Macroeconomics- Exam 3

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37 terms · Review for Exam 3 (excludes # 11, 12, 13, 17, 18, 20, 21, 23, 24, 25, 38, due to graphs and/or tables)

The aggregate demand curve:

Shows the amount of real output that will be purchased at each possible price level

The aggregate demand curve is:

Down-sloping because production costs decrease as real output rises

The interest-rate and real-balances effects are important because they help explain:

The shape of the aggregate demand curve

The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will:

Increases U.S. exports and decrease U.S. imports

The real-balances, interest-rate, and foreign purchases effects all help explain:

Why the aggregate demand curve is downsloping

The determinants of aggregate demand:

Explain shifts in the aggregate demand curve

Other things equal, a decrease in the real interest rate will:

Expand investment and shift the AD curve to the right

In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to:

Increase aggregate demand

The immediate-short-run aggregate supply curve represents circumstances where:

Both input and output prices are fixed

The immediate-short-run aggregate supply curve is:

Horizontal

The shape of the immediate-short-run aggregate supply curve implies that:

Total output depends on the colume of spending

What percentage of the average firm's costs are accounted for by wages and salaries?

75

Other things equal, an improvement in productivity will:

Shift the aggregate supply curve to the right

Shifts in the aggregate supply curve are caused by changes in:

One or more of the determinants of aggregate supply

The equilibrium price level and level of real output occur where:

The aggregate demand and supply curves intersect

The group of three economists appointed by the President to provide fiscal policy recommendations is the:

Council of Economic Advisors

Fiscal policy is carried out primarily by:

The Federal government

Discretionary fiscal policy refers to:

Changes in taxes and government expenditures made by congress to stabilize the economy

Fiscal policy refers to the:

Manipulation of government spending and taxes to stabilize domestic output, employment, and the price level

Discretionary fiscal policy is so named because it:

Involves specific changes in T and G undertaken expressly for stabilization at the option of Congress

Expansionary fiscal policy is so named because it:

Is designated to expand real GDP

Contractionary fiscal policy is so named because it:

Is aimed at reducing aggregate demand and thus achieving price stability

An economist who favors small government would recommend:

Tax cuts during recession and reductions in government spending during inflation

An economist who favored expanded government government would recommend:

Increases in government spending during recession and tax increases during inflation

In the United States monetary policy is the responsibility of the:

Board of Governors of the Federal Reserve System

The consumption schedule shows:

The amounts households intend to consume at various possible levels of aggregate income, a direct relationship between aggregate consumption and accumulated financial wealth

Which of the following is correct?

APC+APS=1, MPC+MPS=APC+APS

As disposable income increases, consumption:

And saving both increase

The MPC for an economy is:

The slop of the consumption schedule or line

Dissaving means:

That saving and investment is less than zero

Which is NOT correct?

MPS=MPC+1

The greater is the marginal propensity to consume, the:

Smaller is the marginal propensity to save

In the late 1990s the U.S. stock market boomed, causing U.S. consumption to rise. Economists refer to this outcome as the:

Wealth effect

The investment demand curve will shift to the right as the result of:

Business becoming more optimistic about future business conditions

If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is:

12 percent

The multiplier effect means that:

An increase in investment can cause GDP to change by a larger amount

If the MPC is .70 and investment increases by $3 billion, the equilibrium GDP will:

Increase by $10 billion

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