The money supply is vertical because
A) prices are indeterminate.
B) prices have no real impact.
C) the money supply is set by policy.
D) prices are counter-cyclical.
Question 2The period over which a call or put option exists is
A) determined by its delivery date.
B) determined by its expiration date.
C) determined by whether the contract is written for a commodity or for a financial instrument.
D) indeterminate; options contracts continue in existence until either the buyer or the seller desires to discontinue it.
Question 3If the real interest rate in the United States increases, foreign investors will ________ their demand for U.S. dollars because they desire to ________ more U.S. financial assets.
A) increase; buy
B) increase; sell
C) decrease; buy
D) decrease; sell
Question 4The time it takes for policymakers to obtain and to understand the data and to change the policy instrument based on that information is known as ________, respectively.
A) the data, recognition, and effectiveness lags
B) the recognition, data, and effectiveness lags
C) the data, recognition, and implementation lags
D) the recognition, implementation, and effectiveness lags
E) the data, implementation, and effectiveness lags
Question 5Consumption expenditure is 15,000, government purchases are 5,000, planned investment spending is 4,000 and net exports are 1,500. If total output is 25,000, then unplanned inventory investment is ________.
A) negative 500
B) 2,500
C) 3,500
D) 4,000
E) negative 450
Question 6What were the three shocks that the U.S. economy experienced during 2007-2009, and how did these shocks affect the IS curve, the MP curve, and the Phillips curve?
What will be an ideal response?
Question 7Loanable funds refers to
A) only those funds loaned from one bank to another.
B) only those funds loaned to banks by the Federal Reserve.
C) only those funds loaned by banks to private individuals.
D) all those funds changing hands between lenders and borrowers in the bond market.
Question 8An intertemporal budget constraint ________.
A) describes how much time an individual consumer has to spend their disposable net national product
B) is independent of the real interest rate and wealth of the household
C) divides consumption spending into three categories: spending on durables, non-durables and services
D) describes how much a person can consume today versus tomorrow
Question 9In the United States, the growth rate of expenditures has been most volatile for
A) durable goods.
B) nondurable goods.
C) services.
D) The volatility has been roughly equal for all three categories of consumption expenditures.
Question 10Total planned expenditure (equals income) is 13,500, autonomous consumption expenditure is 600, the marginal propensity to consume is 0.8, government purchases are 2,700, taxes are 2,500 and planned investment spending is 2,900.
Net exports is ________. A) 3,840
B) negative 1,500
C) negative 1,380
D) negative 1,340
E) 2,100
Question 11Suppose the economy is in a long-run equilibrium when a temporary, favorable aggregate supply shock occurs. On the graphs above, show what happens to bring the economy back to long-run equilibrium, assuming that there is no policy response.
In words, explain why no response is the best policy.
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