Blog

(04.01–04.07 HC) For all graphs, be sure to correctly and completely label all axes and curves and use arrows to indicate the direction of any shifts.Assume that an economy is in a short-run macroeconomic equilibrium and experiences a negative demand shock. What will happen to real output and the price level as a result? Explain. Using a correctly labeled graph of the money market, illustrate the impact of the negative demand shock. What will happen to the price of previously issued bonds? Explain. What is one policy action that the central bank could take to offset the change in the nominal interest rate from part (b)? Assume a limited reserves system. Assume that the required reserve ratio is 10 percent. If the central bank wants to increase the money supply by $20 billion, what is the specific open-market operation (type and minimum value) that the central bank needs to conduct?

(05.05 MC) When the government borrows money to fund deficit spending, which of the following is likely to occur?

(06.02 MC) Use the graph to answer the question that follows.This graph shows the competitive foreign exchange market for dollars. If initially the price of a dollar is 0.90 euro, which of the following is true?

(02.01 LC) Which of the following is true in the circular flow model of the economy?

(02.04 MC) If the consumer price index for a given year is 120 and the price of the fixed basket of goods for that year is $60, what must the price of the basket have been in the base year?

(04.05 MC) Use the graph to answer the question that follows.Which of the following would explain the shift in the money market shown above?

(02.03 MC) If an unemployed worker does not take any action to seek employment for more than four weeks, which of the following would happen to the employment statistics?

(03.01–03.08, 04.07 HC) A country is currently in a recession. Illustrate this economy on a fully-labeled aggregate demand–aggregate supply model. Include aggregate demand, short-run aggregate supply, and long-run aggregate supply. Label the short-run equilibrium price level PLE and the short-run equilibrium output YE. Label the full-employment level of output YF. If the government and central bank do not intervene, how would this economy adjust in the long run? Explain. Illustrate the process of part (b) on your graph from part (a). The government decides to use fiscal policy to correct the economic situation in part (a). Assume the difference between the short-run and long-run equilibrium output is worth $36 billion, and the marginal propensity to consume is 0.75. Calculate one specific and effective fiscal policy action the government could take. What would be the short-run impact of the government’s action on the economy’s real output? What would be the short-run impact of the government’s action on the potential output of the economy? Will the long-run equilibrium price level if the government intervenes be less than, equal to, or greater than the long-run equilibrium price level without intervention? Show the impact of the government intervention from part (d) on the equilibrium real interest rate on a fully labeled loanable funds market graph. Will the long-run aggregate supply curve move as a result of the change from part (h)? Explain.

(01.01–01.03, 05.06 HC) Assume that Atlantis and the Mushroom Kingdom use equal resources to produce consumer and capital goods, as illustrated in the table below showing maximum possible production figures. Country Capital Goods Consumer Goods Atlantis 60 units 180 units Mushroom Kingdom 20 units 100 units Draw a fully labeled production possibility curve for Atlantis. Place capital goods on the vertical axis and consumer goods on the horizontal axis. Assume constant opportunity cost. On your graph from part (a), label an inefficient point of production I, an efficient point of production E, and an unattainable point of production U. Which country has the comparative advantage in the production of capital goods? Explain. If Atlantis shifted from producing 10 units of capital goods and 150 units of consumer goods to producing 24 units of capital goods and 108 units of consumer goods, what would be the impact on its economic growth in the long run? Based on the data table, what range of capital goods could be traded for 15 units of consumer goods that would be mutually beneficial?

(04.03 MC) If the central bank of a country decides to print an additional $125,000 currency, it will initially add to the ________ and will ________ the M1 in the economy.