macro

Assume policy makers increased spending and cut taxes to stimulate the economy. If the government's budget was initially in balance, which of the following will occur? A There will be a budget deficit, real interest rates will increase, and investment spending will be crowded out. B There will be a budget deficit, real interest rates will decrease, and investment spending will increase. C There will be a budget surplus, real interest rates will increase, and investment spending will be crowded out. D There will be a budget surplus, real interest rates will decrease, and investment spending will increase. E The budget will remain in balance, real interest rates will not change, and investment spending will not change.

A deficit = more borrowing so incr demand for LF so incr IR and CROWDING OUT

According to the expenditure multiplier, if the marginal propensity to consume is greater than zero, a one-dollar change in autonomous expenditures will result in which of the following?

A one-dollar change in autonomous expenditure leads to a greater-than-one-dollar increase in aggregate demand for goods and services.

An increase in the expected inflation rate will cause which of the following? A A rightward shift in the aggregate demand curve B A rightward shift in the short-run Phillips curve C A rightward shift in the short-run aggregate supply curve D A leftward shift in the long-run Phillips curve E A leftward shift in the long-run aggregate supply curve

B

Assume an economy is in long-run equilibrium and the central bank engages in an expansionary monetary policy for a prolonged time period. If the velocity of money is constant, which of the following is true according to the quantity theory of money? A The government's budget deficit will increase. B Price level will increase at the same rate as the money supply. C Real output will exceed full employment in the long run. D The actual unemployment rate will exceed the natural rate of unemployment. E The production possibilities curve will shift inward.

B

Which of the following is true for both stocks and bonds? A They are interest-bearing assets. B They are easily converted to cash. C They are risk-free assets. D They are equity. E They are the most liquid form of financial assets.

B

Which of the following is true about the loanable funds market? A The demand for loanable funds shows a positive relationship between real interest rates and the quantity demanded of loanable funds. B The supply of loanable funds shows an inverse relationship between real interest rates and the quantity supplied of loanable funds. C Investment is financed by national savings in a closed economy. D Investment is financed by government borrowing in an open economy. E Public savings is the sum of national savings and private savings.

C

crowding out

Crowding out refers to the adverse effect of increased government borrowing in the loanable funds market, which increases real interest rates and crowds out private investment.

Mia transferred $1,000 from her checking account to her savings account. How will M1 and M2 measures of the money supply change? A M1 will increase and M2M2 will decrease. B M1 will increase and M2M2 will increase. C M1 will decrease and M2M2 will increase. D M1 will decrease and M2M2 will not change. E M1 will not change and M2M2 will increase

D

Which of the following is adjusted by the actual inflation rate? A Nominal wages B Automatic stabilizers C Unemployment rate D Price of previously issued bonds E Real interest rates

E

An economy is in short-run equilibrium as illustrated by the graph above. Which of the following combinations of policy actions would definitely move the economy toward long-run equilibrium? A A decrease in government spending and an increase in income taxes B An increase in government spending and a decrease in the money supply C An increase in the money supply and an increase in the discount rate D A decrease in the money supply and an increase in income taxes E A decrease in income taxes and an increase in the money supply

E (incr MS = incr price level bc inflation) may 18 1, 3, 5 may 19 2, 4, 6 may 20 7, makeups

increase price level = (?) real output

INCREASE

M2 Money

M1 plus savings accounts, money market accounts, and other near monies

Suppose that the economy is in a recession. In the absence of government policy action to restore the economy to full employment, how will the economy adjust in the long run?

The SRAS2 curve shifts to the right as nominal wages decrease and full employment is restored.

Assume the economy of Country A is in long-run equilibrium. Which of the following will happen in the short run in Country A if one of its major trading partners, Country B, experiences a recession?

There is a decrease in imports from Country B, AD decreases so price level decreases

Two nations sign a trade agreement expecting to enjoy mutual gains from the trade of a certain good. How will this event likely affect the supply of the good in the two nations?

This event will likely cause an increase in the supply of the good in both nations.

If nominal wages are fixed by labor contracts, then which of the following explains why the aggregate supply curve is upward sloping?

an increase in the price level will increase profits, to which firms respond by hiring more workers and increasing production.

M1 money is

cash and checkable deposits

monetary base

cash and money in commercial banks

Country X is a major buyer of Country Y's grains. Assume Country X's government announced an increase in taxes on its imports of Country Y's grains effective next month. How will this news likely affect consumers' demand for grains in Country X?

it will increase now because the tax on imported grains will increase the future price of grains.

Which of the following contributes to the economic problem of scarcity?

they have alternative uses