macro test 2 (2)
How does the level of risk affect an asset's desirability?
They are inversely related- the higher the level of risk, the less attractive the asset
Which of the following does not cause a change in the Solow residual?
a change in expectations
When economists say that money is neutral, this means that:
a change in the money supply changes nominal variables but not real variables
Which of the following is most likely to lead to a decrease of 10% in the nominal demand for money
a decline of 10% in the price level
Countries in which was adjust slowly to changes in the supply of and demand for labor are likely to have ___ sacrifice ratio
a high
Which of the following best describes a general equilibrium?
all markets are simultaneously in equilibrium
All of the following will shift the FE line except
an increase in the price level
Identify the following variables as being leading, lagging or coincident business fixed investment__ residential investment ___ inventory investment___ stock prices ___ money supply ___ nominal interest rates__
coincident leading leading leading leading lagging
The IS curve represents:
combinations of output and the real interest rate such that desired national saving is equal to desired investment
If all the money was held in the form of currency, what would happen if the Federal Reserve sold financial assets to the public? The money supply would ____
decrease
If you knew that the economy was falling into a recession, what would you expect to happen to production during the next few quarters?___ to investment? ___ to average labor productivity?___ to the real wage?__ to the unemployment rate?___
decrease decrease decrease decrease increase
Keynesians prefer a disinflation policy of
gradualism
The misperceptions theory concludes that:
in the short run, anticipated monetary changes are neutral but unanticipated monetary changes are not neutral
If all the money was held in the form of currency, what would happen if the Federal Reserve bought financial assets fro the public? The money supply would ____
increase
Define the velocity of money
it is the ratio of nominal GDP to the amount of money in circulation
What is comovement?
macroeconomic variables that tend to move in the same direction over time
Suppose that Sam buys a new iPod for $200. In this example, money serves the role of ___
medium of exchange
In the classical model, money is neutral. This seems to be inconsistent with the business cycle fact that:
money is a leading, procyclical variable
Which of the statements below, regarding the functions of money, is true?
money serves as a medium of exchange, as unit of account, and as a store of value
In the efficiency wage model, an increase in productivity will cause
no change in the real wage
What does the Keynesian model predict about monetary neutrality? in the short run, changes in the money supply will affect ___ while in the long run, these changes will only affect ___
output and the real interest rate; the price level
For something to satisfy the medium of exchange function of money, it must be
readily exchangeable for other goods
The natural rate of unemployment in the US generally __ from 1960 to 1980 and ___ from 1980 to 1995.
rose; fell
In each of the following cases, what is the effect on the FE line? an inverse supply shock___ an increase in the labor supply ____ an increase in the money supply ___
shifts the FE line leftward shifts the FE line rightward does not change the FE line
In each of the following cases, what is the effect on the LM curve? An increase in the expected inflation rate___ an increase in government spending ___ an increase in the price level___
shifts the LM curve down and to the right does not shift the LM curve shifts the LM curve up and to the left
In the quantity theory of money, velocity is assume to be highly
stable
Suppose that Sam saved $15 every week for the past 10 weeks in order to buy the iPod. Here, money served the role of
store of value
The Solow residual, the most common measure of productivity shocks is
strongly procyclical
Which of the following best describes the FE line?
the FE line is vertical at the full employment level of output
The full employment level of employment is
the equilibrium level of employment reached after all wages and prices have fully adjusted
In the U.S., the money supply is determined by
the federal reserve
The position of the FE line is determined by
the labor market and the production function
A difficulty face by policymakers who wish to use the unemployment rate as a guide to whether the economy is weak or strong is that
the natural rate of unemployment is hard to measure
Which of the following best represents the relationship between inflation and the unemployment rate?
the phillips curve
How does the expected rate of return on an asset affect its desirability?
they are directly related - the higher the expected return, the more attractive the asset
How does the level of liquidity affect an asset's desirability?
they are directly related- the more liquid the asset, the more desirable the asset
While shopping, Sam noticed that an iPod was priced at $200, a competing MP3 player was selling for $100. When he realized that the iPod was twice as expensive as the MP3 player, money served the role of ____
unit of account
In each of the following cases, what is the effect on the short run aggregate supply (SRAS) curve? An increase in firm costs shifts the SRAS curve ____. An increase in the money supply ____. An increase in consumption ____.
upward does not shift the SRAS curve does not shift the SRAS curve
In the Keynesian model, short run equilibrium occurs
where the IS and LM curves intersect
the gift exchange motive suggest that
workers who feel well treated will work harder and more efficiently
