Worksheetsreview
Total questions: 72
Worksheet time: 39mins
In the model of IS curse and the fed rule, when government spending increases
The interest rate increases and discourages private investment
The interest rate decreases and discourages private investment
The interest rate remains constant
In the model of the IS curve and the Fed Rule, when taxes increase
consumption and output increase
consumption and output decrease
consumption and output remain constant
Quantitative reasoning refers to
the easing of fiscal conditions
the easing of economic conditions
the large scale purchases of long-term Treasury bonds by the Fed
As the interest rate increases, the price of existing bonds
increases
decreases
remains constant
According to the expectations theory of term structure of interest rates,
long-term rates are equal to the average amount of current and expected future short-term rates
short-term rates are equal to the average of current and expected future long-term rates
Since 2008, to control the interest rate, the Fed
conducts open market operations
pays interest on excess reserves
decreases investment
Before 2008, to control the interest rate, the Fed used to
conduct open market operations
pay interest on excess reserves
decrease investment
The demand for money
increases as the interest rate increases
decreases as the interest rate increases
does not depend on the interest rate
Since the money multiplier is greater than one
an increase in the money supply causes a larger increase in output
an increase in reserves causes a larger increase in the money supply
an increase in reserves causes a larger increase in output
As the required reserve ratio increases, the money multiplier
increases
decreases
remains constant
Banks create money by
creating reserves
creating deposits
creating net worth
Net worth is equal to
a fraction of disposable income
a multiple of disposable income
assets minus liabilities
M1 includes
equilibrium output
inflation
currency held outside banks
demand deposits
Money is
a means of payment, or medium of exchange
an automatic stabilizer
a store of value
a unit of account
An automatic stabilizer stabilizes
GDP
inflation
the marginal propensity to consume
When the government runs a budget deficit, government debt tends to
increase
decrease
stabilize automatically
When the government spends more than it collects in taxes, the government runs
a budget surplus
a budget deficit
a balanced budget
In the model of Chapter 9, if government spending increases
output increases
consumption increases
the multiplier increases
The government spending multiplier is greater than one because
taxes amplify the effect of government spending on output
investment amplifies the effect of government spending on output
consumption amplifies the effect of government spending on output
The tax multiplier is
greater than one
equal to one
less than zero
As the interest rate increases, investment
increases
decreases
remains constant
Disposable income is equal to
the difference between income and consumption
the difference between income and saving
the difference betweeen income and taxes
The marginal propensity to save is
the multiplier
the fraction of additional income that is consumed
the fraction of additional income that is saved
Inflation was relatively high
in the 1950s
in the 1970s
in the 1990s
In an expansion
aggregate production tends to increase
employment tends to increase
unemployment tends to increase
consumption tends to increase
investment tends to increase
Gross domestic product measures
the total spending of everyone in the economy
the overall price level
the value of all output in the economy
the total income of everyone in the economy
Gross domestic product includes the value of
new final goods and services
old final goods and services
transfer payments
The largest expenditure component of GDP i
consumption
investment
government spending
net exports
Depreciation refers to
a decrease in the overall level of economic activity
a decrease in the value of capital
a decrease in the overall price level
Net investment is equal to gross investment minus
inflation
GDP
imports
depreciation
Net exports is equal to exports minus
inflation
GDP
imports
depreciation
Disposable personal income is equal to
personal income minus consumption
personal income minus saving
personal income minus depreciation
personal income minus personal income taxes
Changes in nominal GDP can be due to
changes in prices
changes in quantities of output produced
Changes in real GDP can be due to
changes in prices
changes in quantities of output produced
Approximately, the GDP inflation rate is equal to
the sum of the nominal GDP growth rate and the real GDP growth rate
the nominal GDP growth rate minus the real GDP growth rate
the real GDP growth rate minus the nominal GDP growth rate
The marginal propensity to save is
the multiplier
the fraction of additional income that is consumed
the fraction of additional income that is saved
The marginal propensity to save is equal to one minus the marginal propensity to consume
True
False
The slope of the aggregate expenditure function is equal to
the multiplier
the marginal propensity to consume
the marginal propensity to save
As the interest rate increases, investment is likely to
increase
decrease
remain constant
Aggregate output minus planned aggregate expenditure is equal to
depreciation
deflation
planned changes in inventories
unplanned changes in inventories
An endogenous variable is
a variable that the model takes as given
a variable that the model explains
Because of a Real Wealth Effect, an increase in the price level
raises real wealth and consumption
lowers real wealth and consumption
raises real wealth but lowers consumption
An increase in inflation expectations may act like an adverse cost shock and raise actual inflation.
True
False
When an exogenous factor Z makes the Fed raise the interest rate
the Aggregate Demand curve shifts to the right
the Aggregate Demand curve shifts to the left
the Aggregate Supply curve shifts to the right
the Aggregate Supply curve shifts up and to the left
When consumer and businesses become more optimistic
the Aggregate Demand curve shifts to the right
the Aggregate Demand curve shifts to the left
the Aggregate Supply curve shifts to the right
the Aggregate Supply curve shifts up and to the left
When advances in technology increase productivity
the Aggregate Demand curve shifts to the right
the Aggregate Demand curve shifts to the left
the Aggregate Supply curve shifts to the right
the Aggregate Supply curve shifts up and to the left
When an increase in Aggregate Demand causes an expansion
the price level increases
the price level decreases
the price level remains constant
When a favorable Aggregate Supply shock causes an expansion
the price level increases
the price level decreases
the price level remains constant
When output is above its potential level, wages and costs increase, and the Aggregate Supply curve shifts upward.
True
False
In the short run, expansionary fiscal and monetary policies
Raise output
Raise the price level
In the long run, expansionary fiscal and monetary policies
Raise output
Raise the price level
In the short run, expansionary monetary policy raises
output
the interest rate
investment
the price level
Government spending has a greater effect on output
when output is well below capacity
when output equals its potential level
when output is near capacity
In a binding situation, when the interest rate is equal to zero
monetary policy is very effective
monetary policy is ineffective
The real interest rate is equal to
the product of the interest rate and real GDP
the ratio of the interest rate to real GDP
the difference between the interest rate and expected future inflation
If inflation is higher than anticipated
debtors gain at the expense of creditors
creditors gain at the expense of debtors
In a period of stagflation
inflation is high
inflation is low
unemployment is high
unemployment is low
Cost-push inflation is
inflation caused by an increase in Aggregate Demand
inflation caused by a decrease in Aggregate Demand
inflation caused by an increase in costs
inflation caused by a decrease in costs
In the 1979-1983 period, under the Fed Chair Paul Volcker, the Fed generally
raised the interest rate to lower inflation
raised government spending to stimulate the economy
lowered taxes to stimulate consumption and output
The goals of monetary policy are
government budget balance and stable public debt
maximum productivity and growth
maximum employment and price stability
An unemployed person is a person who has made specific efforts to find work during the previous
five business days
four weeks
six months
year
The labor force is
the ratio of the labor force to population
the ratio of the unemployed to the labor force
the ratio of the unemployed to population
the sum of the employed and the unemployed
The unemployment rate is
the sum of the employed and the unemployed
the ratio of the labor force to population
the ratio of the unemployed to the labor force
the ratio of the unemployed to population
Since the 1950s, the labor force participation rate of women has
increased
decreased
remained roughly constant
When a discouraged worker stops looking for a job, after a month
the unemployment rate increases
the unemployment rate decreases
the unemployment rate remains the same
Cyclical unemployment is
the portion of unemployment that is due to the normal turnover in the labor market and the time necessary to match workers and jobs
the portion of unemployment that is due to structural features of the economy or changes in the structure of the economy
the portion of unemployment that is caused by business cycle fluctuations
The wage rate may remain above the level that clears the labor market because of
efficiency wages
minimum wage laws
labor unions
Okun's Law describes
a negative relation between inflation and unemployment
a negative relation between output and unemployment
a positive relation between output and the price level
The short-run Phillips curve (the negative relation betweeen inflation and unemployment) results from
shifts in the Aggregate Demand curve
shifts in the Aggregate Supply curve
In the long run, the Phillips curve is vertical. In the long run, then,
the unemployment rate is constant
the inflation rate is constant
the central bank faces a trade-off beween inflation and unemployment
The central bank faces a trade-off beween inflation and unemployment
in a binding situation
in the short run
in the long run
In the long run,
aggregate output equals its potential level
the inflation rate equals the stagflation rate
the unemployment rate equals the natural rate of unemployment
