Econ Macro Chapter 9-12
determine the number of people cyclically unemployed for the year 2004.
100
In an economy, the total expenditures for a market basket of goods in year 1 (the base year) was $5,000 billion. In year 2, the total expenditure for the same market basket of goods was $5,500 billion. What was the GDP price index for the economy in year 2?
110
with an MPC of 0.8 the expenditures multiplier will equal ____. multiplier= (1/1-MPC)
5
A trough in the business cycle occurs when
Employment and output reach their lowest levels
Which of the following events can shift the aggregate supply curve and the aggregate demand curve, moving the economy away from its full-employment level of real GDP?
Government policies, Natural disasters.
Stagflation is used to describe an economy that is not growing, but has rising ____ together with high _____
Inflation, unemployment.
A ______ supply shock causes aggregate supply to rise.
Positive
The M1 money supply is composed of
chackable deposits and currency in circulation
if the Board of Governors of the Federal Reserve System increases the reserve requirement, this change will_______
decreases the excess reserves of member banks and thus decrease the money supply
fiscal policy is typically
difficult to implement quickly
aggregate demand is:
downward sloping.
when the federal government cuts taxes and increases purchases to stimulate the economy during a period of recession, such actions are designed to be
expansionary
some of the challenges of using government expenditures to stimulate the economy are that:
increasing government expenditures can increase the deficit; eventually spending will need to be cut, leading to recession.
If bond prices decrease, then the:
interest rate increases.
an increase in the money supply is likely to reduce
interest rates
the aggregate demand curve shows the_____
inverse relationship between the price level and the quantity of real GDP purchased
contractionary fiscal policy
is the application of fiscal policy to decrease aggregate demand, involves decreasing government purchases and/ or increasing taxes.
lowering the discount rate has the effect of_______
making it less expensive for commercial banks to borrow from central banks
Inflation can be caused by:
recessions, expansions
the time that elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a(n)
recognition flag
Resource price tend to adjust slowly in response to changes in the market. Another way to state is to say that.
resource price sticky.
which would most likely shift the aggregate supply curve? A change in the prices of ________
resources
which of the following causes consumption?
rising wealth, lower personal taxes, increased borrowing
as the economy declines into rescission, the collection of personal income tax revenues automatically falls. This phenomenon best illustrates how a progressive income-tax system.
serves as an automatic stabilizer for the economy.
cost-push inflation occurs as an increase in resource costs shifts aggregate______ to the left.
supply
inflation that results from a decrease in aggregate ______ is called cost-push inflation.
supply
fiscal policy would be more effective if
the government could change taxes and expenditures rapidly
reserves borrowed at the federal funds rate are usually repaid_____
the next day
which of the following statements is correct?
the prime rate involves longer, more risky loans than the federal funds rate.
which of the monetary policy tools can alter both the level of excess reserves and the money multiplier?
the reserve requirement
A_____ is the lowest point in business cycle.
trough
the long-run aggregate supply curve is______
vertical
The interest rate will fall when the
Quantity of money supplied exceeds the quantity of money demanded
Positive shocks or changes to aggregate supply include:
an unexpected increase in productivity, an abrupt decrease in oil changes.
members of the Federal Reserve Board of Governors are
appointed by the president to staggered 14-year terms.
one advantage of automatic stabilizers over discretionary fiscal policy is that automatic stabilizers
are not subject to the timing problems of discretionary fiscal policy.
a wealthy executive is holding money, waiting for a good time to invest in the stock market. This action would be an example of the
asset demand for money.
the federal funds rate is the interest rate that _____ charge(s) ______
banks; other banks
If taxes and government expenses did not vary with income, then income would:
be less stable
suppose there is a negative demand shock. In the short run, the economy moves to a new equilibrium where real GDP is:
below the full-employment level, and unemployment is higher than the natural rate.
Which of the following statements is true?
bond prices and the interest rate are inversely related
the long-run aggregate supply analysis assumes that______
both input and product prices are variable
If the U.S. Congress passes legislation to raise taxes to control demand-pull inflation, then this would be an example of a(n):
contractionary fiscal policy
inflation that results from a decrease in aggregate supply is called _______ _______ inflation.
cost push
the M1 measure of money consists of the sum of
currency, checking deposits, and travelers' checks
unemployment that occurs when there is deficient demand for the goods and services of an economy is called
cyclical unemployment
due to automatic stabilizers, when the nation's total income rises, government transfer payment
decrease and tax revenues increase.
an increase in aggregate demand is most likely to be caused by a(n)_________
decrease in the tax rates on household income
Inflation that results from a(n)_________ in aggregate supply is called ______ Inflation.
decrease, cost-push
inflation caused by an increase in aggregate spending is referred to as
demand-pull inflation
money serves as a basic yardstick for measuring economic value ( a unit of account), allowing
easy comparison of the relative prices of goods and services.
The level of real GDP produced in an economy when its operating at the natural rate of unemployment is called full ______ GDP.
employment
in calculating the unemployment rate, " discouraged" workers who are not actively seeking employment are
excluded from the labor force.
price level and output both increase from a successful ______ fiscal party.
expansionary
traditionally, the Fed often communicated its intentions to restrict or expand monetary policy by announcing a change in it target for the ________
federal funds rate
which of the following statements are true?
in traditional demand model, we compare the quantity demanded of a good to its price; in an aggregate demand model,we use a price index to represent the overall price level or average price of goods and services in the economy.
an increase in expected future income will_____
increase aggregate demand
an increase in productivity will_______
increase aggregate supply
if the price level decreases from 200 to 100, the real output demand will_______
increase by $200 billion.
when the government borrows money so it can increase government or decrease taxes, it increases the demand for_______ _______
loanable funds
the concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP is called the ______ effect
multiplier
A _____ supply shock shifts the aggregate supply to the left.
negative
"full employment" refers to the situation when there is
no cyclical unemployment.
the purchase and sale of government securities by the Fed is called_______
open market operations
which of the following is a tool of monetary policy often used by the Fed for altering the reserves of commercial banks
open-market operations
A negative shock causes aggregate demand or supply to fall at every _____ level.
price
A leftward shift of aggregate supply causes ____to rise with _______
prices, unemployment
supply shocks cause a ______ the aggregate supply curve. A change in the price level causes a _________ the aggregate supply curve.
shift of; movement along.
the aggregate supply curve (short run)
slopes upward and to the right
_______ is a combination of the words stagnation and inflation.
stagflation
the inflation rate measures the percentage growth rate of
the CPI from one year to the next.
which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers?
the Consumer price index
As nominal wages and the costs of other resources rise during an expansion:
the aggregate supply curve shifts to the left, real output falls and the price level rises further.
once an explosion occurs, as nominal wages and the costs of other resources rise, eventually:
the aggregate supply curve shifts to the left, the price level rises, and real GDP returns to the full employment level.
when the price level decreases,________
the demand for money falls and the interest rate falls
the interest rate that the fed charges on loans made directly to banks is called______
the discount rate.
The Phillips Curve refers to
the downward- sloping line that represents the negative, or inverse, relationship between the rate of inflation and the unemployment rate in the short run is called.
The business cycle is:
the short-term fluctuations experienced in the economy due to changes in levels of economic activity.
which of the following statements are true?
we use aggregate demand to describe the overall, or total, demand for all final goods and services produced in an economy; we use demand to talk about the price and quantity of a single good or service produced in a specific market.
the diagram illustrates a patter of
a business cycle
The tax multiplier times initial change in tax equals:
a change in aggregate demand
Negative shocks or changes to aggregate supply include:
a natural disaster, an abrupt increase in oil prices.
if you post your car on eBay with a "but it now" price of $1,800, you are using money as
a unit of account