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29 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Money Demand Curve
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The total quantity of money
demanded in the economy at each interest rate |
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What happens at an equilibrium interest rate?
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the public is content
to hold the quantity of money it is actually holding |
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What happens at a lower interest rate?
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an excess demand for money
causes the interest rate to rise |
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What happens at a higher interest rate?
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an excess supply of money
causes the interest rate to fall |
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If the interest rate in the economy were 2% (with an equilibrium of 3%), the price of bonds...
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would fall
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If labor supply increases, the wage rate increases
True or False |
False
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Growth in employment can result...
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from an increase in either labor supply or labor demand
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If the labor demand decreases, what will happen to the real wage, employment, and output, assuming no
change in the labor supply? |
The real wage will decrease, employment will decrease, and real output will decrease.
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Real Wage, employment, and real output will all do the same.
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Which of the following best describes what has happened to the U.S. labor supply and labor demand over the
past 50 years? |
Both labor supply and labor demand increased.
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Government policies designed to increase the skills of the work force shift the labor demand curve to the
right, increasing employment and total output. True or False |
True
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What would be the effect of a reduction in the corporate profits tax?
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Investment would increase, the production function would shift upward, and both
productivity and output would increase. |
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If we know that the slope of the consumption function is 0.6, then we know that if real disposable income
increased by $1,000 billion, real consumption spending would |
increase by $600 billion
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If real consumption spending increases by $400 billion each time real disposable income rises by $1,000
billion, the marginal propensity to consume is |
0.4
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Which of the following is not another way of describing the marginal propensity to consume?
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autonomous consumption spending
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If Americans became more pessimistic about the economy, what would happen to the consumption-income
line? |
the entire line would shift downward
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If income increased by $20,000, government purchases are fixed at $10,000, investment spending is fixed at
$5,000, net exports are fixed at $500, and aggregate expenditure increases by $15,000, what is the marginal propensity to consume (MPC)? |
0.75
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What is an equilibrium condition of the short-run macro model?
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Aggregate expenditure equals output
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If aggregate expenditure at a particular level of income is less than output then...
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output will decrease
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In the short-run macro model, if firms produce more output than they sell, those firms will...
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decrease their output
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In the short-run macro model, if the economy is in equilibrium, it must also be operating at full employment.
True or False? |
False
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If an economy is at equilibrium, it will also be operating at full employment.
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False
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In the short-run macro model, which of the following is the cause of cyclical unemployment?
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It takes time for people to retrain.
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If firms increase their investment spending, the resulting change in equilibrium GDP is equal to the change in investment spending?
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alone
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If the expenditure multiplier is 3.5 and investment spending increases by $2,000 billion, what will be the
change in GDP? |
$7,000 billion
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If the marginal propensity to consume is 0.7, the expenditure multiplier is
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3.3
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A spending shock is a change in spending that ultimately affects the entire economy.
True or False? |
True
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The expenditure multiplier acts on changes in investment spending, government purchases, net exports, and autonomous consumption.
True or False? |
True
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The impact of saving on the economy is...
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beneficial in the long run, but not necessarily in the short run
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Fiscal policy
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can change equilibrium GDP in the short run
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