macro quiz 10/29

aggregate demand increases if monetary policy _______ the quantity of money and ______ interest rates.

increases; decreases

Starting from a​ full-employment equilibrium, a decrease in​ short-run aggregate supply​ ______ the price level and​ ______ potential GDP.

increases; decreases real GDP below

If the price level and the money wage rate rise by the same​ percentage, the quantity of real GDP supplied​ ______ and there is a movement up along the​ ______ aggregate supply curve.

does not change; long-run

Aggregate demand increases if expected future​ income, inflation, or profits​ ______. And aggregate demand increases if fiscal policy​ ______ government expenditure.

increases; increases

What does the aggregate demand curve​ show? What factors change and what factors remain the same when there is a movement along the aggregate demand​ curve? A movement along the aggregate demand curve occurs if​ _______.

the price level changes and all other factors remain unchanged

What does the aggregate demand curve​ show? What factors change and what factors remain the same when there is a movement along the aggregate demand​ curve? The aggregate demand curve shows the relationship between the quantity of real GDP demanded and​ ______ when everything else remains the same.

the price level

Choose the correct statement. A. The aggregate demand curve slopes downward because of the wealth effect and the money wage rate. B. The higher the price​ level, the greater is the quantity of real GDP demanded. C. The quantity of real GDP demanded depends on the quantity of real GDP supplied. D. The quantity of real GDP demanded is the sum of the real consumption​ expenditure, investment, government​ expenditure, and exports minus imports.

D

Does economic growth result from increases in aggregate​ demand, short-run aggregate​ supply, or​ long-run aggregate​ supply? Economic growth results from​ ______.

a growing supply of labor and increasing labor productivity, which increases long-run aggregate supply

If the money wage rate rises and potential GDP remains the​ same, does the LAS curve or the SAS curve shift or is there a movement along the LAS curve or the SAS​ curve? A rise in the money wage rate with no change in potential GDP creates​ ______.

a leftward shift of the SAS curve and no change in the LAS curve

Does inflation result from increases in aggregate​ demand, short-run aggregate​ supply, or​ long-run aggregate​ supply? Inflation results from​ ______.

a persistent increase in aggregate demand at a faster pace than that of the increase in long-run aggregate supply

Describe three types of​ short-run macroeconomic equilibrium. A macroeconomic equilibrium in which real GDP exceeds potential GDP is​ _____ equilibrium. And one in which real GDP is less than potential GDP is​ _____ equilibrium.

an above full-employment; a below full-employment

The U.S. price level rises. This event​ _______.

decreases the quantity of real GDP demanded

the U.S. price level rises. This event ______.

decreases the quantity of real GDP demanded

Aggregate demand increases if fiscal policy​ ______ taxes or​ ______ transfer payments.

decreases; increases

aggregate demand increases if the exchange rate ______ or foreign income ______.

decreases; increases

how do a decrease in transfer payments and a decrease in taxes change aggregate demand? aggregate demand _______ when a decrease in transfer payments occurs. aggregate demand _______ when a decrease in taxes occurs.

decreases; increases

Inventory Investment Decreases When real GDP increased in the first quarter of​ 2017, consumption​ expenditure, exports, and fixed investment increased but business inventory investment fell. ​Source: Bureau of Economic​ Analysis, June​ 29, 2017 Explain how a fall in inventories influences aggregate demand. A fall in inventories​ _______ aggregate demand because​ _______.

decreases; investment decreases

Long-run macroeconomic equilibrium occurs when real GDP​ _____ potential GDP​ - equivalently, when the economy is on its​ _____ curve.

equals; LAS

A below​ full-employment equilibrium is an equilibrium in which potential GDP​ _____ real GDP.

exceeds

When potential GDP​ _____ real​ GDP, the output gap is called a recessionary gap.

exceeds

An above​ full-employment equilibrium is an equilibrium when real GDP​ _____.

exceeds potential GDP

the graph shows an aggregate demand curve. suppose there is a decrease in transfer payments. draw a new curve to show the effect of this change on aggregate demand. Label the new curve. C1. now suppose that there is a decrease in taxes. Draw a new curve to show the effect of this change on the original AD curve. Label the new curve C2.

image

When Canada sets new environmental standards that require power utilities to upgrade their production​ facilities, Canada's aggregate demand​ _______.

increases

an increase in expected future profits ________.

increases aggregate demand today

The graph shows an aggregate demand curve. Draw a curve that shows the effect on aggregate demand of an increase in expected future income. Label it.

increases aggregate demand today; increases aggregate demand today AD1 is to the right of set line

How do fluctuations in aggregate demand and​ short-run aggregate supply bring fluctuations in real GDP around potential​ GDP? Starting from a​ full-employment equilibrium, an increase in aggregate demand​ ______, and creates​ ______ gap.

increases real GDP above potential GDP; an inflationary

Autoworkers agree to a lower money wage rate. This event​ _______.

increases the quantity of real GDP demanded

Explain for each event whether it changes the quantity of real GDP demanded or aggregate demand. Automotive firms in the United States switch to a new technology that raises productivity. This event​ _______.

increases the quantity of real GDP demanded

Explain for each event whether it changes the quantity of real GDP demanded or aggregate demand. Toyota and Honda build additional plants in the United States. This event​ _______.

increases the quantity of real GDP demanded

autoworkers agree to a lower money wage rate. This event ______.

increases the quantity of real GDP demanded.

Canada trades with the United States. Explain the effect of each of the following events on​ Canada's aggregate demand. When the government of Canada cuts income​ taxes, Canada's aggregate demand​ _______. When the United States experiences strong economic​ growth, Canada's aggregate demand​ _______.

increases; increases

If the price level rises and the money wage rate remains​ constant, the quantity of real GDP supplied​ ______ and there is a movement up along the​ ______ aggregate supply curve.

increases; short-run

The graph shows an​ economy's long-run aggregate supply curve. The economy is at a full​-employment equilibrium. Draw an aggregate demand curve and a​ short-run aggregate supply curve. Label them. Draw a point at the​ short-run equilibrium.

midline point. criss cross line. top line: SAS. bottom line: AD

​Long-run aggregate supply is the relationship between the quantity of real GDP supplied and the price level when the ​ _____ changes in step with the price level to maintain full employment.

money wage rate

Why does the aggregate demand curve slope​ downward? The aggregate demand curve slopes downward because​ _______.

of the wealth effect and the substitution effect

On what does the quantity of real GDP supplied​ depend? The quantity of real GDP supplied depends on the​ _______.

quantity of labor employed, the quantity of physical and human capital, and the state of technology

The gap between​ ______ is the output gap. When​ _____, the output gap is called an inflationary gap.

real GDP and potential GDP; real GDP exceeds potential GDP

When​ _____ there is a​ full-employment equilibrium.

real GDP equals potential GDP

Aggregate demand is the relationship between the quantity of​ _____ demanded and the​ _____ when all other influences on expenditure plans remain the same.

real GDP; price level

​Short-run aggregate supply is the relationship between the quantity of​ _____ supplied and the​ _____ when the money wage​ rate, the prices of other​ resources, and potential GDP remain constant.

real GDP; price level

​Short-run macroeconomic equilibrium occurs when the quantity of​ _____ demanded equals the quantity of​ _____ supplied at the point of intersection of the​ _____ curve and the​ _____ curve.

real GDP; real GDP; AD; SAS

In the long​ run, the money wage rate​ ______, short-run aggregate supply​ ______, and the economy returns to a​ full-employment equilibrium.

rises; decreases

Which of the following economies is facing a stagflation​?

the European economy is experiencing a decrease in real GDP for three quarters and a rise in the price level

Which of the following statements illustrate monetary policy​?

the Fed has raised the federal funds rate by 0.3 percent.

Which of the following statements illustrate fiscal policy​?

the US government has proposed a hike in the corporate tax rate.

When does potential GDP​ increase? Potential GDP increases when​ _______.

the full-employment quantity of labor increases