Macro Practice Final
if the marginal propensity to consumer goes up, then
a given increase in government spending will have more impact on equilibrium GDP
All other things being equal, if the Fed buys bond
aggregate demand will increase
Which of the following shifts aggregate demand to the right?
an increase in government expenditures, but not a change in the price level
an increase in the money supply
and a decrease in the income tax both cause aggregate demand to shift right
The level of real GDP per person
and the growth rate of real GDP per person vary widely across countries
If PPP holds, a dollar will buy
as many goods in foreign countries as it does in the United States
The federal Funds rate is the interest rate
banks charge each other for short-term loans
If money growth does not affect real DP, and velocity is stable, an increase in the money supply creates a proportional increase in
both the price level and nominal GDP
the nominal interest rate is the
interest rate as usually reported by banks
as the price level rises
interest rate rises
if the per-worker production function shifts down
it now takes more capital per hour worked to get the same amount of real GDP per hour worked
According to new growth theory
knowledge capital is subject to increasing returns
Other things being equal, an increase in the price level makes the dollars people hold worth
less, so they spend less
If a country's saving rate declined, then other things the same, in the long run it would have
lower productivity and lower GDP per person
purchasing power parity theory does not hold at all times because
many goods are not easily transported; the same goods produced in different countries may b imperfect substitutes for each other
The economy's inflation rate is the
percentage change in the price level from the previous period
in the long run, changes in the money supply affect only
prices
If the Fed conducts open-market purchases which of these three increases in the short run: interest rate, prices, and investment spending?
prices and investment spending, not interest rates
Assuming no crowding out, a $100 billion increase in government expenditures shifts aggregate demand
right by more than $100 billion
When the money market is drawn with the nominal interest rate (i) on the vertical axis, a decrease in the reserve requirement would tend to shift the money supply curve to the
right, lowering the interest rate
Which of the following tends to make the size of a shift in aggregate demand resulting from a tax change smaller than otherwise?
the crowding out effect
other things being equal, aggregate expenditure increases if
the dollar depreciates
If the economy is in long-run equilibrium and then the Fed sells bonds
the price level will decrease and real GDP will be unchanged in the long run
When an economy faces diminishing returns
the slope of the per-worker production function becomes flatter as capital per hour worked increases
Which of the following is correct concerning the long-run Phillips curve?
Its position depends on the natural rate of unemployment
An increase in the saving rate would, other things being equal
increase growth more for a poor country than a rich country, but raise growth temporarily
in the short run, open-market purchases by the Fed
increase the price level and real GDP
Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 195 for 2005. Ruth's 1931 salary was equivalent to a 2005 salary of about
$1,026,000
If a small country has a current nominal GDP of $25 billion and the GDP deflator is 125, what is real GDP?
$20 billion
If GDP equals $2,450 billion, consumption expenditure equals $1,390 billion, government expenditure equals $325 billion, and investment equals $510 billion. What is net exports?
$225 billion
During the past century the average growth rate of U.S. real GDP per person was about 2%. This implies that it doubled about every
35 years
Assume that the MPC is 0.75. The government spending multiplier is
4
If the CPI in the US is 175, the CPI in Sweden is 210, and the real exchange rate is 5, what is the nominal exchange rate, expressed as the number of Swedish krona per US dollar?
6
If the economy is currently in short-run equilibrium at a level of GDP that is above potential GDP, which of the following would move the economy back to potential GDP?
A decrease in wealth
Which of the following would not be associated with an adverse (negative) supply shock A. the long-run Phillips curve shifts left B. unemployment rises C. the price level rises D. output falls
A. the long run Phillips curve
Assume an economy experienced a higher inflation rate, as measured by the CPI, between 2004 and 2005 than it experienced between 2003 and 2004. Which of the following scenarios is consistent with this assumption? A. the CPI was 100 in 2003, 110 in 2004, 120 in 2005 B. the CPI was 100 in 2003, 110 in 2004, 124 in 2005 C. the CPI was 110 in 2003, 150 in 2004, and 200 in 2005
B. the CPI was 100 in 2003, 110 in 2004, 124 in 2005
In the short run, an increase in the money supply causes interest rate to
decrease, and aggregate demand to shift left
other things being equal, as a country's price level falls, the country's real exchange rate
falls
As recessions begin, production
falls and unemployment rises
If the stock market booms
household spending increases. To offset the effects of this on the price level and real GDP, the Fed would decrease the money supply
in the CPI, goods and services are weighted according to
how much consumers buy of each good or service
A steep SRAS curve
implies that an expansionary open market operation by the Fed will have a bigger impact on the price level than if SRAS were flatter
foreign produced goods and services that are sold domestically are called
imports