MacroQuizQuestions – Flashcards

Unlock all answers in this set

Unlock answers
question
difference between aggregate expenditure and aggregate demand is that
answer
aggregate demand shows the relationship between the price level and the jlevel of aggregat expediture when all other factors that affect aggregate expenditure are held constant; aggregate expediture is a point on the aggregate demand curve at a specific price.
question
The aggregate demand curve does not slope down for
answer
a lower price level makes imports from other countries less expenses, and US citizens buy more imports.
question
an increase in the price level will cause a what in the aggregate demand curve.
answer
movement up along
question
an increase in government purchases will cause a what in the aggregate demand curve.
answer
rightward shift
question
an increase instate income taxes will cause a what in the aggregate demand curve.
answer
leftward shift
question
an increase in interest rates will cause a what in the aggregate demand curve.
answer
leftward shift
question
A faster income growth in other countries will cause what in the US aggregate demand curve.
answer
rightward shift
question
aggragate demand curve does not shift because of the
answer
price level change
question
the long run aggregate supply curve is vertical because in the long run,
answer
changes in the price level do not affect potential GDP, as potential GDP depends on the size of the labor force, capital stock and technology
question
Suppose that workers and firms could always predict next years price level with perfect accuracy. Under these circumstances, the SRAS curve
answer
would be the same as the LRAS
question
A supply shock is
answer
a sudden increase in the price of an important natural resource, resulting in a leftward shift of the SRAS curve
question
What would cause a decrease in real GDP and if large enough a recession?
answer
an increase in interest rates that causes aggregate demand to fall
question
What scenario would lead to a reduction in real GDP and may even cause a recession
answer
an increase in oil price that causes short-run aggregate supply to fall
question
what would cause an increase in the price level (short run inflation)
answer
a reduction in taxes that increases aggregate demand
question
In the dynamic aggregate demand and aggregate supply model, if aggregate demand increases faster than potential real GDP there will be
answer
inflation
question
In the dynamic aggregate demand and aggregate supply model, if aggregate demand increases slower than potential real GDP there will be
answer
recession
question
During the expansion of the business cycle, production, employment and income...
answer
increase
question
During the recession phase of the business cycle, production, employment and income...
answer
decrease
question
in the first quarter of 2011, business inventories increased by $49.1 billion. Can we tell from this information whether aggregate expenditure was higher or lower than GDP during the first quarter of 2011?
answer
Aggregate expenditure was less than GDP in the first quarter of 2011
question
What is the effect on inventories, GDP, and employment when aggregate expenditure exceeds GDP?
answer
Inventories decrease, GDP increases and employment increases
question
in the 45 degree line diagram the 45 degree line shows
answer
all the points where aggregate expediture equals real GDP
question
Suppose we drop the assumption that net exports do not depend on real GDP
answer
negative slope because as domestic GDP or income increases, imports increase while exports remain the same leading to a reduction in net exports
question
correct statement about planned inventory increases
answer
planned inventory increases are likely to indicate business optimism and correspond with upturns in the businesss cycle
question
correct statement about unplanned inventory increases
answer
unplanned inventory increase are likely to indicate that aggregate expenditures are low and correspond with downturns in the business cycle
question
the multiplier effect is the process by which
answer
an increase in autonomous expenditure leads to a larger increase in real GDP
question
If the marginal propensity to consume is .90 by how much will an increase in planned investment spending of $200 billion shift up the aggregate expediture line?
answer
if planned investment spending increases by $200 billion, it will shift the aggregate expenditure line up by $200 billion
question
by how much will it increase equilibrium real GDP?
answer
increase by $2000 billion
question
would a larger multiplier lead to more severe recessions or less severe recessions?
answer
a larger multiplier means that small changes in spending lead to large changes in GDP, and thus recessions would be more severe.
question
True of False: Increases in real GDP per capita do not increase the amount of goods and services available to a country's citizens
answer
false
question
True of False: increases in real GDP per capita increase life expectancy at birth
answer
True
question
True of False: Increases in real GDP per capita mean people will have a lower portion of leisure time over the course of their lives
answer
False
question
What factores would cause a US labor productivity to be nearly six times higher than russian labor productivity?
answer
the US has more capital available per worker and higher levels of technology
question
What is not a loanable fund?
answer
Real Estate
question
households supply loanable funds because of the
answer
interest income recieved from the borrowers
question
businesses demand loanable funds because
answer
firms need to borrow funds for new projects such as building new factories or carrying out new research projects.
question
A weak financial system might make economic growth difficult since
answer
capital investment, essential for rapid economic growth, is often financed by borrowed funds and an unstable financial system leads to difficulty attracting loanable funds
question
With the decrease shift in supply, the equilibrium quantity of loanable funds
answer
decreases
question
with the change in equilibrium quantity of loanable funds, the quantity of saving decreases and the quantity of investment
answer
decreases.
question
suppose the economy is currently in a recession and that economic forecasts indicate that the economy will soon enter an expansion. As a result
answer
expected profitability of new investment in plant and equipment increases and the demand for loanable funds rises.
question
What is the general relationship between the business cycle and unemployment and inflation?
answer
during an expansion, unemployment falls and inflation increases.
question
When examining economic growth rates throughout history
answer
the world experienced little to no growth until the industrial revolution, after which some economies began to experience growth.
question
When comparing US economic growth with the economic growth that occurred in the soviet union during the 1900s, a possible explanation for the US growing at significantly higher rates is
answer
the US experienced a greater level of technological progress than the soviet union.
question
Why are the limits on political freedom likely to become an obstacle to china's continued economic growth?
answer
failure to establish the rule of law, entrepreneurs will feel secure enough to bring together the factors of production, lack of consistent enforcement of property rights.
Get an explanation on any task
Get unstuck with the help of our AI assistant in seconds
New