Worksheet 17.1: Intro to AD
|
|
- Olivia Wiggins
- 7 years ago
- Views:
Transcription
1 Worksheet 17.1: Intro to After watching Jason Welker s An Introduction to Aggregate Demand video found at answer the following questions. 1. What factors cause a change in? 2. What does household wealth refer to? 3. What determines the level of government spending? 4. How do exchange rates impact?
2 Copyrighted Material - Do Not Post Answers Online Worksheet 17.1: Intro to Answer Key After watching Jason Welker s An Introduction to Aggregate Demand video found at answer the following questions. 1) What factors cause a change in? Changes in consumer spending, investment spending, government spending and net exports will change. 2) What does household wealth refer to? Household wealth is the value a household s assets minus its liabilities. 3) What determines the level of government spending? Fiscal policy of the Congress to enact spending and change tax rates determines the level of government spending. State and local governments policies may affect the level of government spending. 4) How do exchange rates impact? Exchange rate appreciation: Domestic goods are becoming more expensive for foreigners to buy, therefore exports fall and shifts left. Exchange rate depreciation: Domestic goods are becoming cheaper for foreigners to buy, therefore exports rise and shifts right.
3 Worksheet 17.2: Aggregate Demand Determine the effect on aggregate demand of each of the following events. Explain whether it represents a change in quantity demanded represented by a movement along the curve (up or down) or a change in demand represented by a shift of the curve (left or right). (Remember, explain means how and why.) Then, in a correctly labeled graph, show how each of the following will affect the curve. 1. Business owners are less optimistic about the health of the economy. 2. The government decreases welfare and veteran s benefits. 3. The Federal Reserve increases interest rates. 4. A rising price level decreases the value of money held for purchases. 5. The government lowers personal income taxes. 6. Consumers expect the job market to be much stronger in the next few months. 7. The stock market has reached new records high levels of value. 8. The stock of physical capital has been falling for nearly a year.
4 Copyrighted Material - Do Not Post Answers Online Worksheet 17.2: Aggregate Demand Answer Key Determine the effect on aggregate demand of each of the following events. Explain whether it represents a change in quantity demanded represented by a movement along the curve (up or down) or a change in demand represented by a shift of the curve (left or right). (Remember, explain means how and why.) Then, in a correctly labeled graph, show how each of the following will affect the curve. 1. Business owners are less optimistic about the health of the economy. shifts left; investment spending decreases 2 2. The government decreases welfare and veteran s benefits. shifts left; decrease in disposable income and therefore consumer spending 2 3. The Federal Reserve increases interest rates. shifts left; decrease in investment and interest sensitive consumer spending 2 4. A rising price level decreases the value of money held for purchases. There is a movement down the curve as consumer purchasing power erodes
5 Copyrighted Material - Do Not Post Answers Online 5. The government lowers personal income taxes. shifts right. Lower taxes implies higher disposable income so consumer spending rises and shifts right 2 6. Consumers expect the job market to be much stronger in the next few months. shifts right; expectations about future employment increase investment and consumer spending 2 7. The stock market has reached new records high levels of value. shifts right; consumer wealth increases causing more consumer spending 2 8. The stock of physical capital has been falling for nearly a year. shifts right; investment will increase to replace the failing stock of capital. 2
6 Exit Slip: Module The interest rate effect is the tendency for changes in the price level to affect A. the quantity of investment demanded and thus affect interest rates. B. export demand and thus affect aggregate demand. C. interest rates and thus affect the quantity of investment and consumption demanded. D. real incomes and lead to shifts in potential output. E. interest rates and thus affect the productivity of existing capital equipment. 2. Draw a correctly labeled graph to show the impact of an increase in taxes on aggregate demand. 3. When the aggregate price level rises, this will, other things equal, A. lead to a rightward shift in the curve. B. lead to a leftward shift in the curve. C. result in a decrease in the quantity of aggregate output demanded. D. result in an increase in the quantity of aggregate output demanded. E. result in a decrease in the quantity of aggregate output supplied.
7 Copyrighted Material - Do Not Post Answers Online Exit Slip: Module 17 Answer Key 1. The interest rate effect is the tendency for changes in the price level to affect A. the quantity of investment demanded and thus affect interest rates. B. export demand and thus affect aggregate demand. C. interest rates and thus affect the quantity of investment and consumption demanded. D. real incomes and lead to shifts in potential output. E. interest rates and thus affect the productivity of existing capital equipment. (C) 2. Draw a correctly labeled graph to show the impact of an increase in taxes on aggregate demand. 3. When the aggregate price level rises, this will, other things equal, A. lead to a rightward shift in the curve. B. lead to a leftward shift in the curve. C. result in a decrease in the quantity of aggregate output demanded. D. result in an increase in the quantity of aggregate output demanded. E. result in a decrease in the quantity of aggregate output supplied. (C)
8 MODULE 17: AGGREGATE DEMAND: INTRODUCTION AND DETERMINANTS In-Class Presentation of Module and Sample Lecture Suggested time: This module can be covered in one hour-long class period. I. Aggregate Demand A. Why Is the Aggregate Demand Curve Downward Sloping? 1. Wealth Effect 2. Interest Rate Effect B. Shifts of the Aggregate Demand Curve 1. Changes in Expectations 2. Changes in Wealth 3. Size of the Existing Stock of Physical Capital C. Government Policies and Aggregate Demand 1. Fiscal Policy 2. Monetary Policy I. Aggregate Demand is a curve that shows the relationship between the aggregate price level and the quantity of aggregate output demanded by households, firms, the government, and the rest of the world. A. Why is the curve downward sloping? Students think that the downward slope of the aggregate demand curve is a natural consequence of the law of demand. Since the demand curve for any one good is downward sloping, isn t it natural that the demand curve for aggregate output is also downward sloping? This is a misleading parallel. The demand curve for any individual good shows how the quantity demanded depends on the price of that good, holding the prices of other goods and services constant. Example: The demand curve for apples is downward sloping because all else equal, if the price of apples goes up, consumers will switch to a substitute fruit like bananas. With, we are talking about the aggregate price level rising for all goods and services in the economy. 1. Wealth or real balances effect When price level falls, purchasing power of existing financial assets (like money in your savings account) rises, this can increase consumer spending and there is a downward movement along the fixed curve. 2. Interest-rate effect A decline in price level means lower interest rates which can increase levels of certain types of spending. How does this work? 2015, BFW/Worth Publishers Section 4, Module 17 Page 1
9 A lower price level increases the purchasing power of money in your pocket so you need to hold less money to buy your goods and services. This decrease in the demand for money holdings puts downward pressure on interest rates. Remind students that we learned that nominal interest rate = real interest rate + expected inflation. If inflation expectations gradually fall, nominal interest rates should also gradually fall. Lower interest rates will increase investment spending, thus increasing real GDP along the curve. B. Shifts of the Aggregate Demand Curve There are shifts of the aggregate demand curve, changes in the quantity of goods and services demanded at any given price level. An increase in aggregate demand means a shift of the aggregate demand curve to the right, as shown in the figure below. A rightward shift occurs when the quantity of aggregate output demanded increases at any given aggregate price level. A decrease in aggregate demand means that the curve shifts to the left. A leftward shift implies that the quantity of aggregate output demanded falls at any given aggregate price level. Whether shifts to the right or left, that is spending is increasing or decreasing, the multiplier effect is always at work. 1. Changes in Expectations When consumers and firms are more optimistic about their future economic prospects, they will increase consumption and investment spending. This shifts to the right. 2. Changes in Wealth We discussed in the last module that the consumption function shifts up (or consumption spending increases) if consumer wealth increases. When the value of accumulated household assets goes up, consumers respond by increasing current consumption. This shifts to the right. This is one reason why a weak stock market or real estate market has a negative ripple effect in the economy by shifting to the left. 2015, BFW/Worth Publishers Section 4, Module 17 Page 2
10 3. Size of the Existing Stock of Physical Capital Firms plan to invest in physical capital when the stock is being depleted or is insufficient to meet demand for their products. Therefore, if physical capital stock is being depleted, investment spending will pick up causing to shift to the right. Alternatively, if firms have plenty of physical capital already, investment spending will slow down. This will shift to the left. C. Government Policies and Aggregate Demand Note: prepare the students for future chapters on fiscal and monetary policy by getting them to think about how the government can affect. Government can have a powerful influence on aggregate demand and that, in some circumstances, this influence can be used to improve economic performance. The two main ways the government can influence the aggregate demand curve are through fiscal policy and monetary policy. 1. Fiscal Policy Congress and the President control fiscal policy. Fiscal policy is the use of either government spending government purchases of final goods and services and government transfers or tax policy to stabilize the economy. Suppose the economy was in a recession. The government can intervene directly or indirectly. If the government increases spending (G), it will have a direct impact on. This is because the overall demand for goods and services is rising, shifting to the right. If the government decreased taxes, this would increase disposable income, and this would increase consumption spending. The increase in C raises demand and would shift the curve to the right, helping to indirectly reverse the recession. 2. Monetary Policy The Federal Reserve controls monetary policy the use of changes in the quantity of money or the interest rate to stabilize the economy. When the Fed increases the quantity of money in circulation, households and firms have more money, which they are willing to lend out.* This drives the interest rate down at any given aggregate price level, leading to higher investment spending and higher consumer spending. Thus, increasing the quantity of money shifts the aggregate demand curve to the right. *Note: It may useful to explain to students the difference between money and income. That is why people won t buy more goods with money and choose to lend because their Consumption spending is related to income and not money holding. Students will be exposed in great detail to monetary policy in upcoming chapters of the text. 2015, BFW/Worth Publishers Section 4, Module 17 Page 3
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 informationEC2105, 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 informationEconomics 152 Solution to Sample Midterm 2
Economics 152 Solution to Sample Midterm 2 N. Das PART 1 (84 POINTS): Answer the following 28 multiple choice questions on the scan sheet. Each question is worth 3 points. 1. If Congress passes legislation
More information7 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 informationEcon 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 informationMULTIPLE 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 informationChapter 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 informationRefer to Figure 17-1
Chapter 17 1. Inflation can be measured by the a. change in the consumer price index. b. percentage change in the consumer price index. c. percentage change in the price of a specific commodity. d. change
More informationMONEY, 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 informationPre-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 informationLECTURE 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 informationECON 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
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Study Questions 5 (Money) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The functions of money are 1) A) medium of exchange, unit of account,
More informationANSWERS TO END-OF-CHAPTER QUESTIONS
ANSWERS TO END-OF-CHAPTER QUESTIONS 9-1 Explain what relationships are shown by (a) the consumption schedule, (b) the saving schedule, (c) the investment-demand curve, and (d) the investment schedule.
More informationMULTIPLE 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 informationStudy Questions for Chapter 9 (Answer Sheet)
DEREE COLLEGE DEPARTMENT OF ECONOMICS EC 1101 PRINCIPLES OF ECONOMICS II FALL SEMESTER 2002 M-W-F 13:00-13:50 Dr. Andreas Kontoleon Office hours: Contact: a.kontoleon@ucl.ac.uk Wednesdays 15:00-17:00 Study
More informationThe Federal Reserve System. The Structure of the Fed. The Fed s Goals and Targets. Economics 202 Principles Of Macroeconomics
Economics 202 Principles Of Macroeconomics Professor Yamin Ahmad The Federal Reserve System The Federal Reserve System, or the Fed, is the central bank of the United States. Supplemental Notes to Monetary
More information1. 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
More informationCHAPTER 9 Building the Aggregate Expenditures Model
CHAPTER 9 Building the Aggregate Expenditures Model Topic Question numbers 1. Consumption function/apc/mpc 1-42 2. Saving function/aps/mps 43-56 3. Shifts in consumption and saving functions 57-72 4 Graphs/tables:
More information2. With an MPS of.4, the MPC will be: A) 1.0 minus.4. B).4 minus 1.0. C) the reciprocal of the MPS. D).4. Answer: A
1. If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to: A) save is three-fifths. B) consume is one-half.
More informationAnswer: 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 informationD) surplus; negative. 9. The law of one price is enforced by: A) governments. B) producers. C) consumers. D) arbitrageurs.
1. An open economy is one in which: A) the level of output is fixed. B) government spending exceeds revenues. C) the national interest rate equals the world interest rate. D) there is trade in goods and
More informationQUIZ 3 14.02 Principles of Macroeconomics May 19, 2005. I. True/False (30 points)
QUIZ 3 14.02 Principles of Macroeconomics May 19, 2005 I. True/False (30 points) 1. A decrease in government spending and a real depreciation is the right policy mix to improve the trade balance without
More informationDefinitions and terminology
Exchange rates are a confusing concept despite the fact that we have to deal with exchange rates whenever we travel abroad. The handout will tackle the common misconceptions with exchange rates and simplify
More informationAggregate Demand and Aggregate Supply Ing. Mansoor Maitah Ph.D. et Ph.D.
Aggregate Demand and Aggregate Supply Ing. Mansoor Maitah Ph.D. et Ph.D. Aggregate Demand and Aggregate Supply Economic fluctuations, also called business cycles, are movements of GDP away from potential
More informationProblem 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 informationEcon 336 - Spring 2007 Homework 5
Econ 336 - Spring 2007 Homework 5 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The real exchange rate, q, is defined as A) E times P B)
More informationChapter 12: Gross Domestic Product and Growth Section 1
Chapter 12: Gross Domestic Product and Growth Section 1 Key Terms national income accounting: a system economists use to collect and organize macroeconomic statistics on production, income, investment,
More informationPre-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 informationFinance, Saving, and Investment
23 Finance, Saving, and Investment Learning Objectives The flows of funds through financial markets and the financial institutions Borrowing and lending decisions in financial markets Effects of government
More informationFISCAL 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 informationAGGREGATE DEMAND AND AGGREGATE SUPPLY The Influence of Monetary and Fiscal Policy on Aggregate Demand
AGGREGATE DEMAND AND AGGREGATE SUPPLY The Influence of Monetary and Fiscal Policy on Aggregate Demand Suppose that the economy is undergoing a recession because of a fall in aggregate demand. a. Using
More informationBusiness 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 informationECON 4423: INTERNATIONAL FINANCE
University of Colorado at Boulder Department of Economics ECON 4423: INTERNATIONAL FINANCE Final Examination Fall 2005 Name: Answer Key Student ID: Instructions: This test is 1 1/2 hours in length. You
More informationBADM 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 information11.1 Estimating Gross Domestic Product (GDP) Objectives
11.1 Estimating Gross Domestic Product (GDP) Objectives Describe what the gross domestic product measures. Learn two ways to calculate the gross domestic product, and explain why they are equivalent. 11.1
More informationWith lectures 1-8 behind us, we now have the tools to support the discussion and implementation of economic policy.
The Digital Economist Lecture 9 -- Economic Policy With lectures 1-8 behind us, we now have the tools to support the discussion and implementation of economic policy. There is still great debate about
More information7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* * Chapter Key Ideas. Outline
C h a p t e r 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* * Chapter Key Ideas Outline Production and Prices A. What forces bring persistent and rapid expansion of real GDP? B. What leads to inflation? C.
More informationChapter 16 Output and the Exchange Rate in the Short Run
Chapter 16 Output and the Exchange Rate in the Short Run Prepared by Iordanis Petsas To Accompany International Economics: Theory and Policy, Sixth Edition by Paul R. Krugman and Maurice Obstfeld Chapter
More informationPracticed 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 informationPre-Test Chapter 8 ed17
Pre-Test Chapter 8 ed17 Multiple Choice Questions 1. The APC can be defined as the fraction of a: A. change in income that is not spent. B. change in income that is spent. C. specific level of total income
More informationMacroeconomics 2301 Potential questions and study guide for exam 2. Any 6 of these questions could be on your exam!
Macroeconomics 2301 Potential questions and study guide for exam 2 Any 6 of these questions could be on your exam! 1. GDP is a key concept in Macroeconomics. a. What is the definition of GDP? b. List and
More informationEcon 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 information3. a. If all money is held as currency, then the money supply is equal to the monetary base. The money supply will be $1,000.
Macroeconomics ECON 2204 Prof. Murphy Problem Set 2 Answers Chapter 4 #2, 3, 4, 5, 6, 7, and 9 (on pages 102-103) 2. a. When the Fed buys bonds, the dollars that it pays to the public for the bonds increase
More informationInternational Economic Relations
nternational conomic Relations Prof. Murphy Chapter 12 Krugman and Obstfeld 2. quation 2 can be written as CA = (S p ) + (T G). Higher U.S. barriers to imports may have little or no impact upon private
More informationThe level of price and inflation Real GDP: the values of goods and services measured using a constant set of prices
Chapter 2: Key Macroeconomics Variables ECON2 (Spring 20) 2 & 4.3.20 (Tutorial ) National income accounting Gross domestic product (GDP): The market value of all final goods and services produced within
More informationFactors 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 informationThe 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 informationThe 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 informationMEASURING A NATION S INCOME
10 MEASURING A NATION S INCOME WHAT S NEW IN THE FIFTH EDITION: There is more clarification on the GDP deflator. The Case Study on Who Wins at the Olympics? is now an FYI box. LEARNING OBJECTIVES: By the
More informationIntroduction to Macroeconomics 1012 Final Exam Spring 2013 Instructor: Elsie Sawatzky
Introduction to Macroeconomics 1012 Final Exam Spring 2013 Instructor: Elsie Sawatzky Name Time: 2 hours Marks: 80 Multiple choice questions 1 mark each and a choice of 2 out of 3 short answer question
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Survey of Macroeconomics, MBA 641 Fall 2006, Quiz 4 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The central bank for the United States
More informationIn 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 informationMacroeconomics, 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 informationEcon 202 Section 4 Final Exam
Douglas, Fall 2009 December 15, 2009 A: Special Code 00004 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Section 4 Final Exam 1. Oceania buys $40
More informationMONEY, 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 informationName: Date: 3. Variables that a model tries to explain are called: A. endogenous. B. exogenous. C. market clearing. D. fixed.
Name: Date: 1 A measure of how fast prices are rising is called the: A growth rate of real GDP B inflation rate C unemployment rate D market-clearing rate 2 Compared with a recession, real GDP during a
More informationa) Aggregate Demand (AD) and Aggregate Supply (AS) analysis
a) Aggregate Demand (AD) and Aggregate Supply (AS) analysis Determinants of AD: Aggregate demand is the total demand in the economy. It measures spending on goods and services by consumers, firms, the
More informationWhat three main functions do they have? Reducing transaction costs, reducing financial risk, providing liquidity
Unit 4 Test Review KEY Savings, Investment and the Financial System 1. What is a financial intermediary? Explain how each of the following fulfills that role: Financial Intermediary: Transforms funds into
More informationAP Macroeconomics 2010 Scoring Guidelines
AP Macroeconomics 2010 Scoring Guidelines The College Board The College Board is a not-for-profit membership association whose mission is to connect students to college success and opportunity. Founded
More informationSHORT-RUN FLUCTUATIONS. David Romer. University of California, Berkeley. First version: August 1999 This revision: January 2012
SHORT-RUN FLUCTUATIONS David Romer University of California, Berkeley First version: August 1999 This revision: January 2012 Copyright 2012 by David Romer CONTENTS Preface vi I The IS-MP Model 1 I-1 Monetary
More informationINTRODUCTION AGGREGATE DEMAND MACRO EQUILIBRIUM MACRO EQUILIBRIUM THE DESIRED ADJUSTMENT THE DESIRED ADJUSTMENT
Chapter 9 AGGREGATE DEMAND INTRODUCTION The Great Depression was a springboard for the Keynesian approach to economic policy. Keynes asked: What are the components of aggregate demand? What determines
More informationEcon 202 Section H01 Midterm 2
, Spring 2010 March 16, 2010 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Section H01 Midterm 2 Multiple Choice. 2.5 points each. 1. What would
More informationThe Keynesian Cross. A Fixed Price Level. The Simplest Keynesian-Cross Model: Autonomous Consumption Only
The Keynesian Cross Some instructors like to develop a more detailed macroeconomic model than is presented in the textbook. This supplemental material provides a concise description of the Keynesian-cross
More informationANSWERS TO END-OF-CHAPTER QUESTIONS
ANSWERS TO END-OF-CHAPTER QUESTIONS 7-1 In what ways are national income statistics useful? National income accounting does for the economy as a whole what private accounting does for businesses. Firms
More information1) 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 informationEcon 102 Aggregate Supply and Demand
Econ 102 ggregate Supply and Demand 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, ggregate Supply
More informationAgenda. Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy, Part 1. Exchange Rates. Exchange Rates.
Agenda, Business Cycles, and Macroeconomic Policy in the Open Economy, Part 1 How Are Determined A Supply-and-Demand Analysis 19-1 19-2 Nominal exchange rates: The nominal exchange rate indicates how much
More informationLesson 8 - Aggregate Demand and Aggregate Supply
Lesson 8 - Aggregate Demand and Aggregate Supply Acknowledgement: Ed Sexton and Kerry Webb were the primary authors of the material contained in this lesson. Section 1: Aggregate Demand The second macroeconomic
More information13 EXPENDITURE MULTIPLIERS: THE KEYNESIAN MODEL* Chapter. Key Concepts
Chapter 3 EXPENDITURE MULTIPLIERS: THE KEYNESIAN MODEL* Key Concepts Fixed Prices and Expenditure Plans In the very short run, firms do not change their prices and they sell the amount that is demanded.
More informationEffects 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 informationThe Short-Run Macro Model. The Short-Run Macro Model. The Short-Run Macro Model
The Short-Run Macro Model In the short run, spending depends on income, and income depends on spending. The Short-Run Macro Model Short-Run Macro Model A macroeconomic model that explains how changes in
More informationAP Macroeconomics 2012 Scoring Guidelines
AP Macroeconomics 2012 Scoring Guidelines The College Board The College Board is a mission-driven not-for-profit organization that connects students to college success and opportunity. Founded in 1900,
More informationPractice Problems on NIPA and Key Prices
Practice Problems on NIPA and Key Prices 1- What are the three approaches to measuring economic activity? Why do they give the same answer? The three approaches to national income accounting are the product
More informationBUSINESS ECONOMICS CEC2 532-751 & 761
BUSINESS ECONOMICS CEC2 532-751 & 761 PRACTICE MACROECONOMICS MULTIPLE CHOICE QUESTIONS Warning: These questions have been posted to give you an opportunity to practice with the multiple choice format
More informationPre-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 informationCh. 38 Practice MC 1. In international financial transactions, what are the only two things that individuals and firms can exchange? A.
Ch. 38 Practice MC 1. In international financial transactions, what are the only two things that individuals and firms can exchange? A. Currency and real assets. B. Services and manufactured goods. C.
More informationI. Introduction to Aggregate Demand/Aggregate Supply Model
University of California-Davis Economics 1B-Intro to Macro Handout 8 TA: Jason Lee Email: jawlee@ucdavis.edu I. Introduction to Aggregate Demand/Aggregate Supply Model In this chapter we develop a model
More informationChapter 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 informationGovernment 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 informationEcon 202 H01 Final Exam Spring 2005
Econ202Final Spring 2005 1 Econ 202 H01 Final Exam Spring 2005 1. Which of the following tends to reduce the size of a shift in aggregate demand? a. the multiplier effect b. the crowding-out effect c.
More information12.1 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 informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chatper 34 International Finance - Test Bank MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The currency used to buy imported goods is A) the
More informationPractice Problems Mods 25, 28, 29
Practice Problems Mods 25, 28, 29 Multiple Choice Identify the choice that best completes the statement or answers the question. Scenario 25-1 First National Bank First National Bank has $80 million in
More informationEconomics 212 Principles of Macroeconomics Study Guide. David L. Kelly
Economics 212 Principles of Macroeconomics Study Guide David L. Kelly Department of Economics University of Miami Box 248126 Coral Gables, FL 33134 dkelly@miami.edu First Version: Spring, 2006 Current
More informationFISCAL 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 information2 0 0 0 E D I T I O N CLEP O F F I C I A L S T U D Y G U I D E. The College Board. College Level Examination Program
2 0 0 0 E D I T I O N CLEP O F F I C I A L S T U D Y G U I D E College Level Examination Program The College Board Principles of Macroeconomics Description of the Examination The Subject Examination in
More informationUniversity 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 informationMeasuring the Aggregate Economy
CHAPTER 25 Measuring the Aggregate Economy The government is very keen on amassing statistics... They collect them, add them, raise them to the n th power, take the cube root and prepare wonderful diagrams.
More informationProblem 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 informationUsing Policy to Stabilize the Economy
Using Policy to Stabilize the Economy Since the Employment ct of 1946, economic stabilization has been a goal of U.S. policy. Economists debate how active a role the govt should take to stabilize the economy.
More informationChapter 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 informationAggregate 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 informationchapter: 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 informationProfessor Christina Romer. LECTURE 17 MACROECONOMIC VARIABLES AND ISSUES March 17, 2016
Economics 2 Spring 2016 Professor Christina Romer Professor David Romer LECTURE 17 MACROECONOMIC VARIABLES AND ISSUES March 17, 2016 I. MACROECONOMICS VERSUS MICROECONOMICS II. REAL GDP A. Definition B.
More informationCHAPTER 5: MEASURING GDP AND ECONOMIC GROWTH
CHAPTER 5: MEASURING GDP AND ECONOMIC GROWTH Learning Goals for this Chapter: To know what we mean by GDP and to use the circular flow model to explain why GDP equals aggregate expenditure and aggregate
More informationS.Y.B.COM. (SEM-III) ECONOMICS
Fill in the Blanks. Module 1 S.Y.B.COM. (SEM-III) ECONOMICS 1. The continuous flow of money and goods and services between firms and households is called the Circular Flow. 2. Saving constitute a leakage
More informationUnit 4: Measuring GDP and Prices
Unit 4: Measuring GDP and Prices ECO 120 Global Macroeconomics 1 1.1 Reading Reading Module 10 - pages 106-110 Module 11 1.2 Goals Goals Specific Goals: Understand how to measure a country s output. Learn
More information