Macroeconomics Questions
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Changes in different components of the autonomous spending have different effect on the equilibrium output.
The life cycle hypothesis focuses on the assumption that consumers prefer a balanced (smooth) path of consumption over strong intertemporal volatility of consumption.
The intertemporal budget constraint shows that the present value of all consumption expenditures must equal to the present value of the disposable income.
An increase in government spending without an increase in taxes is known as a deficit spending.
Q; Governments that run large deficits can:a) reduce the deficit by raising taxes.b) reduce the deficit by reducing spending. c) finance the deficit by printing money.d) Answers (a), (b), and (c) are all correct.
10. The economy of Brittania has been suffering from high inflation with anunemployment rate equal to its natural rate. Policy makers would like todisinflate the economy with the lowest economic cost possible. Assume thatthe state of the economy is not the result of a negative supply shock. Howcan they try to minimize the unemployment cost of disinflation? Is itpossible for there to be no cost of disinflation?
As interest rates increase, bond prices decrease.
Q: Cyclical unemployment and the output gap:a) move together, but cyclical unemployment fluctuates morethan the output gap.b) have a relationship that Okun's law quantifies.c) are negatively related: In the United States, when the cyclical unemployment rate increases by 1%, the output gap decreases by 0.5%.d) Answers (a), (b), and (c) are all correct.
Improved job finding, increase in structural/frictional unemployment leads to
the curve showing the del between a nation's price level and the quantity of goods supplied by its producers-in a short run, it is an upward-sloping curve-in a long run, the curve is vertical (change in price level does not affect quantity supplied)
*a long run, the curve is vertical (change in price level does not affect quantity supplied)why?
a balance of forces permitting the simultaneous fulfillment of plans by buyers and sellers
a downward-sloping curve showing the relationship between the price level and the quantity of domestically produced goods and services all households, business firms, governments and foreigners (net exports) are willing to purchase
an increase in the value of a currency relative to forging currency-increase the purchasing power of the currency over foreign goods
the interest rate adjusted for expected inflation-indicates the real cost to the borrower (and yield to the lender) in terms of goods and services-actual burden/payoffs
a highly aggregated market encompassing the flow of all final-user goods and services-market counts all items that enter into GDP-real output of this market = real GDP
a component of money interest rate that reflects compensation to the lender for the expected decrease, due to inflation, in the purchasing power of the principal and interest during the course of the loan-determined by the expected rate of future inflation
the situation when a country's exports of goods and services are greater than its imports
a reduction in the value of a currency relative to foreign currencies-reduces the purchasing power of the currency over foreign goods
**a lower price level will reduced the demand for money and lower the real interest rate, which will stimulate additional purchases