Macro Economics Midterm

The central problem in economics is

• promoting economic growth.

• ensuring stable prices; limiting inflation.

• promoting private ownership and protection of private property rights.

• scarcity; the use of limited resources.

• limiting unemployment.

Stagflation is the result of which of the following shifts in the AD/AS model?

• The aggregate demand curve shifting to the left

• The aggregate demand curve shifting to the right

• The aggregate supply curve shifting to the left

• The aggregate supply curve shifting to the right

• The long run aggregate supply curve shifting to the left

The natural rate of unemployment is

• The number of unemployed divided by the labor force

• The rate of unemployment when there is no frictional unemployment

• The rate of unemployment when the economy is in long run equilibrium

• The labor force divided by the working-age non-institutionalized population

• The rate of unemployment when the price level meets the Federal Reserve target for inflation

A leftward shift in the short-run aggregate supply curve could be the result of

• an increase in capital stock

• a central bank sale of government securities

• tax credits for capital investments

• a decrease in personal income taxes

• an increase in input prices

An increase in the expected rate of inflation is most likely to cause which of the following changes in the Phillips curve?

• a move downward to a new point along the short run Phillips curve

• a move upward to a new point along the short run Phillips curve

• a shift of the long run Phillips curve to the right

• a shift of the entire short run Phillips curve to the left

• a shift of the entire short run Phillips curve to the right

If foreign investors purchase U.S. government treasury bills, those purchases will be included in their nation’s

• balance of trade

• current account

• financial account

• gini coefficient

• net cash transfers

A rightward shift in the aggregate demand curve could most likely be caused by which of the following?

• a decrease in consumer confidence

• a decrease in investment spending

• an increase in the price level

• the purchase of government securities by the central bank

• an increase in personal income taxes

If nominal wages and prices are not flexible, which of the following must be true when the economy has a severe recessionary gap?

• The aggregate demand curve is vertical

• The aggregate demand curve is horizontal

• The short run aggregate supply curve is vertical

• The short run aggregate supply curve is upward sloping

• The short run aggregate supply curve is horizontal

Which of the following groups would benefit in the short run from an unanticipated rise in the inflation rate?

• Retirees on a fixed income

• Young people repaying fixed-interest-rate student loans

• Union workers whose contracts do not include a cost-of-living-adjustment (COLA)

• Homeowners with adjustable mortgage rate loans from banks

• Financial institutions that have more fixed interest outstanding loans than adjustable rate loans on their books

What must be true if a nation's economy is operating inside of its production possibilities curve?

• The nation is utilizing all resources as efficiently as possible

• The nation currently lacks the resources and technology to operate at a point on the production possibilities curve

• The nation is using resources and technology inefficiently

• The nation must increase investment spending on capital stock to produce on the curve

• The nation’s nominal gross domestic product is growing at a faster rate than real gross domestic product