macro exam 2 7-8

when interest rates increase the value of the U.S dollar in foreign exchange market

appreciates because foreigners more U.S interest bearing assets

an economy at a short-run equilibrium below potential output will

below full employment

other things the same, as the price level decreases it induces greater spending on

both net export and investment

which of the following investment determinants is NOT negatively related to investment spending

capital productivity

if the economy is a short-run equilibrium that puts upward pressure on wages and prices, the upward pressure occurs for all of the following reasons EXCEPT

consumers are not purchasing sufficient quantities of the good or service at the existing price

if the value of the stock market rises we might expect

consumption to increase

if the MPC is equal to 3/5,then if the income increases by 100

consumption will increase by 60

if at the current price level, an economy is experiencing a shortage, then price adjustment would cause

firms to increase production and people to purchase fewer goods & services

which of the following does NOT describe an economic mechanism that makes total spending on goods and services negatively related to the price level

inflation effect

a foreign increase in tariffs on U.S goods

is a negative aggregate demand shock and will shift the curve to the left

a decrease in govt spending

is a negative aggregate demand shock and will shifts the curve to the left

a decrease in income taxes

is a positive aggregate demand shock and will shift the curve to the right

an increase in capital productivity

is a positive aggregate demand shock and will shift the curve to the right

an increase in the expected price level shifts short-run aggregate supply to the

left and an increase in the actual price level does not shift short-run aggregate supply

other things the same an increase in the price level makes the dollar people hold worth

less, so they can buy less

sticky nominal wages can result in

lower profits for firms when the price level is lower than expected

the sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected, some firms will have

lower than desired prices which leads to an increase in aggregate quantity of goods and services supplied

the aggregate demand curve shows the__relationship between total spending and the price level

negative

a higher price level tends to increase interest rates because

people shifts funds out of short-term interest bearing assets and into cash or checking accounts

as the price level rises

people will want to buy fewer bonds, so the interest rate rises

long-run aggregate supply is the level of output given by

potential output

which of the following is not a determinant of the long-run level of real GDP

price level

in the short-run a change in overall prices will move economy away from potential output because

prices and wages are sticky

of the price level rises above what was expected and nominal wages are fixed then

production becomes more profitable so firms will hire more workers

suppose a war destroys a significant portion of an economy's physical capital stock We might expect

the long-rub aggregate supply curve to shift left

suppose the pace of technological change and innovations increases we might expect

the long-run aggregate supply to shift right

according to the wealth effect, when the price level rises

the purchasing power cash and checking accounts falls

the aggregate supply curve is upward sloping in

the short run, but not the long run

suppose that price expectations fall. we might expect

the short-run aggregate supply curve to shift down/right

suppose that energy cost increase we might expect

the short-run aggregate supply curve to shift up/left

if the price level of an economy were above the equilibrium price, then

there would be surpluses and prices would fall

the logic of the multiplier effect applies

to any change in spending on any component of GDP

if income in our major trading partners rises we would expect

u.s export rise

the long-run aggregate supply curve is

vertical

in the value of the U.S dollar appreciates against the currencies of our major trading partners, we would expect

-U.S exports to fall -U.S imports to rise U..S net exports to decline

which of the following is included in the aggregate demand for goods and services

-consumptions demand -investment demand -net exports

the sticky-price theory implies that

-the short-run aggregate-supply curve is upward-slopping -unexpected fall in the price level includes firms to reduce the quantity of goods and services they produce -menu cost influence the speed of adjustment of price

if the multiplier is 6, then the MPC is

0.83

when the mpc is equal to 3/5, the value of the spending multiplier is

2.5

suppose that govt spending increase by 100 billion and that the MPC is equal to 3/5. How much will total spending change as a result of the govt purchases and all of the subsequent rounds of the multiplier process

250 billion

assume the MPC is 0.72 the multiplier is

3.57

suppose the govt purchases increase by 100 billion and that the mpc is equal to 3/5. in the 3rd round of the spending multiplier process, consumption increase by

36 billion

the following expression represents total spending on all united states goods and services

C+I+G+EX-IM

all of the following are examples of investment spending EXECPT

a household purchase 1000 shares of google stock

which of the following would help explain why the aggregate demand curve slopes downward

a lower price level reduces the interest rate, which encourages greater spending on investment goods

from 2006 to 2008 there was a dramatic fall in the price of houses. if this fall made people feel less wealthy, then it would have shifted

aggregate demand left

suppose business in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shift

aggregate demand left

other things the same, an increase in the amount of capital firms wish to purchase would initially shifts

aggregate demand right

other things the same, when the govt spends more, the initial effect is that

aggregate demand shifts right

suppose a fall in stock prices make people feel poorer. The decrease in wealth would induce people to

decrease consumption, shown by shifting the aggregate-demand curve to the right

which of the following shifts short-run aggregate supply right

decrease the price of oil

if the economy beings at a short-run equilibrium below potential output, then there would be

downward press on both wages and prices

the marginal propensity to consume(MPC) is defined as the fraction of

extra income that a household consumes rather than saves

which of the following consumptions determinants is NOT an aggregate demand shock and therefore doesn't shift the aggregate demand curve

income

which of the following consumptions determinants is NOT positively related to consumption

income taxes

if the economy is at a short-run equilibrium above potential output, then wages and prices expectations would

increase

the short-run aggregate supply curve is upward sloping because wages and some are sticky, so an increase in the overall price level will tend to

increase profit per unit and some firms will increase production

When taxes decrease, consumption

increases as shown by a shift of the aggregate demand curve to the right.

other things the same, when the price level rises, interest rates

rise, so firms decrease investment

if the MPC is equal to 3/5, then if income increase by 100

saving will increase by 40

a change in the expected price level is likely to cause which of the following

shift int short run aggregate supply curve

if the economy beings at a short-run equilibrium above potential output, then we would expect wage adjustment and price expectations change to

shift the short run aggregate supply curve up/left

which of the following is not a component of spending

taxes

the long-run aggregate supply curve shifts right if

the capital stock increase immigration from abroad increases technology advances

all of the following are examples of government purchases of goods & services EXCEPT

the govt makes social security to your grandmother