Final Exam Review Flashcards
The point on a business cycle when the real GDP stops falling is the:
Business cycle trough
The business cycle measures:
Short run fluctuations in economic activity
Inflation adjusted price formula:
New price = Previous Price x (Current Price Level/Previous Price Level)
The consumer price index reflects the:
Changes in the price goods and services typically purchased by consumers.
When the GDP is above full employment output, cyclical unemployment:
Is negative
A shortcoming in using real GDP as a measure if a nation’s well-being is that it does not measure changes in:
environmental quality
An increase in expected future prices causes:
a decrease in SRAS
If other countries sink into a recession, in the short run, output in the U.S. will ______ and the price level will ______.
decrease; decrease
In the short run, if housing values fall, then there will be an ______ in the equilibrium price level and a ______ in the equilibrium level of real GDP.
increase; decrease
An increase in general price level will lead to _______ the SRAS curve as firms ______ output.
an upward movement along; increase
When the price level rise and U.S. goods become relatively more expensive thank foreign goods, there will be ________ the AD curve.
an upward movement along
During economic expansions, outlays ______ and tax revenue ______.
decrease; increase
Because short run output is greater than full employment output, in long run we would expect the price level to:
rise
A decrease in foreign income would cause a _______ of the AD curve.
leftward shift
Suppose the gov’t permanently reduces spending in an effort to reduce the budget deficit. In the new long run equilibrium, output will ______ and the price level will ______.
remain unchanged, decrease
An increase in AD is beneficial in the short run because _____, but harmful in the long run because _____.
the unemployment rate falls; the price level rises.
During normal economic times, unemployment in France and Germany tends to be ____________ than in the United States mainly because of ____________.
higher; labor market regulations
Natural unemployment is:
the sum of structural and frictional unemployment.
When foreign income rises, U.S. aggregate:
demand will shift to the right.
If firms and workers expect the price level to fall, this causes an ________ in short-run aggregate supply.
increase
A decrease in aggregate demand will generate _______ in real GDP and _______ in the price level in the short run.
a decrease; a decrease
Suppose a major technological advance increases productivity in the economy. What is the effect of this on equilibrium GDP and the equilibrium price level in the long run?
GPD will increase and the price level will decrease.
Suppose the stock market crashes. In the short-run we would expect the equilibrium price level to _________ and the equilibrium level of real GDP to _______.
decrease, increase
If there is an increase in expected income, this would cause an ______ the aggregate demand curve.
upward movement
An increase in the value of the dollar will __________ exports and __________ imports.
decrease; increase
__________ would cause a rightward shift of the aggregate demand curve.
An increase in expected income
You read a study that predicts that rising oil prices projected for this summer are certain to fuel inflation.
Having taken an economics class, due to this expected change in prices, you predict that spending today will
_________ and aggregate demand today will _________.
increase; increase
If the value of a dollar increases, aggregate demand will:
shift left.
Shifts in the long-run aggregate supply curve are caused by:
changes in labor productivity.
If inflation turns out to be higher than expected, this will:
shift short-run aggregate supply to the left.
Suppose advances in computer technology lead to a surge in worker productivity. In the long run, output will
_________ and the price level will _________.
increase; decrease
A severe drought hits a country and reduces farm output by 50%. In the short run, this will __________ output and
__________ employment.
decrease; decrease
Payments to Social Security recipients is considered as ________ government spending.
mandatory
M1 Formula
M1 = Currency + Checkable Deposits
M2 Formula
M1 + saving deposits + money market mutual funds + CD’s
Deposits Formula
Loans + Reserves = Deposits
Required Reserves Formula
= rr x deposits
Excess Reserves Formula
= reserves – required reserves
Simply Money Multiplier Formula
mm = 1/rr
Change in Money Supply Formula
= mm x initial injection
The largest component of M2 is:
savings deposits
The maximum amount the bank can hold as loans is:
the amount of excess reserves
The purchase of existing U.S. Treasury securities by the Federal Reserve will ______ the money supply.
increase
Central banks can use monetary policy to:
reduce interest rates
By shifting aggregate demand, monetary policy can affect __________ and __________.
real gross domestic product (GDP); unemployment
The idea that the money supply does not affect real economic variables is:
money neutrality
