Macroeconomics 3

Question 1

Investment spending

Answer 1

spending on capital items. 
residential construction
non-residential construction
business PP&E
business inventory

Question 2

Government spending

Answer 2

purchase of G/S by all levels of government. excludes transfer payments.

Question 3

How does the government affect aggregate demand?

Answer 3

by changes to government spending and government taxation.

Question 4

Discretionary fiscal policy

Answer 4

government changes to spending or taxation to impact aggregate demand.

Question 5

transfer price

Answer 5

the amount at which G/S are transferred between affiliated entities. the related transactions are intercompany transactions

Question 6

Net exports

Answer 6

exports - imports

Question 7

Aggregate Demand

Answer 7

the total amount of expenditures for consumer goods and investment for a period of time. it includes purchases by consumers, businesses, government, and foreign entities.

Question 8

What does an aggregate supply curve measure?

Answer 8

the total output of the economy that will occur at different price levels

Question 9

what is the slope of a classical aggregate supply curve

Answer 9

it is completely vertical. supply remains unchanged at various price levels

Question 10

what is the slope of a conventional supply curve

Answer 10

continuously positively sloped. steeper slope beginning at the level of full employment. supply increases with price, but requires proportionately higher prices at full employment

Question 11

what is the slope of a keynesian supply curve

Answer 11

it is horizontal up until the level of output at full employment, then slopes upward to the right. supply increases with no change in price until the economy is at full employment.

Question 12

Demand induced (demand pull) inflation

Answer 12

results when levels of aggregate spending for G/S exceed the productive capacity of the economy at full employment. The excess demand “pulls up” the prices

Question 13

M1

Answer 13

paper and coin currency, check writing deposits in bank

Question 14

M2

Answer 14

included everything in M2 and also:
savings deposits
money-market deposits
CDs of less than $100,000
Individual owned money-market mutual funds

Question 15

M3

Answer 15

includes everything in M2 plus” CDs greated than $100k

institutional owned money-market mutual funds

Question 16

What would the gov do to dampen the economy and prevent inflation

Answer 16

reduce gov spending
increase taxes
reduce the money supply
increase interest rates