Macro
According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply leads to...
an increase in the price level but does not change real GDP
Which of the following is correct?
When real GDP falls, the rate of unemployment rises.
Which of the following would both shift aggregate demand right?
government expenditures increase and the money supply increases.
The long-run aggregate supply curve shifts right if...
immigration from abroad increases, the capital stock increases, technology advances.
Most economist believe that money neutrality holds...
in the long run but not the short run.
Most economists believe that classical macroeconomic theory is a good description of the economy...
in the long run, but not in the short run.
According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what it produces had...
increased, so it would increase production.
The interest-rate effect...
is the most important reason, in the case of the United States, for the downward slope of the aggregate-demand curve.
Which of the following rises during recessions?
layoffs but not consumer spending.
Other things the same, an increase in the price level makes consumers feel...
less wealthy, so the quantity of goods and services demanded falls.
other things the same, an increase in the price level makes the dollars people hold worth...
less, so they can buy less.
The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected, some firms will have...
lower than desired prices which leads to an increase in the aggregate quantity of goods and services supplied.
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.
The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected...
production is less profitable and employment falls.
The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected...
production is more profitable and employment rises.
As the price level rises, the exchange rate...
rises, so exports fall and imports rise.
The aggregate demand curve shifts right if either...
speculators lose confidence in U.S. assets or recessions in foreign countries end.
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.
The long-run aggregate supply curve shifts right if....
technology improves.
Which of the following effects helps to explain the slope of the aggregate-demand curve?
the exchange-rate effect, the wealth effect, the interest-rate effect.
Aggregate demand includes...
the quantity of goods and services households, firms, the government, and customer abroad want to buy.
When the interest rate is above the equilibrium level...
the quantity of money that people want to hold is less than the quantity of money that the Federal Reserve has supplied, people respond by buying interest-bearing bonds or by depositing money in interest-bearing bank accounts, bond issuers and banks respond by lowering the interest rates they offer.
Which of the following effects provide incentives for consumers to spend less when the price level rises?
the wealth effect and the interest-rate effect.
Which of the following typically rises during a recession?
unemployment.
Other things the same, when the government spends more, the initial effect is that...
aggregate demand shifts right.
Which of the following shifts both the short-run and long-run aggregate supply right?
an increase in the capital stock.
Which of the following decrease in response to the interest-rate effect from an increase in price level?
both investment and consumption.
Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time. What happens to the price level and real GDP in the short run?
both the price level and real GDP fall.
People hold money primarily because it...
can directly be used to buy goods and services
Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to...
decrease consumption, which shifts aggregate demand left.
According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces had....
decreased, so it would decrease production.