Final Exam - Macro

Which of the following individuals referred to the expectations of investors as "animal spirits"?

Keynes

The multiplier-accelerator model was first developed by

Paul Samuelson

An increase in U.S. interest rates, holding Canadian interest rates unchanged, will cause the U.S. dollar to appreciate against the Canadian dollar.

True

Reductions in the real interest rate cause increases in investment

True

When real interest rates are high, people want to take advantage of the high return on bonds, so they choose to hold less money.

True

The accelerator theory describes the impact of

a change in future GDP on investment

The multiplier-accelerator model shows that

a decrease in GDP causes a decrease in investment, which causes further drops in GDP

A situation where expansionary monetary policies are ineffective because nominal interest rates are already low is called

a liquidity trap

Which of the following would cause an increase in GDP?

an open market purchase

An increase in the U.S. interest rate relative to the British interest rate will cause a(an)

appreciation of the dollar and a depreciation of the British pound

The Fed's efforts to stimulate and make the economy grow require that the Fed

buy bonds to lower the interest rates

Rising wages and input prices

cause the aggregate supply curve to shift to the left

When inflation increases, the

demand for money increases.

If wages are sticky downward, an increase in labor

demand increases the wage rate

Friedman and Keynes

disagreed on the speed at which wages change.

The price of one country's currency in terms of another country's currency is called the

exchange rate

In order to shorten a recession when the economy is producing below full employment, the monetary authority could

expand the money supply

A variable is considered procyclical if it moves

in the same direction as real GDP.

When the economy is in a liquidity trap, one way to get the economy out of a recession is to

increase government expenditures

Generally speaking, investment ________ when real GDP ________

increases; increases

Of the 4 components of GDP, which one is most volatile?

investment expenditures

Actions by business today that have costs today and provide benefits in the future are

investments

The aggregate supply curve shows the relationship between prices and the

level of real GDP produced.

The real interest rate is

the nominal interest rate adjusted for the effects of inflation

Which of the following curves is illustrated as an upward-sloping line?

the short-run aggregate supply curve