MACRO FINAL

(Table) According to the table, nominal GDP for 2013 is approximately

$5,050 billion.

Demand-pull inflation scenarios took place in the

1960s for the United States and from 1985 to 1995 for Japan

The peak of Internet growth, when new "dot.com" companies sprouted up daily, occurred during

1998-1999

A bond has a face value of $1,000 and an annual interest payment of $44. What is its coupon rate, and what is its yield if it is sold for $1,100 in the secondary market?

4.4% and 4.0%, respectively

If an economy's GDP will double in 15 years, then its growth rate must be about

4.7%

Friedman observed that people with the same income consume the same amount, regardless of wealth.

False

GDP includes the value of illegal transactions, which means the level of economic activity in a country is overstated.

False

If market interest rates increase to 9% and the yield on a bond is 7%, then the price of the bond will rise.

False

If one nation is in an economic expansion while other nations are in recession, then that one country's currency will appreciate.

False

If there is a general rise in fear of the financial system, then the potential money multiplier will fall.

False

Increased productivity causes the aggregate supply curve to shift to the left.

False

Saving is zero when the economy is in macroeconomic equilibrium in the simple Keynesian model.

False

The balanced budget multiplier means that government spending, when financed by taxes, cannot affect the economy.

False

The recessionary gap is the spending reduction necessary to bring an overheated economy back to full employment.

False

When aggregate prices rise, U.S. goods become more expensive relative to goods from other countries, which leads to an increase in exports.

False

Which law created the central bank of the United States?

Federal Reserve Act of 1913

The development of social media has contributed to economic growth.

True

The unemployment rate does not explicitly include underemployed and discouraged workers.

True

The official unemployment rate as commonly reported by the Department of Labor each month does not include people who

are underemployed

Which country was NOT bailed out by the European Central Bank in the period from 2008 to 2013?

France

The _____ is/are equal to the total market value of all final goods and services produced in the United States.

GDP

Net domestic product measures

GDP minus depreciation

Which assumption is NOT a problem related to using the consumer price index (CPI) to accurately state the rate of inflation?

The CPI does not deal with producer prices.

Which event does NOT occur when there is an excess supply of U.S. dollars?

The U.S. current account worsens

If new technologies are not developed, China's growth rate is likely to fall.

True

Low interest rates are primarily responsible for the fact that the U.S. debt is relatively manageable.

True

From 1999 to 2002, the Japanese inflation rate was, respectively, -0.3%, -0.6%, -0.7%, and -0.7%. During this time, the Japanese economy underwent

deflation

The concept of intergenerational imbalance refers to

future generations funding the current generation's benefits

Because the private and foreign sectors of the economy were in a deep slump during the Great Depression, Keynes suggested an increase in _____ spending.

government

The rate of exchange that allows a specific amount of currency in one country to purchase the same quantity of goods in another country is called

purchasing power parity

Tightening monetary policy causes interest rates to _____ and aggregate _____ to _____.

rise; demand; decrease

As market interest rates rise, the cost of the public debt

rises, because the government must make larger interest payments

If national incomes of foreign countries fall at the same time the dollar appreciates, then in the United States, the aggregate demand curve

shifts to the left

The sum of the balance of trade, the balance of income, and net transfers is

the current account

An increase in aggregate demand can be caused by

the depreciation of the dollar.

Which item does NOT constrain federal spending?

the mortgage interest rate

Who is responsible for paying off a deferment on a college loan?

the student at a later date

As the aggregate price level declines

there is a movement down along the aggregate demand curve

Suppose an economy faces the following situation: current federal funds rate = 2%; inflation rate = 3%; inflation rate target = 2%; and current GDP 3% higher than full-employment GDP. According to the Taylor rule, which policy approach should this country be using?

tight money

The labor force is defined as the

total number of the employed and unemployed.

Social Security payments are included in the personal income category of national income.

true

(Figure: Aggregate Demand and Supply) The graph depicts an economy originally in equilibrium at point e. Assume that the government uses expansionary fiscal policy. The movement from point a to point b is due to

workers and suppliers adjusting their expectations to higher price levels

According to the equation of exchange, if P × Q = 7 trillion and the money supply is 2 trillion, what is the velocity of money?

3.5

(Graph: Consumption) Based on the information provided in the graph, when income equals $1,000, the average propensity to save equals

0.2

Cost-push inflation occurs when aggregate demand expands so much that equilibrium output exceeds full employment output.

False

The balanced budget multiplier changes according to the values of the marginal propensity to consume and the marginal propensity to save.

False

What event was a major influence on the development of macroeconomics?

Great Depression

A decrease in the reserve ratio will increase excess reserves.

True

Depreciation of a nation's currency would increase costs of production in that country.

True

Economic growth is hindered if consumers and businesses do not have a good idea of the likely rate of inflation in the near future.

True

In response to the financial crisis, the Fed lowered the federal funds target to 0%.

True

The target federal funds rate is the Fed's primary approach to monetary policy.

True

Total factor productivity captures the factors that influence the overall effectiveness of inputs.

True

When a supply shock occurs in the short run, the best policy is to target nominal income or output in order to spread the shock's impact between income and output losses and price level increases.

True

Year-over-year growth data excludes seasonal variations in growth rates.

True

Which of these would NOT cause a shift in the aggregate demand curve?

change in the price level

Which asset is included in M1?

checkable deposits

The more time a free-market economy has to adjust to price changes, the

closer GDP gets to the natural rate of output

In 2018, the United States ran both a _____ account deficit and a _____ account surplus.

current; capital

Unanticipated _____ is detrimental to economic growth.

inflation or deflation

If the economy is currently operating below long-run output, what should the Federal Reserve do?

lower interest rates from their current level

Which of these is an appropriate policy to address a jobless recovery?

lowering interest rates to reduce the cost of financing major projects

If the economy is below full employment and the government uses expansionary fiscal policy in an attempt to reduce unemployment

output and the price level will rise

A production function shows the

output that is produced using different combinations of inputs combined with existing technology.

If the reserve requirement is 1%, a $10,000 decrease in deposits means that the actual money supply will decrease by more than $1 million.

False

In Keynesian macroeconomic equilibrium, there are pressures on the economy to move to a different income level.

False

Which measure takes into account the differences in the cost of living between countries?

GDP-PPP

If the Feds raise interest rates, what would be the impact on the money supply and aggregate demand?

Money supply decreases and aggregate demand shifts to the left

Because of the compounding effect, a $7,500 loan at 12% interest can grow to $23,293.86 after 10 years.

True

Equilibrium income is reached when injections equal withdrawals.

True

If the federal government were required to balance its budget annually

a recession would lead to higher taxes or reduced spending.

The spending reduction necessary to bring an overheated economy back to full employment is called the

inflationary gap.

Suppose full employment real GDP is $12 trillion, current real GDP is $11 trillion, and the marginal propensity to consume is 0.8. The recessionary gap is

$0.2 trillion

If 1 euro will buy $1.30

$1 will purchase 0.77 euro

If you spend $100 and the MPC is 0.9, how much spending will this $100 generate in the economy?

$1,000

(Table) According to the table, net domestic product is

$1,330 billion

Assume that US$1 will buy 110 yen. If absolute purchasing power parity exists between the United States and Japan, and if the Big Mac meal costs $5 in the United States, it will cost _____ in Japan.

550 yen

The Taylor rule is 2 + inflation rate + 1/2 output gap + 1/2 inflation gap. If inflation is 3%, the output gap is 1%, and the inflation gap is 1%, the target interest rate is

6%

The typical length of a recession has been _____ months and is usually _____ than the subsequent period of expansion.

8 to 18; shorter

Last year, the consumer price index was 115 while the consumer price index for this year is 125. The rate of inflation is

8.7%

According to the simple Keynesian model, which statement is NOT correct?

APC+MPC=1

In 1933, Congress directed the _____ to develop estimates of "total national income for each of the calendar years 1929, 1930 and 1931. . ."

Department of Commerce

Which of these was NOT a cause of the 2007-2009 financial crisis?

Congress enacted restrictive trade policies that failed to curb imports.

Which graph BEST depicts the impact of a policy that reduces burdensome regulations?

Graph C (two blacks line at bottom and two red lines, only one blue line

Which statement is TRUE regarding the possible effects of a tax change?

Higher marginal tax rates tend to depress economic activity.

In which situation are people experiencing money illusion?

Prices rise 5% and incomes rise 5% and people think that their real incomes have risen 5%.

In an AD/AS model, if the economy is below its long-run output, what will happen in the long run if the markets are left alone?

SRAS will shift right.

What is a critical dilemma when implementing fiscal policy in reference to timing lags?

The economy may already be in a recovery before fiscal policy is enacted

Which of these is NOT a concern raised by critics of the government's extensive policy response to the 2007-2009 recession?

The value of U.S. Treasury bonds may eventually become worthless as default risk increases.

Why have many Americans' retirement accounts regained much of their lost value since the 2007-2009 stock market crash?

They were able to buy more stocks for a cheaper value when the market price was low.

Which of these did NOT contribute to the jobless recovery from the 2007-2009 recession?

a decrease in interest rates

According to Keynes, what determines the level of employment and income?

aggregate expenditures

Monetary policy is LEAST effective in reversing

an adverse supply shock

Which of these will shift the aggregate supply curve to the right?

an increase in the investment of human capital

Voters who want federal government revenues to equal federal government expenditures every year would agree with the _____ approach to federal finance.

annually balanced budget

The Federal Reserve can purchase _____ to fund fiscal policy, resulting in _____.

bonds; an increase in the money supply

In counteracting demand shocks, the Federal Reserve can achieve

both full employment and price stability

According to a cyclically balanced budget, what type of fiscal policies should be used during periods of economic expansion?

contractionary fiscal policy to generate a budget surplus

The balance of trade is included in the _____ account.

current

If the economy shown in the figure begins at point C, an increase in consumer confidence leads to what changes in the short run?

demand-pull inflation

Changes in taxes first cause changes in _____, and thus the government tax multiplier is _____ than the government spending multiplier.

disposable income; smaller

(Figure: Determining Fiscal Policy) The graph depicts an economy in short-run equilibrium at point a. For an economy in this situation, the BEST discretionary fiscal policy option is

expansionary fiscal policy that leads to full employment.

The balance of trade is/are

exports of goods and services minus imports of goods and services

If the dollar appreciates, _____ will _____, causing aggregate demand to _____, the aggregate price level to _____, and output to _____ in the short run.

exports; decrease; fall; fall; fall

The fractional reserve banking system

imposes limits on the amount of money that banks can create

In the simple circular flow model

income is equal to spending

Last year ABCD Corp., a New York firm, earned $1.5 million from business it conducted in Brazil. Its earnings are recorded in the balance of payments as

income received

According to the production function, which of these changes will NOT result in economic growth?

increases in consumption spending

Supply-side fiscal policies include all of these EXCEPT

increasing transfer payments

Using demand-side fiscal policy to stimulate aggregate demand when the economy is at full employment will primarily result in

inflation

The twin perils of the modern macro economy are said to be

inflation and unemployment

Assume that the reserve requirement is 20% and the Federal Open Market Committee buys a $10,000 bond. The impact on the banking system is a(n) _____ in new reserves.

injection of $10,000

Equilibrium in the Keynesian model requires that withdrawals be the same as

injections

Property rights consist of _____ goods that _____ be easily measured.

intangible; cannot

Money

is anything that is accepted in exchange for other goods and services or for payment of debt.

A stronger dollar will shift the U.S. aggregate demand curve to the _____ and _____ output demanded.

left; decrease

Which of these would NOT be included in official GDP measures?

lost wages from taking time off work due to bad air pollution

If the Federal Reserve sets a fixed rate for money supply growth, it is using

monetary targeting.

(Figure: Determining Long-Run and Short-Run Economic Shifts) Starting at point r, the economy will move to point _____ in the short run if policymakers successfully increase aggregate demand.

n

If short-term interest rates become larger than long-term interest rates, the yield curve becomes _____ sloped, and the chance of a recession becomes _____ likely.

negatively; more

All of these are determinants of aggregate supply EXCEPT

net exports.

A(n) _____ in the business cycle usually means the economy is operating at its capacity.

peak

Which of these is NOT a withdrawal that reduces the size of the spending multiplier?

personal investment in human capital

Which is a determinant of aggregate supply?

productivity

All of these are considered monetary policy lags EXCEPT _____ lag.

speculation

If the United States sends money to Haiti for disaster relief, it will be accounted for as a(n) account.

subtraction from the US current

If Productovia has exports of $50 billion and imports of $40 billion, it has a trade

surplus of $10 billion

The Taylor rule

targets the federal funds rate

Which country voted to leave the European Union in 2016?

the United Kingdom

(Table) According to the table, which country will have the lowest real GDP per capita in 23.67 years?

Nomia

A disadvantage of supply-side fiscal policies is that they take longer to work than do demand-side fiscal policies.

True

A supply shock can be due to an increase in the price of oil.

True

An example of a natural resource is a mineral deposit.

True

Friedman advocated a steady growth in the supply of money.

True

Full employment is considered to be the equivalent of the natural rate of unemployment.

True

Hypothetically speaking, if the Organization of the Petroleum Exporting Countries (OPEC) stopped exporting oil, a decrease in production would lead to a decrease in aggregate supply.

True

In macroeconomics, the long run is

a period long enough that participants in the economy will have enough time to gain all relevant information and enough time to act correctly on that information

The economy is not likely to be heading into a recession when the National Activity Index equals -0.95.

False

The equation of exchange applies only in the short run.

False

The goal of unemployment policy is to eliminate frictional unemployment.

False

The multiplier effect relates a change in savings to the resulting change in investment.

False

The natural rate of unemployment occurs when the rate of increase in the wage is greater than the increase in productivity.

False

The target for the federal funds rate is set by the federal government.

False

(Figure: Understanding Phillips Curves) What is the natural rate of unemployment associated with Phillips curve PCa?

4%

(Table: Money Measure Components, January 2019) Based on the table, currency as a percentage of M1 for January 2019 was

44%

Which statement is NOT true regarding the role of automation in the economy?

Firms are more likely to replace workers with automation before a recession begins

Based on the unemployment data since 1998 presented in the chapter, which statement(s) is/are true? I. The unemployment rate among blacks has tended to be about double the rate among whites. II. The unemployment rate for college graduates is consistently low. III. People who lost their jobs constitute a small percentage of the unemployed.

I and II only

Which statement(s) is/are TRUE? I. Increased use of technology has enabled companies to use fewer workers, contributing to jobless recoveries. II. The use of fiscal and monetary policy to address a jobless recovery will not lead to spending by consumers and to firms being crowded out by government spending. III. Increasing taxes to reduce the national debt is an appropriate policy to address a jobless recovery.

I only

Which statement(s) is/are TRUE? I. The balance of trade is included in the capital account. II. A deficit in either the current or capital account must be offset by an equal surplus in the other account. III. If the United States sends money to Haiti for disaster relief, it will be accounted for as a subtraction from the U.S. current account.

I only

Which change is likely to increase wages the MOST in a country?

The capital-to-labor ratio rises by 2%.

Macroeconomics focuses on issues such as job growth, economic growth, and inflation rates.

True

Missing a minimum payment on a credit card can make it more expensive to get a car loan in the future.

True

Rational expectations are forward looking, since they assume that people will make use of all available information.

True

The European Central Bank sometimes requires countries to agree to trim their budgets and cut their debt in return for its loans.

True

The Fed has been successful at keeping the federal funds rate near the target.

True

The balance of trade is the difference between exports of goods and services and imports of goods and services.

True

The catch-up effect is the idea that up to a certain point, developing countries can achieve greater productivity for each unit of capital invested because they have the advantage of using technologies already developed by other countries.

True

The main idea of a circular flow diagram is that every dollar spent in an economy becomes a dollar of income to someone else.

True

The work of Robert Mundell was useful when the nations of the European Union established a single currency.

True

Thomas Malthus believed that the geometric growth of the population and the arithmetic growth of the food supply would never be altered.

True

Thomas Malthus thought that world starvation was inevitable.

True

If a country's GDP is $200 million and its total population is 10,000, but only 8,000 of these people work, the country's per capita income is

$20,000

Compare the price of a pound of salmon in the United States with a pound of salmon in Japan. If we assume that the price of salmon in the United States is $4 per pound, while in Japan it is 1,488 yen, and the dollar-yen exchange rate is US$1 = ¥124, then the real exchange in terms of salmon is

0.33

(Table) The table shows data on consumption at various levels of income. Assume there is no private investment. The value of the average propensity to consume at equilibrium is

1.00

(Table) According to the table, the number of people in the labor force is

140

Soybeans produced in Brazil, but eaten by cows in a Kansas feedlot, will be included in U.S. GDP.

False

The consumer price index measures the average change in prices received by domestic producers for their output.

False

Which of these is NOT true regarding the Keynesian model?

Aggregate spending is always less than aggregate income.

What does the paradox of thrift say?

An economy that saves too much can end up with lower total savings.

Which of these would NOT shift the AD curve?

An increase in market power occurs in the airline industry

_____ is known for showing that a reduction in tax rates could increase tax revenues.

Arthur Laffer

Supply shocks that are counteracted by increasing the money supply will restore the economy to full employment and also decrease the price level.

False

Supply-side fiscal policies have the disadvantage of setting up a tradeoff between low inflation and low unemployment rates.

False

The Fed's Board of Governors is made up of the heads of the 12 regional districts.

False

(Table) When you look at the table, what evidence do you see that suggests which country has the highest savings rate?

Consumer spending is a smaller share of total spending in Macland, suggesting that consumers are saving a larger share of their income.

A consumer price index of 107 means that prices rose by 7% from the previous year.

False

A person is considered to be unemployed if he or she has been either actively or passively looking for work.

False

An absence of enforcement of contracts would encourage economic development because people would be more willing to incur risks if they did not have to worry about getting sued.

False

An increase in interest rates will lead to an increase in aggregate demand.

False

Compared with stocks, bonds tend to reward investors with a higher average return on investment over the long run.

False

Fiat money is money that is backed by gold, silver, or some other commodity.

False

If inflation is too high, the Federal Reserve will raise taxes to reduce spending.

False

In September 2013, the Fed was waiting for a pattern of economic improvement in the data before winding down its bond purchases. This wait for a signal about the economy's condition is known as decision lag.

False

Savings account deposits are more liquid than currency is.

False

Since 2008, females have had a higher unemployment rate than males

False

Social media raises the costs of doing business for firms.

False

Which statement(s) is/are TRUE? I. The 18-month economic downturn that lasted from December 2007 to July 2009 was dubbed the Great Depression. II. The economic recovery that took place after the 2007-2009 economic downturn was slow, requiring many years for economic indicators to return to their prerecession levels. III. The housing boom of 2003-2007 did not contribute to the 2007-2009 economic downturn.

II only

_____ government spending, _____ transfer payments, and _____ taxes all increase aggregate demand.

Increasing; increasing; decreasing

Which company did the Federal Reserve and the Treasury allow to fail to send a message to the financial markets about the costs of risky behavior?

Lehman Brothers

The official unemployment rate (U-3) includes which person as unemployed?

Logan, who was laid off from a cybersecurity firm and is actively seeking a similar job

Which statement about M1 and M2 is correct?

M2 is greater than M1

Which statement regarding discretionary and mandatory spending is correct?

Mandatory spending may act as an automatic stabilizing force in the macro economy.

Which of these is MOST likely to have a large intergenerational imbalance?

Medicare

_____ are all examples of discretionary spending

National defense, income security, and veterans' benefits

Which set of events would lead to an increase in a country's aggregate demand?

Taxes are decreased in the country while expectations of job security rise in the workforce.

If the economy shown in the figure begins on AD1 and SRAS1, what will happen in the short run and long run if the government begins a sustained period of increased spending?

The economy moves from point C to E to B.

The Rule of 70 would be most accurate for estimating the doubling time in which situation?

The growth rate is steady at 4%.

Demand-pull inflation occurs when aggregate demand expands beyond the level necessary for full employment.

True

If the price level is stable and if aggregate spending increases, a significant change in output occurs, showing the full impact of the spending multiplier.

True

In September 2012, the Argentinian central bank increased its benchmark interest rate via open market operations. The bank must have sold securities.

True

In the aftermath of a recession, firms are more likely to add overtime shifts than hire permanent workers when the demand for their product increases.

True

If the U.S. dollar appreciates against the Canadian dollar, what is expected to happen to U.S. exports to Canada and to U.S. aggregate demand, all else equal?

U.S. exports to Canada would decrease and U.S. aggregate demand would decrease

(Figure: Determining SRAS Shifts 3) Consider the shift in aggregate supply shown in the accompanying figure. Which of these might cause this change in short-run aggregate supply?

Unions successfully negotiate higher wages

Whispering Valley Furniture hires 5 employees working eight hours each to produce 80 rocking chairs. Rocky Gap Furniture hires 10 employees working eight hours each to produce 100 rocking chairs. Which company's workers are more productive?

Whispering Valley Furniture's workers are more productive.

Suppose a car sells for $20,000 in the United States while the same car sells for 2.4 million yen in Japan. Which exchange rate is consistent with purchasing power parity?

Y120 for US$1

Which of these is an example of gross private domestic investment?

a change in business inventories

The historical evidence shows that

a country's degree of freedom is related to the level of economic growth.

What would cause the price level to decrease and employment to increase?

a shift to the right of the short-run aggregate supply curve

If there is a general rise in fear of the financial system, the _____ multiplier will _____.

actual; fall

If a Japanese mutual fund buys a share of stock on the New York Stock Exchange, it will be accounted for as a(n) _____ account.

addition to the U.S. capital

The U.S. economy is currently experiencing high unemployment and low inflation. To lessen the unemployment problem, the Federal Reserve could

buy bonds through open market operations, thereby enabling banks to lend more money, increase the money supply, stimulate spending, and create jobs

(Table: Retirement Plans for Four Companies) Jan is deciding between job offers from the four companies represented in the table. She expects to work for five more years before retiring and wants to have as much as possible in her retirement savings account in five years. She will contribute only enough of her salary as is needed to obtain the maximum employer match. Given the information in the table, which company should she choose in order to reach her goal?

company C

To counteract a positive demand shock, the Federal Reserve uses _____ monetary policy, which _____.

contractionary; reduces both output and the price level

Suppose a government finances its expansionary fiscal policy by borrowing from the public. Joseph is concerned that this will increase the demand for loanable funds, drive up interest rates, and leave less loanable money available for consumers and businesses. Joseph is concerned about the _____ effect.

crowding-out

Which of these requires the government to balance its budget over the business cycle?

cyclically balanced budget

China's recent policy of currency management has _____ U.S. import prices and _____ U.S. manufacturing employment.

decreased; decreased

Suppose the exchange rate of US dollars per British pound has changed from $1.90/pound to $1.50/pound. This means that

dollar appreciates from .53lb per $US to .67lb per dollar

One way a stable financial system supports economic growth is that it

facilitates the movement of capital from savings to investment

Collateralized debt obligations are

financial instruments backed by a collection of mortgages

Robert Mundell discussed the problems of moving from a _____ to a _____.

fixed exchange rate system; flexible exchange rate system

A country's _____ exchange rate is determined in international currency exchange markets.

flexible

The buying and selling of foreign currency is

foreign exchange

The interest paid on public debt held by _____ is a real claim on American goods and services.

foreigners

The four types of spending in GDP are personal consumer spending, _____ private domestic investment, government spending, and _____.

gross; net exports

Which is NOT consistent with the level of output in the long run?

high inflation

Which of these are examples of automatic stabilizers?

income tax revenues and transfer payments

If the Federal Reserve adheres strictly to the Taylor rule, it will

increase the target federal funds rate when there is concern about inflation and lower it when there is concern about recessions

Increases in government spending _____ equilibrium income, and increases in taxes _____ equilibrium income.

increase; decrease

What is the single most important factor influencing economic growth for an economy?

increased productivity

Which example of infrastructure is the LEAST tangible?

increased protection of property rights

Which approach to monetary policy would be MOST likely to increase unemployment problems caused by a negative supply shock to an economy?

inflation targeting

The cyclically balanced budget

is not easy to implement because of the time it takes to define stages of the business cycle.

The marginal propensity to consume

is the change in consumption associated with a change in income

The national economic objectives that the Fed attempts to achieve include all actions EXCEPT

keeping tax rates low

Which factor of production is the least likely to increase output per worker?

labor

The _____ is the change in consumption associated with a change in income.

marginal propensity to consume

The money multiplier

measures the maximum amount the money supply can increase when new deposits enter the banking system

Adaptive expectations theory describes the use of _____ to form expectations of inflation

past rates of inflation only

What is the best measure of economic growth and standards of living in a country?

real GDP per capita

Over the past century, when worker productivity rose

real wages rose

Under flexible exchange rates, an open economy _____ monetary policy and _____ fiscal policy.

reinforces; hampers

A monetary rule would make it difficult to

respond to unforeseen events.

Graphically, expansionary fiscal policy is displayed by a shift to the _____ in aggregate _____.

right; demand

If the government offers firms investment tax credits for building new factories, the after-tax rate of return _____, causing the loanable funds _____ curve to shift _____, leading to _____ interest rates.

rises; demand; rightward; higher

A breakthrough in solar energy research that halves the cost of electricity will

shift the aggregate supply curve to the right

In the market for loanable funds, the government announces new tax breaks for saving for retirement while there is an increase in demand for products. What should be expected in the market for loanable funds as a result of these two events?

the amounts of funds borrowed will rise, but there is uncertainty about the direction of any change in interest rates

All of these would cause a decrease in a country's aggregate demand EXCEPT

the country's CPI rises

Which behavior is NOT a problem caused by a lack of transparency regarding monetary policy?

the possibility of lack of coordination leading to fiscal and monetary policies that offset or overshoot each other

Which entity will gain from unanticipated inflation?

the state of Kansas, which is running a budget deficit

When the housing bubble collapsed in 2007, _____ rose significantly, and the Federal Reserve _____ interest rates.

unemployment; lowered