ECN 101 Study Guide - Final Guide: Phillips Curve, Nominal Interest Rate, Aggregate Supply

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turquoisegnu128

9 Jan 2019

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You will have 120 minutes to complete this exam. Multiple choice: (20 points total, 2 points each) choose best answer and record in blanks below. Problem 1: is/lm in the short run (20 points total) Be sure to label the axes, the curves, and use arrows showing the direction the curves shift. Also mark the initial equilibrium as point 1", and the short-run equilibrium as point 2". Explain each curve shift briefly. (make the usual is-lm assumptions: prices are completely fixed in the short run. If the government"s goal were to raise gdp by the billion. amount, while keeping national. Explain your reasoning in a few sentences: (6 points) suppose that in this economy, the real money demand behavior were less responsive to the interest rate than you assumed in parts (a) and (b) above. ____: slope of lm curve: steeper b) flatter c) same, steeper b) flatter c) same, ambiguous, ambiguous. ____: total national saving: ambiguous, ambiguous, ambiguous.

Related Questions

1. What happens when the price level rises?
a. The value of money rises, and exchange rates and interest rates also rise.
b. The value of money rises, while exchange rates and interest rates fall.
c. The value of money falls while exchange rates and interest rates rise.
d. The value of money falls, and exchange rates and interest rates also fall.

2. Which of the following best describes what happens when the price level rises?
a. Households increase foreign bond purchases, and the supply of dollars increases.
b. Households increase foreign bond purchases, and the supply of dollars decreases.
c. Households decrease foreign bond purchases, and the supply of dollars increases.
d. Households decrease foreign bond purchases, and the supply of dollars decreases.

3. In which of the following situations does investment spending increase?
a. when the price level rises, causing interest rates to rise
b. when the price level rises, causing interest rates to fall
c. when the price level falls, causing interest rates to rise
d. when the price level falls, causing interest rates to fall

4. If a government started with a deficit and moved to a surplus, which of the following best describes the
effects of these changes?
a. Domestic investment and the real exchange rate would rise.
b. Domestic investment and the real exchange rate would fall.
c. Domestic investment would rise, and the real exchange rate would fall.
d. Domestic investment would fall, and the real exchange rate would rise.

5. Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the
minimum wage. In the short run, what would we expect to happen?
a. the price level to rise, and real GDP to fall
b. the price level to fall, and real GDP to remain unchanged
c. the price level to remain unchanged, and real GDP to fall
d. the price level to fall, and the real GDP to rise the same

skyleopard547

1. In economy A, all workers agree in advance on the nominal wages that their employers will pay them. In economy B, half of all workers have these nominal wage contracts. In contrast, the other half have indexed employment contracts, so their wages rise and fall automatically with the price level.

A. According to the sticky-wage theory of aggregate supply, which economy has a more steeply sloped short-run aggregate-supply curve?
B. In which economy would a 5 percent increase in the money supply have a larger impact on output in the short run?
C. In which economy would it have a larger impact on the price level in the short run?

2. When output rises, unemployment falls.

a. TRUE
b. FALSE

3. How do prices change due to an economic contraction that is caused by a shift in aggregate demand?

A. They rise in the short run and fall back to their original level in the long run.

B. They rise in the short run and rise even more in the long run.

C. They fall in the short run and rise back to their original level in the long run.

D. They fall in the short run and fall even more in the long run.

4. What happens to sales and profit during recessions?

A. sales rise and profits fall

B. profits fall and sales rise

C. sales and profits fall

D. sales and profits rise

5. Which of the following explains why production rises in most years?

A. increases in prices of goods and services

B. increases in stock prices

C. aging population

D. technological innovation

plumbutterfly691

1. Explain how the real balance effect works?

2. How will either the AD curve or SRAS curve shift as a result of each of the following changes:

A rise in the interest rate

An adverse supply shock

A rise in wealth

3. Explain what happens to U.S. net exports and U.S. aggregate demand as the dollar depreciates

4. Explain what happens to aggregate demand in each of the following cases: (a) The interest rate rises; (b) Wealth falls; (c) The dollar depreciates relative to foreign currencies; (d) Households expect lower prices in the future; (e) Business taxes rise.

5. Explain how expectations about future sales will affect investment.

6. Explain how each of the following can affect short-run aggregate supply: (a) An increase in wage rates; (b) A beneficial supply shock; (c) An increase in the productivity of labor; (d) A decrease in the price of a nonlabor resource (such as oil).

(a) An increase in SRAS that is greater than the increase in AD will lead to an increase in Real GDP and a fall in the price level.

(b) A decrease in AD that is greater than the increase in SRAS will lead to a fall in both the Real GDP and the price level.

roseshark361

ECN 101 Study Guide - Final Guide: Phillips Curve, Nominal Interest Rate, Aggregate Supply

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