macro 7

List two ways that the Fed can "sterilize" reserves in the banking system.

1.) selling some of its enormous asset holdings to the bank 2.) ask the treasury to pay the debt

By what percent per year did real GDP grow in the four years after the end of the 2007-2009 recession?

2.5% per year

an increase in aggregate supply driven by productivity increases can offset the inflationary pressures from an increase in aggregate demand

T

at the equilibrium price level, the real domestic output purchased is equal to the real domestic output produced

T

changes in aggregate demand involve a change in initial spending from one of the determinants and a multiplier effect on spending

T

in the short run, an increase in aggregate demand will increase both the price level and the real domestic output

T

per-unit production cost is determined by dividing total input costs by units of output

T

productivity is a measure of real output per unit of input

T

the aggregate supply curve is vertical in the long run at full-employment level of output

T

the immediate short-run aggregate supply curve is horizontal and the short-run aggregate supply curve is up-sloping

T

when the determinates of short-run aggregate supply change, they alter the per-unit production cost at each price level and thereby aggregate supply

T

"It is not just currency that is subject to the inflation tax." What else "is equally at risk of having this tax applied to it"?

every debt of the federal government fixed in nominal terms

Because the inflation rate in 2012 was about 2.5%, how much extra did the federal government collect in tax revenues?

300 billion

Consider all of the debt incurred by the U.S. government in its history. What percent of this debt has been incurred since George W. Bush took office in 2001?

70%

if the prices of imported resources increase, then this event would most likely a.) decrease aggregate supply b.) increase aggregate supply c.) increase aggregate demand d.) decrease aggregate demand

A

when the price level rises a.) the demand for money and interest rates rises b.) spending that is sensitive to interest-rate changes increases c.) holders of financial assets with fixed money values increase their spending d.) holders of financial assets with fixed money values have more purchasing power

A

a significant decrease in aggregate demand can result in recession and cyclical unemployment

T

if congress passed much stricter laws to control air pollution from businesses, this action would tend to a.) increase per-unit production costs and shift the aggregate supply curve to the right b.) increase per-unit production costs and shift the aggregate supply curve to the left c.) increase per-unit production costs and shift the aggregate demand curve to the left d.) decrease per-unit production costs and shift the aggregate supply curve to the left

B

fear of price wars, menu costs, and wage contracts are associated with a.) a price level that is inflexible upward b.) a price level that is inflexible downward c.) a domestic output that cannot be increased d.) a domestic output that cannot be decreased

B

the aggregate demand curve is the relationship between the a.) price level and what producers will supply b.) price level and the real domestic output purchased c.) price level and the real domestic output produced d.) real domestic output purchased and the real domestic output produced

B

the aggregate supply curve is the relationship between the a.) price level and the real domestic output purchased b.) price level and the real domestic output produced c.) price level that producers are willing to accept and the price level purchasers are willing to spend d.) real domestic output purchased and the real domestic output produced

B

the short-run aggregate supply curve assumes that a.) nominal wages respond to changes in the price level b.) nominal wages do not respond to changes in the price level c.) the economy is operating at full-employment output d.) the economy is operating at less than full-employment output

B

a decrease in aggregate supply decreases the equilibrium real domestic output and increases the price level, resulting in cost-push inflation

T

an increase in aggregate supply will a.) increase the price level and real domestic output b.) decrease the price level and and real domestic output c.) decrease the price level and increase the real domestic output d.) decrease the price level and have no effect on real domestic output

C

an increase in business taxes will tend to a.) decrease aggregate demand but not change aggregate supply b.) decrease aggregate supply but not change aggregate demand c.) decrease aggregate demand and decrease aggregate supply d.) decrease aggregate supply and increase aggregate demand

C

if at a particular price level real domestic output from producers is less than real domestic output desired by buyers, there will be a a.) surplus and the price level will rise b.) surplus ans the price level will fall c.) shortage and the price level will rise d.) shortage and the price level will fall

C

if there were cost-push inflation a.) both the real domestic output and the price level would decrease b.) the real domestic output would increase and rises in the price level would become smaller c.) the real domestic output would decrease and the price level would rise d.) both the real domestic output and rises in the price level would become greater

C

in the aggregate demand-aggregate supply model, an increase in the price level will a.) increase the real value of wealth b.) increase the strength of the multiplier c.) decrease the strength of the multiplier d.) have no effect on the strength of the multiplier

C

in the long-run the aggregate supply curve is a.) up-sloping b.) downsloping c.) vertical d.) horizontal

C

the aggregate demand curve will be increased by a.) a decrease in the price level b.) an increase in the price level c.) a depreciation in the value of the U.S. Dollar d.) an increase in the excess capacity of factories

C

a fall in the price level increases the real value of financial assets with fixed money values and, as a result, increases spending by the holders of these assets

T

a rise in excess capacity, or unused existing capital goods, will reduce the demand for new capital and therefore reduce aggregate demand

T

a sharp decline in the real value of stock prices, which is independent of a change in the price level, would best be an example of a.) the interest-rate effect b.) the foreign purchases effect c.) a change in household borrowing d.) a change in the real value of consumer wealth

D

aggregate demand decreases and real output falls, but the price level remains the same. which factor most likely contributes to downward price inflexibility? a.) an increase in aggregate supply b.) the foreign purchases effect c.) lower interest rates d.) efficiency wages

D

an increase in aggregate demand with a short-run aggregate supply curve will increase a.) the price level and have no effect on real domestic output b.) the real domestic output and have no effect on the price level c.) the price level and decrease the real domestic output d.) both real output and the price level

D

one explanation for the downward slope of the aggregate demand curve is that a change in the price level results in a.) a multiplier effect b.) an income effect c.) a substitution effect d.) a foreign purchases effect

D

a change in aggregate demand is caused by a change in the price level, other things equal

F

a large decline in household borrowing will increase consumption spending and aggregate demand

F

a movement along a fixed aggregate demand curve is the same as a shift in aggregate demand

F

a rise in the price level of an economy (relative to foreign price levels) tends to increase that economy's exports and to reduce its imports of goods and services

F

aggregate demand reflects a positive relationship between the price level and the amount of the real output demanded

F

an increase in aggregate demand is associated with cost-push inflation

F

appreciation of the dollar relative to foreign currencies will tend to increase net exports and aggregate demand

F

fear of price wars tends to make the price level more flexible rather than less flexible

F

given a fixed supply of money, a rise in the price level increases the demand for money in the economy and drives interest rates downward

F

the explanation as to why the aggregate demand curve slopes downward is the same as the explanation as to why the demand curve for a single product slopes downward

F

the greater the increase in the price level that results from an increase in aggregate demand, the greater will be the increase in the equilibrium real GDP

F

the real-balances effect is one of the determinants of aggregate demand

F

State the "two well-deserved reasons" why "the latest recession will likely stick with the American people for a long time."

If the federal reserve had not stepped in to end the financial panic of 2008 we would have seen consequences that were similar to previous panics such as unemployment at 25% and output falling 30% the housing market was utterly devastated

Define the term "stagflation."

a period in time where there is lackluster performance in the economy, accompanied by rising prices in goods and services

What is the "general rule that applies to recessions and the recoveries that follow them"?

the deeper the recession, the stronger the recovery

"Because it also appears unlikely that the federal government will cut spending enough to match receipts from conventional taxes, this leaves only two possibilities." What are these two possibilities?

we could either default or have inflation