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?

    <p>It increases the interest rate</p> Signup and view all the answers

    What is the Fisher's equation of exchange?

    <p>MV = PY</p> Signup and view all the answers

    What is the condition for capital market equilibrium?

    <p>S = I</p> Signup and view all the answers

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

    <p>It rises</p> Signup and view all the answers

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

    <p>It remains the same</p> Signup and view all the answers

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

    <p>It remains vertical</p> Signup and view all the answers

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

    <p>It increases</p> Signup and view all the answers

    What is the effect of tax policy on the economy?

    <p>It has the same effect as government spending</p> Signup and view all the answers

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

    <p>It decreases</p> Signup and view all the answers

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

    <p>Increase in labor supply</p> Signup and view all the answers

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

    <p>It shifts to the right</p> Signup and view all the answers

    What is the result of an increase in labor supply?

    <p>An increase in employment</p> Signup and view all the answers

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

    <p>Quantity of money</p> Signup and view all the answers

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

    <p>It has no effect</p> Signup and view all the answers

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

    <p>An increase in output</p> Signup and view all the answers

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