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5 Written Questions

5 Matching Questions

  1. Shifters of Long Run Aggregate Supply
  2. Classical Economist
  3. GDP deflator
  4. Budget Deficit
  5. Loanable funds market (Demand)
  1. a -reveals the cost durings the current period of purchasing the items included in GDP relative to the cost during the base year
    -includes capital goods and other goods purchased by businesses and government
    -(Normal GDP x GDP deflator / GDP deflator)
  2. b Believe prices are flexible, Economy can correct itself, Soys law: supply curves demand (production matters)
  3. c -Change in Resource base
    -change in technology
    -Change in arrangements that affect productivity
  4. d government spending is great than government revenues
  5. e Downward sloping because as interest rate decreases firms will want to borrow more money

5 Multiple Choice Questions

  1. -excludes non market production
    -excludes the underground economy
    -excludes leisure and human costs
    -difficult measuring quality variation and introduction of new goods
    -excludes the costs of harmful side effects
  2. New classical economists do not believe that budget deficits will stimulate additional consumption and aggregate demand
    -people will save for the expected future tax increase (permanent income hypothesis)
  3. -changes in quantity are not sensitive to changes in price
    -curves are steeper
    -Perfect = vertical line
  4. transfers of income from some individuals to others (social security, unemployment benefits, health care)
  5. Changes in quantity are sensitive to changes in price
    -elastic curves are flatter
    -perfect = horizontal

5 True/False Questions

  1. Budget surplusgovernment revenue is great than government spending


  2. Downward sloping demand curve-inverse relationship (negative) between the price of a good and the quantity that buyers are willing to purchase


  3. High interest rates cause-consumption and investment to increase
    -net exports to increase
    -asset prices to increase


  4. Height of Supply curveamount of money in the economy, determined by the Fed. It is vertical because it is determined by Fed policy and does not depend on the interest rate.


  5. What open market operation decreases the money supply?-Resource Price
    -Changes in expected inflation
    -Supply Shocks


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