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Macro Exam 2

Macroeconomics TTU Alley

QuestionAnswer
Inflation is the increase in the Prices of all goods and services in general
Inflation rate formula using CPI? (Year 2 - Year 1)/Year 1
which index measures price increases that typical Amerrican sonsumers face when shopping? CPI
Why do we use "real" prices of goods to measure how expensive things have become? To see whether there have been any changes in our purchasing power.
Current forecasts say that mild inflation is expected next year. If, however, deflation occurs instead then ____________ lenders on existing fixed rate loans will gain while borrowers lose, Next years CPI will be higher than this years, % growth of the CPI will be negative.
Unanticipiated high inflation always means a loss in purchasing power for lenders.
According to CPI, since 1950 the averation US inflation rate has been 3.9%
Inflation is best defined as an increase in the average price level
When actual inflation is equal to expected inflation no one benefits
Commodoity Consumption Indicator is or is not used by economics to measuer inflation Is not
Velocity of money, money supply, inflation and GDP formula M*V=P*Y y=gdp
which of the three price indexes measures theacerage price level of the largest total number of goods? GDP deflator
If, in an economic panic, people decide to hold their money rather than spend it, the velocity of money will become unpredictable
The quantity theory of money descrives the relationship between money velocity, money, real output, prices
Money illusion is Thinking you have more money than you do because of inflation.
When the government monetizes its debt, the results are higher inflation and losses for holders of government bonds.
Wages are sticky when Labor unions have set wages for a certain period of time They are not changed as often as prices, they, Set accoring to expected inflation rates that end up being different than actual rates.
Solow Growth rate is the rate of economic growth that occurs when _____ prices and wages are flexible
The short-run aggregate supply curve shows a relationship between the real growth rate and the _______ inflation rate actual inflation rate
Sticky wages amplify negative shocks if wages do not fall quickly when there are declines in economic activity
The first major event of the Great Depression was The stock market crash
Holding everything else contant, increase in growth rate of Money Supply will cause Dynamic AD curve to shift outward
Dynamic AD curve is ________ sloping downward
cost of changing prices in response to an economic chock is called menu cose
When the fed reserve makes an open market purchase, the reserves of the banking system will increase
The monetary base (MB) refers to Currency plus total reserves held at the Fed.
A bank will become illiquid if it has short-term liabilities that exceed its short term assets.
Accoriding to the quantity theory of money, increase in money supply causes an increase in prices
If we expected inflation is high than actual inflation, then wealth will be redistributed from BORROWERS to LENDERS.
Fed has direct control over which part of the money pyramid? the monetary base
Suppose you deposit $1,000 in checking account, If the reserve ratio is 10 %, how much of your deposit can tha bank loan out? $900
The narrowest measure of US money supply is monetary base
When the banks borrow directly from the Fed, the interest rate they pay is called the discount rate
If the fed wants short-term interest rates to rise, it could engage in a monetary contraction.
For a given level of reserves, a decrease in the money multiplier will cause the money supply to decrease
When the Fed Reserve buys bonds, the supply curve for bonds does not shift
An increase in money growth will cause output growth to increase in Short run only
The members of the Board of Governors of the Fed Reserve are appointed for 14 years
Amount by which money supply expands with easch additional dollar in reserve is the money multiplie.
Created by: jparris42
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