MACRO TEST 4

If the MPC is 0.50 and there are no crowding-out or accelerator effects, then an initial increase in aggregate demand of $95 billion will eventually shift the aggregate demand curve to the right by

$190 billion

In a certain economy, when income is $100, consumer spending is $60. The value of the multiplier for this economy is 4. It follows that, when income is $101, consumer spending is

$60.75

If velocity = 8, the quantity of money = 2,300, and the price level = 2.25, then the real value of output is approximately

$8,178

If the price level increased from 130 to 150, what is inflation rate?

15.4 percent

There is an excess demand for money at an interest rate of

3.25 percent (lowest amount on left)

Katrina puts money into an account. One year later she has 6 percent more dollars and that her money will buy 4 percent more goods. The nominal interest rate was

6 percent and the inflation rate was 2 percent

In the graph, MS represents the money supply and MD represents the money demand. The vertical axis is the value of money measured as 1/P and the horizontal axis is the quantity of money. Refer to Figure 30-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the velocity of money is 4. If the money market is in equilibrium, then the economy's real GDP amounts to

8,000

(a) The Money Market (b) The Aggregate Demand Curve A decrease in Y from Y1 to Y2 is explained as follows

An increase in P from P1 to P2 causes the money-demand curve to shift from MD1 to MD2; this shift of MD causes r to increase from r1 to r2; and this increase in r causes Y to decrease from Y1 to Y2.

Other things the same, as the price level decreases in induces greater spending on

Both net exports and investment

From 2001 to 2005 there was a dramatic rise in the value of houses. If this rise made homeowners feel wealthier, then it would have shifted aggregate

Demand Right

In 2008, the United States was in recession. Which of the following things would you not expect to have happened?

Increased real GDP

When the Fed buys bonds the supply of money

Increases and so aggregate demand shifts right.

According to the liquidity preference theory, an increase in the overall price level of 10 percent

Increases the equilibrium interest rate, which in turn decreases the quantity of goods and services demanded.

Last year, Jane spent all of her income to purchase 200 units of corn at $5 per unit. This year, she spent all of her income to purchase 180 units of corn at $6 per unit.

Janes nominal income increased this year, but her real income decreased.

The effect of an increase in the price level on the aggregate-demand curve is represented by a

Movement to the left along a given aggregate-demand curve.

A decrease in taxes would move the economy from Q (bottom) to

P (right) in short run; O (top) in the long run

If the economy starts at point R (middle), then a recession occurs at

Point P (far left)

Assume the MPC is 0.80 Assume there is a multiplier effect and that the total crowding-out effect is $14 billion. An increase in government purchases of $90 billion will shift aggregate demand to the

Right by $436 billion

When the money supply curve shifts from MS1 (left) to MS2 (right),

The equilibrium value of money decreases.

Which of the following would not be an expected response from a decrease in the price level and so help to explain the slope of the aggregate-demand curve?

With prices down and wages fixed by contract, Fargo Concrete Company decides to lay off workers.

The natural level of output occurs at

Y2 (middle line)

Suppose there is a tax decrease. To stabilize output, the Federal Reserve could

decrease the money supply.

If Y and V are constant and M doubles, the quantity equation implies that the price level

doubles

When consumer price index decreases from 140 to 125

less money is needed to buy the same amount of goods, so the value of money rises

The sticky-wage theory of the short-run aggregate supply curve says that when price level rises more than expected, production is

more profitable and employment and output rises

When there is an excess supply of money,

people will try to get rid of money causing interest rates to fall. Investment increases.

In countries that have high minimum wages an require a lengthy and costly process to get permission to open a business,

reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right.

An increase in government purchases will

shift aggregate demand from AD2 to AD1

The economy of Umrica uses gold as money. If the government discovers a large reserve of gold on their land the

supply of money increases, the value of money falls, and price rises

If the money supply is MS2 ant the value of money is 5, then there is a excess

supply of money that is represented by the distance between points D and A (top left point and top right point)