Test 3 -- Short Run Fluctuations and Utopian Policy
If a person making $40,000 per year pays $10,000 in federal income taxes, and a person making $72,000 per year pays $18,000 in federal income taxes, which statement best describes the tax code?
$30,243.50 ($16,750 × 0.10) + [($68,000 − $16,750) × 0.15] + [($137,300 − $68,000) × 0.25] + [($150,000 − $137,300) × 0.28] = $30,243.50.
Assume the average price level was 101 in 2016 and in 102 it is 2017. If the inflation rate was 3.96 percent, then the __________ rate in 2017 is _____________.
(102 − 101) ÷ 101)) × 100 = 0.99 percent. Since it is lower than the rate in 2016, this is disinflation.
If for a certain economy the growth rate of the money supply is 5 percent, the growth rate of the velocity of money is _____ percent, the rate of inflation is 3 percent, and the real growth rate is 2 percent, then the quantity theory of money holds.
0 This is because 5 + 0 = 3 + 2.
What growth rate on the money supply did Milton Friedman advocate?
0.03
What share of total federal tax revenue is collected from the bottom 20 percent of income earners?
0.8%
Suppose an economy has _____ million unemployed workers, 135 million employed workers, and 70 million adults who do not participate in the labor force. The labor force participation rate for this economy is 67.4 percent.
10
Assuming no deductions or exemptions, what would the average tax rate be for a person earning $45,000 per year?
13.1 percent The tax liability is $5,895, which is 13.1 percent of $45,000.
Suppose an economy has 13.5 million unemployed workers, _____ million employed workers, and 73.1 million adults who do not participate in the labor force. The labor force participation rate for this economy is 68.26 percent. Please choose the correct answer from the following choices, and then select the submit answer button.
143.7
Between 1940 and 2015, what time period had the highest debt as a percentage of GDP for the United States?
1941-1946 As shown in Figure 36.5, World War II debt pushed the U.S. debt-to-GDP ratio to its highest level ever.
According to the AD curve, if m is 5 percent, v is 0, and the rate of inflation is 3 percent, what must be the growth rate of real GDP?
2%
In a typical year, spending on Social Security, Medicare, Medicaid, and defense represents about _____ of the federal government's budget.
2/3
A number of economists have argued that the Federal Reserve policy in _____ contributed to the housing boom and eventual bust that led to the financial crisis in 2007-2008.
2001-2004 The Fed kept short-term interest rates at record lows, which may have contributed to the housing bubble.
Using the information provided in the table, the real equilibrium rate of return G is equal to:
3 percent. (Recall that i = Eπ + requilibrium, thus 4 percent = 1 percent + requilibrium.)
Refer to the following table, which gives the CPI for the years 2004 through 2011.
3.1 percent (224.9 − 218.1) ÷ 218.1 = 0.031, which is 3.1 percent.
If for a certain economy the growth rate of the money supply is _____ percent, the growth rate of the velocity of money is 0.5 percent, the rate of inflation is 2.5 percent, and the real growth rate is 2 percent, then the quantity theory of money holds.
4 This is because 4 + 0.5 = 2.5 + 2.
If the number of employed is _____ million and the total labor force is 50 million, then the unemployment rate is 10 percent.
45 ([(50 − 45) ÷ 50)] × 100 = 10%)
Refer to the following figure, which shows the aggregate demand curve for an economy with 7 percent spending growth as well as some possible long-run aggregate supply curves. If long-run aggregate supply curve A (2%) represents the current Solow growth rate, what will be the rate of inflation?
5%
If the reserve ratio is 20 percent and the change in reserves is $8 billion, then the money multiplier is _______ and the change in the money supply is _________.
5; $40 billion With a reserve ratio of 20 percent, the money multiplier is 1 ÷ .2 = 5 and the change in the money supply is thus 5 × $8 billion or $40 billion.
If the inflation rate is 5% and the real GDP growth rate is 1%, what is the specified spending growth rate?
6 percent. 5 percent + 1 percent = 6 percent.
If the number of unemployed is 4 million and the number of employed is 60 million, then the unemployment rate is _____ percent.
6.25%
According to data from the Bureau of Labor Statistics, approximately what percentage of unemployed workers in 2005 found work in less than 14 weeks?
65%
Suppose an economy has 8.5 million unemployed workers, 131.2 million employed workers, and _____ million adults who do not participate in the labor force. The labor force participation rate for this economy is 66.84 percent. Please choose the correct answer from the following choices, and then select the submit answer button.
69.3
Suppose an economy has 10 million unemployed workers, 135 million employed workers, and _____ million adults who do not participate in the labor force. The labor force participation rate for this economy is 67.4 percent.
70
The current federal debt held by the public-to-GDP ratio in the United States is approximately:
75%
Assume that you make $60,000 per year, are married, have one child, and carry a mortgage on your house with interest payments of $1000 per month. Given this information, your total taxes due before exemptions or deductions would be $:
8,092.50. Use Figure 36.2: (0.10 × $18,150) + 0.15 × ($60,000 − $18,150).
description of the multiplier effect:
An increase in G stimulates C so the increase in AD can be larger than the increase in G alone.
What effect does an increase in reserves have on the money supply?
An increase in reserves increases both M1 and M2. An increase in reserves increases the money supply through a multiplier process.
What impact does an increase in the expected inflation rate have on the SRAS curve?
An increase in the expected inflation rate shifts the SRAS curve up and to the left. As shown in Figure 32.13, an increase in the expected inflation rate shifts the SRAS curve up and to the left.
Statement that describes a difficulty that makes it hard for the Fed to get monetary policy exactly right all of the time:
Changes in monetary policy typically affect the economy with a lag that can vary from 6 to 18 months. The Federal Reserve's control of the money supply is subject to uncertain lags.
How does crowding out influence the effectiveness of fiscal policy?
Crowding out reduces the effectiveness of fiscal policy
Which phrase sums up the notion that in some situations increased government spending can increase economic growth?
Demand can create its own supply. An increase in government spending can put the economy back on track, bringing the growth rate back to the Solow growth rate.
How does faster growth in real GDP affect unemployment?
Faster growth in real GDP decreases unemployment.
Which country has the highest long-term unemployment?
Greece
If taxpayers were given a tax rebate, what impact would this have on the aggregate demand curve? Please choose the correct answer from the following choices, and then select the submit answer button.
If taxpayers spend the extra money from a rebate, aggregate demand shifts up and to the right.
If the rate of real growth is fixed by real factors, what will accompany changes in m and v?
If the rate of real growth is fixed by real factors, changes in m and v can change only the inflation rate. On a given long-run aggregate supply curve, a shift of the AD curve will only affect the rate of inflation at which the two curves intersect.
How do individuals respond to negative shocks, given that they engage in intertemporal substitution?
Individuals respond to negative shocks by working less.
How do individuals respond to positive shocks, given that they engage in intertemporal substitution?
Individuals respond to positive shocks by working more; When productivity rises after a positive shock, work becomes more rewarding
If the Fed is able to use monetary policy to perfectly offset a negative aggregate demand shock and end a recession, all else equal, which statement is TRUE?
Inflation expectations in the long run will be the same as before the recession.
If the Federal Reserve overstimulated the economy, how would this most likely affect inflation?
Inflation would rise.
If a person making $40,000 per year pays $10,000 in federal income taxes, and a person making $72,000 per year pays $22,000 in federal income taxes, which statement best describes the tax code?
It is progressive.
According to the AD curve, if in a certain economy in a given year the money supply rises from $1,000 billion to $1,070 billion, real GDP rises from $15,000 billion to $15,300 billion, and the rate of inflation is 5 percent, then what must have happened to the velocity of money in this same year?
It remained stable. The rate of spending growth for this AD curve is 7 percent.
money illusion
Mistaking changes in nominal prices for changes in real prices
Which situation is a consequence of price signals being difficult to interpret because of inflation?
Resources flow more slowly to profitable uses. Inflation confuses consumers, workers, firms, and entrepreneurs.
If the rate of spending growth decreases, what happens to the aggregate demand curve?
The AD curve shifts down and to the left. If inflation is constant, the real growth rate of GDP must fall; if the real growth rate of GDP is constant, inflation must fall.
Statement that is NOT a criticism of the claim that the Federal Reserve should have raised rates more quickly in response to the housing bubble:
The Federal Reserve knew that the housing bubble would be good for the economy in the short run.
Given a best-case scenario, which statement correctly describes the Federal Reserve's behavior?
The Federal Reserve tries to offset a negative shock to aggregate demand with an increase in the money supply.
What is TRUE regarding the causes of the Great Depression?
The Great Depression was caused by a combination of real shocks and aggregate demand shocks.
Whihc of the following is true regarding the great depression?
The Great Depression was caused by a combination of real shocks and aggregate demand shocks. The Great Depression resulted from an unfortunate concentrated and interrelated series of aggregate demand and real shocks.
Refer to the following table, which gives the CPI and the prices of three goods for a hypothetical economy over three years. What happened to the real price of good B between year 1 and year 2?
The real price fell, because the price did not change and the CPI rose. Between the two years, the CPI rose by 5 percent and the good's price did not rise.
What impact will a slower money growth rate have on the AD curve?
There will be a decrease in aggregate demand. As shown in Table 32.2, slower money growth will cause a decrease in aggregate demand.
Suppose that the economy is hit by a negative real shock, such as a rapid oil price increase. What impact will this have on the price level?
There will be a higher rate of inflation.
Imagine that the government has decided to build new highways and bridges in an effort to replace infrastructure and simultaneously stimulate the economy. The bill has been passed by Congress and signed by the president. However, the contractors are not paid until the job is complete, thus delaying the economic benefit. Which statement would best characterize this issue?
This is an example of an effectiveness lag. The effectiveness lag is due to the fact that the plan takes time to work.
In the days leading up to an exam, suppose you choose to study more and more each day, thereby giving up more and more leisure time each day. Which statement BEST describes your behavior?
This is clearly an example of intertemporal substitution
Suppose that you have a tennis tournament coming up next week, and you choose to practice more and more each day, thereby giving up more and more leisure time each day. Which statement BEST describes your behavior?
This is clearly an example of intertemporal substitution.
According to the unemployment benefit replacement rates from 1994, which country's unemployed workers have the smallest share of their income replaced in the first year of unemployment? Please choose the correct answer from the following choices, and then select the submit answer button.
United States
Which describes an automatic stabilizer?
a change in fiscal policy that stimulates AD in a recession without the need for explicit action by policymakers
Which condition is mentioned in the textbook as an aggregate demand shock that contributed to the Great Depression?
a decrease in wealth due to bank failures; Reduced wealth can cause a negative AD shock.
Which would cause the LRAS to shift left?
a destructive war
When many people in the economy reduce their spending at the same time, this causes:
a reduction in income for many other people.
Compared to the United States, other countries spend _____ of their GDP on health care costs.
a smaller fraction
The U.S. government spending is _____ of GDP compared to most other developed countries
a smaller fraction
The growth in health care costs is _____ in other developed countries, compared to that in the United States.
about the same Other countries spend a smaller fraction of their GDP on health care costs, however.
Which curve shows all of the combinations of inflation and real growth that are consistent with a specified rate of spending growth?
aggregate demand curve
The _____ curve is more responsive to changes in government spending when there is _____ than when there is not.
aggregate demand; a multiplier effect
the labor force is equal to :
all workers, employed plus unemployed.
Transmission mechanisms are best described as economic forces that can:
amplify shocks by transmitting them across time and sectors of the economy. The transmission mechanisms covered in the chapter are intertemporal substitution, uncertainty and irreversible investments, labor adjustment costs, time bunching, and collateral damage.
Suppose the growth rate of consumption falls by x percent and an increase in government spending of y percent is able to exactly offset it and restore aggregate demand to its original level. If x is greater than y, the increase in the growth rate of government spending led to:
an increase in the growth rate of consumption.
If the Fed responds to a negative real shock by decreasing the money supply, the real growth rate will:
be lower than if the Fed did nothing. However, the rate of inflation will also be lower than if the Fed did nothing.
Most of the money spent by the U.S. government is spent on:
big programs. If a politician claims that he or she will pay for new spending programs or tax cuts by cutting "waste," beware!
A positive AD shock affects :
both inflation and the real growth rate in the short run but in the long run only affects inflation. In the short run, the economy will travel along the SRAS curve; in the long run, the SRAS curve will shift toward the long-run aggregate supply curve.
If the Fed wants to increase aggregate demand, it should:
buy bonds in an open market operation. Buying bonds in open market operations would increase the money supply, causing more borrowing and investing.
The federal bank does not :
calculate labor market statistics, such as the unemployment rate.
An account that you can access with a debit card is called a:
checkable deposit.
The central bank can help the inflation rate to decrease after a negative real shock through:
contractionary monetary policy; real growth rate falls even further
Time bunching is the tendency for economic activities to be:
coordinated at common points in time.
The unemployment effects of disinflation will be reduced if the disinflation policy is:
credible. If the central bank wishes to undertake a disinflation, it has to be ready to stay the course, and it should announce and explain its policy very publicly.
A negative AD shock:
decreases the real growth rate at first but in the long run decreases only the rate of inflation. In the short run, the economy will travel along the SRAS curve; in the long run, the SRAS curve will shift toward the long-run aggregate supply curve.
a significant reduction in the rate of inflation
disinflation
When India's agricultural output falls, so does India's GDP. This is:
due in part to the fact that other parts of the Indian economy will suffer when farmers suffer. For instance, the demand for tractors will go down, and the shock spreads to other parts of the economy.
When the crops are bountiful, it makes sense for farmers to work from dawn until dusk because:
each hour of additional work pays a lot. But when the crops are poor, the returns to an additional hour of work are low
Other than defense, the biggest federal government programs are those that transfer wealth to the:
elderly
The central bank can help the real growth rate to improve after a negative real shock through:
expansionary monetary policy
One of the Federal Reserve's most powerful tools is its influence over _____, not its influence over _____.
expectations; the money supply Fear and confidence are some of the most important shifters of aggregate demand.
Suppose that households become pessimistic and begin to cut back on their spending to build up their cash reserves. As a result, the growth rate of the velocity of money _____ and the _____ shifts to the left.
falls; aggregate demand curve
Fiscal policy is less likely to be successful today than it was in the 1930s since increases in government spending today are more dramatic compared to the 1930s. The increase in government spending in the 1930s was much more dramatic than increases in government spending in modern times.
false
Monetary policy is also subject to lags, but these are generally longer than for fiscal policy.
false
The U.S. Federal Reserve no longer uses interest payments on reserves to control the money supply. This method is still in use.
false
The civilian, non-institutionalized population is another name for the entire population
false
The original goal of the Alternative Minimum Tax was to make sure that it would not be possible for too many people to avoid all income tax.
false
A spending increase creates a permanent increase in growth
false (It would create a temporary increase in growth.)
A tax with constant rates that do NOT vary with income is a:
flat tax
When banks only hold a fraction of their deposits in reserve and lend the rest, this is:
fractional reserve banking. When you open a bank account, the teller doesn't take your money and put it into a box labeled with your name.
Workers do not know all of the job opportunities available, and employers do not know all of the available candidates. This contributes to:
frictional unemployment
Which would cause the LRAS curve to shift to the right?
good weather This would benefit the agricultural sectors among others.
Fiscal policy is likely to be needed and most effective when:
government spending is inefficient or unproductive
During an economic boom, firms have _____, which means that banks are willing to lend _____ to firms.
greater cash flow; more money (This is why collateral shocks can act as a transmission mechanism.)
What can increase structural unemployment?
greater unemployment benefits, a higher minimum wage, stronger unions
As a result of the financial crisis of 2007-2008, the Fed:
has become much more active and has assumed greater powers. It is widely recognized that a more comprehensive redefinition of the Fed's responsibilities is needed.
M1 and M2
have the most significant effects on aggregate demand.
This is not a variable that affects a person's Social Security benefits.
his or her projected earnings during retirement
Assume the average price level was 100 in 2016 and in 2017 it is 900. The __________ rate in 2017 is _____________.
hyperinflation; 800 percent The inflation rate is ((900 − 100) ÷ 100) × 100 = 800 percent, which is classified as hyperinflation.
One of the reasons that the government is not likely to resort to monetizing its debt is that:
if lenders expected the government to allow high inflation, they would raise nominal interest rates. (The other reason is that many bondholders are also voters, who would be angry with the lower rates of return on their bonds due to high inflation.)
If generous unemployment benefits make work less appealing, this will:
increase structural unemployment.
If the growth rate of household consumption falls, causing a recession, the federal government, using fiscal policy, can:
increase the growth rate of government spending to compensate
A positive AD shock:
increases the real growth rate at first but in the long run increases only the rate of inflation. In the short run, the economy will travel along the SRAS curve; in the long run, the SRAS curve will shift toward the long-run aggregate supply curve.
(P2 − P1) ÷ P1 is the formula used to calculate the:
inflation rate
A negative real shock leads to a higher _____ and a _____ growth rate for GDP.
inflation rate; lower
f the inflation rate is positive, it is safe to conclude that there has been:
inflation. Inflation results from having more money chasing the same amount of goods.
The discount rate sets the _____ of the reserves that the Fed will lend. The term auction facility sets the _____ of the reserves that the Fed will lend.
interest rate; quantity The term auction facility is a more recent innovation.
The Federal Reserve acquires its unique powers through its ability to:
issue money
What does the Federal Reserve do?
keep accounts for private banks
Imagine that the government has identified an issue in the economy that it wants to correct through fiscal policy. However, arguments and discussions within the House and Senate prevent the bill from being proposed and passed in a timely manner. This is a demonstration of:
legislative lag
Suppose that for an imaginary economy, the velocity of money is equal to 8 and the money supply is $1.2 billion. The real GDP of this economy is:
less than $9.6 billion if the price level is greater than 1. Nominal GDP is $1.2 billion × 8 = $9.6 billion. Real GDP is nominal GDP divided by the price level.
During a boom, people are _____ likely to retire, and homemakers are _____ likely to enter the workforce.
less; more
The dilemma that a negative real shock poses for the Federal Reserve stems from its having to choose between too high a rate of inflation and too:
low a rate of real growth. Due to the inexactness of monetary policy, the central bank stands a really good chance of getting a mix of both problem
The factor of increase in the money supply that occurs with each dollar of increase in reserves is called the:
money multiplier
When the crops are bountiful and each hour of labor offers a higher rate of return, farmers will MOST likely respond by working:
more and using more capital. (But when the crops are poor, the returns to an additional hour of work are low, so farmers will respond by working less and using less capital.)
All else equal, the greater one's life expectancy, the:
more beneficial Social Security will be for him or her.
The aggregate demand curve is _____ responsive to changes in government spending when there is _____ than when there is not.
more; a multiplier effect
A negative AD shock will increase output in:
neither the short run nor the long run. A negative AD shock will decrease inflation in both the short run and the long run.
Money illusion occurs because:
prices are signals, and inflation makes price signals more difficult to interpret.
The Federal Reserve creates money:
primarily by electronically adding reserves to bank accounts held at the Fed.
What is something that the Federal Reserve does?
protect consumers with disclosure regulations The Federal Reserve regulates many aspects of banking.
Which event is NOT mentioned in the textbook as an aggregate demand shock that contributed to the Great Depression?
reduced productivity resulting from tariffs This is given as an example of a real shock that contributed to the Great Depression.
A lot of the tax cuts in the United States were:
saved
The federal reserev does not :
set marginal tax rates. congress does this
the fed has the most influence over:
short-term real interest rates. The Fed has the most influence over the Federal Funds rate.
The rate of economic growth, given flexible prices and the existing real factors of capital, labor, and technology, is known as the:
solow growth rate
When inflation occurs, it is usually the case that:
some prices have gone up and others have fallen. At any one point in time, some prices are going up and some are going down.
With respect to the American Recovery and Reinvestment Act, there seems to be a consensus that the:
spending may not have targeted unemployed labor very successfully.
The Fed acted quickly to stop Bear Stearns and AIG from going under because of the existence of:
systemic risk. Systemic risk is the risk that the failure of one financial institution can bring down other institutions.
The idea of moral hazard is that when individuals or institutions are insured, they tend to:
take on too much risk. Moral hazard occurs when banks and other financial institutions take on too much risk, hoping that the Fed and regulators will later bail them out.
This event did not occur as a result of falling real estate prices in 2007-2008
the Federal Funds rate began to rise. The Federal Funds rate is determined by the Fed, not by events in the broader economy.
Which country has the lowest level of total government spending as a percentage of GDP?
the United States
The velocity of money is:
the average number of times a dollar is spent on final goods and services in a year.
Due to the redistribution that takes place under Social Security and Medicare, _____ benefit the most from these programs.
the elderly Social Security and Medicare primarily transfer wealth to the elderly.
The seasonal business cycle reveals that GDP typically grows the MOST in which quarter?
the fourth quarter, from October to December Seasonal business cycles help us understand some features of regular business cycles.
When price signals are difficult to interpret:
the market system doesn't work as well. When price signals are difficult to interpret, resources are wasted in activities that appear profitable but in fact are not.
Which characteristic is NOT a criterion in determining whether a person is categorized as unemployed?
the person is under the age of 65
If the Fed responds to a negative real shock by decreasing the money supply, the Fed is addressing:
the problem of inflation, but not the problem of lower real growth.
If the Fed responds to a negative real shock by increasing the money supply, the Fed is addressing:
the problem of lower real growth, but not the problem of inflation.
The alternative minimum tax is:
the separate income tax code that began in 1969 to ensure that the rich pay income tax. The AMT was not indexed to inflation and is now an extra tax burden on many upper-middle-class families.
Nominal wage confusion occurs when workers respond to _____ instead of _____.
the wage number on their paychecks; what their wage can buy This is one explanation as to why prices and wages don't instantly adjust to changing market conditions.
Imagine that the government is striving to manage the economy but does not have timely data on economic activity. Which statement would BEST characterize this issue?
this is an example of recognition lag
The tendency for economic activities to be coordinated at common points in time is known as time:
time bunching
What is the Fed's ultimate goal in undertaking monetary policy?
to influence aggregate demand In order to stimulate the economy, the Fed would want to take action to increase aggregate demand.
Economic forces that can amplify shocks by making their effects extend across time and sectors of the economy are known as:
transmission mechanisms.
A credible disinflation decreases the unemployment effects of disinflation.
true
A progressive tax has higher tax rates on people with higher incomes
true
After all the deductions, exemptions, loopholes, and so forth, the U.S. tax system is progressive.
true
An increase in spending growth shifts the AD curve outward, up and to the right.
true
Banks hold reserves according to the law and the Federal Reserve as well as to meet ordinary depositor demands for currency and payment services.
true
Cultural factors can influence the labor force participation rate.
true
Deflation is a decrease in prices.
true
Fiscal policy is federal government policy on taxes, spending, and borrowing that is designed to influence economic fluctuations.
true
Fiscal policy is less likely to be successful today than it was in the 1930s since increased government spending today is likely to draw people from one job to another job rather than from unemployment to work.
true
Fiscal policy is less likely to be successful today than it was in the 1930s since increases in government spending today are less dramatic compared to the 1930s. The increase in government spending in the 1930s was much more dramatic than increases in government spending in modern times.
true
Fiscal policy is likely to be needed and most effective when many resources are unemployed and the fiscal stimulus can be targeted toward those unemployed resources.
true
If depositors start visiting the ATM a lot more often, banks will want to have a higher reserve ratio.
true
If there is unexpected disinflation, then it will benefit lenders and harm borrowers.
true
In recent decades, health care costs per person have been rising more than twice as fast as GDP per capita.
true
Irreversible investments have value only under certain conditions, and they cannot be easily moved, adjusted, or reversed if conditions change.
true
One of the Federal Reserve's most powerful tools is its influence on expectations, not its influence over the money supply.
true
Periods of lower growth are usually accompanied by higher unemployment.
true
Prices don't move instantly to their new long-run equilibrium; thus, increases in growth can be brought about by a spending increase. Prices do not move instantly.
true
Real prices are used to compare the price of goods over time
true
The advocates of discretion in monetary policy think that the Fed's adjustments, on average, push the economy in the right direction and decrease volatility.
true
The average interest rate on U.S. debt in 2017 was about 2 percent.
true
The choice to work can be influenced by taxes on workers and benefits paid to non-workers.
true
The deficit is the annual difference between federal spending and revenues.
true
The difference between the deflation of the Great Depression and the disinflation of the 1980s is that the disinflation of the 1980s was a policy chosen on purpose.
true
The discount rate is the interest rate banks pay when they borrow directly from the Fed.
true
The government can cut taxes during a recession to try to increase private spending.
true
The majority of the tax cuts in the United States were used to pay off debt.
true
The reserve ratio is the ratio of bank-held cash to deposits.
true
The responses to monetary policy take time, and the lags from action to response are not fixed but may vary.
true
The slope of the AD curve is -1.
true
There are 12 Federal Reserve Banks, each headquartered in a different region of the country.
true
Uncertainty can create a bandwagon effect on investment.
true
We count someone as unemployed if and only if he or she is willing and able to work and is looking but can't find a job.
true
a decrease in velocity will shift the AD curve down and to the left.
true
banks earn profits on loans
true
Adults who do not have a job but are looking for work are:
unemployed workers
The percentage of the labor force without a job is the:
unemployment rate
What impact would radical disinflation have on unemployment?
unemplyment would rise in the short run only
When the Federal Reserve changes the money supply by changing reserves, which formula can be used to calculate the change in the money supply?
ΔMS = ΔReserves × MM. The change in the money supply caused by a change in reserves equals the amount of the change in reserves times the money multiplier.