Macro Economics Final 2040
The term hyperinflation refers to
a period of very high inflation
Which of the following would both shift aggregate demand right?
government expenditures increase and the money supply increases
The long-run aggregate supply curve shifts right if
immigration from abroad increases, the capital stock increases, & technology advances
Most economists believe that money neutrality holds
in the long run but not the short run
Most economists believe that classical macroeconomic theory is a good description of the economy
in the long run, but not in the short run
According to the misperceptions theory of aggregate supply, if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent, then the firm would believe that the relative price of what it produced had
increased, so it would increase production
When the price level rises, the number of dollars needed to buy a representative basket of goods
increases, so the value of money falls
The interest-rate effect
is the most important reason, in the case of the United States, for the downward slope of the aggregate-demand curve
Which of the following rises during recessions?
layoffs but not consumer spending
Other things the same, an increase in the price level makes consumers feel
less wealthy, so the quantity of goods and services demanded falls
Other things the same, an increase in the price level makes the dollars people hold worth
less, so they can buy less
The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected, some firms will have
lower than desired prices which leads to an increase in the aggregate quantity of goods and services supplied
The effect of an increase in the price level on the aggregate demand curve is represented by a
movement to the left along a given aggregate-demand curve
If the economy starts at A and moves to D in the short run, the economy
moves to C in the long run
If the economy is at A and there is a fall in aggregate demand, in the short run the economy
moves to D
If a country raises its budget deficit, then its
net capital outflow and net exports fall
In the open-economy macroeconomic model, if the U.S. interest rate rises then its
net capital outflow falls, so the supply of dollars in the market for foreign exchange shifts left
In the open-economy macroeconomic model, if investment demand increases, then
net exports fall and the real exchange rate rises
If foreigners want to buy more U.S. bonds, then in the market for foreign-currency exchange the exchange rate
net exports rise and the real exchange rate falls
According to the assumptions of the quantity theory of money, if the money supply increases by 5 percent, then
nominal GDP would rise by 5 percent, real GDP would be unchanged
If the Fed purchases bonds in the open market, then the money supply curve shifts right. A change in the price level does
not shift the money supply curve
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
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
When real GDP falls, the rate of unemployment
rises
As the price level rises, the exchange rate
rises, so exports fall and imports rise
The aggregate demand curve shifts right if either
speculators lose confidence in U.S. assets or foreign countries enter into recession
In order to understand how the economy works in the short run we need to
study a model in which real and nominal variables interact
An increase in the U.S. government budget deficit shifts the
supply of loanable funds left and decreases investment spending
Net exports are affected by
tastes of consumers, prices of goods at home and abroad, the incomes of consumers at home and abroad, and the government policies toward international trade
The imposition of an import quota shifts
the demand for currency right, so the exchange rate rises
What effects help to explain the slope of the aggregate-demand curve?
the exchange rate effect, the wealth effect, the interest-rate effect
Suppose that monetary neutrality and the Fisher effect both hold. An increase in the money supply growth rate increases
the inflation rate and nominal interest rates
Which of the following is correct concerning the open-economy macroeconomic model?
the net-capital-outflow curve slopes downward
When the money market is drawn with the value of money on the vertical axis, if the money supply rises
the price level rises and the value of money falls
Aggregate demand includes
the quantity of goods and services households, firms, the government, and customers abroad want to buy
When the interest rate is above the equilibrium level
the quantity of money that people want to hold is less than the quantity of money that the Fed has supplied, people respond by buying interest-bearing bonds or by depositing money in interest-bearing bank accounts, bond issuers and banks respond by lowering the interest rates they offer
Which of the following effects provide incentives for consumers to spend less when the price level rises?
the wealth effect and the interest-rate effect
If the economy starts at C, an increase in the money supply moves the economy
to A in the long run
An increase in the money supply would move the economy from C to
to B in the short run and A in the long run
Another name given to Net Exports
trade balance
Which of the following typically rises during a recession?
unemployment
The long-run aggregate supply curve shifts right if technology
improves
A paperback book in the U.S. costs $6. In Chile it costs 4 pesos. If the nominal exchange rate is 1/2 peso per dollar, what is the real exchange rate?
3/4
Based on the quantity equation, if Y = 3,000, P = 4, and V = 3, then M =
4,000
The economy would be moving to long-run equilibrium if it started at
D and moved to C
Other things the same, when the government spends more, the initial effect is that
aggregate demand shifts right
Which of the following shifts both the short-turn and long-run aggregate supply right?
an increase in the capital stock
According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply leads to
an increase in the price level but does not change real GDP
When Mexico suffered from capital flight in 1994, Mexico's net capital outflow
and net exports increased
Which of the following decreases in response to the interest-rate effect from an increase in the price level?
both investment and consumption
Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at any given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time. 20.Refer to Financial Crisis. What happens to the price level and real GDP in the short run?
both the price level and real GDP fall
People hold money primarily because it
can directly be used to buy goods and services
Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to
decrease consumption, which shifts aggregate demand to the left
According to the mis-perceptions 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
When net capital outflow is positive it means
domestic residents are spending more on foreign assets than foreigners are spending on domestic assets
If Y and V are constant and M doubles, the quantity equation implies that the price level
doubles
If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity?
e = P*/P