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AGEC 217: Purdue University Exam|84 answered Questions
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AGEC 217: Purdue University Exam|84 answered Questions
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AGEC 217: Purdue University Exam|84 answered Questions
Potential output is - -The amount that can be produced when resources are
normally employed
- On the goods market diagram, - -The vertical axis is the price level, and
the horizontal axis is the level of output
- What two goods market diagrams show recession? - -When AD-1 moves
down and to the left to AD-2 and AS stays the same, and when AS-1 moves
up and to the left to AS-2 and AD stays the same.
- What goods market diagram shows a decrease in aggregate demand? - -
When AD-1 moves down and to the left to AD-2 and AS stays the same
- What money market diagram shows a decrease in money supply? - -When
MS-1 moves up and to the left to MS-2 and MD stays the same.
- On the goods market diagram, the intersection of the aggregate demand
and aggregate supply curve shows - -The equilibrium price level and the
equilibrium level of output
- What two goods market diagrams show deflation? - -When AD-1 moves
down and to the left to AD-2 and AS stays the same, and when AS-1 moves
down and to the right to AS-2 and AD stays the same
- What two goods market diagrams show expansion? - -When AD-1 moves
up and to the right to AD-2 and AS stays the same, and when AS-1 moves
down and to the right to AS-2 and AD stays the same
- On the goods market diagram, - -The downward sloping curve is
aggregate demand, and the upward sloping curve is aggregate supply
- On the money market diagram, - -The vertical axis is the real interest rate,
and the horizontal axis is the quantity of money
- What good market diagram shows a decrease in aggregate supply? - -
When AS-1 moves up and to the left to AS-2 and AD stays the same
- What money market diagram shows a decrease in money demand? - -
When MD-1 moves down and to the left to MD-2 and MS stays the same
, - When incomes rise, - -People make more purchases, so the demand for
money rises.
- Prices probably do not adjust to equilibrium instantly because, - -Contracts
and lagging price expectations cause wages, cost and prices to be "sticky"
- When the money supply increases in the money market, - -The equilibrium
real interest rate decreases, which increases investment spending in the
goods market, increasing aggregate demand, and raising the price level and
output
- When money demand decreases in the money market, - -The equilibrium
real interest rate decreases, which increases investment spending in the
goods market, increasing aggregate demand, and raising the price level and
output
- One reason that interest rates tend to rise during expansions is - -Rising
prices and income increase money demand
- If banks are pessimistic about the prospects of business repaying loans, - -
They lend less, which decreases the money supply and increases the real
interest rate
- In the macroeconomic model, if an improvement in technology increases
productivity, - -Aggregate supply will increase, output will increase and the
price level will decrease
- In the goods market - -In the short run there is a trade-off between
inflation and unemployment, but there is no trade-off in the long run
- When aggregate demand falls in the goods market, so that equilibrium
output is less than potential output - -The price level will fall in the goods
market, which reduces input cost, which increases aggregate supply, moving
equilibrium output back towards potential output
- When aggregate demand rises in the goods market, so that equilibrium
output is greater than potential output - -The price level will rise in the
goods market, which increases input cost, which decreases aggregate
supply, moving equilibrium output back towards potential output
- The Federal Reserve conducts monetary policy by - -Changing the supply
of money, to influence interest rate
- In the macroeconomic model, if a drop in home prices causes consumers o
save more and spend less, - -Aggregate demand will decrease, output will
decrease and the price level will decrease
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