Take your pick!
Which of the following is not a component of Aggregate Demand?
A. Consumption
B. Investment
C. Saving
D. Net Exports
C. Saving
Name the 4 phases of a business cycle. (See image)
Trough, Expansion, Peak, Contraction (Recession)
If the MPC is 0.63, the multiplier would be _____?
1-0.63 = 0.37 (MPS)
1/0.37 = Multiplier
= 2.703
A measure of price changes for a typical basket of consumer products
Consumer Price Index
Bertha just graduated college and is in the midst of applying for jobs. What type of unemployment is he experiencing?
a. Frictional
b. Structural
c. Seasonal
d. Cyclical
a. Frictional
Draw the AS/AD graph to illustrate an increase in the incomes of Canadian trading partners and how it would AS/AD for Canada.
Aggregate Demand Curve shift to the right.
(Higher incomes abroad will lead Canadian trading partners to increase their purchases of Canadian produced goods. The resulting increase in Canadian net exports will add to aggregate demand in Canada, leading to increased real output and a higher price level.
What is the difference between cost-push inflation and demand-pull inflation?
Cost-push inflation is driven by supply costs while demand-pull inflation is driven by consumer demand. Both will lead to higher prices passed on to consumers.
The number of years that it takes a variable to double can be estimated by this
Rule of 70
A leftward shift of the short-run aggregate supply curve would illustrate:
A. demand pull inflation
B. Inflationary Gap
C. Positive GDP Gap
D. Cost-push inflation
D. Cost-push inflation
Will the following event cause a shift in the position of the LRAS curve? If it causes a shift, sketch the graph as well.
A tsunami decimates oil rigs, factories, and ports along the coast of a nation
Yes - There is a shift of the LRAS curve to the left. The capacity for production has been reduced.
What are 3 things not included when calculating GDP?
1. Used Goods / Second Hand Sales
2. Financial Assets (Bonds & Stocks)
3. Transfer Payments
The amount by which equilibrium output exceeds potential output
Inflationary Gap
If the MPC is .75 and the economy has a recessionary expenditure gap of $10 billion, then equilibrium GDP is:
A. $10 billion below full-employment GDP
B. $10 billion above full-employment GDP
C. $40 billion below full-employment GDP
D. $40 billion above full-employment GDP
C. $40 billion below full-employment GDP
Ceteris Paribus, an improvement in productivity in the short term cause what changes on your AS/AD graph.
Aggregate Supply Curve shifts to the right
What are 3 examples of leakages?
Imports, Savings & Sum of Taxes
As changes of price level occur, the real value of households' financial assets changes, this causes households to adjust their spending
Wealth Effect
(Determinant of Aggregate Demand)
Suppose the CPI value for 1996 is 150, and the CPI value for 1997 is 155. Given this the inflation rate for 1997 is:
A. 2.5%
B. 3.23%
C. 3.33%
D. 5%
C. 3.33%
The government reduces taxes and increases transfer payments.
AD shifts rightward.
Calculate the GDP using the income approach.
$1879.3 Billion Dollars
These government policies are designed to stabilize prices and reduce output
Contractionary Policies