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ECO 221 Intermediate Macroeconomics Recap

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ECO 221 Intermediate Macroeconomics Recap

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Questions and Answers

What is the condition for labour market equilibrium?

P = F(N, P)

Nd = Ns (correct)

S = I

Y = F(K, N)

What is the effect of a bond-financed increase in government spending on the equilibrium values of output and the price level?

It has no effect on output and the price level (correct)

It increases output but decreases the price level

It increases output and the price level

It decreases output and the price level

What is the relationship between the interest rate and the supply of loanable funds at equilibrium?

The interest rate equals the supply of loanable funds (correct)

The interest rate is higher than the supply of loanable funds

The interest rate is lower than the supply of loanable funds

The interest rate has no relation to the supply of loanable funds

What is the effect of a bond-financed increase in government spending on the interest rate?

It increases the interest rate (A) Signup and view all the answers

What is the Fisher's equation of exchange?

MV = PY (A) Signup and view all the answers

What is the condition for capital market equilibrium?

S = I (B) Signup and view all the answers

What happens to the equilibrium interest rate when government deficit spending is added?

It rises (D) Signup and view all the answers

What is the effect on aggregate demand when government spending is financed by selling bonds to the public?

It remains the same (D) Signup and view all the answers

What happens to the supply curve when the money supply increases?

It remains vertical (B) Signup and view all the answers

What is the effect on the price level when government spending is financed by increasing the money supply?

It increases (B) Signup and view all the answers

What is the effect of tax policy on the economy?

It has the same effect as government spending (B) Signup and view all the answers

What happens to private expenditure when government spending is financed by selling bonds to the public?

It decreases (B) Signup and view all the answers

What is the primary effect of reducing marginal income tax rates?

Increase in labor supply (D) Signup and view all the answers

What happens to the labor supply schedule when the marginal income tax rate falls?

It shifts to the right (B) Signup and view all the answers

What is the result of an increase in labor supply?

An increase in employment (B) Signup and view all the answers

What determines the price level and nominal income in the classical system?

Quantity of money (A) Signup and view all the answers

What is the effect of monetary policy on real variables in the classical system?

It has no effect (B) Signup and view all the answers

What is the result of a shift to the right in the aggregate supply curve?

An increase in output (C) Signup and view all the answers