Need A Tutor?    |   Need Homework Help?                                                                             Help and Support     | Join or Cancel

According to macroeconomic theory, evidence that high unemployment may be accompanied by low inflation, and low unemployment may be accompanied by high inflation is supported by the:
Keynesian Phillips curve tradeoff
 
If a Phillip curve shows that unemployment is low and inflation is high in the economy, then that economy:
is producing at a point where output is more than potential GDP
 
In macroeconomics, what name is given to the costs of changing prices that businesses must consider?
menu costs
 
____________________ will not cause a shift of the AS curve in a Keynesian framework.
changes in output prices
 
Consumption, investment, government spending, exports, and imports are:
all components of aggregate demand
 
If markets throughout the global economy all have flexible and continually adjusting prices, then:
each economy will always head for its natural rate of unemployment
 
Aggregate demand is more likely to _________________ than aggregate supply in the short run.
shift substantially
 
According to the Keynesian framework, ________________________ may cause a recession, but not inflation.
a major trading partner's economic slowdown
 
The Keynesian economic framework is based on an assumption that:
prices and wages are sticky and do not adjust rapidly
 
According to the _____________________ argument, a market-oriented economy has no obvious way to implement a plan of systematic wage reductions.
coordination
 
When an economy is experiencing higher real interest rates, business firms will most likely be discouraged from investing in:
tangible and/or intangible capital
 
If a Phillips curve shows that unemployment is high and inflation is low in the economy, then that economy:
is producing at a point where output is less than potential GDP
 
The sum of all the income received for contributing resources to GDP is called ___________________.
national income (Y)
 
The onset of a trade deficit is most likely supported by a country's:
strong economic growth
 
The quantity of money in circulation is governed by
the central bank
 
Neutrality of money refers to
a one-time change in the money supply has no real consequence for the economy
 
Buying an item with cash would be an example of money's role as a
medium of exchange
 
Use of money to save up for a future cash purchase would be an example of money's role as a
store of value
 
Price tags attached to goods for purchase at a store would be an example of money's role as a
unit of account
 
The most distinguishing economic feature of money is its
medium of exchange role
 
The two most common types of money in circulation in Canada today consist of
fiat money and transaction deposits at banks
 
Fiat money is
Canadian currency in Canada
 
Monetary aggregates are
different definitions of money
 
The most narrowly defined monetary aggregate is
currency outside banks
 
The monetary base includes
inside money
 
Which one of the following is included in M3, but not in M2?
foreign currency deposits of residents of Canada
 
In formulating its monetary policy, the Bank of Canada focuses primarily on?
M1++ and M2++
 
Which of the following is included in M2, but not in M1?
personal savings deposits
 
Monetary aggregates are useful indirect measures of
aggregate economic activity
 
Barter, the exchange of goods for goods, relates to
a double coincidence of wants
 
Double coincidence of wants means
two economic agents want to exchange the goods they have
 
The double coincidence of wants problem is solved by
the use of money
 
Money is useful in exchange when
credit transactions are difficult
 
Nominal bonds can be issued by
government, consumers, or business firms
 
The real return on bonds is
the return someone receives from holding a nominal bond from the current to the future period
 
The Fisher relationship may be described by the following equation in which R is the nominal rate of interest, r is the real rate of interest, and i is the inflation rate.
1 + r = (1 + R / 1 + i)
 
Which of the following approximately describes the relationship between the nominal and real interest rate?
r ≈ R - I
 
The real interest rate is approximately equal to
the nominal interest rate minus the inflation rate
 
The most significant problem in trying to empirically measure the real rate of interest is that
expected inflation is unobservable
 
The monetary intertemporal model contains the fact that
transactions require money and transactions services supplied by banks
 
Which of the following is an example of the role of banks?
financial intermediaries
 
The monetary intertemporal model assumes that
all credit card balances are paid off at the end of the day
 
The demand for money is determined by
the behavior of the consumer and the firm
 
If R > q, then
the marginal benefit of using the credit card exceeds the marginal cost
 
If R < q, then
the marginal cost of using the credit card exceeds the marginal benefit
 
Equilibrium in the credit card market
determines the demand for money
 
If the nominal interest rate is rises,
the opportunity cost of holding cash rises
 
The nominal money demand is defined as
M = PL(Y, r)
 
Real money demand depends
negatively on the nominal interest rate
 
Real money demand is a function of
increasing real income and decreasing nominal interest rates
 
In the monetary intertemporal model, the supply of money is determined by
the government merged with the Bank of Canada
 
The nominal money supply is
exogenous
 
If an increase in the level of the money supply results in a proportionate increase in prices with no effect on any real variables, we say that
money is neutral
 
The aggregate demand curve shows the relationship between the aggregate price level and (the) aggregate:
quantity of output demanded by households, businesses, the government, and the rest of the world.
 
The aggregate demand curve slopes:
downward in part because as the price level falls, the ability of households and firms to borrow cheaply increases.
 
Refer to Figure: The Multiplier. If this economy is at /Y/1 and the price level decreases:
a downward movement along the /AD/1 will take place, reflecting a decrease in the price level.
 
Aggregate demand will shift to the RIGHT if:
government purchases increase.
 
When the price level decreases, firms in imperfectly competitive markets will:
decrease output and decrease the price.
 
In the short run, wages and some prices are considered to be:
sticky.
 
A decrease in energy prices will:
increase short-run aggregate supply.
 
In the long run, the aggregate price level has:
no effect on the quantity of aggregate output.
 
The long run in macroeconomic analysis is a period:
in which prices and nominal wages are flexible.
 
Producing a short-run level of aggregate output that exceeds the economy's potential output results in a(n) _____ adjustment in _____.
upward; nominal wages
 
A natural disaster that destroys part of a country's infrastructure is a type of negative _____ shock and therefore shifts the _____ curve to the _____.
supply; short-run aggregate supply; left
 
Suppose the equilibrium aggregate price level and the equilibrium level of real GDP are both rising. This is probably the effect of a(n) _____ in aggregate _____.
increase; demand
 
The intersection of an economy's aggregate demand and long-run aggregate supply curves:
occurs at the economy's potential output in long-run equilibrium.
 
When the economy is producing output above the potential, it has:
an inflationary gap.
 
A negative demand shock can cause:
a recessionary gap.
 
To increase the nominal money supply, the government can
drop money out of helicopters
 
To increase the nominal money supply, the Bank of Canada can engage in
open market purchases
 
Government printing of money to finance government spending is called
seigniorage
 
An open-market operation refers to
an exchange of money for interest-bearing debt by the monetary authority
 
The inflation tax is
the revenue from seigniorage
 
A classical dichotomy refers to the fact that
the real variables in the model are determined independently of the money market
 
In the monetary intertemporal model, changing M
affects the price level
 
Debit cards and online banking has
lowered the cost of banking transactions and reduced the demand for money
 
An increase in the perceived instability of banks
increases the demand for money
 
The marginal cost of financial transactions rises with the volume of financial transactions due to
congestion
 
Unpredictable shocks to the financial system
increase the demand for money
 
Which of the following is a key element of the Friedman-Lucas Money Surprise model?
workers have imperfect information about aggregate variables in the short-run
 
In the money surprise model, labour supply responds to changes in the money supply because
workers cannot distinguish changes in M from changes in z
 
In the money surprise model, an increase in the money supply causes
the real interest rate and real wage to fall, output and employment increase
 
The equilibrium allocation of resources in the money-surprise model is Pareto optimal if
workers can distinguish between changes in the money supply and total factor productivity
 
Money growth rate targeting can be beneficial when
there are shocks to money demand
 
Money supply targeting
performs poorly
 
Interest rate targeting may be problematic when
the central bank cannot distinguish shocks to money demand from shocks to total factor productivity
 
Under the current policy approach of the Bank of Canada, the
nominal interest rate target is the key indicator of monetary policy
 
The segmented markets model is best described by:
some economic agents participate more frequently in financial markets than others
 
Inflation targeting attempts to keep inflation
between 1% and 3%.
 
According to the Taylor rule the central bank's target interest rate should
increase if inflation is above its target
 
According to the Keynesian framework, ________________ will not help reduce inflation, but may help a country get out of a recession.
increased spending by the government on health care
 
According to the Keynesian framework, ____________ in ______________ may cause inflation, but not a recession.
an increase; domestic investment
 
Keynesian economics focuses on explaining why recessions and depressions occur, as well as offering a ______________________ for minimizing their effects.
policy prescription
 
The equilibrium quantity of labor and the equilibrium wage increase when:
labor demand shifts to the left, if wages are flexible
 
The equilibrium quantity of labor and the equilibrium wage level decrease when:
labor demand shifts to the right, if wages are flexible
 
The equilibrium quantity of labor increases and the equilibrium wage decreases when:
labor supply shifts to the right, if wages are flexible
 
The equilibrium quantity of labor decreases and the equilibrium wage increases when:
labor supply shifts to the left, if wages are flexible
 
According to the Keynesian framework, which of the following may help a country reduce inflation, but will not help that country to get out of a recession?
a decrease in the tax rate on consumer income
 
According to the Keynesian framework, which of the following will not help a country to get out of a recession, but may help that country reduce inflation?
an increase in military spending
 
If a Keynesian expenditure-output model shows that aggregate demand for both goods and labor has shifted to the left to D1, while wages remained at w0 and prices remained at P0, what will be the result?
excess supply
 
When the consumption function ordinates MPT 0.2, MPS 0.3, MPI 0.5, and MPC 0.7 are plotted on a graph, what will their values reflect?
steeper consumption function due to high marginal propensity to consume
 
_____________ are economists who generally emphasize the importance of aggregate supply in determining
the size of the macroeconomy over the _____________.
Neoclassical economists; long run
 
In a Keynesian cross diagram, the expected future rate of return _________________________.
shifts the investment function up or down
 
In a Keynesian cross diagram, the slope of the aggregate expenditure function increases:
if the marginal propensity to import falls
 
Which of the following is a distinguishing characteristic of a Keynesian cross diagram?
45-degree line
 
The nominal interest rate cannot fall below zero because
financial markets cannot allow for arbitrage opportunities
 
A liquidity trap occurs when
the real interest rate is zero
 
Quantitative easing occurs when the central bank
purchases long-term assets
 
Quantitative easing may not be effective because the central bank has no specific advantage over the private sector in
swapping short-term debt for long-term debt
 
The evidence on the quantitative easing undertaken by the U.S. Federal Reserve suggests
little support one way or the other for its effectiveness
 
Which of the following data would be analyzed to determine whether any shift in the MPI has occurred over the course of
the past 5 year period?
exchange rates
 
In macroeconomics, a _________________ is used to show the relationship between output and the input price level.
Phillips curve
 
In a Keynesian cross diagram, what name is given to the distance between an output level that is below potential GDP
and the level of potential GDP?
recessionary gap
 
Suppose that out of the original 100 increase in government spending, 33 will be recycled back into purchases of
domestically produced goods and services in the second round and 10.89 is spent in the third round. Following this
multiplier effect, what value would be recycled in the fourth round of this cycle?
3.59
 
Oil Price Floor and Investment Spending. Suppose the government said that they would not let the U.S. price for a barrel of
oil fall below​ $50. They could do this by raising taxes on oil if the price fell below​
$50.
 
By keeping the price of oil​ high, firms would have an incentive to invest in​ energy-saving technologies
True
 
If interest rates decrease​, the present value of a fixed payment in the future will
increase
 
As real interest rates rise​, investment spending in the economy will
decreases
 
Proponents of solar energy point to the vast savings that come in the long run from using a free source of energy rather than
paying high prices for electricity. Unfortunately, solar energy systems typically
have a large up front expenses to install the system.
 
Using the concept of present value, solar energy systems are more likely to be profitable when the interest rates are low.
True
 
Suppose that out of the original 100 of government spending, 33 will be recycled back into purchases of domestically produced goods and services in the second round and 10.89 is spent in the third round. Following this multiplier effect, what will the value of the total aggregate expenditures be after the fourth round in the cycle is completed?
147.48
 
Suppose that out of the original 100 increase in government spending, 60 will be recycled back into purchases of domestically
produced goods and services. Following this multiplier effect, what value will be recycled in the next round in the cycle?
36
 
When the economy is in a recession, the government will want to increase output. If the multiplier equals 2.5 and the government increases spending by 200, how much will output increase by?
500
 
The economy is in a recession and the government wants to increase output. If the multiplier equals 3 and the government increases spending by 250, how much will output increase by?
750
 
Which of the following will cause the multiplier to be smaller and cause changes in investor confidence to have a smaller effect in an economy?
bigger leakages