Macro final

Other things remaining the same, if the US interest rate differential increases, the demand curve for US dollar shifts __________ and the supply curve of the US dollar shifts __________.

Other things remaining the same, if the US interest rate differential increases, the demand curve for US dollar shifts ___rightward_______ and the supply curve of the US dollar shifts ____leftward______.

The AD curve shifts to the left with a ________ in government purchases (G) or a __________ in taxes.

The AD curve shifts to the left with a __fall_____ in government purchases (G) or a ____rise___ in taxes.

The interest rate that a commercial bank pays when it borrows from the Fed is the _________ rate.

The interest rate that a commercial bank pays when it borrows from the Fed is the __discount___ rate.

When the economy is at its fully employment real GDP the unemployment rate is equal to?

The natural unemployment rate

Theoretically, to eliminate a recessionary gap, the Fed could us _________ monetary policy, and to eliminate an inflationary gap, the Fed could use _______ monetary policy.

Theoretically, to eliminate a recessionary gap, the Fed could us __expansionary______ monetary policy, and to eliminate an inflationary gap, the Fed could use __contractionary_____ monetary policy.

This year Pizza Hut makes a total investment of $1.3 billion in new stores. Its depreciation in this year is $300 million. Pizza Hut's gross investment is ________ and its net investment is ________.

This year Pizza Hut makes a total investment of $1.3 billion in new stores. Its depreciation in this year is $300 million. Pizza Hut's gross investment is _1.3billion___ and its net investment is __1billion___.

The long-run Philips curve is?

Vertical at the natural unemployment rate

If the economy is self-regulating and in a recessionary gap, what happens?

Wages fall, the SRAS curve shifts rightward, the price level falls , and Real GDP rises.

When the Fed purchases securities from a bank, it ___________ reserves and ________ the money supply

When the Fed purchases securities from a bank, it ___increases________ reserves and ___decreaes_____ the money supply

When there is a inflationary gap, Real GDP is ________ Natural Real GDP, and the (actual) unemployment rate is _________ the natural rate of unemployment.

When there is a inflationary gap, Real GDP is __greater than_____ Natural Real GDP, and the (actual) unemployment rate is ___less than___ the natural rate of unemployment.

MPC stands for

marginal propensity to consume

Monetary policy is

the policy concerning changes in the money supply that is pursued to achieve particular macroeconomic goals

The long-run aggregate supply (LRAS) curve is?

vertical at natural real GDP, or potential output

If the economy's capital stock decreases over time

depreciation exceeds gross investment.

Suppose that a bond promises to pay its holder $100 a year forever. If the price of the bond increases from $1,000 to $1,250, then the interest rate on the bond

falls from 10% to 8%

A federal budget deficit occurs when

government expenditures exceed tax revenues

Suppose that the excess reserves in Bank A increase by $1,000. IF the required reserve ratio is 16% what is the maximum change in checkable deposits brought about by the banking system?

$6,250

When the MPC = 0.6, the multiplier is

2.50

A decrease in government budget deficit decreases the ________ loanable funds and an increase in the government budge surplus increases the _________ loanable funds.

A decrease in government budget deficit decreases the _demand for____ loanable funds and an increase in the government budge surplus increases the __supply of___ loanable funds.

A decrease in the required reserve ratio ________ the money supply; an open market purchase __________ the money supply.

A decrease in the required reserve ratio __increases___ the money supply; an open market purchase ___increases_____ the money supply.

A decreases in the real interest rate leads to a _______ the demand for loanable funds curve, and a decrease in the expected profit leads to a _________ the demand for loanable funds cure.

A decreases in the real interest rate leads to a __movement down along___ the demand for loanable funds curve, and a decrease in the expected profit leads to a ____movement up along_____ the demand for loanable funds cure.

Here is a consumption function: C = C0 + MPC(Yd). If MPC is .8, then we know that A. As Yd rises by $1, C rises by $0.80 B. as Co rises by $0.8, Yd rises by $1 C. as Yd rises by $1, Co rises by $.08 D. Yd rises by $0.8

A. As Yd rises by $1, C rises by $0.08

Suppose the MPC = .60 and government purchases increase by 40billion. In Keynesian theory, which of the following is true? A. The TE curve shifts upward by 40billion, and real GDP increases by 100billion. B. The TE curve shifts upward by 40billion, and Real GDP increases by 40billion C. The TE curve shifts downward by 40billion, and real GDP decreases by 100billion D. The TE curve shifts downward by 40billion and real GDP decrease by 40billion

A. The TE curve shifts upward by 40billion, and real GDP increases by 100billion.

An increase in the interest rate ________ purchases of consumer _________.

An increase in the interest rate __reduces____ purchases of consumer ___durables____.

An increase in the price of non-labor inputs shifts the?

An increase in the price of non-labor inputs shifts the SRAS curve leftward.

As incorrectly low inflation expectations catch up with the higher actual inflation rate, the SRAS curve shifts ________ and the short run Phillips curve shifts __________.

As incorrectly low inflation expectations catch up with the higher actual inflation rate, the SRAS curve shifts ___leftward_____ and the short run Phillips curve shifts ____upward______.

Business optimism about future sales tends to __________ investment expenditures, shifting the AD curve to the __________.

Business optimism about future sales tends to __increase_____ investment expenditures, shifting the AD curve to the _right____.

In the loanable funds market, the supply comes from

savings, the government budget surplus, and borrowing form the rest of the world

Due to the recession in 2008, firms decreased their profit expectations. As a result, there was a ________ shift in the ________ loanable funds curve.

Due to the recession in 2008, firms decreased their profit expectations. As a result, there was a __leftward___ shift in the __supply of___ loanable funds curve.

The marginal propensity to consume + marginal propensity to save is?

Equal to one

Expansionary fiscal policy actions include__________ government spending and/or___________ taxes, while contractionary fiscal policy actions include_________ government spending and/or ___________ (increase, decrease)

Expansionary fiscal policy actions include___increasing___ government spending and/or___decreasing____ taxes, while contractionary fiscal policy actions include___deceasing___ government spending and/or ___increasing____

What is held constant when moving along a short-run Phillips curve?

Expected inflation rate

Foreign real national income rises. This raises U.S. ___________ which ________ aggregate demand (AD). The AD curve shifts ___________.

Foreign real national income rises. This raises U.S. __net exports____ which ____raises___ aggregate demand (AD). The AD curve shifts __rightward_____.

In the equation of exchange PQ stands for

GDP

If households disposable income decreases, then

If households disposable income decreases, then households saving will decreases

Increases in the quantity of money can start a ___________ inflation and an increase in government expenditure can start a _________ inflation.

Increases in the quantity of money can start a ___demand pull______ inflation and an increase in government expenditure can start a ----demand-pull____ inflation.

Interest rates and the price of old or existing bonds are __________

Interest rates and the price of old or existing bonds are __inversely related____

As the price level falls, ceteris paribus, people holding some of their wealth in monetary form become?

More wealthy and they buy more

Persons who argue against the deliberate use of fiscal and monetary policies to smooth out the business cycle are referred to as

non activists

A bank has $10million in checkable deposits and $2.5 million in reserves. If the required reserve ration is 10%, then the bank has how much required/excess reserves?

required reserves of 1million excess reserves of 1.5million