Econ Final

Deflation is a:

decreasing aggregate price level

In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts of these two curves, which of these is a likely outcome?

inflation

Monetary policy attempts to affect the overall level of spending by making changes in:

interest rates and quantity of money

If an economy is on the vertical portion of the aggregate supply curve, then it

is at full employment

In the short run, wages and some prices are considered to be:

sticky

The principal measure of inflation in the United States is

the consumer price index

The unemployment rate is defined as the number _____ divided by the _____.

unemployed; number in the labor force

Which event causes a decrease in aggregate demand?

increases in taxes

For developed countries, which factor is considered the MOST important driver in productivity growth?

technological progress

Suppose in 2010 the cost of purchasing a basket of goods was $100. That same basket cost $150 in 2011. If 2010 is the base year, the consumer price index for 2011 is

150

Suppose that banks are issuing personal loans at 9%. If expected inflation is 3%, then the nominal interest rate is _____% and the real interest rate is _____%.

9; 6

What do a rubber-necking traffic jam and the paradox of thrift have in common?

Individual behavior has large negative consequences for the whole of society.

_______________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________.

Neoclassical economists; long run

Robert Reich described the "virtuous" cycle of falling inequality in Inequality for All. What were his main points?

That falling inequality will help grow the middle class (where most of the spending happens) and thus stimulate the economy and leave more tax revenue for important programs like education, which further stimulates the economy

Which of these provides an accurate description regarding the slope of the short-run aggregate supply curve?

The positive slope of the short-run aggregate supply curve is steeper the more flexible prices are or flatter the more rigid prices are.

Which person is considered to be unemployed?

Tiffany, who is going for interviews, hoping to get her first job

Which of these would NOT cause a shift in the aggregate demand curve?

a change in price level

Which of the following would shift the short-run (but not the long-run) aggregate supply curve?

a decline in personal income tax rates

Which of these would shift the aggregate demand curve from AD1 to AD2?

a decrease in interest rates

The central mission of modern macroeconomics is to prevent:

a deep recession like the Great Depression

Which event will shift the aggregate demand curve to the right?

a new government program implemented to eliminate poverty

Refer to Figure: Aggregate Supply. If the economy is at point E: -higher on the graph

actual output is more than potential output.

Diminishing returns to physical capital means that as more and more physical capital is combined with a fixed amount of human capital and a fixed technology, eventually:

additions to aggregate output or real GDP decline.

Which factor will cause the aggregate demand curve to shift to the left?

an appreciation of the dollar

Which of the following would shift the short-run (but not the long-run) aggregate supply curve?

an increase in oil prices

Unanticipated inflation does NOT:

cause disinflation

Because of trade, a country may

consume outside its production possibility frontier.

Which group is helped by inflation?

debtors

If the inflation rate decreases from 5% to 3%, the economy is undergoing

disinflation

With everything else held constant, if 5% of those considered to be frictionally unemployed found work while the number of people considered to be structurally unemployed increased by 5%, the natural rate of unemployment

does not change

If real GDP rises while nominal GDP falls, then prices on average have:

fallen

Which event causes an increase in aggregate demand?

falling interest rates

Which change would contribute to a nation's rapid long-run economic growth?

faster technological progress

In the paradox of thrift:

increased saving by individuals increases their chances of becoming unemployed.

Fiscal policy refers to changes in _____ to affect overall spending in the economy:

government spending and taxation

If the price level decreases, real income will:

increase

Increased taxes will shift the aggregate demand curve to the _____ and _____ output demanded.

left; decrease

Unit-of-account costs refer to the:

loss of the reliability of money as a relative unit of measurement

Changing interest rates is an example of _____ policy.

monetary

If all of the households and businesses start saving more during economic hard times, then aggregate income will fall, hurting everyone in the economy. This is known as the:

paradox of thrift

The inflation rate is the:

percentage change in the price level from one year to the next

Investment spending is spending on:

productive physical capital

An example of investment spending is the:

purchase of a freezer by an ice-cream parlor.

High taxes and/or heavy regulation

raise costs of production so that the aggregate supply curve shifts to the left.

Intermediate goods are NOT counted in GDP because:

to do so would result in double counting.

GDP is the:

total market value of all final goods and services produced in one year

If inflation is unanticipated, then income may be redistributed from creditors to debtors.

true

If the price level at the end of year 1 is 150 and the price level at the end of year 2 is 160, the inflation rate in year 2 is 6.67%.

true

Suppose that the real interest rate is 2.1% and the nominal interest rate is 5.4%. The inflation rate is _____%.

3.3

Diminishing returns to physical capital implies that, when the human capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to _____ productivity.

a smaller increase in

Which change will NOT increase the productivity of labor?

an increase in the size of the labor force

The production possibility frontier will shift outward because of:

better technology that improves worker productivity

The use of online banking would _____ the _____ cost of a high inflation rate.

decrease; shoe leather

A shift of the aggregate _____ curve to the _____ would cause inflation to rise and employment to increase.

demand; right

A key insight into macroeconomics is that in the short run the combined effect of individual decisions:

may be very different from what any one individual intended.

GDP is the sum of:

personal consumption, investment, government purchases, and net exports

Unanticipated inflation:

reduces the value of money

The concept of comparative advantage is based on:

relative opportunity costs

Decreased interest rates will shift the aggregate demand curve to the _____ and _____ output demanded.

right; increase

If oil prices decline, the short-run aggregate supply curve shifts _____ and output supplied will _____.

right; increase