Macro Economics Final
What is not a shift in the short-run aggregate supply curve?
A change in the price level
The price level falls if the aggregate demand does what with the aggregate supply
Aggregate demand increases more slowly than aggregate supply
Demand Pull is...
An inflation that starts because aggregate demand increases. It can begin with any factors that increases aggregate demand!! An increase in government expenditure.
Cost push inflation is...
An inflation that starts with an increase in costs. Gas and electricity rises***
Aggregate expenditure equals
C+I+G+X-M
During a cost push inflation spiral, the money wage rate _______ and the quantity of money ________
Increases; increases
Suppose that originally the marginal propensity to consume was 0.75. If the marginal propensity to consume rises, what will happen to the value of the multiplier?
It will become larger
Who is the current chairman of the Federal Reserve?
Jerome Powell
Once supply-side effects are taken into account, tax cuts for labor income can change what?
The supply of labor and potential GDP
Stagflation is the result of....
a decrease in short run aggregate supply
If the economy falls into a recession, which of the following responses constitutes the use of automatic fiscal policy?
an existing system to make government payments to the growing ranks of unemployed workers
In the United States today, money consists of
currency and deposits at banks
Fiscal Policy...
decisions related to government expenditure on goods and services, the value of transfer payments and tax rev
Liquidity is the
ease with which an asset can be converted into a means of payment with little or no loss of value
If aggregate demand grows only slightly faster than potential GDP, then the economy will
experience economic growth with low inflation
As real disposable income increases, consumption expenditure ___________ and saving _________.
increases; increases
If the expected future inflation rate decreases then what happens to the aggregate demand?
it decreases
According to the Gaffer curve, raising the tax rate would do what the the amount of tax revenue?
it might increase, decrease or not change the amount
The multiplier effect exists because a change in autonomous expenditure...
leads to changes in income, which generates further spending
Aside from being a means of payment, the other functions of money are...
medium of exchange, unit of account, and store of value
One reason that the aggregate demand curve has a negative slope is that when the domestic price level rises...
people substitute toward more imported goods and services `
Deflation
persistently falling price level
Inflation
persistently rising price level
Discretionary fiscal policy...
policy action that is initiated by an act of congress
The Fed's goals include...
price level stability
At the start of a cost-push inflation...
prices and unemployment are rising
An inflationary gap occurs when...
real GDP exceeds potential GDP
As a unit of account, money is used to
state prices of all goods and service
Control of the nation's quantity of money is handled by
the Federal Reserve System
As a result of a tax increase...
the aggregate demand curve shifts leftward
Bank reserves include...
the cash in the bank's value and the banks deposits at the Federal Reserve
A reason the government expenditure multiplier is larger than 1 because...
the government expenditure changes generate changes in the consumption expenditure
Fed. Fund Rate is....
the interest rate at which banks borrow and lend overnight from other banks
A one-time rise in the price level can turn into a demand-pull inflation when
the quantity of money persistently increased
When workers and employers correctly anticipate an increase in inflation caused by an increase in aggregate demand...
unemployment will be at the natural rate
Which of the following would cause an inflationary gap?
a large increase in foreign incomes and a small increase in the price of oil.
If aggregate planned expenditure is less than real GDP then...
firms' inventories will increase and real GDP will decrease as production falls
Autonomous fiscal policy is...
fiscal policy action action triggered by the state of the economy with no government action
If a person has $10,000 in a checking in a checking account and the price level rises significantly then
the individuals real wealth and consumption expenditure decrease