ECON 1022 FINAL
CHP 8 In a small closed economy investment is $50 billion and private saving is $45 billion. What are public saving and national saving?
$5 billion and $50 billion
CHP 15 Aggregate demand shifts right when the Federal Reserve:
Increases the money supply.
CHP 15 A decrease in the price level:
Increases the quantity of goods and services demanded.
CHP 15 Which of the following shifts short-run, but not long-run aggregate supply right?
a decrease in the expected price level
CHP 8 Other things the same, as the maturity of a bond becomes longer, the bond will pay
a higher interest rate because it has more risk
CHP 15 When we say that economic fluctuations are "irregular and unpredictable," we mean that
recessions do not occur at regular intervals.
CHP 12 When the money market is drawn with the value of money on the vertical axis, as the price level decreases, the value of money
increases, so the quantity of money demanded decreases
CHP 12 Wealth is redistributed from creditors to debtors when inflation was expected to be
low and it turns out to be high.
CHP 8 If there is a shortage of loanable funds, then
the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium.
CHP 15 The aggregate-demand curve shows the:
Quantity of domestically produced goods and services that households, firms, the government, and customers abroad want to buy at each price level.
CHP 15 The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if:
The price level is higher than expected making production more profitable.
CHP 8 Which of the following could explain an increase in the equilibrium interest rate and a decrease in the equilibrium quantity of loanable funds?
The supply of loanable funds shifted left.
CHP 15 Which of the following is correct concerning recessions?
They tend to be associated with rising unemployment rates.
CHP 12 Open-market purchases by the Fed make the money supply
increase, which makes the value of money decrease.
CHP 15 Which of the following shifts aggregate demand to the right?
increases in the profitability of capital due perhaps to technological progress.
CHP 12 If when the money supply changes, real output and velocity do not change, then a 2 percent increase in the money supply
increases the price level by 2 percent
CHP 11 The Fed can reduce the federal funds rate by
increasing the money supply. To increase the money supply it could buy bonds.
CHP 11 Money is the most liquid asset available because
it is a medium of exchange
CHP 15 The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have:
lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied
CHP 15 The sticky-price theory of the short-run aggregate supply curve says that if the price level rises by 5% and people were expecting it to rise by 2%, then firms have:
lower than desired prices, which leads to an increase in the aggregate quantity of goods and services supplied.
CHP 8 The slope of the demand for loanable funds curve represents the
negative relation between the real interest rate and investment.
CHP 8 For an imaginary closed economy, T = $5,000; S = $11,000; C = $48,000; and the government is running a budget surplus of $1,000. Then
private saving = $10,000 and GDP = $63,000
CHP 15 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
CHP 15 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
CHP 12 When the money market is drawn with the value of money on the vertical axis, a decrease in the money supply leads people to
spend less so the value of a dollar rises.
CHP 8 Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer's interest income was tax free. This would shift the
supply of loanable funds to the right, causing interest rates to fall.
CHP 15 The long-run aggregate supply curve shifts right if
technology improves
CHP 8 In a closed economy, if Y is 10,000, T is 1,000, G is 3,000, and C is 5,000, then
the government has a budget deficit and investment is 2,000
CHP 12 According to the classical dichotomy, when the money supply doubles, which of the following also doubles?
the price level nominal wages nominal GDP
CHP 12 According to the classical dichotomy, when the money supply doubles which of the following doubles?
the price level and nominal GDP
CHP 15 When the Fed buys bonds
the supply of money increases and so aggregate demand shifts right.
CHP 15 The long-run aggregate supply curve shifts left if:
there is a natural disaster.
CHP 11 Economists use the word "money" to refer to
those assets regularly used to buy goods and services
CHP 12 According to the principle of monetary neutrality, a decrease in the money supply will not change
unemployment
CHP 15 Other things the same, an increase in the price level induces less spending on
investment and net exports.
CHP 12 Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M =
$2,250.
CHP 8 GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. For this economy, consumption amounts to
$38,000.
CHP 11 A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to
$45,600.
CHP 11 If the reserve ratio is 12.5 percent, then $1,000 of additional reserves can create up to
$8,000 of new money.
CHP 11 Which of the following is correct? a. A bank's deposits at the Federal Reserve counts as part of the bank's reserves. The Federal Reserve pays interest on these deposits. Correct Correct b. A bank's deposits at the Federal Reserve counts as part of the bank's reserves. The Federal Reserve does not pay interest on these deposits. c. A bank's deposits at the Federal Reserve does not count as part of the bank's reserves. The Federal Reserve pays interest on these deposits. d. A bank's deposits at the Federal Reserve does not count as part of the bank's reserves. The Federal Reserve does not pay interest on these deposits.
A bank's deposits at the Federal Reserve counts as part of the bank's reserves. The Federal Reserve pays interest on these deposits.
CHP 8 Suppose that Congress were to repeal an investment tax credit. What would happen in the market for loanable funds?
The demand and supply of loanable funds would shift left.
CHP 8 Interest rates fall and investment falls. Which of the following could explain these changes?
The government repeals an investment tax credit.
CHP 8 Other things the same, which bond would you expect to pay the lowest interest rate?
a bond issued by a state with a very good credit rating
CHP 12 The classical dichotomy argues that changes in the money supply
affect nominal variables, but not real variables.
CHP 15 From 2001 to 2005 there was a dramatic rise in the price of houses. If this rise made people feel wealthier, then it would have shifted:
aggregate demand right
CHP 15 If the dollar depreciates because of speculation or government policy, U.S.
aggregate demand shifts right. U.S. aggregate demand shifts left if other countries experience a decrease in real GDP.
CHP 11 The federal funds rate is the interest rate that
banks charge one another for loans.
CHP 8 A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a
bond.
CHP 11 When the Fed decreases the discount rate, banks will
borrow more from the Fed and lend more to the public. The money supply increases
CHP 8 ABC Co. sells newly issued bonds. JLG Co. sells newly issued stocks. Which company is raising funds in financial markets?
both ABC and JLG
CHP 12 If money is neutral and velocity is stable, an increase in the money supply creates a proportional increase in
both the price level and nominal output.
CHP 11 To increase the money supply, the Fed can
buy government bonds or decrease the discount rate
CHP 11 When conducting an open-market purchase, the Fed
buys government bonds, and in so doing increases the money supply.
CHP 15 Historical evidence for the U.S. economy indicates that
changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle.
CHP 15 At a given price level, an increase in which of the following shifts aggregate demand to the right?
consumption investment government expenditures
CHP 15 During recessions which type of spending falls?
consumption and investment
CHP 15 Changes in the price level affect which components of aggregate demand?
consumption, investment, and net export
CHP 15 Other things the same, continued increases in the money supply lead to:
continued increases in the price level but not continued increases in real GDP.
CHP 15 Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to
decrease consumption, shown by shifting the aggregate-demand curve to the left.
CHP 15 According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought that 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.
CHP 15 When taxes increase, consumption:
decreases as shown by a shift of the aggregate demand curve to the left
CHP 15 The misperceptions theory of short-run aggregate supply curve says that quantity of output will decrease if the price level:
decreases by more than expected so that firms believe the relative price of their output has decreased
