Questions from Macroeconomics

Q: For each of the three theories for the upward slope of the

For each of the three theories for the upward slope of the short-run aggregate-supply curve, carefully explain the following: a. how the economy recovers from a recession and returns to its long-run e...

Q: What might shift the aggregate-demand curve to the left?

What might shift the aggregate-demand curve to the left? Use the model of aggregate demand and aggregate supply to trace through the short-run and long-run effects of such a shift on output and the pr...

Q: Which of the following is an example of an automatic stabilizer?

Which of the following is an example of an automatic stabilizer? When the economy goes into a recession, a. more people become eligible for unemployment insurance benefits. b. stock prices decline, pa...

Q: In the early 1980s, new legislation allowed banks to pay interest

In the early 1980s, new legislation allowed banks to pay interest on checking deposits, which they could not do previously. a. If we define money to include checking deposits, what effect did this leg...

Q: From one year to the next, inflation rises from 4 to

From one year to the next, inflation rises from 4 to 5 percent, while unemployment rises from 6 to 7 percent. Which of the following events could be responsible for this change? a. The central bank i...

Q: Name two macroeconomic variables that decline when the economy goes into a

Name two macroeconomic variables that decline when the economy goes into a recession. Name one macroeconomic variable that rises during a recession.

Q: Suppose the Federal Reserve’s policy is to maintain low and stable inflation

Suppose the Federal Reserve’s policy is to maintain low and stable inflation by keeping unemployment at its natural rate. However, the Fed believes that the natural rate of unemployment is 4 percent w...

Q: Advocates of taxing consumption rather than income argue that a.

Advocates of taxing consumption rather than income argue that a. a consumption tax is a better automatic stabilizer. b. taxing consumption does not cause any deadweight losses. c. the rich consume a...

Q: The ability of insurance to spread risk is limited by a

The ability of insurance to spread risk is limited by a. risk aversion and moral hazard. b. risk aversion and adverse selection. c. moral hazard and adverse selection. d. risk aversion only.

Q: Suppose the federal government cuts taxes and increases spending, raising the

Suppose the federal government cuts taxes and increases spending, raising the budget deficit to 12 percent of GDP. If nominal GDP is rising 5 percent per year, are such budget deficits sustainable for...