ECON 2 Lecture Notes - Lecture 1: Menu Cost, Nominal Rigidity, Aggregate Demand

68 views1 pages

jadefox251

3 Sep 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

sky.h.kim and 37594 others unlocked

ECON 2 Full Course Notes

Verified Note

21 documents

Document Summary

3. investments interest rate goes down foreign exchange effect: prices go down, interest rate goes down, more money to be lent in economy. Y = c + i + g + nx tax cut = increase spending investment = increase gov"t = increase net export + = increase (more exports) net export - = decrease (more imports) Long-run aggregate supply controlled by fed population increase more productivity more money technological improvement more productivity more money. Short run aggregate supply production increase or population increase.

Related Questions

MACROECONOMICS

1. Which one of the following is not a determinant of aggregate demand?

a. Investment expenditure

b. Technology

c. Consumption expenditure

d. Net exports

2. An improvement in technology will?

a. Decrease aggregate demand

b. Increase aggregate demand

c. Increase aggregate supply

d. Decrease aggregate supply

3. Oil price changes in the mid 80's are an example of?

a. An exiernal supply shock increasing prices and reducing real income

b. An external supply shock decreasing prices and raising real income

c. An external supply shock increasing prices and reducing real in come

d. An external demand shock inceasing prices and reducing real in come

4. The oil shock in 1979-80 was an example of?

a. An external supply shock decreasing prices and increasing real income

b. An external supply shock increasing prices and decreasing real income

c. An external demand shock decreasing prices and real income

d. An external demand shock increasing prices and real income

5. Which one of the following does not cause the aggregate demand curve to slop downward?

a. Changes in relative prices between foreign and domestic goods

b. Wealth effect

c. Changes in real output

d. Changes in interest rate

6.Which one of the following is not determinant of aggregate supply?

a. Productivity

b. Disposal income

c. Capacity and investment plan

d. Cost and availability of resources

7. Which of the following relationship is correct?

a. Equilibrium employment and full employment may not be the same

b. Equilibrium employment and full employment are not related

c. Equilibrium employment and full employment are always the same

d. Equilibrium employment and full employment are never the same

8. Which of the following was not a factor limiting the severity of effects of the oil sopply shock of 1979-80?

a. Increase in use of alternative sources of energy

b. More efficient use of energy

c. Increased supplies of non-OPEC oil

d. More rapid worldwide economic growth

9. Which one of following does not cause the aggregate demand curve to slop downward?

a. Changes in relative prices between foreign and domestic goods

b. Interest rate changes

c. Wealth effect

d. Chnages in real output

10. With aggregate demand shocks?

a. teh aggregte supply curve moves up the aggregate demand curve and increases price and reduces real income

b. the aggregate demand curves moves up the aggregate supply curve and increases prices and real income

c. the aggregate demand curves moves down the aggregate supply curve and increases both prices and real income

d. the aggregate supply curve moves down the aggregate demand curve and reduces prices and increases in real income

14) Globalization refers to

A) the process of establishing a common world currency.

B) the willingness of individuals within a given country to share knowledge.

C) the process of countries becoming more open to foreign trade and investment.

D) the reduction in growth rates of real GDP per capita as a result of trade with foreign

countries.

15) According to a study by economists Raymond Fisman and Edward Miguel, as the level of corruption in a country increases,

A) so does the number of parking violations by the country's United Nations delegates.

B) so does the size of the country's population.

C) the levels of foreign direct investment and foreign portfolio investment decrease.

D) the levels of real GDP per capita and real income per capita increase.

16) Which of the following best describes the "wealth effect"?

A) When the price level falls, the real value of household wealth falls.

B) When the price level falls, the nominal value of household wealth falls.

C) When the price level falls, the nominal value of household wealth rises.

D) When the price level falls, the real value of household wealth rises.

17) The "interest rate effect" can be described as an increase in the price level that raises the interest 17) rate and chokes off

A) government spending.

B) government spending and unplanned investment.

C) investment and consumption spending.

D) net exports.

18) Which of the following is one explanation as to why the aggregate demand curve slopes downward?

A) Decreases in the price level raise the interest rate and increase consumer spending.

B) Decreases in the price level raise the interest rate and increase investment spending.

C) Decreases in the U.S. price level relative to the price level in other country's lower net exports.

D) Decreases in the price level to raise real wealth and increase consumer spending.

19) Higher personal income taxes

A) increase in aggregate demand.

B) increase disposable income.

C) decrease aggregate demand.

D) both B and C

20) If the U.S. dollar decreases in value relative to other currencies, how does this affect the aggregate demand curve?

A) This will move the economy up along a stationary aggregate demand curve.

B) This will move the economy down along a stationary aggregate demand curve.

C) This will shift the aggregate demand curve to the left.

D) This will shift the aggregate demand curve to the right.

21) How do lower taxes affect aggregate demand?

A) They increase disposable income, consumption, and aggregate demand.

B) They reduce disposable income, consumption, and aggregate demand.

C) they increase corporate investment and aggregate demand.

D) They increase aggregate supply and thus increase aggregate demand as well.

sangriagoat830

The demand for money
A) d and e are correct
B) all of the following are correct
C) decreases as the average selling price of a unit of outputincreases
D) increases as GDP increases
E) is increased by credit card usage
2. The higher the interest rate, the more of their wealth peoplewill hold as money.
A) True
B) False
3. The money demand curve slopes
A) downward because the cost of holding money decreases as theinterest rate decreases
B) downward because the cost of holding money increases as theinterest rate decreases
C) upward because people demand more money as GDP increases
D) upward because people demand more money as GDP decreases
E) downward because people demand more money as the price levelincreases
4. Which of the following, other things constant, will shift themoney demand curve to the left?
A) an increase in the interest rate
B) a decrease in the interest rate
C) a decrease in real GDP
D) an increase in real GDP
E) an increase in the price level
5. An increase in the money supply will
A) increase the demand for money at each interest rate
B) decrease the demand for money at each interest rate
C) lead people to try to exchange money for interest-bearingassets
D) lead people to try to exchange interest-bearing assets formoney
E) increase the interest rate
6. When an increase in the money supply reduces the interest rate,investment and nominal GDP increase.
A) True
B) False
7. In the short run, a decrease in the money supply will cause adecrease in Gross Domestic Product and a decrease in the pricelevel.
A) True
B) False
8. The demand curve for investment is graphed with __________ onthe vertical axis and __________ on the horizontal axis.
A) the interest rate; investment
B) investment; the interest rate
C) the price level; investment
D) investment; the price level
E) real GDP; investment
9. As the interest rate increases,
A) the demand for investment curve shifts to the right
B) the demand for investment curve shifts to the left
C) there is a movement downward along the demand for investmentcurve
D) there is a movement upward along the demand for investmentcurve
E) GDP increases
10. If the economy experiences a contractionary gap and the Fedstimulates the economy, then:
A) The money supply is increasing because the Fed prints moremoney
B) The money supply is decreasing because the Fed hoardsmoney
C) The money supply is increasing because the Fed makes open-marketpurchases
D) The money supply is decreasing because the Fed makes open-marketsales
E) There is no change in the money supply because the Fed cannotinfluence the money supply
11. If the Fed decreases the money supply, GDP
A) increases because the resulting increase in the interest rateleads to a decrease in investment
B) increases because the resulting decrease in the interest rateleads to an increase in investment
C) decreases because the resulting increase in the interest rateleads to a decrease in investment
D) decreases because the resulting increase in the interest rateleads to an increase in investment
E) decreases because the resulting decrease in the interest rateleads to an increase in investment
12. An increase in the money supply can increase the price level,real GDP, or both, but it is impossible to tell exactly what willhappen without knowing the slope of the aggregate supplycurve.
A) True
B) False
13. If the economy experiences an expansionary gap and the Fedsells US government securities in the open-market, then:
A) Money supply increases, investment increases, aggregate demandincreases
B) Money supply increases, the interest rate increases, and theaggregate demand increases
C) Money supply decreases, the interest rate decreases, and theaggregate demand falls
D) Money supply decreases, the investment decreases, and theaggregate demand decreases
E) Interest rate falls, investment falls, aggregate demandincreases
14. If the money supply equals $1,000 and nominal GDP equals$3,000, then V
A) equals 1/3
B) equals 3
C) equals 3 million
D) cannot be determined since we do not know anything aboutprices
E) cannot be determined since we do not know anything about realGDP
15. If the money supply is increasing at a constant 8 percent,velocity is constant, real GDP is increasing at 5 percent, and theinflation rate is 3 percent, which of the following is true?
A) The growth rate of GDP is too low to be maintained.
B) The inflation rate is too low to be maintained.
C) Velocity is too low to be maintained.
D) The money supply growth rate is too low to be maintained.
E) This situation can continue indefinitely.
16. If real output and velocity are stable and predictable, thenthe equation of exchange can be used to derive a simplerelationship between
A) the money supply and the price level
B) the money supply and the interest rate
C) the money supply and the foreign exchange rate
D) velocity and real GDP
E) velocity and nominal GDP
17. For the quantity theory of money to yield usefulpredictions,
A) fiscal policy must be ineffective in altering aggregatedemand
B) fiscal policy must be effective in altering aggregatedemand
C) the economy must be operating at the potential level of realGross Domestic Product
D) velocity must be stable or predictable
E) velocity must be unstable
18. A rising rate of inflation
A) makes people more willing to hold money as an asset
B) reduces the usefulness of money as a store of value and thusincreases the velocity of money
C) increases the usefulness of money as a medium of exchange andthus reduces the velocity of money
D) is usually preceded by a reduction in the money supply
E) does not, apparently, have any effect on the velocity ofmoney
19. There is considerable disagreement about whether the Fedshould
A) engage in open market operations
B) have the power to set reserve requirements
C) reduce the money supply when the economy is growing
D) allow banks to invest in the stock market
E) attempt to control interest rates or should instead attempt tocontrol the money supply
20. For interest rates to remain stable during economic expansions,the growth rate of the money supply should
A) exceed the growth in the demand for money
B) just match the growth in the demand for money
C) be less than the growth in the demand for money
D) be zero
E) just match the growth in nominal GDP

salmonpug424

ECON 2 Lecture Notes - Lecture 1: Menu Cost, Nominal Rigidity, Aggregate Demand

ECON 2 Full Course Notes

Document Summary

Get access

Related Documents

ECON 2 Chapter Notes - Chapter 17: Loanable Funds, Menu Cost, Fallacy

EC140 Lecture Notes - Lecture 7: Potential Output, Aggregate Supply, Aggregate Demand

EC140 Lecture Notes - Lecture 7: Diminishing Returns, Supreme Headquarters Allied Powers Europe, Final Good

Related Questions