Macro Final

b. only the short-run aggregate supply curve right

A decrease in the expected price level shifts a. only the long-run aggregate supply curve right. b. only the short-run aggregate supply curve right. c. both the short-run and the long-run aggregate supply curve right. d. Neither the short-run nor the long-run aggregate supply curve right

c. the investment accelerator

The idea that expansionary fiscal policy has a positive affect on investment is known as a. monetary policy. b. crowding out. c. the investment accelerator. d. the multiplier.

c. decrease taxes or increase the money supply

What actions could be taken to stabilize output in response to a large decrease in U.S. net exports? a. increase taxes or increase the money supply b. increase taxes or decrease the money supply c. decrease taxes or increase the money supply d. decrease taxes or decrease the money supply

a. net exports rise, which increases the aggregate quantity of goods and services demanded

When the dollar depreciates, U.S. a. net exports rise, which increases the aggregate quantity of goods and services demanded. b. net exports rise, which decreases the aggregate quantity of goods and services demanded. c. net exports fall, which increases the aggregate quantity of goods and services demanded. d. net exports fall, which decreases the aggregate quantity of goods and services demanded.

d. less foreign currency, and so buys fewer foreign goods

When the dollar depreciates, each dollar buys a. more foreign currency, and so buys more foreign goods. b. more foreign currency, and so buys fewer foreign goods. c. less foreign currency, and so buys more foreign goods. d. less foreign currency, and so buys fewer foreign goods.

b. households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise

When the price level falls a. households want to lend more, so the interest rate rises making the quantity of goods and services demanded rise. b. households want to lend more, so the interest rate falls, making the quantity of goods and services demanded rise. c. households want to lend more, so the interest rate rises, making the quantity of goods and services demanded fall. d. None of the above are correct

c. recessions do not occur at regular intervals

When we say that economic fluctuations are "irregular and unpredictable," we mean that a. the relationship between output and unemployment is erratic and difficult to characterize. b. when one macroeconomic variable that measures income or spending is falling, other macroeconomic variables that measure income or spending are likely to be rising. c. recessions do not occur at regular intervals. d. All of the above are correct

b. aggregate demand to the left

A decrease in government spending initially and primarily shifts a. aggregate demand to the right. b. aggregate demand to the left. c. aggregate supply to the right. d. neither aggregate demand nor aggregate supply

a. both the short-run and the long-run Phillips curves to the right

A policy that raised the natural rate of unemployment would shift a. both the short-run and the long-run Phillips curves to the right. b. the short-run Phillips curve right but leave the long-run Phillips curve unchanged. c. the long-run Phillips curve right but leave the short-run Phillips curve unchanged. d. neither the long-run Phillips curve nor the short-run Phillips curve right.

d. decreased, so it would decrease production

According to the misperceptions 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 a. increased, so it would increase production. b. increased, so it would decrease production. c. decreased, so it would increase production. d. decreased, so it would decrease production.

c. is negatively related to the interest rate, while the money supply is independent of the interest rate.

According to the theory of liquidity preference, money demand a. and the money supply are positively related to the interest rate. b. and the money supply are negatively related to the interest rate. c. is negatively related to the interest rate, while the money supply is independent of the interest rate. d. is independent of the interest rate, while money supply is negatively related to the interest rate.

b. increases the money supply

Aggregate demand shifts right when the Federal Reserve a. raises personal income taxes. b. increases the money supply. c. institutes an investment tax credit. d. All of the above are correct.

d. consumption, investment, and net exports

Changes in the price level affect which components of aggregate demand? a. only consumption and investment b. only consumption and net exports c. only investment d. consumption, investment, and net exports

b. greater than the natural rate. In the long run and the short-run Phillips curve will shift left

If inflation is less than expected, then the unemployment rate is a. greater than the natural rate. In the long run the short-run Phillips curve will shift right. b. greater than the natural rate. In the long run the short-run Phillips curve will shift left. c. less than the natural rate. In the long run the short-run Phillips curve will shift right. d. less than the natural rate. In the long run the short-run Phillips curve will shift left.

b. workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve left.

If output is above its natural rate, then according to sticky-wage theory a. workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve right. b. workers and firms will strike bargains for higher wages. This increase in wages shifts the short-run aggregate supply curve left. c. workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve right. d. workers and firms will strike bargains for lower wages. This decrease in wages shifts the short-run aggregate supply curve left.

d. falls and the inflation rate rises

If policymakers accommodate an adverse supply shock, then in the short run the unemployment rate a. and the inflation rate rise. b. and the inflation rate fall. c. rises and the inflation rate falls. d. falls and the inflation rate rises.

c. $600 billion

If the MPC is 0.8 and there are no crowding-out or accelerator effects, then an initial increase in aggregate demand of $120 billion will eventually shift the aggregate demand curve to the right by a. $216 billion. b. $150 billion. c. $600 billion. d. $480 billion

d. decrease which shifts aggregate demand left

If the dollar appreciates, perhaps because of speculation or government policy, then U.S. net exports a. increase which shifts aggregate demand right b. increase which shifts aggregate demand left c. decrease which shifts aggregate demand right d. decrease which shifts aggregate demand left

d. aggregate demand shifts right. U.S. aggregate demand shifts left if other countries experience a decrease in real GDP

If the dollar depreciates because of speculation or government policy, U.S. a. aggregate demand shifts left. U.S. aggregate demand also shifts left if other countries experience an increase in real GDP. b. aggregate demand shifts left. U.S. aggregate demand shifts right if other countries experience an increase in real GDP. c. aggregate demand shifts right. U.S. aggregate demand also shifts right if other countries experience a decrease in real GDP. d. aggregate demand shifts right. U.S. aggregate demand shifts left if other countries experience a decrease in real GDP

d. real GDP and the price level fall

If the government repeals an investment tax credit and increases income taxes, a. real GDP rises, and the price level could rise, fall, or stay the same. b. real GDP falls, and the price level could rise, fall, or stay the same. c. real GDP and the price level rise. d. real GDP and the price level fall.

d. Inflation expectations fall which shifts the short-run Phillips curve to the left

If unemployment is above its natural rate, what happens to move the economy to long-run equilibrium? a. Inflation expectations rise which shifts the short-run Phillips curve to the right. b. Inflation expectations rise which shifts the short-run Phillips curve to the left. c. Inflation expectations fall which shifts the short-run Phillips curve to the right. d. Inflation expectations fall which shifts the short-run Phillips curve to the left.

c. both the increased funding for states and the tax cuts

In 2009 Congress passed legislation providing states with funds to build roads and bridges. It also instituted tax cuts. Which of these shifts aggregate demand right? a. only the increased funding for states b. only the tax cuts c. both the increased funding for states and the tax cuts d. neither the increased funding for states nor the tax cuts

c. federal funds rate

In recent years, the Federal Reserve has conducted policy by setting a target for the a. size of the money supply. b. growth rate of the money supply. c. federal funds rate. d. discount rate

b. shifts the short-run Phillips curve left so unemployment returns to its natural rate

In the long run, a decrease in the money supply growth rate a. shifts the short-run Phillips curve left so inflation returns to its original rate. b. shifts the short-run Phillips curve left so unemployment returns to its natural rate. c. Both A and B are correct. d. None of the above is correct.

c. the inflation rate but not the natural rate of unemployment

In the long run, which of the following depends primarily on the growth rate of the money supply? a. the natural rate of unemployment and the inflation rate b. the natural rate of unemployment but not the inflation rate c. the inflation rate but not the natural rate of unemployment d. neither the natural rate of unemployment nor the inflation rate

c. The money supply increases, causing the interest rate to fall.

In which of the following cases does the aggregate-demand curve shift to the right? a. The price level rises, causing the interest rate to fall. b. The price level falls, causing the interest rate to fall. c. The money supply increases, causing the interest rate to fall. d. The money supply decreases, causing the interest rate to fall

c. unstable, because waves of pessimism and optimism create fluctuations in aggregate demand

Keynes argued that aggregate demand is a. stable, because the economy tends to return to its long-run equilibrium quickly after any disturbance to aggregate demand. b. stable, because changes in consumption are mostly offset by changes in investment and vice versa. c. unstable, because waves of pessimism and optimism create fluctuations in aggregate demand. d. unstable, because of long and variable policy lags that worsen economic fluctuations.

a. the effects of changes in money demand and supply on interest rates

Liquidity preference refers directly to Keynes' theory concerning a. the effects of changes in money demand and supply on interest rates. b. the effects of changes in money demand and supply on exchange rates. c. the effects of wealth on expenditures. d. the difference between temporary and permanent changes in income.

b. short run and supposes that the interest rate adjusts to bring money supply and money demand into balance

Liquidity preference theory is most relevant to the a. short run and supposes that the price level adjusts to bring money supply and money demand into balance. b. short run and supposes that the interest rate adjusts to bring money supply and money demand into balance. c. long run and supposes that the price level adjusts to bring money supply and money demand into balance. d. long run and supposes that the interest rate adjusts to bring money supply and money demand into balance

d. imprecise; this makes policy lags more relevant

Macroeconomic forecasts are a. precise; this makes policy lags less relevant b. precise; this makes policy lags more relevant c. imprecise; this makes policy lags less relevant d. imprecise; this makes policy lags more relevant

d. output in the short run only

Monetary policy and fiscal policy influence a. output and prices in the short run and the long run. b. output and prices in the short run only. c. output in the short run and the long run. d. output in the short run only

d. in the long run, but not in the short run

Most economists believe that classical macroeconomic theory is a good description of the economy a. in neither the short nor long run. b. in the short run and in the long run. c. in the short run, but not in the long run. d. in the long run, but not in the short run

b. less money, so they lend more, and the interest rate falls

Other things the same, a decrease in the price level motivates people to hold a. less money, so they lend less, and the interest rate rises. b. less money, so they lend more, and the interest rate falls. c. more money, so they lend more, and the interest rate rises. d. more money, so they lend less, and the interest rate falls.

a. the dollar depreciates

Other things the same, as the price level falls, a. the dollar depreciates. b. the interest rate rises. c. people feel less wealthy. d. All of the above are correct.

b. continued increases in the price level but not continued increases in real GDP

Other things the same, continued increases in the money supply lead to a. continued increases in the price level and real GDP. b. continued increases in the price level but not continued increases in real GDP. c. continued increases in real GDP but not continued increases in the price level. d. a one-time permanent increase in both prices and real GDP

a. employment and production rise.

Other things the same, if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, then a. employment and production rise. b. employment rises and production falls. c. employment falls and production rises. d. employment and production fall.

b. 0.750

Scenario 34-1. Take the following information as given for a small, imaginary economy: • When income is $10,000, consumption spending is $6,500. • When income is $11,000, consumption spending is $7,250. Refer to Scenario 34-1. The marginal propensity to consume for this economy is a. 0.650. b. 0.750. c. 0.650 or 0.664, depending on whether income is $10,000 or $11,000. d. 0.800.

c. aggregate demand right

Suppose a shift in aggregate demand creates an economic contraction. If policymakers can respond with sufficient speed and precision, they can offset the initial shift by shifting a. aggregate supply right. b. aggregate supply left. c. aggregate demand right. d. aggregate demand left

d. all of the above are correct

Suppose policymakers take actions that cause a contraction of aggregate demand. Which of the following is a short-run consequences of this contraction? a. the inflation rate decreases b. the level of output decreases c. the unemployment rate increases d. all of the above are correct

c. increase both consumption and investment spending

The Fed is concerned about stock market booms because the booms a. increase consumption spending. b. increase investment spending. c. increase both consumption and investment spending. d. None of the above is correct

a. the inflation rate decreases

The economy will move to a point on the short-run Phillips curve where unemployment is higher if a. the inflation rate decreases. b. the government increases its expenditures. c. the Fed increases the money supply. d. None of the above is correct

a. the multiplier effect

The government builds a new water-treatment plant. The owner of the company that builds the plant pays her workers. The workers increase their spending. Firms from which the workers buy goods increase their output. This type of effect on spending illustrates a. the multiplier effect. b. the crowding-out effect. c. the Fisher effect. d. the wealth effect.

b. the political system of checks and balances that slows down the process of implementing fiscal policy.

The lag problem associated with fiscal policy is due mostly to a. the fact that business firms make investment plans far in advance. b. the political system of checks and balances that slows down the process of implementing fiscal policy. c. the time it takes for changes in government spending or taxes to affect the interest rate. d. All of the above are correct.

d. decreased or Congress made a substantial increase in the minimum wage

The long-run aggregate supply curve would shift left if the amount of labor available a. increased or Congress made a substantial increase in the minimum wage. b. decreased or Congress abolished the minimum wage. c. increased or Congress abolished the minimum wage. d. decreased or Congress made a substantial increase in the minimum wage

d. aggregate demand of a given increase in government purchases

The multiplier effect is exemplified by the multiplied impact on a. the money supply of a given increase in government purchases. b. tax revenues of a given increase in government purchases. c. investment of a given increase in interest rates. d. aggregate demand of a given increase in government purchases.

a. decreases when the interest rate decreases, so people desire to hold more of it.

The opportunity cost of holding money a. decreases when the interest rate decreases, so people desire to hold more of it. b. decreases when the interest rate decreases, so people desire to hold less of it. c. increases when the interest rate decreases, so people desire to hold more of it. d. increases when the interest rate decreases, so people desire to hold less of it

b. the natural rate of unemployment, but not monetary growth

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on a. the natural rate of unemployment and monetary growth. b. the natural rate of unemployment, but not monetary growth. c. monetary growth, but not the natural rate of unemployment. d. neither monetary growth nor the natural rate of unemployment

a. is determined by resource usage and technology.

The position of the long-run aggregate supply curve a. is determined by resource usage and technology. b. is at the point where the unemployment rate is zero. c. shifts to the right when the money supply increases. d. is at the point where the economy would cease to grow

a. positive feedback from aggregate demand to investment

The process of the investment accelerator involves a. positive feedback from aggregate demand to investment. b. negative feedback from aggregate demand to investment. c. positive feedback from aggregate supply to investment. d. negative feedback from aggregate supply to investment.

b. the long-run Phillips curve shifts over time

To say that the natural rate of unemployment changes over time is to say that a. the short-run Phillips curve shifts over time. b. the long-run Phillips curve shifts over time. c. the aggregate demand curve shifts over time. d. the Federal Reserve influences the natural rate of unemployment over time

a. nominal wages are slow to adjust to changing economic conditions

Which of the following can explain the upward slope of the short-run aggregate supply curve? a. nominal wages are slow to adjust to changing economic conditions b. as the price level falls, the exchange rate falls c. an increase in the money supply lowers the interest rate d. an increase in the interest rate increases investment spending

d. all of the above are correct

Which of the following effects helps to explain the slope of the aggregate-demand curve? a. the exchange-rate effect b. the wealth effect c. the interest-rate effect d. All of the above are correct.

a. an increase in government spending increases interest rates, causing investment to fall.

Which of the following is an example of crowding out? a. an increase in government spending increases interest rates, causing investment to fall b. a decrease in private savings increases interest rates, causing investment to fall c. a decrease in the money supply increases interest rates, causing investment to fall d. an increase in taxes increases interest rates, causing investment to fall

c. Monetary policy cannot change the natural rate of unemployment, but other government policies can.

Which of the following is correct according to the long-run Phillips curve? a. No government policy, including changes in the money supply growth rate, can change the natural rate of unemployment. b. Changes in the money supply growth rate are the only means by which government policy can change the natural rate of unemployment. c. Monetary policy cannot change the natural rate of unemployment, but other government policies can. d. Monetary policy and other government policies can shift the long-run Phillips curve.

b. increases in the profitability of capital due perhaps to technological progress

Which of the following shifts aggregate demand to the right? a. a decrease in the money supply b. increases in the profitability of capital due perhaps to technological progress. c. the repeal of an investment tax credit d. a decrease in the price level