Macroeconomics Exam

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Questions and Answers

Which of the following would most likely lead to a negative demand shock?

An increase in interest rates

An increase in consumer spending

A decrease in business confidence

An increase in the price of inputs such as steel (correct)

Which of the following would most likely decrease consumption?

An increase in consumer confidence coupled with an increase in real interest rates

An increase in real disposable income coupled with an increase in expected wealth

An increase in real disposable income coupled with an increase in real interest rates (correct)

An increase in real disposable income coupled with an increase in business confidence

An increase in consumer confidence coupled with an increase in real wealth

If the Federal Reserve System were to increase the short-term market interest rate, it should

decrease money supply by decreasing the discount rate

increase money supply by increasing money supply

none of the above

decrease money supply by increasing the required reserve ratio

increase money supply by decreasing the required reserve ratio (correct)

In a country, when disposable income increases by $50,000 real consumption spending increases by $40,000 on average. Given that, what is the country's simple expenditure multiplier?

5 Signup and view all the answers

Suppose the economy is in equilibrium and exports decrease by $50 billion. According to the Keynesian model, what would be the more likely result?

It would decrease by more than $50 billion. Signup and view all the answers

Income taxes would affect the following GDP exports do not influence aggregate spending. These things would change what?

Disposable income decreases, consumption at any income level decreases, and aggregate demand shifts leftward. Signup and view all the answers

In the context of the AD/AS model, which of the following would most likely lead to a decrease in US real GDP?

An increase in depreciation of the dollar Signup and view all the answers

Money in circulation, checking account balances, and credit card limits, examples of which are included in the money supply, are, according to the Federal Reserve System...

currency in circulation, credit card limits, and checking account balances Signup and view all the answers

In a country where disposable income increases by $500, real consumption spending increases by $400,000,000. Given that the country's simple multiplier = $6,000,000,000. What is the country's GDP?

6,000,000,000 Signup and view all the answers

Suppose the economy is in equilibrium and exports decrease by $50 billion. According to the Keynesian model, what would be the most likely effect on equilibrium GDP?

It would decrease by more than $50 billion. Signup and view all the answers

Income taxes would affect which of the following the most?

Disposable income Signup and view all the answers

Monetary policy is the management of the money supply and credit in the Federal Reserve System. Examples of money in circulation, checking account balances, and credit card limits, and money include

Travelers' checks, credit card limits, and checking account balances Signup and view all the answers

If the Federal Reserve System would like to increase the short term market interest rate, it should

decrease money supply by increasing the required reserve ratio Signup and view all the answers

Study Notes