ECO 202 Exam 2 Dellachiesa

if the per-worker production function shifts up

an economy can increase its real GDP per hour worked without changing the level of capital per hour worked

which of the following will shift the aggregate demand curve to the right?

an increase in foreign real GDP

in the basic aggregate demand -- aggregate supply model, an increase in the price of oil will in the short run lead to _____ in the unemplyment rate and _____ in the price level.

an increase, an increase

in the basic aggregate demand -- aggregate supply model, a descrease in the price of oil will in the short run lead to ____ in the employment rate and _____ in the price level.

an increase; a decrease

in economics, money is defined as

any asset people generally accept in exchange for goods and services

M2 includes (ignoring traveler's checkcs)

currency in circulations, checking account deposits, and savings-type account deposits

a bank is legally required to hold a fraction of its ____ as ______.

deposits, required reserves

the quantity theory of money seeks to explain the connection between money and

inflation

when the government runs a budget deficit, we could expect to see that

investment will fall

In the early 1900s, Henry Ford revolutionized the automotive manufacturing industry by instituting the assembly line. What impact did the assembly line method for producing automobiles have on the per-worker production function for Ford?

it shifted up

as a lender of last resort, a central bank like the federal reserve makes loans to "banks" that have

liquidity problems

on the 45-degree line diagram, for points that lie below the 45-degree line,

planned aggregate expenditure is less than GDP

the federal reserve systems four monetary policy goals are

price stability, high employment, economic growth, and stability of financial markets and institutions

as the economy nears the end of an expansion, which of the following do we typically see?

rising interest rates

an economy is described by the following equations: c=62+0.6(y-T); T=100; I^p=200; G=80; NX=-30; Y*=600. what policy should the government implement to eliminate the output gap (for Yto equal Y*)

sell bonds

Expansionary fiscal policy will

shift the aggregate demand curve to the right

if whole tomatoes were money, which of the following function would be hardest for tomatoes to satisfy?

store of value

which of the following characterizes the Fed's ability to prevent recessions

the Fed is able to keep a reccession shorter and milder than it would otherwise be

if there is an increase of $30 million as a result of an increase in autonomous consumption spending of $10 million, then the MPC is

the MPC is 0.66

if there is an increase of $50 million as a result of an increase in autonomous consumption spending of $10 million, then the MPC is

the MPS is 0.8

U.S. net export spending rises when

the growth rate of U.S. GDP is slower than the growth rate of GDP in other countries

in the recession of 2007-2009 made many pessimism affect the aggregate demand curve?

this will shift the aggregate demand curve to the left

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

formula for output gap

((y-y*)/y*)*100

if government saving is negative, then

T-Tr<G

if the bank of waterloo receives $20,000 deposit and the reserve requirement is 20 percent, how much can the bank loan out? (assume that before the deposit this bank is just meeting its legal reserve requirement)

$16,000

consumption spending is $5 millio, planned investment spending is $8 million, actual investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million- what is the aggregate expenditure for this exconomy?

$25 million

if investment in an economy increases by $20 million and subsequently equilibrium GDP only increases by $5 million, the multiplier for this economy is _____.

0.25

multiplier formula

1/(1-MPC)

using the quantity equation expressed is growth rates, if the velocity of money grows at 3 percent, the money supply grows at 5 percent, and real GDP grows at 5 percent, then the inflation rate will be

3 percent

an economy is described by the following equations: c=62+0.6(y-T); T=100; I^p=200; G=80; NX=-30; Y*=600. Find the output gap

30

the formula for aggregate expenditure is

AE=C+I+G+NX

an increase in aggregate expenditure has what result on equilibrium GDP?

Equilibrium GDP rises

if an increase in investment spending of $50 million results in $400 million increase in equilibrium real GDP, then

MPC is 0.875

an unplanned increase in inventories result in

actual investment that is greater than planned investment

investment spending ____ during a recession and ______ during an expansion.

declines, increases

an economy is described by the following equations: c=62+0.6(y-T); T=100; I^p=200; G=80; NX=-30; Y*=600. what policy should the government implement to eliminate the output gap (for Y=Y*)

decrease g by 12

to combat inflation, the government should

decrease government spending

which of the following is one explanation as to why the aggregate demand curve slopes downward?

decreases in the price level raise real wealth and increase consumption spending

if the fed decreases the reserve requirement then this

encourages banks to make more loans, and increases the money supply

the interest rate that banks charge other banks for loans is the

federal funds rate

expansionary monetary policy refers to the ____ to increase real GDP

federal reserves increasing the money supply and decreasing interest rates

expansionary monetary policy refers to the _______ to increase real GDP

federal resserves increasing the money supply and decreasing interest rates

congress and the president carry out fiscal policy through changes in

government purchases and taxes

If the Fed buys U.S. Treasury securities, then this

increases reserves, encourages banks to make more loans, and increases the money supply

according to the quantity theory of money, (holding velocity constant) deflation will occur if the

money supply grows at a slower rate than the real GDP

according to the quantity theory of money, (holding velocity constant) inflation will occur if the

money supply is less than the real GDP

an increase in government purchases of $200 billion will shift the aggregate demand curve to the right by

more than $200 billion

the three traditional monetary policy tools used by the federal reserve to manage the money supply are

open market operations, discount lending ratio, and reserve requirements