Question

ECO - 252 -- Macroeconomics 7. True/False statements. Simply state if the statement is true or...

ECO - 252 -- Macroeconomics

7. True/False statements. Simply state if the statement is true or false. No explanation required.

a. In the AD-AS Model, the wealth effect refers to a decrease in the interest rate that in turn increases consumption and investment.

b. Ceteris Paribus, a decrease in the price level causes the interest rate to decrease, which leads to a depreciation of the dollar in the foreign-currency exchange.

c. The aggregate demand curve slopes downward because it is the horizontal sum of the demand curves for individual goods.

d. An increase in the money supply shifts the short-run aggregate supply to the right.

e. The AD-AS Model can be used to show that in the short-run, money is not neutral.

f. When OPEC reduced the supply of oil in the mid-1970s, the U.S. suffered from stagflation.

g. John Maynard Keynes argued that fiscal policies could help the economy if the economy was hit by a negative demand shock.

h. In the long run, real output depends on the amount of money available.

i. The Fed can accommodate a decrease in the short run aggregate supply by conducting open market purchases.

Homework Answers

Answer #1

a. True. In AD-AS model, wealth effect refers to a decrease in the interest rate that in turn increases consumption and investment.

b.True. Ceteris paribus, a decrease in price level causes interest rate to decrease which leads to depreciation of dollars in foreign currency exchange.

c.False. Aggregate demand slopes downwards to show the inverse relationship between price level and quantity demanded.

d.False. An increase in money supply means more money is with the public to buy goods and services implies aggregate demand will increase. Over time wages and price levels would revise upwards in response to excess demand and short-run aggregate supply will shift leftwards.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
ECO - 252 Macroeconomics 9. True/False statements. Simply state if the statement is true or false....
ECO - 252 Macroeconomics 9. True/False statements. Simply state if the statement is true or false. No explanation required. a. U.S. dollars are an example of commodity money. b. In the long run, money neutrality implies that an increase in the money supply will increase real variables. c. Ceteris Paribus, if banks decide to hold a smaller part of their deposits as excess reserves, the money supply will fall. d. Open market operations include changing reserve requirements, changing the discount...
ECO - 252 - Macroeconomics 7. True/False statements. Simply state if the statement is true or...
ECO - 252 - Macroeconomics 7. True/False statements. Simply state if the statement is true or false. No explanation required. a. When the economy is at its natural rate of unemployment, the unemployment rate is equal to the natural rate of unemployment. b. Discouraged workers are workers who work part-time. c. Unemployment due to job search is best classified as cyclical unemployment. d. A minimum wage above equilibrium creates a shortage in the labor market. e. Collective bargaining is the...
ECO - 252 - Macroeconomics. 7. True/False statements. Simply state if the statement is true or...
ECO - 252 - Macroeconomics. 7. True/False statements. Simply state if the statement is true or false. No explanation required. a. An increase in U.S. net exports decreases the supply of dollars. b. If net exports are negative, foreign assets bought by Americans are greater than American assets bought by foreigners. c. A decrease in a country's real interest rate reduces net capital outflow. d. If a U.S. resident buys a foreign bond, this action is included in the U.S....
ECO - 252 -- Macroeconomics 6. Imagine that in 2015 the economy is in long-run equilibrium....
ECO - 252 -- Macroeconomics 6. Imagine that in 2015 the economy is in long-run equilibrium. Firms suddenly become pessimistic about the future. Using the AD-AS model and assuming policymakers take no action, a. Which curve shifts and in which direction? b. In the short run, what happens to the price level and real GDP? c. What happens to the expected price level? d. What will happen to nominal wages? e. In the long run, what will happen to the...
Explain very briefly if the following statements are true or false. Mathematical or graphic treatment will...
Explain very briefly if the following statements are true or false. Mathematical or graphic treatment will be appreciated wherever possible or necessary. While in the classical model with flexible wages and prices both output and employment are determined in the goods market by the demand for and supply of goods, in Keynes’ model with fixed money wages they are not. In Keynes’ model the important role of the interest rate is to bring the real demand in line with supply...
The Keynesian school assumes that aggregate supply is plentiful and thus passive in their model. True...
The Keynesian school assumes that aggregate supply is plentiful and thus passive in their model. True False The classical school assumes that since wants and desires are unlimited, aggregate demand is plentiful and thus passive. True False In the macro analysis presented in your textbook, there is a clear distinction between long-run growth and short-run fluctuations. Thus we have two models: 1) long-run model and 2) short-run model. True False If prices and wages were perfectly flexible, there would be...
Assume the economy is at a full-employment equilibrium. Now, if due to the pandemic, shortages in...
Assume the economy is at a full-employment equilibrium. Now, if due to the pandemic, shortages in the supply chain results in higher resource prices, would this, ceteris paribus, be reflected as a change in aggregate demand or a change in aggregate supply? Explain. Be sure to clearly identify a textbook factor of AD or AS that is causing this change. Would this change be an increase or decrease? Explain. Would this change result in the economy moving to a short-run...
Assume the economy is at a full-employment equilibrium. Now, if due to the pandemic, government increases...
Assume the economy is at a full-employment equilibrium. Now, if due to the pandemic, government increases spending to fight the virus, would this, ceteris paribus, be reflected as a change in aggregate demand or a change in aggregate supply? Explain. Be sure to clearly identify a textbook factor of AD or AS that is causing this change. Would this change be an increase or decrease? Explain.  Would this change result in the economy moving to a short-run below, or above, full-employment...
True False or uncertain and explain why in 3 sentences or more. 1)A decrease in the...
True False or uncertain and explain why in 3 sentences or more. 1)A decrease in the (net of transfers) tax rate on national income causes the aggregate demand curve to shift to the right. 2)Unless the economy is composed solely of price-making firms, the short run aggregate supply curve is upward sloping.
When the economy is producing at an output level below the potential output, the unemployment rate...
When the economy is producing at an output level below the potential output, the unemployment rate is above the natural rate of unemployment. the short-run aggregate supply curve will slowly shift to the left when wages start to adjust. the intersection of the short-run aggregate supply curve and the aggregate demand curve is to the right of the long-run aggregate supply curve. the economy might be at the long-run equilibrium. Which of the following is not a determinant of the...