Econ 2202 Final

Front 1

Variables that a model tries to explain are called ___ where as variables that a model takes as given are called ____

Back 1

endogenous, exogenous

Front 2

How does the distinction between flexible and sticky prices impact the study of macroeconomics?

Back 2

Flexible prices are typically assumed in the study of the long run, while sticky prices are assumed in the study of the short run

Front 3

In the relationship expressed in the funtional form, Y = G(K,L)
Y stands for real GDP, K stands for the amount of capital in the economy, L stands for the amount of labor in the economy. In this case G:

Back 3

is the function telling how the variable in the parenthesis determine real GDP

Front 4

Real GDP is measured in ____ dollar and ____ time

Back 4

constant, per unit of

Front 5

The GDP deflator is equal to:

Back 5

the ratio of nominal GDP to real GDP

Front 6

The CPI is determined by computing

Back 6

the price of a fixed basket of goods and services, relative to the price of the same basket in a base year

Front 7

If an increase of an equal percentage in all factors of production results in an increase in output of the same percentage, then a production function has the property called:

Back 7

constant returns to scale

Front 8

The real wage is the return to labor measured in:

Back 8

units of output

Front 9

The marginal product of capital is:

Back 9

additional output produced when one additional unit of capital is added

Front 10

If output is described by the production funtion Y=AK0.2L0.8, then the production function has

Back 10

constant returns to scale

Front 11

A consumption function shows the relationship between consumption and

Back 11

disposable income

Front 12

If the consumption function is given by C=150 + 0.85Y and Y increases by 1 unit, C increases by:

Back 12

0.85

Front 13

The real interest rate is the:

Back 13

nominal interest rate minus the rate of inflation

Front 14

People use money as a store of value when they:

Back 14

hold money to transfer purchasing power into the future

Front 15

To make a trade in a barter economy requires

Back 15

A double coincidence of wants

Front 16

A country that is on a gold standard primarily uses

Back 16

commodity money

Front 17

In the united states, monetary policy is controlled by the

Back 17

Federal Reserve

Front 18

If there are 100 transactions in a year and the average value of each transaction is $10, then if there is $200 of money in the economy, transactions velocity is

Back 18

5

Front 19

When the demand for money parameter k is large, the velocity of money is ___ and money changing hands _____

Back 19

large, frequently

Front 20

Inflation tax means that:

Back 20

as the price level rises, the real value of money held by the public decreases

Front 21

The ex ante real interest rate is equal to the nominal interest rate:

Back 21

plus the expected inflation rate

Front 22

The ex post real interest rate will be greater than the ex ante real interest rate when the:

Back 22

actual rate of inflation is less than the expected rate of inflation

Front 23

The costs of reprinting catalogs and price lists because of inflation are called:

Back 23

menu costs

Front 24

Compared to periods of lower rates of inflation, during a hyperinflation all of the following occur except

Back 24

relative prices do a better job of reflecting true scarcity

Front 25

An example of a real variable is the

Back 25

quantity of goods produced in a year

Front 26

An open economy is one in which

Back 26

there is trade in goods and services with the rest of the world

Front 27

In a small, open economy, if net exports are negative, then:

Back 27

domestic spending is greater than output

Front 28

In a small open economy, if exports equal $15 billion and imports equal $8 billion, then there is a trade ___ and ___ net capital flow

Back 28

surplus, positive

Front 29

Starting from a small open economy with balanced trade, if large foreign countries increase their domestic government purchases, this policy will tend to increase:

Back 29

exports by the small open economy

Front 30

According to purchasing power parity, if the dollar price of oil is higher in New Yrok than in London, arbitrageurs will ___ oil in New York and ___ oil in London to drive ____ the price of oil in NY (buy/sell, buy/sell, up/down)

Back 30

sell, buy, down

Front 31

The natural rate of unemployment is

Back 31

the average rate of unemployment around which the economy fluctuates

Front 32

In the model of the steady-state, unemployment rate with a fixed labor force, the rate of job finding equals the percentage of the ___ who find a jobs each month, while the rate of job separation equals the percentage of the ___ who lose their job each month

Back 32

unemployed, employed

Front 33

Frictional unemployment is unemployment caused by:

Back 33

the time is takes workers to search for a job

Front 34

The unemployment resulting from wage rigidity and job rationing is called ____ unemployment

Back 34

structural

Front 35

One efficiency-wage theory implies that firms pay high wages because:

Back 35

the more a firm pays its workers, the greater their incentive to stay with the firm

Front 36

Unions contribute to structural unemployment when collective bargaining results in wages:

Back 36

above the equilibrium level

Front 37

Short-run fluctuations in output and employment are called

Back 37

business cycles

Front 38

When the federal reserve increases the money supply, at a given price level the amount of output demanded is ___ and the aggregate demand curve shifts __

Back 38

greater, outward

Front 39

If a short-run equilibrium occurs at a level of output above the natural rate, then in the transition to the long run, prices will ___ and output will ___

Back 39

increase, decrease

Front 40

Stabilization policy:

Back 40

aims at keeping output and employment at their natural rate

Front 41

For the purposes of the Keynesian cross, planned expenditure consists of:

Back 41

Planned investment, government spending, and consumption expenditures

Front 42

The equilibrium condition in the Keynesdian-cross analysis in a closed economy is:

Back 42

actual expenditure equals planned expenditure

Front 43

An explanation for the slop of the IS curve is that as the interest rate increases, the quantity of investment ___, and this shifts the expenditure function ______

Back 43

decreases, downward

Front 44

An increase in government spending generally shifts the IS curve, drawn with income along the horizontal axis and the interest rate along the vertical axis: (upward/downward and to the left/right)

Back 44

upward and to the right

Front 45

The theory of liquidity preference implies that, other things being equal, an increase in the real money supply will:

Back 45

lower the interest rate

Front 46

An explanation for the slope of the LM curve is that as:

Back 46

income rises, money demand rises, and a higher interest rate is required

Front 47

In the IS-LM model, a decrease in government purchases leads to a(n) ____ in planned expenditures, a(n) in total income, a(n) ____ in money demand, and a(n) ______ in the equilibrium interest rate (increase/decrease)

Back 47

decrease, decrease, decrease, decrease

Front 48

The monetary transmission mechanism in the IS-LM model is a process whereby an increase in the money supply increases the demand for goods and services:

Back 48

by lowering the interest rate so that investment spending increases

Front 49

According to the IS-LM model, if congress raises taxes but the Fed wants to hold income constant, then the Fed must ____ the money supply

Back 49

increase

Front 50

The US recession of 2001 can be explained in part by a declining stock market and terrorist attack. Both of these shocks can be represented in the IS-LM model by shifting the ___ curve to the ___

Back 50

IS, left

Front 51

One policy response to the US economic slowdown of 2001 was to increase money growth. This policy response can be represented in the IS-LM model by shifting the _____ curve to the ____

Back 51

LM; right

Front 52

Analysis of the short and long runs indicates that the ____ assumptions are most appropriate in _________ (classical/keynesian, SR/LR)

Back 52

Keynesian, the short run whereas the classical assumptions are most appropriate in the long run

Front 53

The money hypothesis suggests that the Great Depression was caused by a:

Back 53

leftward shift in the LM curve

Front 54

All of the following events are consistent with the spending hypothesis as contributing to the Great Depression except:
a. the decline in investment spending on housing because of a decline in immigration in the 1930s
b. the decline in consumption spending caused by the stock market crash of 1929
c. fiscal policy to reduce the budget deficit by raising taxes in 1932
d. the 25 percent reduction in money supply between 1929 and 1933

Back 54

d. the 25 percent reduction in the money supply between 1929 and 1933

Front 55

According to the sticky-price model

Back 55

some firms announce their prices in advance, and some firms set their prices in accord with observed prices and output

Front 56

According to the sticky-price model, deviations of output from the natural level are ____ deviations of the price level from the expected price level

Back 56

positively associated with

Front 57

The imperfect-information model bases the difference in the short-run and long-run aggregate supply curve on:

Back 57

temporary misperceptions about prices

Front 58

According to the imperfect-information model, when the price level falls but the producer did not expect it to fall, the producer

Back 58

decreases production

Front 59

The Phillips curve shows a ____ relationship between inflation and unemployment, and the short run aggregate supply curve shows a _____ relationship between the price level and output

Back 59

negative, positive

Front 60

If the short-run aggregate supply curve is steep, the Phillips curve will be:

Back 60

steep

Front 61

One policy response to the US economic slowdown of 2001 was to increase money growth. This policy response can be represented in the IS-LM model by shifting the _____ curve to the ____

Back 61

LM; right

Front 62

Analysis of the short and long runs indicates that the ____ assumptions are most appropriate in _________ (classical/keynesian, SR/LR)

Back 62

Keynesian, the short run whereas the classical assumptions are most appropriate in the long run

Front 63

The money hypothesis suggests that the Great Depression was caused by a:

Back 63

leftward shift in the LM curve

Front 64

All of the following events are consistent with the spending hypothesis as contributing to the Great Depression except:
a. the decline in investment spending on housing because of a decline in immigration in the 1930s
b. the decline in consumption spending caused by the stock market crash of 1929
c. fiscal policy to reduce the budget deficit by raising taxes in 1932
d. the 25 percent reduction in money supply between 1929 and 1933

Back 64

d. the 25 percent reduction in the money supply between 1929 and 1933

Front 65

According to the sticky-price model

Back 65

some firms announce their prices in advance, and some firms set their prices in accord with observed prices and output

Front 66

According to the sticky-price model, deviations of output from the natural level are ____ deviations of the price level from the expected price level

Back 66

positively associated with

Front 67

The imperfect-information model bases the difference in the short-run and long-run aggregate supply curve on:

Back 67

temporary misperceptions about prices

Front 68

According to the imperfect-information model, when the price level falls but the producer did not expect it to fall, the producer

Back 68

decreases production

Front 69

The Phillips curve shows a ____ relationship between inflation and unemployment, and the short run aggregate supply curve shows a _____ relationship between the price level and output

Back 69

negative, positive

Front 70

If the short-run aggregate supply curve is steep, the Phillips curve will be:

Back 70

steep

Front 71

the Phillips curve expresses a short-run link

Back 71

between nominal and real variables

Front 72

In the case of demand-pull inflation, other things being equal

Back 72

the inflation rises but the unemployment rate falls

Front 73

The phillips curve analysis described in Ch 13 implies that there is a negative tradeoff between inflation and unemployment in:

Back 73

in the short run only

Front 74

If the hypothesis of hysteresis is correct and output is lost even after a period of disinflation, the sacrifice ratio for an economy will

Back 74

increase

Front 75

Along a short run aggregate supply curve, output is related to unexpected movements in the ___. Along a Phillips curve, unemployment is related to unexpected movements in the _

Back 75

price level, inflation rate

Front 76

In the dynamic model, the supply shock variable (curvey v with a little t) is a variable appearing in which of the following equations of the model

Back 76

Phillips curve

Front 77

Expectations of inflation based on recently observed inflation is called the assumption of _____ expectations

Back 77

adaptive

Front 78

According to the monetary policy rule, the central bank sets the nominal interest rate so the real interst rate increases when inflation ______ its target, or output _____ its natural level

Back 78

rises above, rises above

Front 79

The natural rate of interest is the real interest rate:

Back 79

at which the demand for goods and services equals the natural level of output

Front 80

In the dynamic model of aggregate demand and aggregate supply, one period in time is connected to the next period through

Back 80

Inflation expectations