Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 11, Problem 2AP
To determine
To Evaluate: Effects on different economic variable under different condition using IS-LM model.
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Introduction to Macroeconomics: End of Chapter Problem
18. According to By the Numbers, the personal savings rate trended upward during the last five economic recessions.
Personal savings might increase during a recession because of
high unemployment and income anxiety.
an increase in interest rates.
an increase in the prices of the products.
an increase in per capita income.
Anna Graham is the new Treasury Secretary, and she is trying to interpret some inflation measures. In year one, the aggregate
price level increased by 7% and in year two, the aggregate price level decreased by 1%.
Which statement accurately characterizes the changes in the nation's price level?
O In year one, the economy is experiencing inflation. In year two, the economy is also experiencing inflation.
O In year one, the economy is experiencing inflation. In year two, the economy is experiencing deflation.
In year one, the economy is experiencing deflation. In year two, the economy is experiencing disinflation.…
In the Keynesian framework, which of the following events might cause a reaction ?
a) A large increase in the price of the homes people own
b) Rapid growth in the economy of a major trading partner
c) The development of a major new technology offers profitable opportunities for business
d) The interest rate rises
e) The good imported from a major trading partner becomes much less expensive
Consider the Keynesian IS-LM model. How
would each of the following scenarios affect
output, employment, the real interest rate and
the price level in the short run? In the long
run?
Wealth decreases .An increase in immigration
causes an increase in labor supply. The capital
stock increases.
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- In the Keynesian model, which of the following events lead to an increase in aggregate demand? (This is a multiple answer question. One of more options may be correct) a. An increase in the sales tax b. A new infrastructure project by the Federal government c. An increase in value of the Euro relative to the US-Dollar d. A drop in business confidence.arrow_forwardThe figure below is a part of the AD-AS model as a description of the current situation of an economy. PA=$10 P YA=4000 Y a) Find the short-run equilibrium (i.e. the real output and the price level thereof) of this economy. b) If the natural level of output is 3500, which one will be higher, the unemployment rate at point A, or the natural unemployment rate? Explain. c) Give two reasons as to why the short-run aggregate supply is upward sloping. d) Suppose the government takes no action about the situation indicated above. Explain, with the help of a figure properly labeled, what will happen in this economy in the long run. e) Describe the two kinds of macroeconomic policies that can be used in the situation described before part c). Indicate clearly in your description whether each policy is to the aggregate demand or aggregate supply or Further, give reason(s) as to why the government may want to use these policies rather than doing nothing.arrow_forwardThe balanced budget multiplier changes according to the values of the marginal propensity to consume and the marginal propensity to save. O False O Truearrow_forward
- The Great Recession was characterized by a collapse in housing prices, and a subsequent crunch in credit. Begin with the market for bank loans in equilibrium. A credit crunch occurs when the supply of bank loans contract leading to higher interest rates on bank loans. As interest rates on bank loans increase, what happens to durable consumption and planned investment, and why? These changes alter the Keynesian PAE model.arrow_forwardIn the Keynesian model, is aggregate expenditure (AE) exceeds total production an unintended _________ will occur and business will __________. a) inventory reduction; increase production b) inventory reduction; decrease production c) inventory reduction; not change production d) inventory accumulation; decrease production e) inventory accumulation; increase productionarrow_forwardQ.1.12 Which one of the following statements about the simple Keynesian macroeconomic model is correct? (1) Supply creates its own demand; (2) Equilibrium can occur at any level of income, not only the full- employment level; (3) The model can be used to study inflation; (4) Wages and prices are variable.arrow_forward
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