econ final

to decrease bank reserves, the fed will

engage in open market sales

A Phillips curve shows the short-run relationship between.

the unemployment rate and the inflation rate

Changes in the real interest rate affect all of the following components of aggregate expenditure except.

Government purchases

If potential GDP for the third quarter of 2012 = 20.4 billion, and the deviation from potential GDP for the third quarter of 2012 = -1.6 Billion, then the output gap was ____%

-7.8%

suppose that the production function for the economy is Y=AK^(1/4)L^(3/4). assume that the real GDP is $8,000 billion, capital stock is 32,000 billion and the labor supply is 120 million workers. the value of the marginal product of labor is _____ per worker.

$50,000

Which of the following equations best represents the concept of *constant returns to scale*?

3Y=AF(3K,3L)

refer to figure 11.1 assume the economy is in equilibrium at Y1=0. Other things equal, an unexpected large increase in the price of oil will result in a movement from point ____ to point _____.

B,A

When graphing the *per worker production function*, _____ is on the horizontal axis and ____ is on the vertical

Capital labor ratio, real GDP per worker

positive supply shocks can have a tendency to ____ cost of production and ____ the inflation rate.

Decrease, decrease

refer to figure 12.3 suppose that after a negative supply shock, the economy is at a point X in the IS-MP model and at a point B on the Phillips curve. If the fed has a goal of price stability, the economy would ____ in the IS-MP model and ____ on the Phillips curve.

Move to point Y, move to point C

refer to figure 11.2. assume the economy is in equilibrium at Y1=0 where the Gdp equals the potential GDP. the economy experiences a positive demand shock, and the FED responds by increasing real interest rates to bring real GDP and inflation back to their original levels. Other thing equal, the positive demand shock is best represented by a movement from

Point A to point D

Refer to figure 11.2 assume the economy is in equilibrium at Y1, where the GDP equals potential GDP. the economy experiences a positive demand shock and the FED responds by increasing real interest rates to bring the real GDP and inflation back to their original levels. Other things equal, the FED's response to the positive demand shock is best represented by a movement from

Point C to Point D

Refer to figure 12.2 suppose the economy is initial above potential GDP, and the actual inflation rate is greater than the expected inflation rate. if the fed wants to achieve the foal of price stability, this would be represented by a

Shift from MP1 to MP2

Refer to figure 5.1 all else equal, an increase in the total factor productivity will cause a

Shift from PF1 to PF2

in the aggregate production function, Y represents real GDP, K represents capital stock, L represents the quantity of labor, and A represents an index of efficiency. Which of the following equations represents the aggregate production function?

Y=AF(K,L)

Refer to figure 10.3, a negative demand shock with no change in the real interest rate is best represented by ____ in panel (a) and ____ in panel (b).

a Shift from AE3 to AE2 , a shift from IS2 to IS1

included among the Feds primary goals to promote the well functioning economy are

a low rate of unemployment, a low and stable inflation rate and financial market stability

refer to figure 10.3 a positive demand shock accompanied by a decrease in the real interest rate is best represented by ____ in panel (a) and ____ in pane (b)

a shift from AE1 to AE2, a movement from point A to point C

refer to figure 10.3. a positive demand shock accompanied by a decrease in the real interest rate is best represented by ____ in panel (a) and ____ in panel (b)

a shift from AE1 to AE3 , a movement from point A to point C

equilibrium in the goods market occurs where

aggregate expenditures equal real GDP

an increase in foreign investment in brazils mining industry will increase the capital stock in Brazil. all else equal, as the capital stock increases, the marginal product of capital will

decrease due to diminishing marginal returns. *OR* smaller and smaller increases in real GDP

refer to figure 10.1 if the level of real GDP is initial Y2, firms will _____ production until equilibrium is reached at _____

decrease, Y1

positive demand shocks have a tendency to ____ real GDP relative to potential GDP and ____ the inflation rate.

increase, increase

the marginal product of capital is always ____ and it _____ as the capital stock increases

positive, decreases

the marginal product of labor is always ____ and it _____ as the labor stock increases

positive, decreases

the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs is called the firms

production function

a firm that wishes to maximize profits will continue to purchase capital goods until the

real rental price of capital = MPK

a firm that wishes to maximize profits will continue to hire labor until the

real wage = MPL