ECON 3312 Macroeconomics Exam 3 Fall Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Size: px
Start display at page:

Download "ECON 3312 Macroeconomics Exam 3 Fall 2014. Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question."

Transcription

1 ECON 3312 Macroeconomics Exam 3 Fall 2014 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Everything else held constant, an increase in net taxes will cause the IS curve to shift to the and aggregate demand will. A) left; increase B) right; decrease C) right; increase D) left; decrease 1) 2) The expectations-augmented Phillips curve implies that as expected inflation increases, nominal wages to prevent real wages from. A) rise; rising B) fall; rising C) rise; falling D) fall; falling 2) 3) Which market adjusts the quickest in response to shocks to the economy? A) The labor market B) The goods market C) The asset, labor, and goods markets adjust at about the same speed to eliminate a disequilibrium in the macroeconomy. D) The asset market 3) 4) Which of the following changes aggregate supply and shifts the AS curve? i. a change in the price of a major resource ii. increases in the amount of capital iii. a change in the money income of consumers A) i, ii, and iii B) i and ii C) iii only D) ii only E) i only 4) 5) The IS curve shows the combinations of output and the real interest rate for which A) the financial asset market is in equilibrium. B) the labor market is in equilibrium. C) an increase in output will cause the market-clearing interest rate to be bid up. D) the goods market is in equilibrium. 5) 6) The short-run Phillips curve is another way of looking at A) aggregate demand. B) long-run aggregate supply. C) the natural rate of unemployment. D) potential GDP. E) short-run aggregate supply. 6) 1

2 7) The short-run Phillips curve shows between the unemployment rate and the inflation rate and the long-run Phillips curve shows between the unemployment rate and the inflation rate. A) no relationship; no relationship B) a positive relationship; a negative relationship C) a negative relationship; no relationship D) a negative relationship; a positive relationship E) no relationship; a negative relationship 7) 8) You have just read that the Federal Reserve has increased the money supply to avoid a recession. For a given price level, you would expect the LM curve to A) shift up and to the left as the real money supply falls. B) shift up and to the left as the real money supply rises. C) shift down and to the right as the real money supply falls. D) shift down and to the right as the real money supply rises. 8) 9) Which of the following people is most likely to be spending all of their current income? A) a high income person expecting a dramatic drop in income in the future B) a low income person expecting continued low income throughout life C) a low income person expecting a dramatic rise in income in the future D) a high income person expecting to retire soon, and live for a long time afterward E) a high income person expecting continued high income throughout life 9) 10) The long-run aggregate supply curve is a vertical line passing through A) the actual rate of unemployment. B) the natural rate of output. C) the natural-rate price level. D) the expected rate of inflation. 10) 11) In the long-run ISLM model and with everything else held constant, as long as the level of output the natural rate level, the price level will continue to, shifting the LM curve to the, until finally output is back at the natural rate level. A) remains below; rise; right B) exceeds; rise; left C) exceeds; rise; right D) remains below; fall; left 11) 12) If the economy is on its short-run Phillips curve at the natural unemployment rate, then in the AS-AD model, real GDP is definitely A) increasing. B) less than potential GDP. C) greater than potential GDP. D) decreasing. E) equal to potential GDP. 12) 13) According to the traditional interest-rate channel, expansionary monetary policy lowers the real interest rate, thereby raising expenditure on A) consumer nondurables. B) business fixed investment. C) government expenditure. D) net exports. 13) 2

3 14) Suppose the economy is producing at the natural rate of output. An open market sale of bonds by the Fed will cause in real GDP in the short run and in inflation in the short run, everything else held constant. A) no change; a decrease B) an increase; an increase C) no change; an increase D) a decrease; a decrease 14) 15) According to the permanent income hypothesis, the impact of. A) a change in permanent income on consumption is greater than the impact resulting from a change in transitory income. B) a change in transitory income is felt primarily through changes in the total tax revenue paid to the federal government. C) a change in permanent income on consumption is larger than the impact resulting from a change in future income. D) a change in transitory income on consumption is greater than the impact resulting from a change in permanent income. 15) 16) Adaptive expectations assumes that individuals A) base predictions on past observations of the variable being forecast. B) can accurately predict the future. C) form their predictions of macroeconomic variables randomly. D) use all available information in predicting the future. E) none of the above 16) 17) According to the permanent-income hypothesis, A) the income earned in a lifetime will be evenly divided between consumption and saving. B) household consumption depends on income that households expect to receive each year, and financial markets are used to smooth consumption in response to changes in transitory income. C) households use financial markets to to transfer funds from periods when income is high to to periods when income is low. D) the present value of lifetime consumption equals the present value of lifetime income. 17) 18) A decrease in the real interest rate acts as for lenders and as for borrowers. A) a decrease in wealth; an increase in wealth B) an increase in wealth; an increase in wealth C) a decrease in wealth; a decrease in wealth D) an increase in wealth; a decrease in wealth 18) 19) The short-run Phillips curve shows A) potential GDP. B) a tradeoff between real GDP and unemployment. C) a tradeoff between the unemployment rate and the inflation rate. D) the natural unemployment rate. E) the expected inflation rate. 19) 20) If the curve is relatively more unstable than the curve, a money supply target is preferred. A) IS; LM B) IS; IS C) LM; LM D) LM; IS 20) 3

4 21) Moving along the short-run AS curve, when the price level increases, the A) nominal wage rate rises, and there is a decrease in the quantity of real GDP supplied. B) real wage rate rises, and there is a decrease in the quantity of real GDP supplied. C) nominal wage rate falls, and there is an increase in the quantity of real GDP supplied. D) real wage rate falls, and there is an increase in the quantity of real GDP supplied. E) real wage rate rises, and there is an increase in the quantity of real GDP supplied. 21) 22) If a person completely smooths consumption over his lifetime, then consumption is best represented by which of the following? A) lifetime wealth / the number of years the person expects to work B) lifetime wealth / the number of years the person expects to live C) current income X the number of years the person expects to work D) current income X the number of years the person expects to live 22) 23) When the aggregate demand curve shifts rightward, the price level and the unemployment rate. A) decreases; decreases B) does not change; does not change C) increases; increases D) increases; decreases E) decreases; increases 23) 24) In the figure above, the expected inflation rate is A) 8 percent. B) 4 percent. C) 0 percent. D) 6 percent. E) 2 percent. 24) 25) In the figure above, the natural unemployment rate is A) 6 percent. B) 8 percent. C) 2 percent. D) 4 percent. E) 0 percent. 25) 4

5 26) Economic theory suggests that interest rates are important than interest rates in explaining investment behavior. A) real; more; nominal B) nominal; more; real C) market; more; real D) real; less; nominal 26) 27) The long-run Phillips curve shows the relationship between A) the nominal interest rate and real interest rate. B) real GDP and the natural unemployment rate. C) the inflation rate and the natural unemployment rate. D) the inflation rate and the unemployment rate. E) real GDP and potential GDP. 27) 28) If inflation increases unexpectedly, then A) lenders gain and borrowers gain. B) neither borrowers nor lenders lose. C) lenders receive a lower real interest rate than they expected. D) borrowers pay a higher real interest rate than they expected. 28) 29) According Friedmanʹs restatement of the quantity theory of money, an increase in the money supply the demand for, everything else held constant. A) increases; supply B) decreases; supply C) decreases; non-durable goods D) increases; durable goods 29) 30) Human wealth is A) total wealth minus housing wealth. B) the sum of financial and housing wealth. C) the discounted present value of all financial assets. D) financial wealth minus housing wealth. E) the present discounted value of expected future after-tax labor income. 30) 31) Moving along the short-run Phillips curve, a unemployment rate can only be achieved by paying the cost of. A) higher; a higher inflation rate B) lower; a lower price level C) lower; a higher inflation rate D) lower; a lower inflation rate E) lower; a higher expected inflation rate 31) 32) The rate of output at which the price level has no tendency to rise or fall is called the A) efficient level of output. B) bliss point. C) potential level of income. D) natural rate of output. 32) 33) An increase in potential GDP aggregate supply and. A) has no effect on; does not shift the AS curve B) decreases; shifts the AS curve rightward C) increases; shifts the AS curve rightward D) decreases; shifts the AS curve leftward E) increases; shifts the AS curve leftward 33) 5

6 34) Assets that generate high returns when wealth is decreasing are more valuable than those that are poitively correlated with changes in wealth because such assets can be use to. A) smooth consumption B) equate marginal utilities of consumption over time C) hedge income risk D) All of the above 34) 35) For consumers with a binding borrowing constraint, a decrease in the real interest rate. A) decreases consumption now, and increases future consumption B) has no impact on consumption C) decreases consumption now, and in the future D) increases consumption now, and in the future 35) 36) The long-run aggregate supply curve shifts to the right when there is A) an increase in the total amount of capital in the economy. B) an increase in the available technology. C) a decrease in the natural rate of unemployment.. D) A and B. E) A, B, and C. 36) 37) Inflation that is than what is expected benefits and hurts. A) less; lenders; borrowers B) less; borrowers; lenders C) greater; lenders; borrowers D) greater; lenders; no one 37) 38) According to aggregate demand and supply analysis, the negative supply shocks of and had the effect of A) decreasing aggregate output, raising unemployment, and lowering the inflation. B) increasing aggregate output, raising unemployment, and raising the inflation. C) decreasing aggregate output, raising unemployment, and raising the inflation. D) increasing aggregate output, lowering unemployment, and raising the inflation. 38) 39) The long-run rate of unemployment to which an economy always gravitates is the A) natural rate of unemployment. B) neutral rate of unemployment. C) normal rate of unemployment. D) inflationary rate of unemployment. 39) 40) Suppose there is an increase in expected future taxes. This will cause which of the following to occur? A) the LM curve to shift up in the current period B) the LM curve to shift down in the current period C) the IS curve to shift right in the current period D) the IS curve to shift left in the current period 40) 41) Consumption is most likely to respond one-for-one with changes in current income when A) the change in current income results from a one-time bonus B) people believe the change in their current income is temporary. C) the change in current income is caused by the business cycle. D) people are able to borrow as much as they wish, as long as they pay it back. E) none of the above 41) 6

7 42) Moving upward along the aggregate supply curve, is equivalent to A) shifting the short-run Phillips curve leftward. B) moving upward along the short-run Phillips curve. C) moving downward along the short-run Phillips curve. D) shifting the short-run Phillips curve rightward. E) shifting the short-run Phillips curve upward. 42) 43) If the expected inflation rate rises, then the short-run Phillips curve and the long-run Phillips curve. A) shifts; does not shift B) shifts; shifts C) does not shift; does not shift D) does not shift; shifts E) might shift; shifts only if the short-run Phillips curve shifts 43) 44) Suppose policy makers underestimate the natural rate of unemployment, i.e. they believe the natural rate is 4% when it is really 6%. In situations like these, policy makers will likely implement policies that result in A) a steadily decreasing inflation rate. B) more unemployment than necessary. C) a higher inflation rate than necessary. D) an unemployment rate that is ʺtoo high.ʺ E) overly contractionary monetary and fiscal policy. 44) 45) Assuming the economy is starting at the natural rate of output and everything else held constant, the effect of in aggregate is a rise in both inflation and output in the short-run, but in the long-run the only effect is a rise in inflation. A) a decrease; demand B) a decrease; supply C) an increase; demand D) an increase; supply 45) 46) Suppose the intersection of the IS and LM curves is to the right of the full employment output, Y*. What would most likely eliminate a disequilibrium among the asset, labor, and goods markets? A) A rise in the price level, shifting the LM curve up and to the left. B) A rise in the price level, shifting the IS curve up and to the right. C) A fall in the price level, shifting the IS curve down and to the left. D) A fall in the price level, shifting the LM curve down and to the right. 46) 47) When the money supply declines by 10%, in the long run, output and the price level. A) is unchanged; is unchanged B) declines; falls C) is unchanged; falls D) declines; is unchanged 47) 48) Everything else held constant, a change in workersʹ expectations about inflation will cause to change. A) aggregate demand B) the production function C) short-run aggregate supply D) long-run aggregate supply 48) 7

8 49) Assume the economy is initially operating at the natural level of output. Now suppose a budget is passed that calls for an increase in government spending. This increase in government spending will, in the short run, cause an increase in A) the nominal wage. B) the price level. C) the nominal interest rate. D) all of the above E) none of the above 49) 50) Everything else held constant, an autonomous tightening of monetary policy will cause A) the quantity of aggregate demand to increase. B) aggregate demand to increase. C) the quantity of aggregate demand to decrease. D) aggregate demand to decrease. 50) 8

9 Answer Key Testname: ECON3312_EXAM3_SPRING2015 1) D 2) C 3) D 4) B 5) D 6) E 7) C 8) D 9) C 10) B 11) B 12) E 13) B 14) D 15) A 16) A 17) B 18) A 19) C 20) A 21) D 22) B 23) D 24) B 25) A 26) A 27) C 28) C 29) D 30) E 31) C 32) D 33) C 34) D 35) B 36) E 37) A 38) C 39) A 40) D 41) E 42) B 43) A 44) C 45) C 46) A 47) C 48) C 9

10 Answer Key Testname: ECON3312_EXAM3_SPRING ) D 50) D 10

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. ECON 3312 Macroeconomics Practice Exam 3 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Assuming the economy is starting at the natural rate

More information

Economics of Money, Banking, and Fin. Markets, 10e (Mishkin) Chapter 22 Aggregate Demand and Supply Analysis. 22.

Economics of Money, Banking, and Fin. Markets, 10e (Mishkin) Chapter 22 Aggregate Demand and Supply Analysis. 22. Economics of Money, Banking, and Fin. Markets, 10e (Mishkin) Chapter 22 Aggregate Demand and Supply Analysis 22.1 Aggregate Demand 1) The aggregate demand curve is the total quantity of an economy's A)

More information

Principles of Macroeconomics Prof. Yamin Ahmad ECON 202 Fall 2004

Principles of Macroeconomics Prof. Yamin Ahmad ECON 202 Fall 2004 Principles of Macroeconomics Prof. Yamin Ahmad ECON 202 Fall 2004 Sample Final Exam Name Id # Part B Instructions: Please answer in the space provided and circle your answer on the question paper as well.

More information

CHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY

CHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY CHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY Learning goals of this chapter: What forces bring persistent and rapid expansion of real GDP? What causes inflation? Why do we have business cycles? How

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Suvey of Macroeconomics, MBA 641 Fall 2006, Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Modern macroeconomics emerged from

More information

Chapter 9 The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis

Chapter 9 The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Chapter 9 The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Multiple Choice Questions 1. The FE line shows the level of output at which the market is in equilibrium. (a) Goods (b) Asset

More information

Effects of Inflation Unanticipated Inflation in the Labor Market

Effects of Inflation Unanticipated Inflation in the Labor Market Effects of Inflation Unanticipated Inflation in the Labor Market Unanticipated inflation has two main consequences in the labor market: Redistribution of income Departure from full employment Effects of

More information

Chapter 22. Aggregate Demand and Supply Analysis Aggregate Demand

Chapter 22. Aggregate Demand and Supply Analysis Aggregate Demand Chapter 22 Aggregate Demand and Supply Analysis 22.1 Aggregate Demand 1) The aggregate demand curve is the total quantity of an economyʹs A) intermediate goods demanded at all price levels. B) intermediate

More information

7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Aggregate Supply

7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Aggregate Supply Chapter 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Aggregate Supply Topic: Aggregate Supply/Aggregate Demand Model 1) The aggregate supply/aggregate demand model is used to help understand all of the following

More information

6 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts

6 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts Chapter 6 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Key Concepts Aggregate Supply The aggregate production function shows that the quantity of real GDP (Y ) supplied depends on the quantity of labor (L ),

More information

Econ 303: Intermediate Macroeconomics I Dr. Sauer Sample Questions for Exam #3

Econ 303: Intermediate Macroeconomics I Dr. Sauer Sample Questions for Exam #3 Econ 303: Intermediate Macroeconomics I Dr. Sauer Sample Questions for Exam #3 1. When firms experience unplanned inventory accumulation, they typically: A) build new plants. B) lay off workers and reduce

More information

7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts

7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts Chapter 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Key Concepts Aggregate Supply The aggregate production function shows that the quantity of real GDP (Y ) supplied depends on the quantity of labor (L ),

More information

Factors that Shift the IS Curve

Factors that Shift the IS Curve Factors that Shift the IS Curve A change in autonomous factors that is unrelated to the interest rate Changes in autonomous consumer expenditure Changes in planned investment spending unrelated to the

More information

MONEY, INTEREST, REAL GDP, AND THE PRICE LEVEL*

MONEY, INTEREST, REAL GDP, AND THE PRICE LEVEL* Chapter 11 MONEY, INTEREST, REAL GDP, AND THE PRICE LEVEL* The Demand for Topic: Influences on Holding 1) The quantity of money that people choose to hold depends on which of the following? I. The price

More information

Mods Practice

Mods Practice Mods 17-18-19 Practice Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The aggregate demand curve shows the relationship between the aggregate price level

More information

Chapter 13. Aggregate Demand and Aggregate Supply Analysis

Chapter 13. Aggregate Demand and Aggregate Supply Analysis Chapter 13. Aggregate Demand and Aggregate Supply Analysis Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics In the short run, real GDP and

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Based on our understanding of the Keynesian cross, we know with certainty that an equal

More information

Aggregate Supply and Aggregate Demand

Aggregate Supply and Aggregate Demand Aggregate Supply and Aggregate Demand Econ 120: Global Macroeconomics 1 1.1 Goals Goals Specific Goals Be able to explain GDP fluctuations when the price level is also flexible. Explain how real GDP and

More information

Questions. True/False and Explain

Questions. True/False and Explain 166 CHAPTER 11 (27) Questions True/False and Explain Aggregate Supply 11. At full employment, there is no unemployment. 12. Along the LAS curve, a rise in the price level and all resource prices increase

More information

2009 CHAPTER 11 Self Study Questions

2009 CHAPTER 11 Self Study Questions CHAPTER 11 Self Study Questions 1) The aggregate supply/aggregate demand model is used to help understand all of the following except A) inflation. B) business cycle fluctuations. C) the aggregate value

More information

Chapter 12: Aggregate Supply and Phillips Curve

Chapter 12: Aggregate Supply and Phillips Curve Chapter 12: Aggregate Supply and Phillips Curve In this chapter we explain the position and slope of the short run aggregate supply (SRAS) curve. SRAS curve can also be relabeled as Phillips curve. A basic

More information

Practiced Questions. Chapter 20

Practiced Questions. Chapter 20 Practiced Questions Chapter 20 1. The model of aggregate demand and aggregate supply a. is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Inflation can be started by 1) A) an increase in aggregate supply or a decrease in aggregate

More information

Practice Exam. Name: Date: 1. When workers and employers correctly anticipate an increase in inflation caused by an increase in aggregate demand,

Practice Exam. Name: Date: 1. When workers and employers correctly anticipate an increase in inflation caused by an increase in aggregate demand, Practice Exam Name: Date: 1. When workers and employers correctly anticipate an increase in inflation caused by an increase in aggregate demand, workers will underestimate the real wage rate workers will

More information

Macroeconomic Analysis Econ 6022 Level I

Macroeconomic Analysis Econ 6022 Level I 1 / 66 Macroeconomic Analysis Econ 6022 Level I Lecture 8 Fall, 2011 2 / 66 Business Cycle Analysis: A Preview What explains business cycle fluctuations? Two major business cycle theories - Classical theory

More information

Extra Problems #3. ECON 410.502 Macroeconomic Theory Spring 2010 Instructor: Guangyi Ma. Notice:

Extra Problems #3. ECON 410.502 Macroeconomic Theory Spring 2010 Instructor: Guangyi Ma. Notice: ECON 410.502 Macroeconomic Theory Spring 2010 Instructor: Guangyi Ma Extra Problems #3 Notice: (1) There are 25 multiple-choice problems covering Chapter 6, 9, 10, 11. These problems are not homework and

More information

ECON 1010 Principles of Macroeconomics Solutions to Exam #3. Section A: Multiple Choice Questions. (40 points; 2 pts each)

ECON 1010 Principles of Macroeconomics Solutions to Exam #3. Section A: Multiple Choice Questions. (40 points; 2 pts each) ECON 1010 Principles of Macroeconomics Solutions to Exam #3 Section A: Multiple Choice Questions. (40 points; 2 pts each) 1. Domestic savings and foreign savings are: a. sources of funds for investment

More information

Aggregate Supply, Aggregate Demand, and Inflation: Putting It All Together Principles of Economics in Context (Goodwin, et al.)

Aggregate Supply, Aggregate Demand, and Inflation: Putting It All Together Principles of Economics in Context (Goodwin, et al.) Chapter 28 Aggregate Supply, Aggregate Demand, and Inflation: Putting It All Together Principles of Economics in Context (Goodwin, et al.) Chapter Overview This chapter introduces you to the "Aggregate

More information

Business Conditions Analysis Prof. Yamin Ahmad ECON 736

Business Conditions Analysis Prof. Yamin Ahmad ECON 736 Business Conditions Analysis Prof. Yamin Ahmad ECON 736 Sample Final Exam Name Id # Instructions: There are two parts to this midterm. Part A consists of multiple choice questions. Please mark the answers

More information

BADM 527, Fall 2013. Midterm Exam 2. Multiple Choice: 3 points each. Answer the questions on the separate bubble sheet. NAME

BADM 527, Fall 2013. Midterm Exam 2. Multiple Choice: 3 points each. Answer the questions on the separate bubble sheet. NAME BADM 527, Fall 2013 Name: Midterm Exam 2 November 7, 2013 Multiple Choice: 3 points each. Answer the questions on the separate bubble sheet. NAME 1. According to classical theory, national income (Real

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Sample Questions for Chapters 12 & 13 Inflation Unemployment & Business Cycles Fiscal Policy MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Inflation

More information

Suggested Answers for Mankiw Questions for Review & Problems

Suggested Answers for Mankiw Questions for Review & Problems Suggested Answers for Mankiw & Problems The answers here will not have graphs, I encourage to refer to the text for graphs. There is a some math, however I don t expect you to replicate these in your exam,

More information

EC2105, Professor Laury EXAM 2, FORM A (3/13/02)

EC2105, Professor Laury EXAM 2, FORM A (3/13/02) EC2105, Professor Laury EXAM 2, FORM A (3/13/02) Print Your Name: ID Number: Multiple Choice (32 questions, 2.5 points each; 80 points total). Clearly indicate (by circling) the ONE BEST response to each

More information

Chapter 3 AGGREGATE DEMAND AND

Chapter 3 AGGREGATE DEMAND AND Chapter 3 AGGREGATE DEMAND AND AGGREGATE G SULY Dr. Mohammed Alwosabi The aggregate demand and aggregate supply (-AS) model determines RGD and GD Deflator and helps us understand the performance of three

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 35 questions, each 1.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 35 questions, each 1. AUBG ECO 302 A F I N A L E X A M Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 35 questions, each 1.5 points 1) The Bigdrill company drills

More information

Pre-Test Chapter 10 ed17

Pre-Test Chapter 10 ed17 Pre-Test Chapter 10 ed17 Multiple Choice Questions 1. Refer to the above diagrams. Assuming a constant price level, an increase in aggregate expenditures from AE 1 to AE 2 would: A. move the economy from

More information

Answer: C Learning Objective: Money supply Level of Learning: Knowledge Type: Word Problem Source: Unique

Answer: C Learning Objective: Money supply Level of Learning: Knowledge Type: Word Problem Source: Unique 1.The aggregate demand curve shows the relationship between inflation and: A) the nominal interest rate. D) the exchange rate. B) the real interest rate. E) short-run equilibrium output. C) the unemployment

More information

Name: Days/Times Class Meets: Today s Date:

Name: Days/Times Class Meets: Today s Date: Name: _ Days/Times Class Meets: Today s Date: Macroeconomics, Spring 2008, Final Exam, several versions Read these Instructions carefully! You must follow them exactly! I) On your Scantron card you must

More information

Chapter 9. The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis. 2008 Pearson Addison-Wesley. All rights reserved

Chapter 9. The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis. 2008 Pearson Addison-Wesley. All rights reserved Chapter 9 The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Chapter Outline The FE Line: Equilibrium in the Labor Market The IS Curve: Equilibrium in the Goods Market The LM Curve:

More information

Government Budget and Fiscal Policy CHAPTER

Government Budget and Fiscal Policy CHAPTER Government Budget and Fiscal Policy 11 CHAPTER The National Budget The national budget is the annual statement of the government s expenditures and tax revenues. Fiscal policy is the use of the federal

More information

University of Lethbridge Department of Economics ECON 1012 Introduction to Microeconomics Instructor: Michael G. Lanyi. Chapter 29 Fiscal Policy

University of Lethbridge Department of Economics ECON 1012 Introduction to Microeconomics Instructor: Michael G. Lanyi. Chapter 29 Fiscal Policy University of Lethbridge Department of Economics ECON 1012 Introduction to Microeconomics Instructor: Michael G. Lanyi Chapter 29 Fiscal Policy 1) If revenues exceed outlays, the government's budget balance

More information

Macroeconomics CHAPTER 10. Aggregate Supply and Aggregate Demand. Aggregate Supply. The Short-Run Aggregate Supply Curve

Macroeconomics CHAPTER 10. Aggregate Supply and Aggregate Demand. Aggregate Supply. The Short-Run Aggregate Supply Curve Aggregate Supply Macroeconomics CHAPTER 10 The aggregate supply curve shows the relationship aggregate output. Aggregate Supply and Aggregate Demand 3 What you will learn in this chapter: How the aggregate

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Econ 111 Summer 2007 Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The classical dichotomy allows us to explore economic growth

More information

Problem Set #4: Aggregate Supply and Aggregate Demand Econ 100B: Intermediate Macroeconomics

Problem Set #4: Aggregate Supply and Aggregate Demand Econ 100B: Intermediate Macroeconomics roblem Set #4: Aggregate Supply and Aggregate Demand Econ 100B: Intermediate Macroeconomics 1) Explain the differences between demand-pull inflation and cost-push inflation. Demand-pull inflation results

More information

FISCAL POLICY* Chapter. The Federal Budget. goods and services. goods and services, the value of transfer payments,

FISCAL POLICY* Chapter. The Federal Budget. goods and services. goods and services, the value of transfer payments, Chapter 15 FISCAL POLICY* The Federal Budget Topic: The Federal Budget 1) Which of the following is considered a purpose of the federal budget? I. To help the economy achieve full employment. II. To finance

More information

VII. ECONOMIC FLUCTUATIONS AND MACROECONOMIC POLICY

VII. ECONOMIC FLUCTUATIONS AND MACROECONOMIC POLICY VII. ECONOMIC FLUCTUATIONS AND MACROECONOMIC POLICY A. Aggregate Demand and Prices 1. The aggregate demand/inflation (ADI) curve -- graphical representation of the negative relationship (downward sloping

More information

The Aggregate Demand- Aggregate Supply (AD-AS) Model

The Aggregate Demand- Aggregate Supply (AD-AS) Model The AD-AS Model The Aggregate Demand- Aggregate Supply (AD-AS) Model Chapter 9 The AD-AS Model addresses two deficiencies of the AE Model: No explicit modeling of aggregate supply. Fixed price level. 2

More information

Lecture 6: Economic Fluctuations. Rob Godby University of Wyoming

Lecture 6: Economic Fluctuations. Rob Godby University of Wyoming Lecture 6: Economic Fluctuations Rob Godby University of Wyoming Short-Run Economic Fluctuations Economic activity fluctuates from year to year. In some years, the production of goods and services rises.

More information

Monetary and Fiscal Policy in the ISLM Model

Monetary and Fiscal Policy in the ISLM Model WEB CHAPTER 2 Preview Monetary and Fiscal Policy in the ISLM Model S ince World War II, government policymakers have tried to promote high employment without causing inflation. If the economy experiences

More information

1) Explain why each of the following statements is true. Discuss the impact of monetary and fiscal policy in each of these special cases:

1) Explain why each of the following statements is true. Discuss the impact of monetary and fiscal policy in each of these special cases: 1) Explain why each of the following statements is true. Discuss the impact of monetary and fiscal policy in each of these special cases: a) If investment does not depend on the interest rate, the IS curve

More information

. consumption and investment spending.

. consumption and investment spending. Chapter 10 1. The aggregate demand curve: A. is upward sloping because a higher price level is necessary to make production profitable as production costs rise. B. is downward sloping because production

More information

Analytical Problems: Chapter 9

Analytical Problems: Chapter 9 Analytical Problems: Chapter 9 1. (a) The increase in desired investment shifts the IS curve up and to the right, as shown in Figure 9.21. The price level rises, shifting the LM curve up and to the left

More information

Solutions to Spring 2015 Week 13 Tutorial Questions (Ch9)

Solutions to Spring 2015 Week 13 Tutorial Questions (Ch9) Chapter 9: Q1: Macroeconomics P.324 Review Questions #6 Q2: Macroeconomics P.324 Review Questions #7 Q3: Macroeconomics P.324 Review Questions #8 Q4: Macroeconomics P.325 Numerical Problems #1 Q5: Macroeconomics

More information

MONEY, INTEREST, REAL GDP, AND THE PRICE LEVEL*

MONEY, INTEREST, REAL GDP, AND THE PRICE LEVEL* Chapter 11 MONEY, INTEREST, REAL GDP, AND THE PRICE LEVEL* Key Concepts The Demand for Money Four factors influence the demand for money: The price level An increase in the price level increases the nominal

More information

Econ 202 Final Exam. Table 3-1 Labor Hours Needed to Make 1 Pound of: Meat Potatoes Farmer 8 2 Rancher 4 5

Econ 202 Final Exam. Table 3-1 Labor Hours Needed to Make 1 Pound of: Meat Potatoes Farmer 8 2 Rancher 4 5 Econ 202 Final Exam 1. If inflation expectations rise, the short-run Phillips curve shifts a. right, so that at any inflation rate unemployment is higher. b. left, so that at any inflation rate unemployment

More information

LECTURE NOTES ON MACROECONOMIC PRINCIPLES

LECTURE NOTES ON MACROECONOMIC PRINCIPLES LECTURE NOTES ON MACROECONOMIC PRINCIPLES Peter Ireland Department of Economics Boston College peter.ireland@bc.edu http://www2.bc.edu/peter-ireland/ec132.html Copyright (c) 2013 by Peter Ireland. Redistribution

More information

5. The dynamic aggregate demand curve is drawn for a given: A) money supply. B) real interest rate. C) monetary policy rule. D) inflation rate.

5. The dynamic aggregate demand curve is drawn for a given: A) money supply. B) real interest rate. C) monetary policy rule. D) inflation rate. Name: Date: 1. The dynamic aggregate demand curve is downward sloping because as inflation falls the central bank reduces the nominal interest rate by more than the fall in the inflation rate, which the

More information

AGGREGATE DEMAND AND AGGREGATE SUPPLY

AGGREGATE DEMAND AND AGGREGATE SUPPLY 33 AGGREGATE DEMAND AND AGGREGATE SUPPLY Questions for Review 1. Two macroeconomic variables that decline when the economy goes into a recession are real GDP and investment spending (many other answers

More information

Aggregate Demand and Aggregate Supply

Aggregate Demand and Aggregate Supply Demand and Supply Chapter 31 Copyright 21 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College

More information

Pre-Test Chapter 11 ed17

Pre-Test Chapter 11 ed17 Pre-Test Chapter 11 ed17 Multiple Choice Questions 1. Built-in stability means that: A. an annually balanced budget will offset the procyclical tendencies created by state and local finance and thereby

More information

FISCAL POLICY* Chapter. Key Concepts

FISCAL POLICY* Chapter. Key Concepts Chapter 15 FISCAL POLICY* Key Concepts The Federal Budget The federal budget is an annual statement of the government s expenditures and tax revenues. Using the federal budget to achieve macroeconomic

More information

Chapter 11 Keynesianism: The Macroeconomics of Wage and Price Rigidity

Chapter 11 Keynesianism: The Macroeconomics of Wage and Price Rigidity Chapter 11 Keynesianism: The Macroeconomics of Wage and Price Rigidity Multiple Choice Questions 1. Keynesians are skeptical of the classical theory that recessions are periods of increased mismatch between

More information

Agenda. The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis, Part 3. Disequilibrium in the AD-AS model

Agenda. The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis, Part 3. Disequilibrium in the AD-AS model Agenda The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis, art 3 rice Adjustment and the Attainment of General Equilibrium 13-1 13-2 General equilibrium in the AD-AS model Disequilibrium

More information

Macro CH 28 sample test questions

Macro CH 28 sample test questions Class: Date: Macro CH 28 sample test questions Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The opportunity cost of holding money is the a. inflation

More information

Chapter 29 AS-AD and the Business Cycle

Chapter 29 AS-AD and the Business Cycle Chapter 29 AS-AD and the Business Cycle 29.1 Business-Cycle Definitions and Facts 1) The relationship between real GDP and potential GDP over the business cycle can be best summarized by which of the following

More information

Pre-Test Chapter 15 ed17

Pre-Test Chapter 15 ed17 Pre-Test Chapter 15 ed17 Multiple Choice Questions 1. The extended AD-AS model: A. distinguishes between short-run and long-run aggregate demand. B. explains inflation but not recession. C. includes G

More information

12.1 Introduction. 12.2 The MP Curve: Monetary Policy and the Interest Rates 1/24/2013. Monetary Policy and the Phillips Curve

12.1 Introduction. 12.2 The MP Curve: Monetary Policy and the Interest Rates 1/24/2013. Monetary Policy and the Phillips Curve Chapter 12 Monetary Policy and the Phillips Curve By Charles I. Jones Media Slides Created By Dave Brown Penn State University The short-run model summary: Through the MP curve the nominal interest rate

More information

Aggregate Supply and Aggregate Demand

Aggregate Supply and Aggregate Demand 26 Aggregate Supply and Aggregate Demand Learning Objectives Explain what determines aggregate supply Explain what determines aggregate demand Explain what determines real GDP and the price level and how

More information

Chapter 4 Consumption, Saving, and Investment

Chapter 4 Consumption, Saving, and Investment Chapter 4 Consumption, Saving, and Investment Multiple Choice Questions 1. Desired national saving equals (a) Y C d G. (b) C d + I d + G. (c) I d + G. (d) Y I d G. 2. With no inflation and a nominal interest

More information

2W EB CHAPTER. Since World War II, government policymakers have tried to promote high employment. Preview. ISLM Model

2W EB CHAPTER. Since World War II, government policymakers have tried to promote high employment. Preview. ISLM Model 2W EB CHAPTER Monetary and Fiscal Policy in the ISLM Model Preview Since World War II, government policymakers have tried to promote high employment without causing inflation. If the economy experiences

More information

Econ 202 Final Exam. Douglas, Spring 2010 May 6, 2010 PLEDGE: I have neither given nor received unauthorized help on this exam.

Econ 202 Final Exam. Douglas, Spring 2010 May 6, 2010 PLEDGE: I have neither given nor received unauthorized help on this exam. , Spring 2010 May 6, 2010 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Final Exam Multiple Choice. 2 points each. 1. According to the long-run

More information

Chapter 12 Aggregate Supply and Aggregate Demand

Chapter 12 Aggregate Supply and Aggregate Demand Chapter 12 Aggregate Supply and Aggregate Demand After reading Chapter 12, AGGREGATE SUPPLY AND AGGREGATE DEMAND, you should be able to: Use an Aggregate Demand and Aggregate Supply model to explain output,

More information

The Circular Flow of Income and Expenditure

The Circular Flow of Income and Expenditure The Circular Flow of Income and Expenditure Imports HOUSEHOLDS Savings Taxation Govt Exp OTHER ECONOMIES GOVERNMENT FINANCIAL INSTITUTIONS Factor Incomes Taxation Govt Exp Consumer Exp Exports FIRMS Capital

More information

Macroeconomics: Aggregate Demand & Aggregate Supply

Macroeconomics: Aggregate Demand & Aggregate Supply RGDP HOSP 2207 (Economics) Learning Centre Macroeconomics: Aggregate Demand & Aggregate Supply The level of real GDP attained when an economy is at full capacity is called the full capacity GDP or potential

More information

The session previously discussed important variables such as inflation, unemployment and GDP. We also alluded to factors that cause economic growth

The session previously discussed important variables such as inflation, unemployment and GDP. We also alluded to factors that cause economic growth The session previously discussed important variables such as inflation, unemployment and GDP. We also alluded to factors that cause economic growth enabling us to produce more and more to achieve higher

More information

Macroeconomics, 6e (Abel et al.) Chapter 12 Unemployment and Inflation Unemployment and Inflation: Is There a Trade-off?

Macroeconomics, 6e (Abel et al.) Chapter 12 Unemployment and Inflation Unemployment and Inflation: Is There a Trade-off? Macroeconomics, 6e (Abel et al.) Chapter 12 Unemployment and Inflation 12.1 Unemployment and Inflation: Is There a Trade-off? 2) Phillipsʹs research looked at British data on A) unemployment and inflation.

More information

University of Lethbridge Department of Economics ECON 1012 Introduction to Macroeconomics Instructor: Michael G. Lanyi

University of Lethbridge Department of Economics ECON 1012 Introduction to Macroeconomics Instructor: Michael G. Lanyi University of Lethbridge Department of Economics ECON 1012 Introduction to Macroeconomics Instructor: Michael G. Lanyi CH 27 Expenditure Multipliers 1) Disposable income is A) aggregate income minus transfer

More information

Problem Set for Chapter 20(Multiple choices)

Problem Set for Chapter 20(Multiple choices) Problem Set for hapter 20(Multiple choices) 1. According to the theory of liquidity preference, a. if the interest rate is below the equilibrium level, then the quantity of money people want to hold is

More information

Chapter 12 Unemployment and Inflation

Chapter 12 Unemployment and Inflation Chapter 12 Unemployment and Inflation Multiple Choice Questions 1. The origin of the idea of a trade-off between inflation and unemployment was a 1958 article by (a) A.W. Phillips. (b) Edmund Phelps. (c)

More information

Solution. Solution. Monetary Policy. macroeconomics. economics

Solution. Solution. Monetary Policy. macroeconomics. economics KrugmanMacro_SM_Ch14.qxp 10/27/05 3:25 PM Page 165 Monetary Policy 1. Go to the FOMC page of the Federal Reserve Board s website (http://www. federalreserve.gov/fomc/) to find the statement issued after

More information

Econ 202 Final Exam. Douglas, Spring 2006 PLEDGE: I have neither given nor received unauthorized help on this exam.

Econ 202 Final Exam. Douglas, Spring 2006 PLEDGE: I have neither given nor received unauthorized help on this exam. , Spring 2006 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Final Exam 1. When the government spends more, the initial effect is that a. aggregate

More information

Chapter 13: Aggregate Demand and Aggregate Supply Analysis

Chapter 13: Aggregate Demand and Aggregate Supply Analysis Chapter 13: Aggregate Demand and Aggregate Supply Analysis Yulei Luo SEF of HKU March 25, 2013 Learning Objectives 1. Identify the determinants of aggregate demand and distinguish between a movement along

More information

Aggregate Demand & Aggregate Supply

Aggregate Demand & Aggregate Supply Aggregate Demand & Aggregate Supply (the basics) slope of the aggregate supply (AS) curve aggregate supply (AS) - The total quantity of goods and services that firms are willing to supply at varying price

More information

I d ( r; MPK f, τ) Y < C d +I d +G

I d ( r; MPK f, τ) Y < C d +I d +G 1. Use the IS-LM model to determine the effects of each of the following on the general equilibrium values of the real wage, employment, output, the real interest rate, consumption, investment, and the

More information

Macroeconomics, Fall 2007 Exam 3, TTh classes, various versions

Macroeconomics, Fall 2007 Exam 3, TTh classes, various versions Name: _ Days/Times Class Meets: Today s Date: Macroeconomics, Fall 2007 Exam 3, TTh classes, various versions Read these Instructions carefully! You must follow them exactly! I) On your Scantron card you

More information

THE ECONOMY AT FULL EMPLOYMENT: THE CLASSICAL MODEL*

THE ECONOMY AT FULL EMPLOYMENT: THE CLASSICAL MODEL* Chapter 8 THE ECONOMY AT FULL EMPLOYMENT: THE CLASSICAL MODEL* The Classical Model: A Preview Topic: Real Variables 1) Real variables A) are those that determine the cost of living. B) are those that determine

More information

Aggregate Supply and Aggregate Demand

Aggregate Supply and Aggregate Demand Aggregate Supply and Aggregate Demand Chapter CHAPTER CHECKLIST Define and explain the influences on aggregate supply. Aggregate supply is the output from all firms. Other things remaining the same, the

More information

Figure 1: IS-LM Intersection

Figure 1: IS-LM Intersection IS-LM Intersection In the short run, the economy moves to the intersection of the IS and LM curves (figure 1). Production adjusts to demand to put the economy on the IS curve. Bond prices and the interest

More information

FISCAL POLICY* Chapter. Key Concepts

FISCAL POLICY* Chapter. Key Concepts Chapter 11 FISCAL POLICY* Key Concepts The Federal Budget The federal budget is an annual statement of the government s expenditures and tax revenues. Using the federal budget to achieve macroeconomic

More information

chapter: Aggregate Demand and Aggregate Supply Krugman/Wells 2009 Worth Publishers 1 of 58

chapter: Aggregate Demand and Aggregate Supply Krugman/Wells 2009 Worth Publishers 1 of 58 chapter: 12 >> Aggregate Demand and Aggregate Supply Krugman/Wells 2009 Worth Publishers 1 of 58 WHAT YOU WILL LEARN IN THIS CHAPTER How the aggregate demand curve illustrates the relationship between

More information

In this chapter we learn the potential causes of fluctuations in national income. We focus on demand shocks other than supply shocks.

In this chapter we learn the potential causes of fluctuations in national income. We focus on demand shocks other than supply shocks. Chapter 11: Applying IS-LM Model In this chapter we learn the potential causes of fluctuations in national income. We focus on demand shocks other than supply shocks. We also learn how the IS-LM model

More information

Chapter 12. Aggregate Expenditure and Output in the Short Run

Chapter 12. Aggregate Expenditure and Output in the Short Run Chapter 12. Aggregate Expenditure and Output in the Short Run Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics Aggregate Expenditure (AE)

More information

For a closed economy, the national income identity is written as Y = F (K; L)

For a closed economy, the national income identity is written as Y = F (K; L) A CLOSED ECONOMY IN THE LONG (MEDIUM) RUN For a closed economy, the national income identity is written as Y = C(Y T ) + I(r) + G the left hand side of the equation is the total supply of goods and services

More information

THE AGGREGATE DEMAND AGGREGATE SUPPLY MODEL

THE AGGREGATE DEMAND AGGREGATE SUPPLY MODEL THE AGGREGATE DEMAND AGGREGATE SUPPLY MODEL Previously The original Solow model focused on capital investment as the main source of economic growth. Modern growth theory now recognizes that institutions

More information

Chapter 29 Aggregate Demand and Aggregate Supply QUESTIONS

Chapter 29 Aggregate Demand and Aggregate Supply QUESTIONS Chapter 29 Aggregate Demand and Aggregate Supply QUESTIONS 1. Why is the aggregate demand curve downsloping? Specify how your explanation differs from the explanation for the downsloping demand curve for

More information

4 Macroeconomics LESSON 6

4 Macroeconomics LESSON 6 4 Macroeconomics LESSON 6 Interest Rates and Monetary Policy in the Short Run and the Long Run Introduction and Description This lesson explores the relationship between the nominal interest rate and the

More information

I. MULTIPLE CHOICES. Choose the one alternative that best completes the statement to answer the question.

I. MULTIPLE CHOICES. Choose the one alternative that best completes the statement to answer the question. Econ 20B- Additional Problem Set I. MULTIPLE CHOICES. Choose the one alternative that best completes the statement to answer the question. 1.According to the theory of liquidity preference, the money supply

More information

Aggregate Demand and Aggregate Suppy

Aggregate Demand and Aggregate Suppy chapter 12 (28) Demand and Suppy Chapter Objectives Students will learn in this chapter: How the aggregate demand curve illustrates the relationship between the aggregate and the quantity of aggregate

More information

Problem Set 7 FE312 Fall 2014 Rahman. Some Answers

Problem Set 7 FE312 Fall 2014 Rahman. Some Answers Some Answers 1) a. During the Depression, the Federal Reserve enacted policies that reduced the money supply. Sketch a graph and on it indicate what this would do to the aggregate demand and aggregate

More information

Lecture 10: Aggregate Demand and Aggregate Supply I

Lecture 10: Aggregate Demand and Aggregate Supply I EC201 Intermediate Macroeconomics EC201 Intermediate Macroeconomics Lecture 10: Aggregate Demand and Aggregate Supply I Lecture Outline: - how to derive the aggregate demand from the IS-LM model; - a preliminary

More information