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Econ 1150 Principles Of Macroeconomics Answers

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Econ 1150 Principles Of Macroeconomics Answers
ECON 1150: Principles of Macroeconomics
Exam 4 Study Guide
Exam 4 will be given on Tuesday, November 26, 2013. You should bring a dark pencil to the exam. The purpose of this study guide is to list all the major topics and concepts that will be tested on Exam 4. It is intended to help you to focus your study on the important points. You will need to understand these points in depth in order to do well on the exam. The exam covers parts of chapters 9, 10, 11, 12 and 13 in the textbook.
Chapter 9: Demand-Side Equilibrium: Unemployment or Inflation?
Multiplier: Y (or AD ) = multiplier * (C or I or G )
Rounds of spending
Increases in the components of AD (C, I, G), lead to the AD curve shifting to the right
- If the multiplier is greater than 1, the …show more content…

Inflation and the Multiplier
-If the government conducts expansionary fiscal policy and the aggregate supply (AS) curve has a flat slope, what is the result?

Close an inflationary gap: Contractionary Fiscal Policy:
3 options: G, transfer payments (C), taxes (C)
Which option is preferred if one wanted a smaller govt.? larger govt.?
Show both graphically with the AD-AS Graph (Shifts the AD line)
What kind of gap do we have now? Is the U.S. Federal Govt. conducting appropriate short-run fiscal stabilization policy?
Automatic Stabilizers
Examples
Resulting impact on government budgets, e.g., what happens to the govt. deficit during a recession?
Would an “Annual Balanced Budget” Law for the Federal Government increase or decrease inflationary and recessionary gaps?
What if the long-term unemployed become unemployable?
Why is fiscal policy a last resort? Why do we need it as a last resort now?
Chapter 12: Money and the Banking System
Money
Eliminates barter and allows for labor specialization
Functions of Money:
Medium of Exchange
Unit of Account
Store of Value
Commodity Money vs. Paper Money vs. Fiat Money
What kind of money do we have now?
Measure of money supply (M1)

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