Macroeconomics Final Questions Possibilities

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Suppose consumers decrease their consumption expenditure because they worry about what their income will be in the future. There is

A leftward shift of the aggregate demand curve

When autonomous expenditure decreases,

the AE curve shifts downward

If inflation is positive and is perfectly anticipated

those that hold paper money lose

Suppose that in 2019, firms discover that their inventories are falling below their planned levels, Which of the following statements are CORRECT?

Real GDP is less than equilibrium expenditure

Which of the following occurs while moving along a short-run aggregate supply curve?

The price level changes and the money wage rate is constant.

Suppose the equilibrium level of expenditure is $18 trillion. If real GDP is $17 trillion, then inventories are ____ their target levels and real GDP will _____

below; increase

When actual inflation is less than expected inflation,

borrowers lose and lenders gain

If the unemployment rate initially equals its natural rate, then if the inflation rate rises above its expected rate, the unemployment rate

falls below its natural rate

The marginal propensity to consume is the

fraction of a change in disposable income spent on consumption expenditure.

The marginal propensity to consume is the

fraction of a change in disposable income that is consumed

In 2008, when a recession started, the growth of the government expenditures on goods and services double compared to its growth in 2007. According to the aggregate demand theories of the business cycle

government expenditure was not a cause of the recession

If prices are fixed, when aggregate planned expenditure exceeds real GDP, then

inventories decrease, signaling firms to increase production and increase real GDP

If planned aggregate expenditure is less than real GDP,

inventories will increase above their target level and real GDP will decrease

The factor leading to business cycles according to the real business cycle theory is changes in

productivity caused by changes in technology

When the nominal interest rate rises, the

quantity of money demanded decreases

Long Run Phillips Curve is

vertical at the natural unemployment rate

When disposable income equals $800 billion, planned expenditure equals $600 billion, and when disposable income equals $1,000 billion, planned consumption expenditure equals $640 billion. What is the planned saving when disposable income is $800 billion?

$200 billion

When the price level in France increases while the exchange rate and the price level in the United State remain the same, the result is that

1. French citizens are more likely to buy U.S.-made goods 2. U.S. citizens are less likely to buy French-made goods 3. U.S.-made goods become relatively cheaper compared to French-made goods

Which of the following does NOT shift the short-run aggregate supply curve?

A) technological progess B) Reduction in the price of a raw material C)A CHANGE IN THE PRICE LEVEL D) A change in the money wage rate

Which of the following can start an inflation?

A. a decrease in the aggregate supply C. an increase in aggregate demand

Suppose the equilibrium of expenditure is $18 trillion. If real GDP is $19 trillion, then planned expenditures

are less than real GDP and real GDP will decrease

When real GDP exceeds aggregate planned expenditure

GDP will decrease

An individual holds $10,000 in a checking account and the price level rises significantly. Hence

The individual's real wealth and consumption expenditure decrease

At the start of cost push inflation,

prices and unemployment are rising

When the price of U.S.-produced goods rise and the price of foreign-produced goods do not change, the result is

a decrease in exports

According to the real business cycle (RBC) theory, recessions are the result of

a fall in the growth rate of productivity

The start of a cost-push inflation results in

a falling GDP and rising unemployment

Moving along the short-run Phillips curve indicates

a trade-off between inflation and unemployment so that higher inflation is related to lower unemployment

If aggregate planned expenditure exceeds real GDP

actual inventories decrease below their target

If planned expenditures equal $19 trillion when real GDP is $19.5 trillion, then

actual investment will exceed planned investment

In the macroeconomic short run

actual real GDP may be less than or more than potential GDP

People expect that the El Nino effect will cause drought in Australia in coming years. If most Australian firms expect that their profits will fall during the next five years, Australia's _________ this year

aggregate demand will decrease

Your real wealth is measured as the

amount of goods and services your wealth will buy

Demand-full inflation starts with

an increase in aggregate demand

Which of the following factors could start a demand-pull inflation?

an increase in exports

Which of the following shifts the aggregate demand curve rightward?

an increase in government expenditure

According to the interpersonal substitution effect, a fall in the price level will

cause the interest rate to fall so that investment increases and the quantity of real GDP demanded increases

The AD curve shows the sum of

consumption expenditure, investment, government expenditures on goods and services, and net exports

If the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would

decrease

A decrease in foreign incomes

decreases aggregate demand in the United States.

Disposable income _______ when _______

decreases; taxes increase

all else being equal, autonomous expenditure

does not change with changes in real GDP

When the price level rises, the long-run aggregate supply curve

does not shift

If investment decreases, the AE curve shifts

downward and the AD curve shifts leftward

The AD curve slopes

downward due to the wealth and substitution effects.

An increase in the price level result in a

downward shift in the AE curve and a movement up along the AD curve

The demand for money

increases as real GDP increases

As real disposable income increases, consumption expenditure _________ and saving _________

increases; increases

As the price level falls and other things remain the same, real wealth ________ and ______

increases; the quantity of real GDP demanded decreases

For a given level of anticipated inflation and natural unemployment rate, the short-run Phillips curve shows the relationship between

inflation and the unemployment rate

A shift in the aggregate expenditure curve as a result of an increase in the price level results in a

movement up along the aggregate demand curve

If the price level rises, the quantity of

nominal money people demand increases

Suppose that a shock causes the aggregate demand curve to shift rightward. If the Fed does nothing

output initially will exceed potential GDP, but the economy will return to potential GDP with a higher price level.

The long-run aggregate supply curve is vertical because

potential GDP is independent of the price

Suppose that the economy is at full employment and aggregate demand increases by more than it is anticipated to increase. Other things remaining the same,

real GDP increases above potential GDP

When the recession started in 2008, the government estimated that labor productivity for the year was -2.8 percent. This result is most in line with which theory of the business cycle fluctuations?

real business cycle theory

The aggregate demand curve

shifts rightward when taxes are decreased

A fall in the price level

shifts the aggregate expenditure curve upward and increase the quantity of real GDP demanded

An increase in the expected inflation rate shifts the

short-run Phillips curve upward

Based on the Keynesian theory of the business cycle, if the economy is at its full-employment equilibrium and aggregate demand increases then

the price level and real GDP both increase

As the money wage rate rises

the short-run aggregate supply curve shifts rightward

In the macroeconomic long run

there is full employment and real GDP is equal to potential GDP


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