Macro-Economics

Front 1

What falls during a boom?

Back 1

Unemployment

Front 2

Which of the following is true?

A. Recessions are always accompanied by high inflation.

B. Expansions have different lengths

C. Economists can correctly predict the end of a recession.

D. Expansions are always shorter than recession.

Back 2

B. Expansions have different lengths

Front 3

Bauxite is used for making aluminum. What will happen if Bauxite prices fall, assuming all else equal?

Back 3

The labor demand curve of aluminum manufacturers will shift to the right

Front 4

Assuming all else equal, when the labor demand curve shifts to the left, ________

Back 4

Assuming all else equal, when the labor demand curve shifts to the left, output falls.

Front 5

Employers often end up laying off more workers during a recession due to________

Back 5

Employers often end up laying off more workers during a recession due to downwardly rigid wages.

Front 6

According to_______, there is a close connection between unemployment and the growth rate of real GDP.

Back 6

According to Okun's Law, there is a close connection between unemployment and the growth rate of real GDP.

Front 7

__________ emphasize(s) that changing productivity and technology are the main reasons behind fluctuations in the economy.

Back 7

The Real Business Cycle Theory emphasizes that changing productivity and technology are the main reasons behind fluctuations in the economy

Front 8

An initial leftward shift in labor demand often creates a cascading chain of events, amplifying the impact of the initial shock. This is known as the _______ effect.

Back 8

...multiplier effect.

Front 9

What happens if the real interest rate of an economy rises?

Back 9

Investment falls

Front 10

What happens if consumption in an economy falls?

Back 10

Mortgage defaults rise

Front 11

A firm's labor demand curve is likely to shift the left when________

Back 11

its inventory increases.

Front 12

If the aggregate price level______, but nominal wages stay fixed, labor demand_______.

Back 12

falls; falls

Front 13

Counter cyclical policies_______.

Back 13

smooth the rate the growth of the economy over time.

Front 14

If the labor demand curve shifts to the right due to a government policy during a recession, and if wages are flexible_______.

Back 14

real wages will increase.

Front 15

If nominal wages are downwardly rigid, a countercyclical policy during a recession leads to______.

Back 15

an increase in employment.

Front 16

If the Fed wants to stimulate the economy,______

Back 16

it lowers short-run interest rates.

Front 17

If the Fed increases the supply of bank reserves, ________.

Back 17

the Federal Fund Rate falls.

Front 18

If the Fed wants to increase the federal funds rate through open market operations, it__________.

Back 18

sells bonds.

Front 19

Which of the following is true of bank reserves held at the Fed?

A. These reserves are an asset to both the bank and the Fed.

B. These reserves are an asset to the bank and a liability to the Fed.

C. These reserves are a liability to both the bank and the Fed.

D. These reserves are a liability to the bank and an asset to the Fed.

Back 19

B. These reserves are an asset to the bank and a liability to the Fed.

Front 20

If the Fed buys bonds from a private bank,________

Back 20

the private bank's composition of assets will change.

Front 21

The long-run real interest rate is the long-run nominal interest rate________.

Back 21

minus inflation expectations.

Front 22

What will happen due to quantitative easing by the Fed? (shifts)

Back 22

A rightward shift of the supply curve of bank reserves.

Front 23

If the nominal interest rate is 8.25% and inflation rate is 3%, the real interest rate is_______.

Back 23

5.25%

Front 24

The Fed usually prefers the inflation rate to hover around ______.

Back 24

2%

Front 25

If the Fed maintains an expansionary monetary policy, ______.

Back 25

bank deposits increase.

Front 26

Rapid growth in M2 is likely to lead to_______.

Back 26

high levels of inflation.

Front 27

Suppose the inflation rate target is "0" and the long run federal funds target is also "0." If the federal funds rate set using the Taylor rule is 1.5% and inflation rate is 3%, the output gap is_________.

Back 27

-6%

Front 28

If the Federal Funds Rate is set by the Taylor Rule and the output gap increases by 5 percentage points, everything else remaining unchanged, the Federal Funds Rate should_________.

Back 28

increase by 2.5 percentage points.

Front 29

Suppose the inflation rate target is "0" and the long run federal funds target is also "0." Calculate the Federal Funds Rate if the current inflation rate is 5% and real output is 4.5% below trend output.

Back 29

5.25%

Front 30

Expansionary fiscal policy uses______government spending and ________ taxes to increase aggregate economic activity.

Back 30

Expansionary fiscal policy uses higher government spending and lower taxes to increase aggregate economic activity.

Front 31

Expansionary fiscal policy leads to a ________. (shift)

Back 31

rightward shift the labor demand curve.

Front 32

Which of the following is an example of an automatic stabilizer during a recession?

A. An increase in money supply due to a decrease in bank deposits.

B. A decrease in tax revenue due to an increase in unemployment.

C. An increase in interest rates due to a decrease in investment.

D. A decrease in inflation due to an increase in consumption.

Back 32

B. A decrease in tax revenue due to an increase in unemployment.

Front 33

Which of the following is likely to happen if the government increases its expenditure?

A. Price level will fall.

B. Unemployment will increase.

C. Investment will decrease.

D. Consumption will increase.

Back 33

D. Consumption will increase.

Front 34

If a $10 increase in government expenditure produces a change of $17 in gross domestic product, the value of the government expenditure multiplier is________.

Back 34

1.7

Front 35

The government of Youland increased its spending by $100 billion. However, the corresponding change in the output was much smaller than that predicted by the government expenditure multiplier. This occurs due to ________.

Back 35

crowding out.

Front 36

Which of the following is likely to be true when the economy is in a boom?

A. The size of the government expenditure multiplier is large.

B. The inflation rate is negative.

C. The unemployment rate is high.

D. The size of government expenditure multiplier is small.

Back 36

D. The size of government expenditure multiplier is small.

Front 37

If a $15 billion reduction in taxation produces a change of $20 billion in output, the value of the government taxation multiplier is ______.

Back 37

1.3

Front 38

A producer is said to have a comparative advantage in the production of a good when_______.

Back 38

the producer has a lower opportunity cost than another producer.

Front 39

Greatland and Superland both produce 5 million watches in a year. The opportunity cost of producing one watch is 2 shirts in Greenland, and the opportunity cost of producing one watch is 3 shirts in Superland. Which of the following statements is true?

A. Superland has an absolute advantage in producing watches.

B. Superland has a comparative advantage in producing watches.

C. Greatland has a comparative advantage in producing watches.

D. Greatland has an absolute advantage in producing watches.

Back 39

C. Greatland has a comparative advantage in producing watches.