Macro Economics Final

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What is not a shift in the short-run aggregate supply curve?

A change in the price level

The price level falls if the aggregate demand does what with the aggregate supply

Aggregate demand increases more slowly than aggregate supply

Demand Pull is...

An inflation that starts because aggregate demand increases. It can begin with any factors that increases aggregate demand!! An increase in government expenditure.

Cost push inflation is...

An inflation that starts with an increase in costs. Gas and electricity rises***

Aggregate expenditure equals

C+I+G+X-M

During a cost push inflation spiral, the money wage rate _______ and the quantity of money ________

Increases; increases

Suppose that originally the marginal propensity to consume was 0.75. If the marginal propensity to consume rises, what will happen to the value of the multiplier?

It will become larger

Who is the current chairman of the Federal Reserve?

Jerome Powell

Once supply-side effects are taken into account, tax cuts for labor income can change what?

The supply of labor and potential GDP

Stagflation is the result of....

a decrease in short run aggregate supply

If the economy falls into a recession, which of the following responses constitutes the use of automatic fiscal policy?

an existing system to make government payments to the growing ranks of unemployed workers

In the United States today, money consists of

currency and deposits at banks

Fiscal Policy...

decisions related to government expenditure on goods and services, the value of transfer payments and tax rev

Liquidity is the

ease with which an asset can be converted into a means of payment with little or no loss of value

If aggregate demand grows only slightly faster than potential GDP, then the economy will

experience economic growth with low inflation

As real disposable income increases, consumption expenditure ___________ and saving _________.

increases; increases

If the expected future inflation rate decreases then what happens to the aggregate demand?

it decreases

According to the Gaffer curve, raising the tax rate would do what the the amount of tax revenue?

it might increase, decrease or not change the amount

The multiplier effect exists because a change in autonomous expenditure...

leads to changes in income, which generates further spending

Aside from being a means of payment, the other functions of money are...

medium of exchange, unit of account, and store of value

One reason that the aggregate demand curve has a negative slope is that when the domestic price level rises...

people substitute toward more imported goods and services `

Deflation

persistently falling price level

Inflation

persistently rising price level

Discretionary fiscal policy...

policy action that is initiated by an act of congress

The Fed's goals include...

price level stability

At the start of a cost-push inflation...

prices and unemployment are rising

An inflationary gap occurs when...

real GDP exceeds potential GDP

As a unit of account, money is used to

state prices of all goods and service

Control of the nation's quantity of money is handled by

the Federal Reserve System

As a result of a tax increase...

the aggregate demand curve shifts leftward

Bank reserves include...

the cash in the bank's value and the banks deposits at the Federal Reserve

A reason the government expenditure multiplier is larger than 1 because...

the government expenditure changes generate changes in the consumption expenditure

Fed. Fund Rate is....

the interest rate at which banks borrow and lend overnight from other banks

A one-time rise in the price level can turn into a demand-pull inflation when

the quantity of money persistently increased

When workers and employers correctly anticipate an increase in inflation caused by an increase in aggregate demand...

unemployment will be at the natural rate

Which of the following would cause an inflationary gap?

a large increase in foreign incomes and a small increase in the price of oil.

If aggregate planned expenditure is less than real GDP then...

firms' inventories will increase and real GDP will decrease as production falls

Autonomous fiscal policy is...

fiscal policy action action triggered by the state of the economy with no government action

If a person has $10,000 in a checking in a checking account and the price level rises significantly then

the individuals real wealth and consumption expenditure decrease


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