ECN 211- Final Study

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The Federal Reserve

is responsible for conducting the nation's monetary policy, and it plays a role in regulating banks

The source of the supply of loanable funds

is saving and the source of demand for loanable funds is investment

The market demand curve:

represents the sum of the quantities demanded by all the buyers at each price of the good

An economic expansion caused by a shift in aggregate demand causes prices to

rise in the short run, and rise even more in the long run

If the price level falls, the real value of a dollar...

rises, so people will want to buy more

A bond buyer is a

saver. Long term bonds have more risk than short term bonds

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

the price level is higher than expected making production more profitable

Suppose the MPC is 0.9. There are no crowding out or investment accelerator effects. If the government increases its expenditures by $30 billion, then by how much does aggregate demand shift to the right? If the government decreases taxes by $30 billion, then by how far does aggregate demand shift to the right?

$300 billion and $270 billion

Changes in nominal GDP reflect

both changes in prices and changes in the amounts being produced

According to the quantity theory of money, a 3% increase in the money supply

causes the price level to rise by 3%

Dollar bills, rare paintings, and emerald necklaces are all:

stores of value

--------------------------------------------------------- Refer to Figure 34-8. An increase in government purchases will...

-------------------------------------------------------------- shift aggregate demand from AD1 to AD2

Which of the following events would shift money demand to the right?

an increase in the price level

The unemployment rate is computed as the number of unemployed

divided by the labor force, all times 100

Productivity is defined as the quantity of

goods and services produced from each unit of labor input

The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good:

has an absolute advantage in the production of that good

GDP is defined as the:

value of all final goods and services produced within a country in a given period of time

The opportunity cost of an item is:

what you give up to get that item

Which of the following statements about real and nominal interest rates is correct?

when the inflation rate is positive, the nominal interest rate is necessarily greater than the real interest rate

Economists equate money with

assets people use regularly to buy goods and services

Some persons are counted as out of the labor force because they have made no serious or recent effort to look for work. However, some of these individuals may want to work even though they are too discouraged to make a serious effort to look for work. If these individuals were counted as unemployed instead of out of the labor force, then

both the unemployment rate and labor-force participation rate would be higher

Which of the following events must cause equilibrium prices to fall?

demand decreases and supply increases

In the short-run, an increase in the costs of production makes

output falls and prices rise

People choose to hold a larger quantity of money if:

the interest rate falls, which causes the opportunity cost of holding money to fall

The quantity demanded of a good is the amount that buyers are:

willing and able to purchase

Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013. Referring to this scenario, in real terms, Sue Holloway's income amounts to about what percentage of Josh Holloway's income?

70.9%

Which of the following would cause prices and real GDP to rise in the short run?

aggregate demand shifts right

The classical dichotomy refers to the idea that the supply of money

determines nominal variables, but not real variables

When the Fed decreases the money supply, we expect...

interest rates to rise and stock prices to fall

Total output in an economy increases when each person specializes because:

each person spends more time producing that product in which he or she has a comparative advantage

An open-market purchase:

increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public

The consumer price index is used to (CPI)

monitor changes in the cost of living over time

All else equals, if there are diminishing returns, then which of the following is true if a country increases its capital by one unit?

output will rise but by less than it did when the previous unit was added

The model of aggregate demand and aggregate supply explains the relationship between

real GDP and the price level

The quantity supplied of a good is the amount that:

sellers are willing and able to sell

Which of the following shifts aggregate demand to the left?

stock prices fall for some reason other than a change in the price level

Monetary policy is determined by

the Federal Reserve and involves changing the money supply

The long-run aggregate supply curve shifts right if

the capital stock increases

During a certain year, the consumer price index increased from 120 to 132 and the purchasing power of a person's bank account increased by 4%, For that year,

the nominal interest rate was 14%

Fiscal policy is determined by

the president and Congress and involves changing government spending and taxation


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