macro test 2 (2)

How does the level of risk affect an asset's desirability?

They are inversely related- the higher the level of risk, the less attractive the asset

Which of the following does not cause a change in the Solow residual?

a change in expectations

When economists say that money is neutral, this means that:

a change in the money supply changes nominal variables but not real variables

Which of the following is most likely to lead to a decrease of 10% in the nominal demand for money

a decline of 10% in the price level

Countries in which was adjust slowly to changes in the supply of and demand for labor are likely to have ___ sacrifice ratio

a high

Which of the following best describes a general equilibrium?

all markets are simultaneously in equilibrium

All of the following will shift the FE line except

an increase in the price level

Identify the following variables as being leading, lagging or coincident business fixed investment__ residential investment ___ inventory investment___ stock prices ___ money supply ___ nominal interest rates__

coincident leading leading leading leading lagging

The IS curve represents:

combinations of output and the real interest rate such that desired national saving is equal to desired investment

If all the money was held in the form of currency, what would happen if the Federal Reserve sold financial assets to the public? The money supply would ____

decrease

If you knew that the economy was falling into a recession, what would you expect to happen to production during the next few quarters?___ to investment? ___ to average labor productivity?___ to the real wage?__ to the unemployment rate?___

decrease decrease decrease decrease increase

Keynesians prefer a disinflation policy of

gradualism

The misperceptions theory concludes that:

in the short run, anticipated monetary changes are neutral but unanticipated monetary changes are not neutral

If all the money was held in the form of currency, what would happen if the Federal Reserve bought financial assets fro the public? The money supply would ____

increase

Define the velocity of money

it is the ratio of nominal GDP to the amount of money in circulation

What is comovement?

macroeconomic variables that tend to move in the same direction over time

Suppose that Sam buys a new iPod for $200. In this example, money serves the role of ___

medium of exchange

In the classical model, money is neutral. This seems to be inconsistent with the business cycle fact that:

money is a leading, procyclical variable

Which of the statements below, regarding the functions of money, is true?

money serves as a medium of exchange, as unit of account, and as a store of value

In the efficiency wage model, an increase in productivity will cause

no change in the real wage

What does the Keynesian model predict about monetary neutrality? in the short run, changes in the money supply will affect ___ while in the long run, these changes will only affect ___

output and the real interest rate; the price level

For something to satisfy the medium of exchange function of money, it must be

readily exchangeable for other goods

The natural rate of unemployment in the US generally __ from 1960 to 1980 and ___ from 1980 to 1995.

rose; fell

In each of the following cases, what is the effect on the FE line? an inverse supply shock___ an increase in the labor supply ____ an increase in the money supply ___

shifts the FE line leftward shifts the FE line rightward does not change the FE line

In each of the following cases, what is the effect on the LM curve? An increase in the expected inflation rate___ an increase in government spending ___ an increase in the price level___

shifts the LM curve down and to the right does not shift the LM curve shifts the LM curve up and to the left

In the quantity theory of money, velocity is assume to be highly

stable

Suppose that Sam saved $15 every week for the past 10 weeks in order to buy the iPod. Here, money served the role of

store of value

The Solow residual, the most common measure of productivity shocks is

strongly procyclical

Which of the following best describes the FE line?

the FE line is vertical at the full employment level of output

The full employment level of employment is

the equilibrium level of employment reached after all wages and prices have fully adjusted

In the U.S., the money supply is determined by

the federal reserve

The position of the FE line is determined by

the labor market and the production function

A difficulty face by policymakers who wish to use the unemployment rate as a guide to whether the economy is weak or strong is that

the natural rate of unemployment is hard to measure

Which of the following best represents the relationship between inflation and the unemployment rate?

the phillips curve

How does the expected rate of return on an asset affect its desirability?

they are directly related - the higher the expected return, the more attractive the asset

How does the level of liquidity affect an asset's desirability?

they are directly related- the more liquid the asset, the more desirable the asset

While shopping, Sam noticed that an iPod was priced at $200, a competing MP3 player was selling for $100. When he realized that the iPod was twice as expensive as the MP3 player, money served the role of ____

unit of account

In each of the following cases, what is the effect on the short run aggregate supply (SRAS) curve? An increase in firm costs shifts the SRAS curve ____. An increase in the money supply ____. An increase in consumption ____.

upward does not shift the SRAS curve does not shift the SRAS curve

In the Keynesian model, short run equilibrium occurs

where the IS and LM curves intersect

the gift exchange motive suggest that

workers who feel well treated will work harder and more efficiently