than the real GDP
according to the quantity theory of money, (holding velocity constant) inflation will occur if the
money supply is less than the real GDP
an increase in government purchases of $200 billion will shift the aggregate demand curve to the right by
more than $200 billion
the three traditional monetary policy tools used by the federal reserve to manage the money supply are
open market operations, discount lending ratio, and reserve requirements