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37 terms

Macroeconomics- Exam 3

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:
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?
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?
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?
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