Intermediate Macro Test 2 - Assignment Essays

question

With an inflation tax:

answer

there is a redistribution of income from income earners to owners of real assets

question

Generally during a recession

answer

the unemployment rate rises

question

The demand for labor curve is

answer

downward sloping, showing that the quantity of labor demanded increases when the real wage falls
derived from the firms profit maximization problem
equal to the marginal product of labor
derived from the marginal product of labor

question

The explanation for the upward sloping supply of labor curve is that

answer

as wage rises, the opportunity cost of leisure rises, so people work more

question

an increase in the income taxes on wages results in

answer

the labor supply curve shifting left

question

wage rigidity

answer

the failure of wages to adjust to a level at which labor supply equals labor demand
prevents labor supply from reaching equilibrium

question

The "natural rate of unemployment" is the unemployment rate that would prevail

answer

if the economy were in neither a boom nor a recession

question

in the "bathtub model" of unemployment, in the steady state

answer

the change in unemployment is zero

question

Sometimes when discussing inflation, we use a measure of inflation that excludes______from its calculation because these prices tend to be volatile.

answer

food and energy prices

question

Fiat money has value because

answer

people believe it has value

question

The velocity of money is

answer

the average number of times a dollar is used per year

question

essence of the quantity theory of money is that

answer

in the long run, a key determinant of the price level is the money supply

question

You are the head of the central bank and you want to maintain 2% long run inflation, using the quantity theory of money. If the real GDP growth is 4% and the velocity is constant, you suggest a:

answer

6% money supply growth

question

Empirically, a large amount of data suggests that money neutrality____, but changes in money supply_____.

answer

holds in the longs run;can have real effects in the short run

question

By purchasing a fixed rate 30 year mortgage, inflation rate is

answer

passed from the borrower to the lender

question

According to the governments budget constraint, if the government spends more than it generates in taxes, it can raise revenues by:

answer

printing money

question

The coordination problem is difficult to solve because

answer

individual price setting behavior economy wide has built in inflation inertia

question

One implication of the keynote quote:"in the long run we are all dead" is:

answer

the long run is made up of a sequence of short runs

question

the long-run model determines_____ and ______, while the short-run model determines____ and __________

answer

potential output, long-run inflation; current output, current inflation

question

According to the Phillips curve, short run changes in inflation are due to changes in:

answer

short-term output fluctuations

question

Suppose an economy exhibits a large, unexpected increase in productivity growth that lasts for a decade; however monetary policymakers are slow to recognize that the change is to potential, not current, output, and they interpret the increase in output as a boom that leads current to exceed potential output. In this Scenario policy makers believe that _______ pressures are building and incorrectly respond by __________ interest rates sending the economy into a ____________ gap

answer

inflationary; raising; recessionary

question

According to the Phillips Curve presented in the text, a positive macroeconomic shock;

answer

increases the rate of inflation

question

Okun's law shows the ________ relationship between_______ and _______

answer

negative; the unemployment gap and economic fluctuations

question

Taken together, the Phillips curve and Okun's law imply there is a short-term______ relationship between______and inflation

answer

negative;unemployment

question

suppose and economy's natural rate of unemployment is 5%. IF the unemployment rate is 3% according to Okun's law Y~ is:

answer

1 of 25

question

With an inflation tax:

answer

there is a redistribution of income from income earners to owners of real assets

question

Generally during a recession

answer

the unemployment rate rises

question

The demand for labor curve is

answer

question

The explanation for the upward sloping supply of labor curve is that

answer

as wage rises, the opportunity cost of leisure rises, so people work more

question

an increase in the income taxes on wages results in

answer

the labor supply curve shifting left

question

wage rigidity

answer

the failure of wages to adjust to a level at which labor supply equals labor demand
prevents labor supply from reaching equilibrium

question

The "natural rate of unemployment" is the unemployment rate that would prevail

answer

if the economy were in neither a boom nor a recession

question

in the "bathtub model" of unemployment, in the steady state

answer

the change in unemployment is zero

question

Sometimes when discussing inflation, we use a measure of inflation that excludes______from its calculation because these prices tend to be volatile.

answer

food and energy prices

question

Fiat money has value because

answer

people believe it has value

question

The velocity of money is

answer

the average number of times a dollar is used per year

question

essence of the quantity theory of money is that

answer

in the long run, a key determinant of the price level is the money supply

question

You are the head of the central bank and you want to maintain 2% long run inflation, using the quantity theory of money. If the real GDP growth is 4% and the velocity is constant, you suggest a:

answer

6% money supply growth

question

Empirically, a large amount of data suggests that money neutrality____, but changes in money supply_____.

answer

holds in the longs run;can have real effects in the short run

question

By purchasing a fixed rate 30 year mortgage, inflation rate is

answer

passed from the borrower to the lender

question

According to the governments budget constraint, if the government spends more than it generates in taxes, it can raise revenues by:

answer

printing money

question

The coordination problem is difficult to solve because

answer

individual price setting behavior economy wide has built in inflation inertia

question

One implication of the keynote quote:"in the long run we are all dead" is:

answer

the long run is made up of a sequence of short runs

question

the long-run model determines_____ and ______, while the short-run model determines____ and __________

answer

potential output, long-run inflation; current output, current inflation

question

According to the Phillips curve, short run changes in inflation are due to changes in:

answer

short-term output fluctuations

question

answer

inflationary; raising; recessionary

question

According to the Phillips Curve presented in the text, a positive macroeconomic shock;

answer

increases the rate of inflation

question

Okun's law shows the ________ relationship between_______ and _______

answer

negative; the unemployment gap and economic fluctuations

question

Taken together, the Phillips curve and Okun's law imply there is a short-term______ relationship between______and inflation

answer

negative;unemployment

question

suppose and economy's natural rate of unemployment is 5%. IF the unemployment rate is 3% according to Okun's law Y~ is:

answer

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