Economic Fluctuations

Question 1

GDP grows at ___ percent per year with huge fluctuations in___________

Answer 1

3-5, the short run

Question 2

consumption and investment change _____

Answer 2

with GDP

Question 3

Consumption is less volatile while investment

Answer 3

is more volatile

Question 4

unemployment falls
when there is

Answer 4

expansion

Question 5

Fluctuation in investment is much greater than

Answer 5

consumption and real GDP

Question 6

dip in investment has to do

Answer 6

with recession

Question 7

AD: Y =

Answer 7

MV/P

Question 8

AD: Y = MV/P – how much output you will demand will be based on how
much ______ you have and what ___ you have to pay so if P increases QD
will ____

Answer 8

money, price, fall

Question 9

AS=

Answer 9

Y = F (K, L)

Question 10

Monetary policy in not effective in raising supply – because AS depends on

Answer 10

production function

Question 11

there is no fiscal policy since ___ there is not tax or government
spending ____

Answer 11

Y = MV/Y, unless you increase money

Question 12

monetarist model

Answer 12

C + I + G = MV/P

Question 13

So, when G and C increases it will mean that _____

Answer 13

money demand increases

Question 14

Money demand =

Answer 14

M= (1/V) PY

Question 15

V=V (i) so when i increases

Answer 15

this will increase V

Question 16

So, if interest rates rise this will increase V and reduce 1/V

Answer 16

which will decrease
money demand

Question 17

There is ISLM model – where investment and savings are made ____ at different
_____ – this is the ____ market

Answer 17

EQUAL, interest rates, goods market

Question 18

L which is real money demand =

Answer 18

M/P

Question 19

M = money supply is made equal by
the ____

Answer 19

nominal interest rate

Question 20

In the short-run we assume prices are sticky, so they do not ____ – so
SRAS is perfectly _____

Answer 20

move, elastic

Question 21

Answer 21

Question 22

The adjustment of _____ is what moves
the economy to its long-run equilibrium.

Answer 22

prices

Question 23

Shocks will temporarily shift the economy away from_____

Answer 23

full employment

Question 24

Supply shock

Answer 24

alters the cost of production and affects firm’s prices

Question 25

Stabilization policy

Answer 25

actions used to reduce the severity of a short-run shock

Question 26

Monetary policy may be used by increasing money supply to increase the ___ when
there is a _____ – but this will lead to a long run permanent increase in ____
while Y stays the same

Answer 26

AD, supply shock, P