Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Macro > Questions > Flashcards

Questions Flashcards

1
Q

When should the economy contract?

A

When real GDP is above potential GDP and price level is rising.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When should the economy expand?

A

When real GDP is below potential real GDP.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What does contracting cause?

A

Lower price level and lower output, leftward shift of AD

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the Fed’s monetary policy goals?

A
  1. Price stability
  2. High employment
  3. Stability of financial markets and institutions
  4. Economic growth
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the Fed’s monetary policy targets?

A

Money supply and interest rates

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Why does the Fed buy treasury securities?

A

To increase money supply
(Selling securities decreases money supply)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What causes a shift in the money demand curve?

A

Changes in variables other than interest rates cause MD curve to shift:
- Change in price level
- Change in real GDP
- Change in technology

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What causes a rightward shift in the money supply curve?

A
  • Purchasing treasury securities
  • Decrease in required reserve ratio
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What causes a leftward shift in the money supply curve?

A
  • Selling treasury securities
  • Increase in required reserve ratio
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How are interest rates correlated to money demanded?

A

Inversely correlated:
A decrease in the money supply will increase interest rates, and vice versa

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

How can an Aggregate Supply Curve shift along its curve?

A

If the Y-axis is changed (normally price level)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What affects the level of investment?

A
  1. Expectations of future profitability
  2. Interest rate
  3. Taxes
  4. Cash flow
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

deposits over required reserve ratio (decimal form)

A

Increase in the banking sector

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the variables that shift the SRAS curve?

A

Labor/Capital
Technology (aka Productivity)
Expected Future Prices
Previous expectations
Supply Shocks

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the Expansionary policy

A
  1. FOMC orders expansion policy
  2. Money supply increases, interest rates decrease
  3. Investment, consumption, net exports increase
  4. AD curve shifts to the right
  5. Real GDP and the price level rise
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the Contractionary policy

A
  1. FOMC orders a contractionary policy
  2. The money supply decreases, interest rates rise
  3. Investment, consumption, net exports decrease
  4. AD curve shifts to the left
  5. Real GDP and price level fall
17
Q

What are the pro-growth policies

A
  1. Enhancing property rights and the rule of law
  2. Improving health and education
  3. Policies that promote technological change
  4. policies that promote savings and investment
18
Q

What are the five determinants of consumption?

A
  1. Current disposable income
  2. Household wealth
  3. Expected future income
  4. The price level
  5. The interest rate
19
Q

Two main factors of labor productivity

A
  1. Quantity of capital per hour worked
  2. Level of technology
20
Q

Why are high-income countries not catching the US

A
  1. US labor markets are flexible
  2. People enter workforce sooner and retire later in the US
  3. Financial system is very efficient, ensures high liquidity, which makes people invest here
21
Q

Why is there a lack of growth in low-income countries

A
  1. Failure to enforce laws
  2. Wars/revolutions
  3. Poor public health and education
  4. Low rates of saving/investment
22
Q

We can tell it is a recession when our GDP is _____ our LRAS as our potential GDP.

A

below

23
Q

An increase in labor force or capital stock shifts the SRAS curve

A

Right, because more output can be produce at every price level

24
Q

An increase in productivity shifts the SRAS curve

A

Right, because cost of producing output fall

25
Q

An increase in expected future price levels shifts the SRAS curve

A

Left, because workers firms increase wages and prices

26
Q

An increase in interest rates causes the aggregate demand curve to shift to the ____, because…

A

left, because higher interest rates raise the cost to households and firms of borrowing, reducing consumption and investment spending.

27
Q

An increase in government purchases shifts the aggregate demand curve to the ____, because…

A

right, because government purchases are a component of aggregate demand.

28
Q

An increase in personal income taxes or business taxes shifts the aggregate demand curve to the ____, because…

A

left, because consumption spending falls when personal taxes rise, and investment falls when business taxes rise.

29
Q

An increase in workers and firms adjusting to having previously underestimated the price level shift the SRAS curve

A

Left, because workers and firms increase wages and prices

30
Q

An increase in the expected price of a natural resource shifts the SRAS curve

A

Left, because less of the resource is purchased by the government

31
Q

An increase in household’s expectations of their future incomes shifts the aggregate demand curve _____, because…

A

right, because consumption spending increases.

32
Q

An increase in the firms’ expectations of the future profitability of investment spending shifts the aggregate demand curve ____, because…

A

right, because investment spending increases.

33
Q

An increase in the the growth rate of domestic GDP relative to the growth rate of foreign GDP shits the aggregate demand curve ____, because…

A

left, because imports will increase faster than exports, reducing net exports.

34
Q

An increase in the the exchange rate (the value of the dollar) relative to foreign currencies shifts the aggregate demand curve ____, because…

A

left, because imports will rise and exports will fall, reducing net exports.

Macro (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions