Econ HW 8.2

(Table: The Definition of the Money Supply) Refer to the table. What is the M2 money supply?

$535 million

(Figure: U.S. Marginal and Average Tax Rates) According to the tax rates shown in the figure, an individual who earns $63,700 a year, has no deductions, and claims no exemptions will pay income tax of:

$8,772.50.

If velocity is stable, then V equals

0%

This figure shows how real output growth reacts to a shock of a 10% increase in the price of oil. How long does it take for the economy to return to normal?

2.5 years

(Figure: Three AD Curves) Beginning at Point A in the accompanying diagram, a positive money shock could result in a short-run growth rate of:

3%.

For an aggregate demand curve with M = 10% and V = 0%, if inflation is 6%, then real growth is:

4%.

In the AD-AS model, an unexpected decrease in the growth rate of the money supply causes:

a leftward shift of the AD curve and then a downward shift of the SRAS curve.

From an initial equilibrium in the AD-AS model, an increase in consumption growth will initially cause inflation:

and real growth to increase.

Currently, marginal tax rates are:

Lower than in the past

In a regressive tax system, income tax as a share of income:

decreases as income increases.

As a result of a positive shock to C

inflation and output growth increase in the short run, but in the long run they return to the rates before the shock.

A bank is considered illiquid if

it has short-term liabilities greater than its short-term assets, but overall assets greater than liabilities.

Capital gains taxes are paid:

only when an asset is actually sold

A temporary positive shock to spending growth will lead to an increase in:

output and prices in the short run, but no change in either in the long run.

During the Great Depression, the long-run aggregate supply curve:

shifted inward.

An increase in money growth will cause output growth to increase in:

the short run only.

In the AD-AS model, money is not neutral in the short run if:

wages and prices are sticky.

If π < πe:

firms will reduce their output.

According to the quantity theory of money, an increase in money supply causes an increase in:

prices.

If the Fed wants to increase the money supply, it will typically:

purchase additional government bonds.

Deflation:

raises the real value of debts.

An aggregate demand shock is a:

rapid and unexpected shift in spending.

A major hurricane hitting the East Coast of the United States is an example of a:

real shock.

A tax with lower tax rates applied to people with higher incomes is called:

regressive.

An increase in expected inflation will cause the economy's long-run aggregate supply curve to:

remain unchanged.