MACRO Final

High and volatile inflation:

destroys the ability of market prices to send signals about the value of resources and opportunities.

The natural unemployment rate is the rate of _____ unemployment plus the rate of _____ unemployment.

structural; frictional.

Government can influence a person's choice to work or not through:

taxes on workers and benefits paid to nonworkers.

Assume that the economy is initially at point Y in the graph. If the Fed took the appropriate action with monetary policy but overestimated how serious the recession is, then

the Fed would overshoot and the economy would move to point W

According to the quantity theory of money, the major cause of inflation in the long run is an increase in:

the growth rate of the money supply

If an earthquake strikes, destroying a large number of factories, the long-run aggregate supply curve will move:

to the left

The overall population for Region A is 111 million people. The labor force contains 51 million people, 29 million people are employed, and 22 million are unemployed. What is the unemployment rate? Round your answer to two decimals

0.43

In a small economy, the money supply is $400,000, and the velocity of money is 3. The current average price level in the economy is 1. What is the level of real GDP in this economy?

1.2 Million

If the reserve ratio is 4%, the money multiplier is:

20

Find the velocity of money when 𝑀=$522M, 𝑃=105, and 𝑌R=$23.M is the money supply, v is the velocity of money, P is the price level, and YR is the real gross domestic product (GDP). Round your answer to 2 decimal places

4.63

The current state of a hypothetical economy is depicted in the graph. In the graph, depict what happens if the economy's central bank successfully decreases the growth rate of the money supply to return the economy to its long-run equilibrium

AD moves down

The economy of Pandastan, a fictitious country, is depicted in the graph. Because of general pessimism, aggregate demand has moved from a long-run equilibrium to the short-run equilibrium shown. In the graph, depict what happens if Pandastan's central bank successfully increases the growth rate of the money supply to perfectly offset the decrease in aggregate demand

AD moves to the right

The hypothetical data in the table below displays the percentage that unemployment benefits replace take-home pay for workers in different countries. Which country would you expect to have the lowest long-term unemployment rate?

Australia

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

Buy government bonds

Quantitative easing is the:

Fed purchase of longer-term government bonds.

Suppose the reserve ratio is 20% for all banks. If the Fed increases bank reserves by $200, then the money supply will

Increase by $1,000

Consider the world oil market diagrams presented in the figure. Which of the panels correctly depicts what happened in the market for oil during the 1973 OPEC oil crisis?

Panel B

In the graph, demonstrate the short-run effect of an increase in the growth rate of the money supply, assuming all else remains equal

Part 1- AD and SRAS move to right... Part 2- The SRAS curve shifts to the left, and the inflation rate increases, with no change in the growth rate.

The graph shows the aggregate demand (AD) curve and the long-run aggregate supply (LRAS) curve for a hypothetical economy. Suppose that the economy observes a reduction in the world price of oil, an input in many production processes. Show the effect of this change by shifting one of the curves in the graph

Part 1- AD moves up and to right... Part 2- Inflation will rise, Growth Rate will increase

If the actual rate of inflation turns out to be higher than the expected rate of inflation, what happens to the growth rate of output before expectations are updated?

The growth rate is higher than the Solow growth rate.

In the short run, the inflation rate is found where the _____ curves intersect, and in the long run, the inflation rate is found where the _____ curves intersect.

aggregate demand and short-run aggregate supply; aggregate demand and long-run aggregate supply

Because of money illusion, inflation often confuses:

consumers, workers, and firms.