Macroeconomics Final Questions Possibilities
Suppose consumers decrease their consumption expenditure because they worry about what their income will be in the future. There is
A leftward shift of the aggregate demand curve
When autonomous expenditure decreases,
the AE curve shifts downward
If inflation is positive and is perfectly anticipated
those that hold paper money lose
Suppose that in 2019, firms discover that their inventories are falling below their planned levels, Which of the following statements are CORRECT?
Real GDP is less than equilibrium expenditure
Which of the following occurs while moving along a short-run aggregate supply curve?
The price level changes and the money wage rate is constant.
Suppose the equilibrium level of expenditure is $18 trillion. If real GDP is $17 trillion, then inventories are ____ their target levels and real GDP will _____
below; increase
When actual inflation is less than expected inflation,
borrowers lose and lenders gain
If the unemployment rate initially equals its natural rate, then if the inflation rate rises above its expected rate, the unemployment rate
falls below its natural rate
The marginal propensity to consume is the
fraction of a change in disposable income spent on consumption expenditure.
The marginal propensity to consume is the
fraction of a change in disposable income that is consumed
In 2008, when a recession started, the growth of the government expenditures on goods and services double compared to its growth in 2007. According to the aggregate demand theories of the business cycle
government expenditure was not a cause of the recession
If prices are fixed, when aggregate planned expenditure exceeds real GDP, then
inventories decrease, signaling firms to increase production and increase real GDP
If planned aggregate expenditure is less than real GDP,
inventories will increase above their target level and real GDP will decrease
The factor leading to business cycles according to the real business cycle theory is changes in
productivity caused by changes in technology
When the nominal interest rate rises, the
quantity of money demanded decreases
Long Run Phillips Curve is
vertical at the natural unemployment rate
When disposable income equals $800 billion, planned expenditure equals $600 billion, and when disposable income equals $1,000 billion, planned consumption expenditure equals $640 billion. What is the planned saving when disposable income is $800 billion?
$200 billion
When the price level in France increases while the exchange rate and the price level in the United State remain the same, the result is that
1. French citizens are more likely to buy U.S.-made goods 2. U.S. citizens are less likely to buy French-made goods 3. U.S.-made goods become relatively cheaper compared to French-made goods
Which of the following does NOT shift the short-run aggregate supply curve?
A) technological progess B) Reduction in the price of a raw material C)A CHANGE IN THE PRICE LEVEL D) A change in the money wage rate
Which of the following can start an inflation?
A. a decrease in the aggregate supply C. an increase in aggregate demand
Suppose the equilibrium of expenditure is $18 trillion. If real GDP is $19 trillion, then planned expenditures
are less than real GDP and real GDP will decrease
When real GDP exceeds aggregate planned expenditure
GDP will decrease
An individual holds $10,000 in a checking account and the price level rises significantly. Hence
The individual's real wealth and consumption expenditure decrease
At the start of cost push inflation,
prices and unemployment are rising
When the price of U.S.-produced goods rise and the price of foreign-produced goods do not change, the result is
a decrease in exports
According to the real business cycle (RBC) theory, recessions are the result of
a fall in the growth rate of productivity
The start of a cost-push inflation results in
a falling GDP and rising unemployment
Moving along the short-run Phillips curve indicates
a trade-off between inflation and unemployment so that higher inflation is related to lower unemployment
If aggregate planned expenditure exceeds real GDP
actual inventories decrease below their target
If planned expenditures equal $19 trillion when real GDP is $19.5 trillion, then
actual investment will exceed planned investment
In the macroeconomic short run
actual real GDP may be less than or more than potential GDP
People expect that the El Nino effect will cause drought in Australia in coming years. If most Australian firms expect that their profits will fall during the next five years, Australia's _________ this year
aggregate demand will decrease
Your real wealth is measured as the
amount of goods and services your wealth will buy
Demand-full inflation starts with
an increase in aggregate demand
Which of the following factors could start a demand-pull inflation?
an increase in exports
Which of the following shifts the aggregate demand curve rightward?
an increase in government expenditure
According to the interpersonal substitution effect, a fall in the price level will
cause the interest rate to fall so that investment increases and the quantity of real GDP demanded increases
The AD curve shows the sum of
consumption expenditure, investment, government expenditures on goods and services, and net exports
If the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would
decrease
A decrease in foreign incomes
decreases aggregate demand in the United States.
Disposable income _______ when _______
decreases; taxes increase
all else being equal, autonomous expenditure
does not change with changes in real GDP
When the price level rises, the long-run aggregate supply curve
does not shift
If investment decreases, the AE curve shifts
downward and the AD curve shifts leftward
The AD curve slopes
downward due to the wealth and substitution effects.
An increase in the price level result in a
downward shift in the AE curve and a movement up along the AD curve
The demand for money
increases as real GDP increases
As real disposable income increases, consumption expenditure _________ and saving _________
increases; increases
As the price level falls and other things remain the same, real wealth ________ and ______
increases; the quantity of real GDP demanded decreases
For a given level of anticipated inflation and natural unemployment rate, the short-run Phillips curve shows the relationship between
inflation and the unemployment rate
A shift in the aggregate expenditure curve as a result of an increase in the price level results in a
movement up along the aggregate demand curve
If the price level rises, the quantity of
nominal money people demand increases
Suppose that a shock causes the aggregate demand curve to shift rightward. If the Fed does nothing
output initially will exceed potential GDP, but the economy will return to potential GDP with a higher price level.
The long-run aggregate supply curve is vertical because
potential GDP is independent of the price
Suppose that the economy is at full employment and aggregate demand increases by more than it is anticipated to increase. Other things remaining the same,
real GDP increases above potential GDP
When the recession started in 2008, the government estimated that labor productivity for the year was -2.8 percent. This result is most in line with which theory of the business cycle fluctuations?
real business cycle theory
The aggregate demand curve
shifts rightward when taxes are decreased
A fall in the price level
shifts the aggregate expenditure curve upward and increase the quantity of real GDP demanded
An increase in the expected inflation rate shifts the
short-run Phillips curve upward
Based on the Keynesian theory of the business cycle, if the economy is at its full-employment equilibrium and aggregate demand increases then
the price level and real GDP both increase
As the money wage rate rises
the short-run aggregate supply curve shifts rightward
In the macroeconomic long run
there is full employment and real GDP is equal to potential GDP