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Macro Econ Test 2
Terms in this set (40)
An increase in government spending will likely have which of the following effect?
c) a rightward shift in the IS curve
For this question, assume that investment spending depends only on output and no longer depends on interest rate. Given this information, an increase in government spending...
c) will cause investment to increase
Suppose economy is currently operating on both LM curve and IS curve, Which of the following is true for this economy?
A) The money supply equals money demand
B) Financial markets are in equilibrium
C)Production equals demand
D) the quantity supplied of bonds equals the quantity demanded of bonds
Answer is--> E)all of the above
The IS curve will shift to the left when which of the following occurs?
c) a reduction in government spending
A reduction in consumer confidence will likely have which of the following effects?
b) leftward shift in IS curve
During 2008 in United States, consumer confidence fell significantly. Which of the following will occur as a result of this reduction in consumer confidence?
d) the IS curve will shift leftward
Suppose the economy is operating on the LM curve but not on the IS curve. Given this information, we know that...
b) the money market and bond markets are in equilibrium and the goods market is not in equilibrium
Which of the following statements is consistent with a given (i.e., fixed) LM curve?
E) increase in output causes an increase in money demand
The natural rate of unemployment is the rate of unemployment...
E) non of the above
An increase in the minimum wage will tend to cause which of the following?
A) an upward shift in the WS curve
Suppose we wish to examine the determinants of the equilibrium real wage and equilibrium level of employment (N). In a graph with the real wage on the vertical axis, and the level of employment on the horizontal axis, the wage-setting relation will now be
E) upward sloping
A reduction in the minimum wage will tend to cause which of the following?
c) downward shift in WS curve
A reduction in unemployment benefits will tend to cause which of the following?
B) a downward shift in the WS curve
For this question, assume that the economy is initially operating at the natural level of output. A one-time 5% reduction in the nominal money supply will cause
B) a 5% reduction in the price level in the medium run
The aggregate demand curve will shift ti the right when which of the following occurs?
B) a reduction in taxes
When the economy is operating at a point where output is less than the natural level of output, which of the following occurs?
D) all of the above
Suppose a central bank implements a monetary expansion. WHich of the following would we expect to occur in the short run?
E) an increase in nominal wage
For this question, assume that the Phillips curve equation is represented by the following
Piet - piet-1= (m+z)-aut. Which of the following will cause a reduction in the natural rate of unemployment?
A) an increase in a (alpha)
Which of the following best defines the IS curve?
C) the combinations of i and Y that maintain equilibrium in the goods market
Based on our understanding of the IS-LM model that takes into account dynamics, we know that a reduction in government spending will cause
A) a gradual reduction in i and gradual reduction in Y
The IS curve will shift to the right when which of the following occurs?
B) an increase in government spending
Based on price setting behavior, we know that a reduction in the unemployment rate will cause
D) no change in real wage
Which of the following events will cause an increase in the aggregate price level?
D) an increase in the unemployment benefits
Suppose there is a simultaneous central bank purchase of bonds and increase in taxes. W know with certainty that this combination of policies must cause
A) a reduction in i
Which of the following represents the participation rate?
C) the ratio of the labor force to the civilian noninstituational population
non-institutional civilian population is 250 million, of which 100 million are employed and 10 million are unemployed
Based on the information above, the unemployment rate is
Henry Ford's experiment with efficiency wages resulted in
D) a reduction in the layoff rate
Data for which country were first used to illustrate the relationship between unemployment and inflation (i.e., the original Phillip's curve)
E) non of the above
non-institutional population is 250 million, of which 100 million are employed and 10 million are unemployed
Based on information above, the non-employment rate is
Based on the information above, the labor force participation rate is
At the current level of output, suppose the actual price level is greater than the price level that individuals expect (i.e., Pt>Pet). We know that
E) none of the above
Which of the following individuals first discovered the relationship between unemployment and inflation for the United States?
C) Samuelson and Solow
The original Phillips curve implied or assumed that
B) the expected rate of inflation would be zero
For this equation, assume that the Phillips curve equation is represented by the following equation: piet - piet-1=(m+z)-aut. A reduction in the unemployment rate will cause
D)an increase in the inflation rate over time
Since approximately 1970, the most stable Phillips-type relationship for the United States has been between which of the following?
C) the unemployment rate and the change in the rate of inflation
In which of the following periods was the relationship between the US unemployment rate and US inflation rate unstable?
E) none of the above
Today about ____ of US workers have their wages set by collective bargaining agreements
Suppose the aggregate production function is given by the following: Y=AN. GIven this information, we know that labor productivity is represented by the following:
The natural level of output is the level of output that occurs when
A) the economy is operating at the unemployment rate consistent with both the wage-setting and price-setting equations
In the wage setting relation W=PeF(u,z), the variable z does NOT include which of the following variables?
A) the extent to which firms mark up prices over their marginal costs
Recommended textbook explanations
Principles of Economics
N. Gregory Mankiw
Krugman's Economics for AP*
David Anderson, Margaret Ray
Principles of Economics
Paul Krugman, Robin Wells
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