# Figure 1: Shift of s d as G increases S d (G=110) r S d (G=100) S d = 0.5Y+0.5T r-G. I d : r. Figure 2: Shift of IS as G increases

Save this PDF as:

Size: px
Start display at page:

Download "Figure 1: Shift of s d as G increases S d (G=110) r S d (G=100) S d = 0.5Y+0.5T r-G. I d : r. Figure 2: Shift of IS as G increases"

## Transcription

1 Economics 154a, Spring 2005 Intermediate Macroeconomics Problem Set 8: Answer Key April 11, Do numerical problem #4 on p. 425 in Chapter 11 of the textbook: An economy is described by the following equations: Desired Consumption C d = (Y T ) 300r... (a) Write the equation for the aggregate demand curve.... ANSWER: The IS curve is given by Y = C d + I d + G = (Y 100) 300r r = Y 400r. This can be rewritten as 0.5Y = r, or Y = r. The LM curve is M/P = L, or 6300/P = 0.5Y - 200r. To find the aggregate demand curve, substitute the LM curve into the IS curve to eliminate r. To do this, multiply both sides of the LM curve by 4 to get 25, 200/P = 2Y 800r, or 800r = 2Y (25, 200/P ). Then substitute this in the IS curve: Y = r = 900 [2Y (25, 200/P )]. This can be rewritten as 3Y = (25, 200/P ), or Y = (8400/P ). (b) Suppose that P=15. What are the short-run values of output, the real interest rate, consumption, and investment? ANSWER:With P = 15, the AD curve is Y = 300+(8400/15) = 860. From the IS curve, 860 = r, which has the solution r = Consumption is C = ( ) ( ) = 665. Investment is I = 100 ( ) = 95. (c) What are the long-run equilibrium values of output, the real interest rate, consumption, investment, and the price level? ANSWER:In the long run, Y = 700. From the IS equation, 700 = r, which has the solution r = The LM curve then is 6300/P = ( ) ( ) = 300, which has the solution P = 21. Consumption is C = ( ) ( ) = 525. Investment is I = 100 ( ) = 75. In addition, do part (d) below: (d) Suppose that the economy is the long-run equilibrium in part (c) and G increases from 100 to 110 (T remains fixed at 100). Determine the new short-run equilibrium values of Y, r, C, and I (P remains fixed at its initial value). Calculate the 1

2 multiplier on government spending (i.e., the change in Y divided by the change in G). In addition, graph the Id, Sd, IS, and AD curves and show how they shift when G increases from 100 to 110. ANSWER: With P at 21 from part (c), an increase in G of 10 leads to a shift out and up of the IS curve, and to a temporarily higher output level. The IS curve is now Y = (Y T ) 400r or Y = r. The LM curve does not move in the short run, so that it is still Y = r. The equilibrium point is therefore found where r = r, so that r = 320/1200 = This implies output is Y = (320/1200) = Then C = ( ) 300(0.266) = and I = (0.266) = Overall, output increased by 6.6 dollars for 10 dollars of extra government expenditures which implies a multiplier of 6.6/10=66/Figures 1,2 and 3 depict the movements of the S d, IS, and AD curves. Figure 1: Shift of s d as G increases S d (G=110) r S d (G=100) S d = 0.5Y+0.5T r-G I d : r I d,s d Figure 2: Shift of IS as G increases G r IS (G=110) IS (G=100) B LM: Y= r A IS: Y=700+2G-800r Multiplier= Y/ G Y Y 2

4 Figure 4: Increasing money supply with constant price level ANSWER: When the price controls are removed, the price level will jump up, with the short-run aggregate supply curve shifting to SRAS 2. The new equilibrium is at point C, where there is full employment. 3. This problem studies the dynamic behavior of a macroeconomic model that consists of three equations: Okuns law, an aggregate demand curve, and a Phillips curve... (a) Suppose that the growth rate of the money supply is 12% per year... ANSWER: We must show that if (g mt, u T, g y,t, π T ) = (12, 5, 2, 10) for T = t 1 and T = t, then it s also true for all T > t. First, substitute u t = 5 in equation 1 to obtain u t+1 5 = 0.5(g yt+1 2). Then plug in the right hand of this last equation into equation 3 to obtain π t+1 π e t+1 = 2( 0.5(g yt+1 2)) = g yt+1 2. Now plug in equation 2 to obtain π t+1 π e t+1 = g mt+1 π t+1 2 or π t+1 = (g mt+1 + π e t+1 2)/2. Finally, working backwards from the facts that g mt+1 = 12 and that π e t+1 = π t = 10 we get π t+1 = ( )/2 = 10, g yt+1 = = 2 and u t+1 = 5 0.5(2 2) = 5. Therefore this set of values is a steady state for the economy. (b) Suppose instead that g mt = 6 for all t. Show that the steady-state values of u t, g yt, and π t are 5, 2, and 4, respectively. ANSWER: Setting π e t+1 = π t = 4 and g mt+1 = 6 in the equations derived above we get π t+1 = ( )/2 = 4, g yt+1 = 6 4 = 2 and u t+1 = 5 0.5(2 2) = 5. 4

6 Date(t) πt e desired π g mt u t Clearly the sacrifice ratio is 0 in this case. NOTE: This exercise should not be interpreted as gullible expectations, with π e = 4 no matter what, which will lead to a negative sacrifice ratio if the government sticks to its slow disinflation plan. Instead, the idea is that if agents expect the government to set π at 4, the government could do it in one single and painless step. 6

### 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

### Agenda. Inflation and the DAD SAS Model: A General Framework for Macroeconomic Analysis, Part 4. Inflation and the triangle model

Agenda Inflation and the Triangle Model. Inflation and the DAD SAS Model: A General Framework for Macroeconomic Analysis, Part 4 The DAD SAS Model. Inflation Adjustment and the Attainment of General Equilibrium.

### Agenda. The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis, Part 2. The AD Curve. Aggregate Demand and Aggregate Supply

Agenda Aggregate Demand and Aggregate Supply The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis, art 2 13-1 13-2 Aggregate Demand and Aggregate Supply The AD-AS model is derived from

### Introduction to The IS-LM Model

Chapter 9 The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Economics 282 University of Alberta Introduction to The IS-LM Model This name originates from its basic equilibrium conditions:

### 2. a. The IS curve is found from the equation Y = Cd + P + G = (Y - 100) - 500r r+ 100, or 0.5Y = r, or Y = r.

Chapter 11 Numerical Problems 1. The following table shows the real wage (w), the effort level (E), and the effort per unit of real wages (E / w). w E E/w 8 7 0.875 10 10 1.00 12 15 1.25 14 17 1.21 16

### 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

### 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

### Suggested Solutions to Assignment 7 (Optional)

EC290 Intermediate Macro I Instructor: Sharif F. Khan Department of Economics Wilfrid Laurier University Winter 2011 Suggested Solutions to Assignment 7 (Optional) (This assignment is based on the materials

### 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

### So we can use either equilibrium condition to get the same result.

Numerical Problems 1. (a) S d = Y C d G = Y (4000 4000r + 0.2Y) 2000 = 6000 + 4000r + 0.8Y. (b) (1) Using the equation that goods supplied equals goods demanded gives Y = C d + I d + G = (4000 4000r +

### 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

### Econ 102 Homework #9 AD/AS and The Phillips Curve

Econ 102 Homework #9 D/S and The Phillips Curve 1. s on previous homework assignments, turn in a news article together with your summary and explanation of why it is relevant to this week s topic, D/S

### 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

### Foundations of Economics for International Business Supplementary Exercises 7

Foundations of Economics for International Business Supplementary Exercises 7 INSTRUCTOR: XIN TANG Department of World Economics Economics and Management School Wuhan University Fall 2015 1 MULTIPLE CHOICES

### 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

### 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

### Aggregate Demand I: Building the IS-LM Model

CHAPTER 11 : Building the IS-LM Model Modified for ECON 2204 by Bob Murphy 2016 Worth Publishers, all rights reserved IN THIS CHAPTER, YOU WILL LEARN: the IS curve and its relation to: the Keynesian cross

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:

### Homework 4 I Multiple Choices

Homework 4 I Multiple Choices 1) Keynes's motivation in developing the aggregate output determination model stemmed from his concern with explaining A) the hyperinflations of the 1920s. B) why the Great

### 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

### 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

### 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

### Use the following to answer question 9: Exhibit: Keynesian Cross

1. Leading economic indicators are: A) the most popular economic statistics. B) data that are used to construct the consumer price index and the unemployment rate. C) variables that tend to fluctuate in

### 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

### Question 1: Deriving and Solving the IS-LM Model (closed economy)

ECON 222 Macroeconomic Theory I Fall Term 2010 Assignment 4 Due: Drop Box 2nd Floor Dunning Hall by noon November 26th 2010 No late submissions will be accepted No group submissions will be accepted No

### 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

### b. Given this information, describe the government budget balance for this economy.

Economics 102 Summer 2015 Answers to Homework #5 Due Wednesday, July 15, 2015 Directions: The homework will be collected in a box before the lecture. Please place your name on top of the homework (legibly).

Agenda What is a Business Cycle? Business Cycles.. 11-1 11-2 Business cycles are the short-run fluctuations in aggregate economic activity around its long-run growth path. Y Time 11-3 11-4 1 Components

### 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

### A country s economy is in a short-run equilibrium with an output level less than the full-employment output level. Assume an upwardsloping aggregate

ADAS Practice A country s economy is in a short-run equilibrium with an output level less than the full-employment output level. Assume an upwardsloping aggregate supply curve. (a) Using a correctly labeled

### 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)

### 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

### Cosumnes River College Principles of Macroeconomics Problem Set 9 Due November 10, 2015

Name: Solutions Cosumnes River College Principles of Macroeconomics Problem Set 9 Due November 10, 2015 Fall 2015 Prof. Dowell Instructions: Write the answers clearly and concisely on these sheets in the

88 Krugman/Obstfeld International conomics: Theory and Policy, Seventh dition nswers to Textbook Problems. decline in investment demand decreases the level of aggregate demand for any level of the exchange

### Aggregate Demand and Aggregate Supply Analysis

Aggregate Demand and Aggregate Supply Analysis This lecture develops an aggregate demand and aggregate supply model to study the effects of monetary policy on output and inflation. Aggregate Supply A.

Eco 202 Name Final Exam Key 10 May 2004 150 points. Please write answers in ink. Allocate your time efficiently. Good luck. 1. Suppose that Congress passes an investment tax credit, which subsidizes domestic

### 3 Macroeconomics SAMPLE QUESTIONS

Sample Multiple-Choice Questions Circle the letter of each correct answer. 1. Which of the following best describes aggregate supply? (A) The amount buyers plan to spend on output (B) A schedule showing

### ECN 106 Macroeconomics 1. Lecture 6

ECN 106 Macroeconomics 1 Lecture 6 Giulio Fella c Giulio Fella, 12 ECN 106 Macroeconomics 1 - Lecture 6 140/311 Roadmap for this lecture Policy implications of the long-run model Macroeconomic stylized

### 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 26 AD & AS Use the figure below to answer the following questions. Figure 26.1.1

### 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

### Ch.6 Aggregate Supply, Wages, Prices, and Unemployment

1 Econ 302 Intermediate Macroeconomics Chul-Woo Kwon Ch.6 Aggregate Supply, Wages, rices, and Unemployment I. Introduction A. The dynamic changes of and the price adjustment B. Link between the price change

### 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

### A decline in the stock market, which makes consumers poorer, would cause the aggregate demand curve to shift to the left.

Economics 304 Final Exam Fall 2000 PART I: TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. (1.5 pts. each) A decline in the stock market, which makes consumers poorer,

### 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,

### 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

### 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

### 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

### 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

### 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.

### 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

### 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

### 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.

### 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

### Chapter 22. Aggregate Demand and Supply Analysis

Chapter 22 Aggregate Demand and Supply Analysis Aggregate Demand The relationship between the quantity of aggregate output demanded and the price level when all other variables are held constant Based

### AGGREGATE SUPPLY AGGREGATE DEMAND 125

AGGREGATE SUPPLY AGGREGATE DEMAND 125 (E) point A to point B. aggregate demand would be a movement from equilibrium position A to equilibrium position B. 13. In the graph above, contractionary monetary

### 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

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

ECON 410.502 Macroeconomic Theory Spring 2010 Instructor: Guangyi Ma Assignment #3 Notice: (1) There are 25 multiple-choice problems and 2 analytic (short-answer) problems. This assignment is due on March

### Econ 100B: Macroeconomic Analysis Fall Problem Set #3 ANSWERS (Due September 15-16, 2008)

Econ 100B: Macroeconomic Analysis Fall 2008 Problem Set #3 ANSWERS (Due September 15-16, 2008) A. On one side of a single sheet of paper: 1. Clearly and accurately draw and label a diagram of the Production

### 1. Neutrality of money in classical model: brief characteristic, implication for economic policy

Economic policy, examination questions, school year 2010-2011 A. Questions, where brief, compact answer is required 1. Neutrality of money in classical model: brief characteristic, implication for economic

### Macroeconomics Instructor Miller AD/AS Model Practice Problems

Macroeconomics Instructor Miller AD/AS Model Practice Problems 1. The basic aggregate demand and aggregate supply curve model helps explain A) fluctuations in real GDP and the price level. B) long-term

### 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

### 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 ),

### 1. Simple Classical and Keynesian Models

1. Simple Classical and Keynesian Models Tutorial 1 Consider a closed economy characterised by the following equations: y d = c + i + g, c = a + b(y t), a > 0,0 < b < 1 i = i 0 hr, i 0, h > 0 y d = y,

### b) What happens to the level of output and the price level in the short run and in the long run?

1) Suppose the Fed reduces the money supply by 5 percent. a) What happens to the aggregate demand curve? If the Fed reduces the money supply, the aggregate demand curve shifts down. This result is based

### 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

### Agenda. Unemployment and Inflation, Part 1. Unemployment and Inflation. Unemployment and Inflation. Unemployment and Inflation:

Agenda Unemployment and Inflation, Part 1 : Is There a Trade-Off? 15-1 15-2 Is there a trade-off between inflation and unemployment? In 1958, A.W. Phillips found a negative relationship between unemployment

### Inflation and Unemployment CHAPTER 22 THE SHORT-RUN TRADE-OFF 0

22 The Short-Run Trade-off Between Inflation and Unemployment CHAPTER 22 THE SHORT-RUN TRADE-OFF 0 In this chapter, look for the answers to these questions: How are inflation and unemployment related in

### 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

### Questions for Review. CHAPTER 9 Introduction to Economic Fluctuations

HTER 9 Introduction to Economic Fluctuations Questions for Review 1. When GD declines during a recession, growth in real consumption and investment spending both decline; unemployment rises sharply. 2.

### Answers to Text Questions and Problems in Chapter 11

Answers to Text Questions and Problems in Chapter 11 Answers to Review Questions 1. The aggregate demand curve relates aggregate demand (equal to short-run equilibrium output) to inflation. As inflation

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

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

### CH 10 - REVIEW QUESTIONS

CH 10 - REVIEW QUESTIONS 1. The short-run aggregate supply curve is horizontal at: A) a level of output determined by aggregate demand. B) the natural level of output. C) the level of output at which the

### 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

### Name: Final Exam Econ 219 Spring You can skip one multiple choice question. Indicate clearly which one

Name: Final Exam Econ 219 Spring 2005 This is a closed book exam. You are required to abide all the rules of the Student Conduct Code of the University of Connecticut. You can skip one multiple choice

### ECON 1010 Principles of Macroeconomics Final Exam

ECON 1010 Principles of Macroeconomics Final Exam 1. Expansionary monetary policy: Section A: Multiple Choice Questions. (120 points; 3 pts each) a. increases the money supply, interest rates, consumption,

### Rutgers University School of Business Aggregate Economics Fall 2010

Rutgers University School of Business Aggregate Economics Fall 2010 Professor: Dr. Davood Taree Email: dtaree@rbs.rutgers.edu Office hours: Thursday: By appointment Course Information: Course Number: 591:41

### Notes 10: An Equation Based Model of the Macroeconomy

Notes 10: An Equation Based Model of the Macroeconomy In this note, I am going to provide a simple mathematical framework for 8 of the 9 major curves in our class (excluding only the labor supply curve).

### Inflation, Unemployment, and Federal Reserve Policy

Chapter 16 (28) Inflation, Unemployment, and Federal Reserve Policy Chapter Summary Inflation and unemployment are two very important macroeconomic issues. The Phillips curve illustrates the short-run

### Macro Chapter 10 study guide questions

Macro Chapter 10 study guide questions Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Which of the following will reduce aggregate demand? a. an increase

### Using an appropriately labeled money market graph, show the effects of an open market purchase of government securities by the FED on :

Using an appropriately labeled money market graph, show the effects of an open market purchase of government securities by the FED on : The money supply Interest rates Nominal Interest rates i1 i2 Sm1

### 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

### 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

### Summer 2014 Week 13 Tutorial Questions Solutions (Ch9)

Chapter 9: Q1: Macroeconomics P.324 Numerical Problems #1 Q2: Macroeconomics P.325 Numerical Problems #4 Chapter 10: Q3: Macroeconomics P.391 Review Questions #1 Q4: Macroeconomics P.391 Review Questions

### Change Effect on nominal money demand Effect on real money demand Decrease in aggregate price level Shift nominal money demand to left Has no effect

AP Macroeconomics Unit 4 Review Session Money Market 1. Draw the money market, indicating the equilibrium interest rate and quantity. 2. Use the following table to answer this question. Change Effect on

### Macroeconomics Instructor Miller Aggregate Expenditure Practice Problems

Macroeconomics Instructor Miller Aggregate Expenditure Practice Problems 1. The aggregate expenditure model focuses on the relationship between real spending and. A) short-run; real GDP B) short-run; inflation

### THE SHORT-RUN TRADEOFF BETWEEN INFLATION AND UNEMPLOYMENT

21 THE SHORT-RUN TRDEOFF ETWEEN INFLTION ND UNEMPLOYMENT LERNING OJECTIVES: y the end of this chapter, students should understand: why policymakers face a short-run tradeoff between inflation and unemployment.

### Summary of IS-LM and AS-AD. Karl Whelan September 19, 2014

Summary of IS-LM and AS-AD Karl Whelan September 19, 2014 The Goods Market This is in equilibrium when the demand for goods equals the supply of goods. Higher real interest rates mean there is less demand

### 1. a. Interest-bearing checking accounts make holding money more attractive. This increases the demand for money.

Macroeconomics ECON 2204 Prof. Murphy Problem Set 4 Answers Chapter 10 #1, 2, and 3 (on pages 308-309) 1. a. Interest-bearing checking accounts make holding money more attractive. This increases the demand

### 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

### Practice Final Exam Economics 503 Fundamentals of Economic Analysis 2:30-5:30PM

Name Student ID Practice Final Exam Economics 503 Fundamentals of Economic Analysis 2:30-5:30PM Write all of your answers on this white exam paper. Do not hand in the blue books. Multiple Choices (2 points

### 13 EXPENDITURE MULTIPLIERS: THE KEYNESIAN MODEL* Chapter. Fixed Prices and Expenditure Plans. D) the aggregate price level is fixed and that aggregate

Chapter 13 EXPENDITURE MULTIPLIERS: THE KEYNESIAN MODEL* Fixed Prices and Expenditure Plans Topic: Keynesian Model * 1) In the Keynesian model of aggregate expenditure, real GDP is determined by the A)

### Name: Date: 2. The IS-LM model takes as exogenous. A) the price level and national income B) the price level C) national income D) the interest rate

Name: Date: 1. John Maynard Keynes wrote that responsibility for low income and high unemployment in economic downturns should be placed on: A) low levels of capital. B) an untrained labor force. C) inadequate

### Keynes and IS-LM analysis. (Chapter 33 in Mankiw and Taylor)

Keynes and IS-LM analysis (Chapter 33 in Mankiw and Taylor) Short-run fluctuations The next four lectures will cover different aspects of macroeconomic policy, in particular, the role of fiscal and monetary

### 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

### 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

### MACROECONOMICS '4KTH EDITOG

MACROECONOMICS '4KTH EDITOG Andrew B.Abel The Wharton School of the University of Pennsylvania Ben S. Bemanke Dean Croushore Robins School of Business University of Richmond PEARSON Addison Wesley Boston

### Lecture 12: Aggregate Demand and Supply Analysis

Lecture 12: Aggregate Demand and Supply Analysis Aggregate Demand Aggregate demand is made up of four component parts: consumption expenditure, the total demand for consumer goods and services planned