macro

Potential GDP equals $100 billion. The economy is currently producing GDP1 which is equal to $90 billion. If the MPC is 0.8, then how much must autonomous spending change for the economy to move to potential GDP?

$2 billion

The part of the balance of payments that records a​ country's net​ exports, net investment​ income, and net transfers is called

CURRENT account

What is the impact of FEWER buyers of U.S.​ debt?

HIGHER INTEREST RATES resulting in slower economic growth and lower employment.

The most liquid measure of money supply is

M1

Which of the following is not a consequence of hyperinflation?

Money's function as a medium of exchange is enhanced.

If inflation in the United States is higher than inflation in other countries, what will be the effect on net exports for the United States?

Net exports will decrease as U.S. exports decrease.

Models that use​ factors, such as technology​ shocks

REAL business cycle models.

If ________ enters into an agreement with other countries to keep the exchange rate among their currencies fixed it is taking part​ in:

South Korea

The recession of 2007-2009 made many consumers pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve?

This will shift the aggregate demand curve to the left.

If actual inflation is higher than expected​ inflation, the

actual real wage is LESS THAN the expected real​ wage: UNEMPLOYMENT FALLS.

The process of an economy adjusting from a recession back to potential GDP in the long run without any government intervention is known as

an automatic mechanism.

conduct an open market purchase of Treasury securities.19%

11%

As a result of Kristy's deposit, checking account deposits in the banking system as a whole (including the original deposit) could eventually increase up to a maximum of

50,000

Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. As a result of Kristy's deposit, Bank A can make a maximum loan of

8,000

The increase in interest rates as a result of the government of Mexico running a budget deficit​ will:

cause an increase in the value of the peso relative to other currencies and therefore increase imports and decrease exports.

The level of aggregate supply in the long run is not affected by

changes in the price level.

To increase the money supply, the Federal Reserve could

conduct an open market purchase of Treasury securities.

​"The introduction of the EURO has had a profoundly positive effect on the growth of the European Union member​ countries.

disagree

If bankers become more uncertain regarding future deposits and withdrawals and choose to hold more excess reserves against deposits, the money multiplier will increase.

false

When aggregate expenditures exeed GDP, business inventories tend to rise and GDP fall. .

false

Monetary policy has a ________ impact on aggregate demand in an open economy than in a closed economy.

greater

Stagflation occurs when

inflation rises and GDP falls.

shows the relationship between unemployment and inflation. The​ curve, shown at the​ right, indicates what type of relationship between the two​ variables?

inverse relationship

The four main monetary policy tools used by the Federal Reserve to manage the money supply are

open market operations, discount policy, reserve requirements, and interest on reserves.

The Federal Reserve was established in 1913 to

stop bank panics by acting as a lender of last resort.

Which of the following functions of money would be violated if inflation were high?

store of value

The seven members of the Board of Governors of the Federal Reserve are appointed by

the President

Higher consumption and lower savings globally could negatively impact the U.S. because

the U.S. government is a perpetual deficit spender which relies partially on foreign savings to fund the deficits.

Long-run macroeconomic equilibrium occurs when

the aggregate demand and short-run aggregate supply curves intersect at a point on the long-run aggregate supply curve.

The marginal propensity to consume is defined as

the change in consumption divided by the change in disposable income.

The quantity theory of money implies that the price level will be stable (no inflation or deflation) when the growth rate of the money supply equals

the growth rate of real GDP.

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

the rightward shift of the short-run aggregate supply curve that occurs after a recession

What did the article mean by the​ "foreign-trade" gap? Which measure of trade was the article likely referring​ to?

trade balance

Which of the following is not one of the four main categories of spending identified by John Maynard Keynes?

transfer payments

An adverse supply shock causes the short-run aggregate supply curve to shift left, increasing the price level.

true

At macroeconomic equilibrium total spending equals total production.

true

During an expansion many firms experience increased profits, which increases cash flow and investment spending.

true

Inflation is generally the result of total spending growing faster than total production.

true

The five most important variables that determine the level of consumption are disposable income, wealth, expected future income, price level, and interest rate.

true

The major shortcoming of a barter economy is the requirement of a double coincidence of wants.

true

Why would a low surplus in services contribute to a large U.S. foreign trade​ gap?

Because the U.S. typically has a service trade surplus. If this surplus is​ low, it offsets a SMALLER portion of the goods trade​ deficit, widening the overall U.S. foreign trade gap.