macro exam 2 7-8
when interest rates increase the value of the U.S dollar in foreign exchange market
appreciates because foreigners more U.S interest bearing assets
an economy at a short-run equilibrium below potential output will
below full employment
other things the same, as the price level decreases it induces greater spending on
both net export and investment
which of the following investment determinants is NOT negatively related to investment spending
capital productivity
if the economy is a short-run equilibrium that puts upward pressure on wages and prices, the upward pressure occurs for all of the following reasons EXCEPT
consumers are not purchasing sufficient quantities of the good or service at the existing price
if the value of the stock market rises we might expect
consumption to increase
if the MPC is equal to 3/5,then if the income increases by 100
consumption will increase by 60
if at the current price level, an economy is experiencing a shortage, then price adjustment would cause
firms to increase production and people to purchase fewer goods & services
which of the following does NOT describe an economic mechanism that makes total spending on goods and services negatively related to the price level
inflation effect
a foreign increase in tariffs on U.S goods
is a negative aggregate demand shock and will shift the curve to the left
a decrease in govt spending
is a negative aggregate demand shock and will shifts the curve to the left
a decrease in income taxes
is a positive aggregate demand shock and will shift the curve to the right
an increase in capital productivity
is a positive aggregate demand shock and will shift the curve to the right
an increase in the expected price level shifts short-run aggregate supply to the
left and an increase in the actual price level does not shift short-run aggregate supply
other things the same an increase in the price level makes the dollar people hold worth
less, so they can buy less
sticky nominal wages can result in
lower profits for firms when the price level is lower than expected
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 aggregate quantity of goods and services supplied
the aggregate demand curve shows the__relationship between total spending and the price level
negative
a higher price level tends to increase interest rates because
people shifts funds out of short-term interest bearing assets and into cash or checking accounts
as the price level rises
people will want to buy fewer bonds, so the interest rate rises
long-run aggregate supply is the level of output given by
potential output
which of the following is not a determinant of the long-run level of real GDP
price level
in the short-run a change in overall prices will move economy away from potential output because
prices and wages are sticky
of the price level rises above what was expected and nominal wages are fixed then
production becomes more profitable so firms will hire more workers
suppose a war destroys a significant portion of an economy's physical capital stock We might expect
the long-rub aggregate supply curve to shift left
suppose the pace of technological change and innovations increases we might expect
the long-run aggregate supply to shift right
according to the wealth effect, when the price level rises
the purchasing power cash and checking accounts falls
the aggregate supply curve is upward sloping in
the short run, but not the long run
suppose that price expectations fall. we might expect
the short-run aggregate supply curve to shift down/right
suppose that energy cost increase we might expect
the short-run aggregate supply curve to shift up/left
if the price level of an economy were above the equilibrium price, then
there would be surpluses and prices would fall
the logic of the multiplier effect applies
to any change in spending on any component of GDP
if income in our major trading partners rises we would expect
u.s export rise
the long-run aggregate supply curve is
vertical
in the value of the U.S dollar appreciates against the currencies of our major trading partners, we would expect
-U.S exports to fall -U.S imports to rise U..S net exports to decline
which of the following is included in the aggregate demand for goods and services
-consumptions demand -investment demand -net exports
the sticky-price theory implies that
-the short-run aggregate-supply curve is upward-slopping -unexpected fall in the price level includes firms to reduce the quantity of goods and services they produce -menu cost influence the speed of adjustment of price
if the multiplier is 6, then the MPC is
0.83
when the mpc is equal to 3/5, the value of the spending multiplier is
2.5
suppose that govt spending increase by 100 billion and that the MPC is equal to 3/5. How much will total spending change as a result of the govt purchases and all of the subsequent rounds of the multiplier process
250 billion
assume the MPC is 0.72 the multiplier is
3.57
suppose the govt purchases increase by 100 billion and that the mpc is equal to 3/5. in the 3rd round of the spending multiplier process, consumption increase by
36 billion
the following expression represents total spending on all united states goods and services
C+I+G+EX-IM
all of the following are examples of investment spending EXECPT
a household purchase 1000 shares of google stock
which of the following would help explain why the aggregate demand curve slopes downward
a lower price level reduces the interest rate, which encourages greater spending on investment goods
from 2006 to 2008 there was a dramatic fall in the price of houses. if this fall made people feel less wealthy, then it would have shifted
aggregate demand left
suppose business in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shift
aggregate demand left
other things the same, an increase in the amount of capital firms wish to purchase would initially shifts
aggregate demand right
other things the same, when the govt spends more, the initial effect is that
aggregate demand shifts right
suppose a fall in stock prices make people feel poorer. The decrease in wealth would induce people to
decrease consumption, shown by shifting the aggregate-demand curve to the right
which of the following shifts short-run aggregate supply right
decrease the price of oil
if the economy beings at a short-run equilibrium below potential output, then there would be
downward press on both wages and prices
the marginal propensity to consume(MPC) is defined as the fraction of
extra income that a household consumes rather than saves
which of the following consumptions determinants is NOT an aggregate demand shock and therefore doesn't shift the aggregate demand curve
income
which of the following consumptions determinants is NOT positively related to consumption
income taxes
if the economy is at a short-run equilibrium above potential output, then wages and prices expectations would
increase
the short-run aggregate supply curve is upward sloping because wages and some are sticky, so an increase in the overall price level will tend to
increase profit per unit and some firms will increase production
When taxes decrease, consumption
increases as shown by a shift of the aggregate demand curve to the right.
other things the same, when the price level rises, interest rates
rise, so firms decrease investment
if the MPC is equal to 3/5, then if income increase by 100
saving will increase by 40
a change in the expected price level is likely to cause which of the following
shift int short run aggregate supply curve
if the economy beings at a short-run equilibrium above potential output, then we would expect wage adjustment and price expectations change to
shift the short run aggregate supply curve up/left
which of the following is not a component of spending
taxes
the long-run aggregate supply curve shifts right if
the capital stock increase immigration from abroad increases technology advances
all of the following are examples of government purchases of goods & services EXCEPT
the govt makes social security to your grandmother