Macroeconomics Updated Final Exam
If a country experiences a rise in prices but produces the same quantity of output as in the previous year, it's nominal GDP will ___ and it's real GDP will ___
Increase; unchanged
If AD shifts right as the economy booms, and then SRAS shifts left, what happens to inflation?
It stays the same
A shift to the ___ of the ___ curve would cause the price level and employment to decrease in the short run.
Left; short-run aggregate supply
Assume the economy depicted in the figure above is in long run equilibrium with the aggregate demand curve is AD0 and the short run aggregate supply curve is SRAS0. If there is a supply shock, such as a drastic increase in the price of oil, this will cause a ___ and a movement to a short run equilibrium at point ___
Leftward shift in SRAS2: a
Marginal analysis would put an emphasis on:
additional costs and benefits
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.
If the economy is at full employment, increases in government spending:
reduce aggregate output
Open market operations involve the purchase and sale of:
government securities
Assume taxes increase by $200 in the marginal propensity to consumer is 0.75. If the price level was to remain the same we would expect:
Equilibrium income to rise by $800
If the Fed lowers the reserve requirement:
the money multiplier will rise.
IKEA (a Swedish home furnishings company) produces desks that are made in Poland. The value of these imported desks sold at an IKEA store in the United States counts toward:
neither GDP nor GNP.
A guitar is produced in California using $100 in raw materials and sells for $300 in a guitar shop. As a final good, each guitar that is produced contributes ___ to U.S. GDP
$300
How is money created (money supply increased) "out of thin air" by banks?
Banks loan out money that is then redeposited into other banks, creating a cycle
All of the following are determinants of aggregate supply EXCEPT:
Disposable income
If the national debt is $55 million and this year's deficit is $5 million, what would the new national debt be?
$60 million
If a car is produced in Detroit in 2013 but not sold until 2014, it should be included in ___ GDP, and it's value should be counted in ___
2013's; inventory changes
The stronger dollar (US$ appreciating) will ___ U.S. net exports and shift the U.S. aggregate demand curve to the ___
Decrease; left
_____ policy involves adjusting government spending and tax policies to move the economy toward full employment, economic growth, and low inflation.
Discretionary Fiscal
GNP includes output produced ___ but it does not include output produced ___
Outside the U.S. by U.S. citizens; inside the U.S. by foreign citizens
According to the figure of AD/AS curves and assuming the country begins on AD1 and SRAS1, what will happen in the short and long run if the government increases spending?
The economy moves from C to E to B
If the marginal propensity to consume is 0.8, full-employment output is $14 trillion, and current output is $13.5 trillion, then investment spending must _____ to reach full-employment output.
increase by $0.5 trillion
If real GDP at full employment is $5 billion while current GDP is $6 billion, a(n) _____ exists, and will require a _____ in spending to bring the economy back to full employment.
inflationary gap; decrease
In order for the Federal Reserve to raise interest rates, it needs to:
reduce the money supply.
