ECON Exam 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, then what was the inflation rate?
15.4 percent
Refer to Figure 34-1. There is an excess demand for money at an interest rate of
3.25 percent
Katarina puts money into an account. One year later she sees that 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.
Figure 30-2 In the graph, MS represents the money supply and MD represents 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
8,000.0.
Refer to Figure 34-2. 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.
In 2008, the United States was in recession. Which of the following things would you not expect to have happened?
Increased real GDP
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.
Jane's nominal income increased this year, but her real income decreased.
Refer to Figure 33-2. A decrease in taxes would move the economy from Q to
P in the short run and O in the long run.
Refer to Figure 33-5. If the economy starts at Point R, then a recession occurs at
Point P.
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.
Refer to Figure 33-1. The natural level of output occurs at
Y2.
Other things the same, as the price level decreases it induces greater spending on
both net exports and investment.
Suppose there is a tax decrease. To stabilize output, the Federal Reserve could
decrease the money supply.
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.
If Y and V are constant and M doubles, the quantity equation implies that the price level
doubles.
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.
When the 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 the price level rises more than expected, production is
more profitable and employment and output rises.
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.
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 and 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.
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.
Refer to Figure 34-5. An increase in government purchases will
shift aggregate demand from AD2 to AD1.
The economy of Umrica uses gold as its money. If the government discovers a large reserve of gold on their land the
supply of money increases, the value of money falls, and prices rise.
Refer to Figure 30-1. If the money supply is MS2 and the value of money is 5, then there is an excess
supply of money that is represented by the distance between points D and A.
Refer to Figure 30-1. When the money supply curve shifts from MS1 to MS2,
the equilibrium value of money decreases.
