Macro Econ Final Pt 2

The velocity of money is

. the average number of times per year a dollar is spent

In 2007 and 2008 households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose

Both the change in inflation and the change in unemployment are consistent with what a given short-run Phillips curve implies.

.France has a higher natural rate of unemployment than the United States. This suggests that

France's Phillips curve is to the right of that of the United States, possibly because they have more generous unemployment compensation.

France has a higher natural rate of unemployment than the United States. This suggests that

France's Phillips curve is to the right of that of the United States, possibly because they have more generous unemployment compensation.

You bought some shares of stock and, over the next year, the price per share decreased by 7 percent and the price level decreased by 9 percent. Before taxes, you experienced

a nominal lose and a real gain

An event that directly affects firms' costs of production and thus the prices they charge is called

a supply shock

When conducting an open-market purchase, the Fed

buys government bonds, and in so doing increases the money supply.

Which of the following can the Fed do to change the money supply?

change reserves or change the reserve ratio

The idea that nominal variables are heavily influenced by the quantity of money and that money is largely irrelevant for understanding the determinants of real variables is called the

classical dichotomy

The primary difference between commodity money and fiat money is that

commodity money has intrinsic value but fiat money does not.

When the price level falls, the number of dollars needed to buy a representative basket of goods

decreases, so the value of money rises

Wealth is redistributed from debtors to creditors when inflation was expected to be

high and it turns out to be low

The principle of monetary neutrality implies that an increase in the money supply will

increase the price level, but not real GDP

In 2001, the United States was in recession. Which of the following things would you not expect to have happened?

increased investment spending

Which of the following would shift the long-run Phillips curve to the right?

increases in unemployment compensation

When taxes decrease, consumption

increases, so aggregate demand shifts right

Which of the following depends primarily on the growth rate of the money supply?

inflation but not the natural rate of unemployment

The sacrifice ratio is the

number of percentage points annual output falls for each percentage point reduction in inflation

To explain the long-run determinants of the price level and the inflation rate, most economists today rely on the

quantity theory of money

The theory by which people optimally use all available information when forecasting the future is known as

rational expectations

Stagflation exists when prices

rise and output falls

If people decide to hold less currency relative to deposits, the money supply

rises. The Fed could lessen the impact of this by selling Treasury bonds.

Most economists use the aggregate demand and aggregate supply model primarily to analyze

short-run fluctuations in the economy

Liquidity refers to

the ease with which an asset is converted to the medium of exchange.

According to the long-run Phillips curve, in the long run monetary policy influences

the inflation rate but not the unemployment rate

The discount rate is

the interest rate the Fed charges banks.

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then

the nominal interest rate rises, but the real interest rate does not.

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

the slope of the aggregate-demand curve

In the short run

unemployment and inflation are negatively related. In the long run they are largely unrelated problems.

If output is above its natural rate, then according to sticky-wage theory

will strike bargains for higher wages. In response to the higher wages firms will produce less at any given price level.