PPC and Circular Flow
AD/AS and Phillips Curve
Money Market
Loanable Funds
Foreign Exchange
100
Draw a graph on the board showing the idea of increasing opportunity costs
A PPC with a curved line
100
Draw an AD/AS curve and show the effect of an increase in income taxes
Leftward shift of AD because income taxes will decrease the amount people are able to consume, thus decreasing consumption spending and decreasing real GDP
100
The concept of financial market efficiency implies...
What is all opportunities for easy arbitrage profit have been exhausted.
100
explanation of loanable funds?
What is a hypothetical market that brings savers and borrowers together
100
exchange rate
What is the price of a domestic currency in terms of a foreign currency
200
Draw a production possibility curve in which the economy not operating at full capacity
A PPC with production within the curve
200
Show on a Phillips Curve what state a country would be in while in a recession and what state a country would be in while in an inflationary period
A point to the right of the LRPC is recessionary and a point to the left of the LRPC is inflationary
200
The inverse relationship between interest rates and bond prices is due to the following fact:
What is A bond price represents the present discounted value of the payments agreed upon at the time when the bond was issued.
200
What determines the supply of loanable funds?
What is Savings
200
domestic real interest rates will tend to equal foreign real interest rates.
What is The International Fisher equation
300
Show what happens on a production possibilities curve when a country acquires more resources
A shift outward of the ppc
300
Draw a completely labelled AD/AS graph showing both the short term and long term effects of an increase in government spending and show the effect on price level
The AD will shift to the right, throwing equilibrium away from the LRAS. As a result, the SRAS will shift left to return equilibrium to LRAS. The price level will increase
300
A speculative bubble is rational as long as...
What is ...as long as traders believe that the bubble will continue to grow, validate market expectations, and offer the 'normal' return.
300
What determines the demand for loanable funds?
What is Amount of funds desired by indiviuals
300
Over the long run the rate of depreciation of the nominal exchange rate between two countries is approximately equal to the difference in national _________ rates.
What is Inflation
400
Draw a production possibilities curve showing a movement of producing more capital goods to producing more consumer goods
A ppc with consumer goods and capital goods as the axes and a movement along the production possibilities frontier
400
How will a decrease in the interest rate affect the AD/AS curve?
This will increase investment spending and shift AD to the right, increasing real GDP and decreasing price level
400
The implication for macroeconomics that assets are durable is that…
What is …expectations of the value of assets in future periods are essential for understanding the value of assets in the present period.
400
Show and describe what happens to the loanable funds market when the government increases spending
A loanable funds market graph with Demand shifted right. This will increase the interest rate and decrease private investments, leading to the "crowding out" effect
400
To understand the current nominal exchange rate, we need to know
What is nominal exchange rate.
500
Draw a simple Circular Flow Model
Firms provide goods and services to the product market which provides the goods and services to households which provide land, labor, and capital to the factor market which provides factors of productions to firms. Money flows in the opposite direction
500
Using both an AD/AS graph and Phillips Curve, show how an increase in input prices will affect the economy
The SRAS will shift to the left, so aggregate price level will increase and real GPD will decrease, and the SRPC will shift to the right, increasing unemployment and decreasing inflation rate
500
Diversification cannot completely eliminate risk in an investor's portfolio because…
What is …existing risks are almost never perfectly negatively correlated with each other.
500
How will an increase in household savings affect the loanable funds market?
Supply will shift to the right so interest rate will decrease and quantity of loans will increase
500
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