Macro Econ Final Pt 2
The velocity of money is
. the average number of times per year a dollar is spent
In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose
Both the change in inflation and the change in unemployment are consistent with what a given short-run Phillips curve implies.
.France has a higher natural rate of unemployment than the United States. This suggests that
France's Phillips curve is to the right of that of the United States, possibly because they have more generous unemployment compensation.
France has a higher natural rate of unemployment than the United States. This suggests that
France's Phillips curve is to the right of that of the United States, possibly because they have more generous unemployment compensation.
You bought some shares of stock and, over the next year, the price per share decreased by 7 percent and the price level decreased by 9 percent. Before taxes, you experienced
a nominal lose and a real gain
An event that directly affects firms' costs of production and thus the prices they charge is called
a supply shock
When conducting an open-market purchase, the Fed
buys government bonds, and in so doing increases the money supply.
Which of the following can the Fed do to change the money supply?
change reserves or change the reserve ratio
The idea that nominal variables are heavily influenced by the quantity of money and that money is largely irrelevant for understanding the determinants of real variables is called the
classical dichotomy
The primary difference between commodity money and fiat money is that
commodity money has intrinsic value but fiat money does not.
When the price level falls, the number of dollars needed to buy a representative basket of goods
decreases, so the value of money rises
Wealth is redistributed from debtors to creditors when inflation was expected to be
high and it turns out to be low
The principle of monetary neutrality implies that an increase in the money supply will
increase the price level, but not real GDP
In 2001, the United States was in recession. Which of the following things would you not expect to have happened?
increased investment spending
Which of the following would shift the long-run Phillips curve to the right?
increases in unemployment compensation
When taxes decrease, consumption
increases, so aggregate demand shifts right
Which of the following depends primarily on the growth rate of the money supply?
inflation but not the natural rate of unemployment
The sacrifice ratio is the
number of percentage points annual output falls for each percentage point reduction in inflation
To explain the long-run determinants of the price level and the inflation rate, most economists today rely on the
quantity theory of money
The theory by which people optimally use all available information when forecasting the future is known as
rational expectations
Stagflation exists when prices
rise and output falls
If people decide to hold less currency relative to deposits, the money supply
rises. The Fed could lessen the impact of this by selling Treasury bonds.
Most economists use the aggregate demand and aggregate supply model primarily to analyze
short-run fluctuations in the economy
Liquidity refers to
the ease with which an asset is converted to the medium of exchange.
According to the long-run Phillips curve, in the long run monetary policy influences
the inflation rate but not the unemployment rate
The discount rate is
the interest rate the Fed charges banks.
Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then
the nominal interest rate rises, but the real interest rate does not.
The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for
the slope of the aggregate-demand curve
In the short run
unemployment and inflation are negatively related. In the long run they are largely unrelated problems.
If output is above its natural rate, then according to sticky-wage theory
will strike bargains for higher wages. In response to the higher wages firms will produce less at any given price level.