investment and consumption spending. The long-run aggregate supply curve will shift to the right if the economy When banks gain ________, they can ________ their loans; and the money supply ________. Suppose the economy is at full employment and firms become more pessimistic about the future profitability of new investment. Which of the following will happen in the short run? The "interest rate effect" can be described as an increase in the price level that raises the interest rate and chokes off

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

imports; exports; net exports Which of the following will shift the aggregate demand curve to the left, ceteris paribus? The "interest rate effect" can be described as an increase in the price level that raises the interest rate and chokes off When the price level in the United States falls relative to the price level of other countries, ________ will fall, ________ will rise, and ________ will rise. ________ of unemployment during ________ make it easier for workers to ________ wages.

When the price level in the United States falls relative to the price level of other countries, ________ will fall, ________ will rise, and ________ will rise.

move the economy up along a stationary aggregate demand curve. An increase in the price level will An increase in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run? In 2005, Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico which subsequently drove up natural gas, gasoline, and heating oil prices. Three years later, once the refining capacity was restored, these prices came back down. The restoration of refining capacity should The long run aggregate supply curve

An increase in the price level will

This will shift the aggregate demand curve to the left. If you liquidate $3,000 of your money market mutual fund and transfer the funds to your checking account, then initially, M1 will ________ and M2 will ________. The recession of 2007−2009 made many consumers pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve? Money's most narrow definition is based on its function as a There has been a decrease in investment. As a result, real GDP will ________ in the short run, and ________ in the long run.

The recession of 2007−2009 made many consumers pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve?

an increase in net exports Which of the following will shift the aggregate demand curve to the right, ceteris paribus? The level of long−run aggregate supply is affected by all of the following except Commodity money The most liquid measure of money supply is

Which of the following will shift the aggregate demand curve to the right, ceteris paribus?

shift the aggregate demand curve to the left. If a person withdraws $500 from his/her checking account and holds it as currency, then M1 will ________ and M2 will ________. In the United States, currency includes Ceteris paribus, a decrease in the price level would be represented by a movement from Suppose the U.S. GDP growth rate is faster relative to other countries' GDP growth rates. U.S. imports will therefore increase faster than U.S. exports, and this will

Suppose the U.S. GDP growth rate is faster relative to other countries' GDP growth rates. U.S. imports will therefore increase faster than U.S. exports, and this will

They increase disposable income, consumption, and aggregate demand. Refer to the figure. An increase in taxes would be depicted as a movement from _______, using the basic AD-AS model in the figure. The invention of the cotton gin ushered in the Industrial Revolution and began a long period of technological innovation. What did this technological change do the short run supply curve? Refer to the figure to the right. Ceteris paribus, a decrease in government spending would be represented by a movement from How do lower taxes affect aggregate demand?

How do lower taxes affect aggregate demand?

AD2 to AD1. Ceteris paribus, a decrease in interest rates would be represented by a movement from In an attempt to bring lenders and borrowers together following the financial crisis of 2008, the Federal Reserve made a large amount of new funds available to financial markets. The Fed expected this to increase the money supply and the total amount of lending because of the multiplier effect, in which a given amount of new reserves results in a multiple increase in Which of the following best describes how banks create money? Refer to the figure to the right. Ceteris paribus, a decrease in government spending would be represented by a movement from

Refer to the figure to the right. Ceteris paribus, a decrease in government spending would be represented by a movement from

point A to point B. Which of the following is not counted in M1? Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium? Ceteris paribus, a decrease in the price level would be represented by a movement from An increase in government purchases will increase aggregate demand because

Ceteris paribus, a decrease in the price level would be represented by a movement from

AD1 to AD2. The more excess reserves banks choose to keep Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. Refer to the scenario above. As a result of Kristy's deposit, Bank A's reserves immediately increase by The level of long−run aggregate supply is affected by all of the following except Ceteris paribus, a decrease in interest rates would be represented by a movement from

Ceteris paribus, a decrease in interest rates would be represented by a movement from

Macro Midterm 3 (HW #7,8,9)

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Economics - Macroeconomics

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investment and consumption spending.

imports; exports; net exports

move the economy up along a stationary aggregate demand curve.

This will shift the aggregate demand curve to the left.

an increase in net exports

shift the aggregate demand curve to the left.

They increase disposable income, consumption, and aggregate demand.

AD2 to AD1.

point A to point B.

AD1 to AD2.

is vertical.

the level of real GDP in the long run

experiences technological change.

short run only

positive; final goods and services; inputs

unions are successful in pushing up wages.

It shifted the short run aggregate supply curve to the right.

shift the short-run aggregate supply curve to the right.

SRAS2 to SRAS1.

changes in the price level.

the aggregate demand and short-run aggregate supply curves intersect at a point on the long-run aggregate supply curve.

expansion; short run

increase; decrease to its initial value

decrease; decrease further

Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise.

GDP will be below potential GDP.

A and C

Unemployment will rise.

sticky wages and prices

intersects; intersect at a point on

decrease; increase to its initial level

aggregate demand and short−run aggregate supply intersect.

The price level will rise, and the level of GDP will be unaffected.

the rightward shift of the short-run aggregate supply curve that occurs after a recession

Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices.

High levels; a recession; accept lower

GDP = potential GDP.

falls; falls

increases; increases

rises; falls

bring real GDP back to potential GDP more quickly but would result in a permanently higher price level.

the financial crisis

1.8%

any asset people generally accept in exchange for goods and services.

barter

the requirement of a double coincidence of wants.

has value independent of its use as money.

commodity money

barter; money

little to no intrinsic value and is authorized by the central bank or governmental body.

is backed by gold.

The money supply would be easy to control because of the predictability of new gold discoveries.

people have confidence that others will accept them as money.

decreases investment spending on machinery, equipment, factories, consumption spending on durable goods, and net exports.

C to B

government expenditures are a component of aggregate demand.

B to A

A to B.

government purchases.

credit card balances

M1 would rise

medium of exchange

not change; not change

paper money and coins in circulation

equals the value of the person's assets minus his or her liabilities

increase; not change

reserves, loans, and holdings of securities.

an asset; a liability

vault cash and deposits with the Federal Reserve.

less than total reserves

a liability; an asset

$10,000

$2,000

$8,000

$50,000

$5,000

$1800

$3,600

$180 million

less than 5

Banks create checking account deposits when making loans from excess reserves.

the smaller the deposit multiplier

bank deposits

reserves; increase; expands

an increase in net exports

price level; the real value of household wealth

an increase in interest rates

the long run aggregate supply curve will shift to the right.

SRAS1 to SRAS2.

changes in price level

an increase in inflation expectations

B and D

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Macro Midterm 3 (HW #7,8,9)

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