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611 Exam 2 Multiple choice
Terms in this set (18)
reduction in taxes (fiscal policy). what will occur?
IS Curve shifts right (consumption will increase), economy moves along LM curve to reach eqm
when current price level is equal to expected price level, we know that
output is equal to the natural rate of unemployment
when the economy is operating such that output is greater than the natural level of unemployment, what occurs?
all of above: unemp is less than natural unemp, price level is greater than expected price level, price level will be higher next period
what will cause one to increase the amount of money one wishes to hold?
a decrease in the interest rate
the money demand curve will shift right when
theres an increase in income
what happens as a result of expansionary monetary policy?
the LM will shift down
suppose a simultaneous expansion in monetary and fiscal policies, we know for certain that
output will increase
in the wage-asking relation, nominal wage tends to decrease when
unemployment benefits decrease
suppose an expected increase in price level by 5%, what else should we expect?
nominal wage will increase by exactly 5%
based on wage-asking behavior, a reduction in unemployment rate will cause
an increase in real wage
if the aggregate production function is given by Y=N, what is labor productivity?
suppose fiscal policy makers chose to reduce the budget deficit. Based on the IS-LM model, what will occur as a result?
investment spending may increase, decrease, or not change
if u < un, we know that
if investment spending was not very sensitive to interest rate, then
IS curve would be relatively steep
suppose economy is at natural level of output, but then, theres an increase in govt spending. In the medium run, this will have no effect on?
Assume economy is at natural level of output, a one time 5% reduction in nominal money supply will cause what
a 5% reduction in price level in the medium run
CNP is 250mil, 100 mil are employed and 10 mil are unemployed. The unemployment rate is
10/110 = 9.1%
CNP is 250mil, 100 mil are employed and 10 mil are unemployed. The participation rate is
110/250 = 44%
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