macro final

Refer to the graph above. If the supply of money was $200 billion, the interest rate would be

2 percent

Refer to the graph above. Which of the following changes will shift AD1 to AD2?

A cut in personal and business taxes

Refer to the graph above. Which of the following factors will shift AS1 to AS2?

A decrease in business taxes

Refer to the graph above. Which of the following factors will shift AD1 to AD3?

A decrease in consumer wealth

Refer to the above graph. What combination would most likely cause a shift from AD1 to AD2?

A decrease in taxes and an increase in government spending

The fundamental objective of monetary policy is to assist the economy in achieving

A full-employment, noninflationary level of total output

Government actions that were taken in order to stimulate the economy during the Great Recession of 2007-09 included the following, except

A sharp increase in the natural rate of unemployment

The following factors explain the inverse relationship between the price level and the total demand for output, except

A substitution effect

The foreign purchases, interest rate, and real-balances effects explain why the

Aggregate demand curve is downward-sloping

If the dollar appreciates in value relative to foreign currencies

Aggregate demand decreases because net exports decrease

If the national incomes of our trading partners increase, then our

Aggregate demand increases because net exports increase

Refer to the graph above. Which of the following factors will shift AS1 to AS3?

An increase in input prices

Refer to the graph above. Which of the following factors will shift AD1 to AD2?

An increase in national incomes abroad

Refer to the above graph. What combination would most likely cause a shift from AD1 to AD3?

An increase in taxes and a decrease in government spending

Refer to the graph above. The equilibrium for this economy is

At price level P2 and output Q2

The long-run aggregate supply analysis assumes that

Both input and product prices are variable

A decrease in aggregate demand in the short run will reduce

Both real output and the price level

If the Fed buys government securities from commercial banks in the open market

Commercial banks give the securities to the Fed, and the Fed increases the banks' reserves

In the mid-1970s, changes in oil prices greatly affected U.S. inflation. When oil prices rose, the U.S. would experience

Cost-push inflation and falling output

Refer to the graph above. A shift from AS1 to AS2 would be consistent with what economic event in U.S. history?

Cost-push inflation in the mid-1970s

An increase in personal income tax rates will cause a(n)

Decrease (or shift left) in aggregate demand

The intent of contractionary fiscal policy is to

Decrease aggregate demand

A decrease in government spending will cause a(n)

Decrease in aggregate demand

The set of fiscal policies that would be most contractionary would be a(n)

Decrease in government spending and an increase in taxes

The interest rate effect on aggregate demand indicates that a(n)

Decrease in the price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending

Refer to the graph above. If the interest rate rises from 2 percent to 3 percent, the supply of money must have

Decreased by $50 billion

Demand-pull inflation is illustrated in the short run aggregate supply-aggregate demand model as a shift of the aggregate

Demand to the right

Refer to the figure above. A shift from AD1 shifts to AD2 would be consistent with what economic event in U.S. history?

Demand-pull inflation in the late 1960s

The short-run aggregate supply curve shows the

Direct relationship between the price level and real GDP produced

When the Federal government takes budgetary action to stimulate the economy or rein in inflation, such policy is

Discretionary Fiscal Policy

A newspaper headline reads: "Fed Cuts Federal Funds Rate for Fifth Time This Year." This headline indicates that the Federal Reserve is most likely trying to

Ease monetary policy

If Congress passes legislation to increase government spending to counter the effects of a recession, then this would be an example of a(n)

Expansionary fiscal policy

The lending ability of commercial banks increases when the

Fed buys securities in the open market

The conduct of monetary policy in the United States is the main responsibility of the

Federal Reserve System

Traditionally, the Fed often communicated its intentions to restrict or expand monetary policy by announcing a change in its target for the

Federal funds rate

Refer to the figure above. A shift from AD2 to AD1 would be consistent with what economic event in U.S. history?

Great Recession of 2007-2009

The immediate-short-run aggregate supply curve is

Horizontal

An increase in expected future income will

Increase aggregate demand

A decrease in business taxes will tend to

Increase aggregate demand and increase aggregate supply

An increase in productivity will

Increase aggregate supply

If the price of crude oil decreases, then this would most likely

Increase aggregate supply in the U.S.

Refer to the graph above. If aggregate supply shifts from AS1 to AS2, then the price level will

Increase and real domestic output will decrease

A decrease in interest rates caused by a change in the price level would cause a(n)

Increase in the quantity of real output demanded (or movement down along AD)

If Congress passed new laws significantly increasing the regulation of business, this action would tend to

Increase per-unit production costs and shift the aggregate supply curve to the left

If the economy is in a recession and prices are relatively stable, then the discretionary fiscal policy or policies that would most likely be recommended to correct this macroeconomic problem would be

Increased government spending or decreased taxation, or a combination of the two actions

Refer to the figure above. If AD1 shifts to AD2, then the equilibrium output

Increases from Q1 to Q2 while the price level rises from P1 to P2

The American Recovery and Reinvestment Act of 2009 included mostly

Increases in government spending and decreases in taxes

An increase in the money supply is likely to reduce

Interest rates

The aggregate demand curve shows the

Inverse relationship between the price level and the quantity of real GDP purchased

An increase in personal income taxes would shift AD to the

Left because C will decrease

A decrease in expected returns on investment will most likely shift the AD curve to the

Left because I will decrease

A consumer holds money to meet spending needs. This would be an example of the

Liquidity demand, also known as transactions demand for money

The real-balances effect on aggregate demand suggests that a

Lower price level will increase the real value of many financial assets and therefore cause an increase in spending

Menu costs will

Make prices inflexible downward

The purchase and sale of government securities by the Fed is called

Open market operations

Refer to the graph above. Assume that the economy is in a recession with a price level of P1 and output level Q1. The government then adopts an appropriate discretionary fiscal policy. What will be the most likely new equilibrium price level and output?

P2 and Q2

An aggregate supply curve represents the relationship between the

Price level and the production of real domestic output

The Federal Reserve could reduce the money supply by

Raising the federal fund rate

The goal of expansionary fiscal policy is to increase

Real GDP

The foreign purchases effect on aggregate demand suggests that a

Rise in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand

When the Federal Reserve raises the target Federal funds rate, it

Sells government securities to decrease the excess reserves available for overnight loan

Refer to the figure above. The massive increase in government spending during World War II moved the economy in the span of a few short years from mass unemployment and price stability to "overfull" employment. This situation can be best illustrated in the figure above as a

Shift from AD1 to AD2

A fall in labor costs will cause aggregate

Supply to increase

Fiscal policy is enacted through changes in

Taxation and government spending

When the price level decreases

The demand for money falls and the interest rate falls

The interest rate that banks charge each other for over-night loans to each other, which is also the Fed's policy target, is called

The federal funds rate

The stimulus package that the government implemented during the Great Recession of 2007-09 did not have as strong an impact on GDP and unemployment as expected, for the following reasons, except

The stimulus package caused prices to fall in many sectors

One timing problem in using fiscal policy to counter a recession is the "operational lag" that occurs between the

Time fiscal action is taken and the time that the action has its effect on the economy

The long-run aggregate supply curve is

Vertical

The upward slope of the short-run aggregate supply curve is based on the assumption that

Wages and other resource prices do not respond to price level changes

Wage contracts, efficiency wages, and the minimum wage are explanations for why

Wages tend to be inflexible downward

Refer to the graph above. If the equilibrium interest rate is 4 percent, the supply of money must be

$100 billion