Macroeconomics Exam 3 CH 28-29
Mastering Macroeconomics: Exam 3 Quiz
Test your knowledge of key macroeconomic concepts with our comprehensive 50-question quiz based on Chapters 28-29. Engage with a series of targeted questions that challenge your understanding of money demand, inflation, and aggregate supply. Perfect for students or anyone looking to solidify their knowledge in macroeconomics.
- Explore critical concepts and theories.
- Track your progress and knowledge gaps.
- Ideal for exam preparation or self-assessment.
The quantity of money demanded
Is the total currency in circulation
Is the money that people choose to hold
Is the same as the money supply
Changes only when real GDP changes
Is equal to real GDP
The opportunity cost of holding money is that you
Must make more trips to the bank to manage the money
Have trouble balacing your check book
Pay a higher tax rate
Forego interest on an alternative asset
Run a greater risk of being robbed
The quantity of money demanded will decrease if the
Price level rises
Inflation rate decreases
Nominal interest rate decreases
Nominal interest rate increases
Real interest rate decreases
An increaase in the nominal interest rate leads to
A movement downward along the demand for money curve
A rightward shift in the demand for money curve
A movement upward along the demand for money curve
A leftward shift in the demand for money curve
Neither a shift in nor a movement along the demand for money curve
If the price level increases, the
Demand for money increases
Demand for money decreases
Quantity of money demanded increases
Quantity of money demanded decreases
Demand for money does not change and the quantity of money demanded does not change
If real GDP decreases, the
Supply of money decreases
Demand for money increases
Demand for money decreases
Quantity of money demanded increases
Supply of money increases
The increases use of credit cards leads to
A movement downward along the demand for money curve
A leftward shift in the demand for money curve
A rightward shift in the demand for money curve
No movement along the demand curve for money nor a shift in the demand curve
A movement upward along the demand for money curve
The supply of money curve is
Certical because the quantity of money is fixed at any one moment
Upward sloping, showing the influence of the interest rate
Horizontal because interest rates are fixed at any one moment
Downward sloping, showing the negativity influence of the interest rate
Horizontal because the Fed controls the quantity of money supplied
Suppose that the equilibrium nominal interest rate is 4% and the equilibrium quantity of money is 1 trillion. At any interest rate rate ABOVE 4%
Less than 1 trillion will be demanded and bond prices will fall
More than 1 trillion will be supplied and bond prices will fall
More than 1 trillion will be supplied and the interest rate will rise
There is a shortage of money and the interest rate will rise
Less than 1 trillion will be demanded and bond prices will increase
Suppose that the equilibrium nominal interest rate is 5% and the equilibrium quantity of money is 1 trillion. At any interest rate BELOW 5%
The interest rate will fall and bond prices will fall
The supply of money will decrease
The interest rate will rise and bond prices will fall
There will be a surplus of money and bond prices will fall
There will be a surpls of money and bond prices will increase
In the short run, when the Fed increases the quantity of money, the
Demand for money decreases
Nominal interest rate falls
Price level decreases
Demand for money increaseses
Quantity demanded of money decreases
In the long run, money market equilibrium determines
The nominal interest rate
The value of money
Velocity
Real GDP
The real interest rate
The value of money
Increases during economic expansions
Increases during inflationary periods
Is the quantity of good and services that a unit of money can buy
Is determined by the Fed regulations
Is directly related to the price leve
The long run money demand curve shows
That the value of money is directly related to the quantity of money demanded
The relationship between real GDP and money demanded
The relationship between potential GDP and money demand
That the value of money influences the quantity of money that household and firms plan to hold
How the Fed determine the appropriate interest rate
In the long run, when the Fed increases the quantity of money, the
Price level falls
Price level rise
Demand for money decreases
Real interest rate rises
Nominal interest rate falls
Hyperinflation is defined as periods of
Inflation over 25% per year
Low inflation
Inflation under 10% per year
Negative price changes
Inflation over 50% per month
Which of the following is not a cost of inflation
Shoe-leather costs
Confusion cost
Government spending cost
Tax cost
Uncertainty costs
The shoe-leather cost of inflation are the costs from
Higher price of all goods, including necessities such as shoes
Higher taxes due to higher inflation
Time spent trying to spend money quickly
The government taking a higher percentage of interest income
Confusion as people lose track of real cost and benefits
When real GDP equals potential GDP, the quantity theory of money says that an increase in the quantity of money brings an equal percentage
Decrease in real GDP
Decrease in the price level
Increase in real GDP
Decrease in velocity
Increase in the price level
In the figure above, what happens if the Fed increases the quantity of money by 8%
The value of money falls to 0.92 and there is a movement downward along the LRMD
The LRMD curve shifts rightward to restore equilibrium
The value of money rises to 1.08
The interest rate rises to 1.08
The price level falls to 1.08
Potential GDP
Never changes
Is independent of price level
Decreases as the price level increases because people demand fewer goods and services
Increases as the price level increases because firms supply more goods and services
Might either increases or decrease as the price level increases
The aggregate supply curve shows the relationship between
Potential GDP and the aggregate demand curve
The quantity of real GDP supplied and the interest rate
Potential GDP and real GDP
Potential GDP and the price level
The quantity of real GDP supplied and the price level
Moving along the AS curve, when the price level increases the
Real wage rate rises, and there is a decrease in the quantity of real GDP supplied
Nominal wage rate rises, and there sia decrease in the quantity of real GDP supplied
Real wage rate rises, and there is an increase in the quantity of real GDP supplied
Real wage rate falls, and there is an increase in the quantity of real GDP supplied
Nominal wage rate falls, and there is an increase in the quantity of real GDP supplied
An increase in the price level leads to
An upward movement along the aggregate supply curve
A downward movement along the aggregate supply curve
A leftward shift of the aggregate supply curve
A rightward shift of the aggregate supply curve
Neither a movement along teh aggregate supply curve nor a shift of the aggregate supply curve
When the price level rises, the quantity of real GDP supplied __________ because _________
Increases, AS curve shift rightward
Increases, new businsesses open
Decreases, new business open
Increases, business fail and have to shut doors
Decreases, businesses fail, and have to shut their doors
An increase in the money wage rate __________ and increase in the money price of raw materials ________
Sfits the AS curve leftward, does not shift the AS curve
Shifts the AS curve leftward, shifts the AS curve leftward
Shifts the AS curve rightward, shifts the AS curve rightward
Shifts the AS curve leftward, shifts the AS curve rightward
If the cost of production increases, there is
An increase in aggregate supoly and the AS curve shifts rightward
An increase in the quantity of real GDP supplied and a movement up along the AS curve
A decrease in the quantity of real GDP supplied, and a movement down along the AS curve
A decrease in aggregate supply and the AS curve shifts Rightward
A decrease in aggregate supply and the AS curve shifts leftward
Moving along the potential GDP line, the money wage rate changes by the same percentage as the change in the price level so that the real wage rate
Increases
Decreases
Stays at the full-employment equilibrium level
The aggregate supply curve shifts rightward when
Potential GDP decreases
Income taxes increase
The money wage rate rises
The money wage rate falls
Government purchases increase
If profits are high because the price level rose,
Potential GDP must be decreasing
The AS curve shifts leftward
New businesses open and the quantity of real GDP supplied increases
It is likely the result of an increase of the real wage rate
Business failures rise and the quantity of real GDP supplied increases
The AD curve is a graph depicting the
Relationship between the price level and the quantity of real GDP demanded
Relationship between the aggregate quantity of real GDP demanded and the aggregate quantity of real GDP supplied
Business cycle during expansions and recessions
Relationship between the price level and potential GDP
Non of the above
An increase in the price level leads to
A rightward shift of the aggregate demand curve
A leftward shift of the aggregate demand curve
A movement upward along the aggregate demand curve
A movement downward along the aggregate demand curve
Neither a shift in the aggregate demand curve nor a movement along it
If the price level doubles, it will
Decrease the buying power of money
Decrease potential GDP
Increase potential GDP
Have no effect on the buying power of money
Increase the quantity of money
If there is an increase in expected future income, then
There is a downward movement along the aggregate demand curve
The aggregate demand curve shifts leftward there is a n
There is an upward movement along the aggregate demand curve
The aggregate demand curve becomes steeper
The aggregate demand curve shifts rightward
A tax increase
Decreases aggregate demand and the AD curve shifts leftward
Increases aggregate demand and the AD curve shifts rightward
Decreases the quantity of real GDP demanded and there sia movement up along teh AD curve
Increases the quantity of real GDP
Does not shift or lead to movement
In the figure, as the price elvel increases the aggregate demand curve will
Shfit from AD1 to AD3 and teh back to AD1
Not shift, but the aggregate demand curve will change so that it is positively sloped
Shifts from AD1 to AD3
Shfits from AD1 to AD3
Not shift
Based on the figure above, the aggregate demand curve will shift from AD0 to AD2 (<---) when
Potential GDP increases
The price level rises
The price level falls
Government expenditure decreases
The federal reserve lowers the interest rate
Based on the figure above, the aggregate demand curve will shift from AD0 to AD1 (----->) when
The price level rises
Potential GDP increases
The federal reserve lowers the interest rate
The price level falls
Government expenditure decreases
Which of the following shifts the aggregate demand curve leftward
A tax cut
A decrease in price level
A decrease in government expenditure on goods and services
An increase in the price level
An increase in the foreign income
The aggregate demand muliplier effect says that an initial increase in expenditure plans lead to an induced
Increase in government expenditure on goods and services
Increase in exports
Increase in the consumption expenditure
Increase in production expenditure
Decrease in the price level
Macroeconomics equilibrium occurs when
The price level euals the potential price level
The economy is fully employed
The aggregate quantity demanded is equal to the aggregate quantity supplied
There is no inflation
In its macroeconomic equilibrium, the economy can be producing at
Above full employement
Below full employement
At full employement
All the above I,ii,iii
If the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP more than potential GDP, there is
recessionary gap
A below full employment equilibrium
An inflationary gap
A falling price level
Rising real GDP
A recessionary gap occurs when _________ so that real GDP is __________ potential GDP
Aggregate supply decreases, less than
Aggregate supply increases, less than
Aggregate demand decreases, less than
Potential GDP decreases, greater than
Aggregate demand increases, greater than
Inflation can be started by
An increase in aggregate supply or an increase in aggregate demand
A decrease in aggregate supply or an increase in aggregate demand
A decrease in aggregate supply or a decrease in aggregate demand
An increase in aggregate supply or a decrease in aggregate demand
An increase in aggregate demand or an increase in potential GDP
Demand-pull inflation results from continuelly increasing the quantity of money, which leads to continually
Increasing potential GDP
Increasing aggregate demand
Decreasing aggregate demand
Increasing aggregate supply
Decreasing aggregate supply
Cost-push inflation starts with
An increase in aggregate demand
A decrease in aggregate supply
An increase in aggregate supply
An increase in potential GDP
A decrease in aggregate demand
To prevent demand-pull inflation,
Real GDP must increase
The Fed must not eh let the quantity of money persistently rise
Firms must refuse to increase the real wage rate
Firms must refuse to increase the money wage rate
The natural employment rate must increase
If the equilibrium price level is 135 nd the actual price level is 150 then
Aggregate demand will decrease to restore equilibrum
The quantity of real GDP demanded is less than the quantity of real GDP supplied
Aggregate demand will increase to restore equilibrium
Firms increase their production becasue they are are able to sell their ouput at a hgiher than expected price
If the quantity of the real GDP demanded is less than the quantity of real GDP supplied, then
The economy must be producing at a potential GDP
The price level rises to restore the macroeconomic equilibrium
The price level falls and firms increase production
The price level falls and firms decrease production
Aggregate demand changes to restore the equilibrium
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