Explain the difference between Microeconomics and Macroeconomics. What will be an ideal response? ANSWER Microeconomics and macroeconomics differ in the economic unit on which they focus. Microeconomics focuses on the individual economic agent, i.e., the consumer or the firm. Whereas macroeconomics considers the economy as a whole. There is a close link between the […]
In general terms describe trends in the inflation rate, considering the period since 1953 . How are these trends related to movements in the inflation rate over this period? What will be an ideal response? ANSWER Trend inflation rose steadily in the 1950s and 1960s, then rose dramatically during the 1970s. Beginning in the […]
In the equation Y = (1/1 – b + v)(a + I + G + X − u), the term (1/1 – b + v) is referred to as the a. level of autonomous expenditures. b. autonomous expenditure multiplier. c. balanced budget multiplier. d. tax multiplier. ANSWER B
In a one-period economy, real consumption A) is always less than disposable income. B) is typically greater than disposable income. C) is exactly equal to disposable income. D) can be greater than, less than, or equal to disposable income. ANSWER C
Given the accelerationist Phillips curve Δπ = – 0.7 (U – 5 ) + ρ, suppose that inflation has increased from 8 percent to 10 percent. If the unemployment rate is 4 percent, then the price shock is ________. A) 2.7 percent B) 0.6 percent C) 1.3 percent D) 1 percent E) none of the […]
Some of the most renowned examples of hyperinflation occurred in Austria, Hungary, Germany and Poland shortly after A) the collapse of the Austro-Hungarian Empire. B) World War I. C) World War II. D) the fall of the Berlin Wall. ANSWER B
We measure economic growth by the percentage change in real GDP. In general terms outline the course of the U.S. output growth rate in recent decades, both in terms of its trend and its changes around trend. Pay particular attention to the stability of the growth rate. ANSWER Real output growth has been highly […]
In the two-period model with limited commitment, if the collateral constraint binds A) increases in the present value of collateral increase current consumption and reduce future consumption. B) increases in the present value of collateral increase current consumption one-for-one. C) increases in the present value of collateral decrease current consumption and increase future consumption. D) […]
From the equation of exchange, if both nominal income and the quantity of money (M) have tripled, while the price level (P) has increased by 50 percent and velocity (V) remains constant, then real output (Y) ________. A) also triples B) increases by 50 percent C) doubles D) decreases by 50 percent E) none of […]
The most likely cause of a hyperinflation is A) central bank incompetence. B) the inability to finance government spending through taxation or borrowing. C) an acute shortage of natural resources. D) over-aggressive labor unions. ANSWER B
