AGEC 217 Module 2 - Practice || Already Passed.
In the goods market, an equilibrium to the left of potential output implies that correct answers the
economy has unemployed resources.
When the price level rises, correct answers people's purchases are more expensive, so the
demand for money rises.
In the goods market, if a rise in oil prices raises the costs of production for businesses, correct
answers aggregate supply will decrease, output will decrease and the price level will increase.
When the money supply decreases in the money market, correct answers the equilibrium real
interest rate increases, which decreases investment spending in the goods market, decreasing
aggregate demand, and reducing the price level and output.
How can bank behavior change the quantity of money? correct answers if banks change the share
of deposits that they hold in reserves, the money multiplier changes, and the quantity of money
created by the banking system changes.
Your model of bank lending generates the following hypothesis: increases in inflation should
cause increases in the nominal interest rate charged by banks. You collect data for many years on
inflation and interest rates in an economy, and find a correlation of -0.13 between the two data
series. Which of the following is true? correct answers The correlation between inflation and
nominal interest rates is negative but close to zero. This is evidence rejecting your hypothesis.
The correlation coefficient between the unemployment rate and the CPI core inflation rate over
the 1961-2016 period is 0.21. This provides evidence that correct answers there is no consistent
relationship between the price level and unemployment.
When output is above potential, and the unemployment rate is low (below 5%), second shift #1
implies that input costs increase and aggregate supply decreases. Which of the following is
evidence for this hypothesis? correct answers A correlation between the unemployment rate and
the change in the inflation rate of -0.41.
Recessions often occur at the end of big wars because correct answers government stops buying
military goods, which reduces aggregate demand.
A century ago, when agriculture was a huge part of the U.S. economy, financial markets were
vulnerable to panics during the harvest season because correct answers the supply of money was
lower. Money was needed for harvest-time transactions, so banks held more reserves to handle
withdrawals.
The San Francisco earthquake in 1906 was one of the reasons for the Panic of 1907, because
correct answers Great Britain raised its interest rate, creating a gold flow out of the United States,
and the reduced U.S. money supply increased U.S. interest rates.
, The Federal Reserve System was created with 12 regional banks and a limited central board in
Washington. This was a political compromise between correct answers Democrats who feared
the power of a single central bank, and Republicans who feared that monetary policy would be
directed by politicians.
The Federal Reserve suddenly increased the discount rate in January 1920. As a result, correct
answers banks stopped borrowing from the Fed and stopped lending to businesses and
consumers. Consumption and investment spending dropped. Inflation stopped and a sharp
recession began.
This table shows real GDP growth, inflation and unemployment data for the U.S. economy
during the Panic of 1908. The unemployment rate must have been about 5% at the end of 1907.
Which of the above aggregate demand aggregate supply diagrams best represents this economy?
Year Real GDP Growth Inflation Rate Unemployment Rate
1908 -13.2% -1.8% 7.5% correct answers aggregate demand decreased
The discount rate increase of 1920 helped cause a sharp recession in 1920-21. Which of the
above pairs of graphs best represents these economic events? correct answers aggregate demand
decreased, money supply decreased
This table shows real GDP growth, inflation and an interest rate spread for the U.S. economy
during the Panic of 1907. The interest rate spread in 1906 was 1.5%, and other evidence shows
that the quantity of money decreased. Which of the above money demand money supply
diagrams best represents this economy? correct answers money supply decreased, money
demand increased
Here are some excerpts from "US Economy Slowed Last Quarter, but Signs Are Pointing Up,"
New York Times, January 30, 2015. Read the article and answer the question.
The U.S. economy slowed in the final three months of 2014, but a burst in consumer spending
and the prospect of continued low energy prices are bolstering confidence that growth will
strengthen this year.
The economy, as measured by the gross domestic product, grew at a 2.6 percent annual rate in
the October-December period, the government said Friday. That was down from a sizzling 5
percent gain in the previous quarter.
Consumers stepped up their spending at the fastest rate in nearly nine years. Thanks to steady job
growth, tumbling oil prices and signs that pay may finally be picking up, Americans appear
poised to keep the economy expanding at a solid pace. On Friday, the University of Michigan
reported that its index of sentiment showed that U.S. correct answers increased by about 0.9%.
Here are some excerpts from "US Economy Slowed Last Quarter, but Signs Are Pointing Up,"
New York Times, January 30, 2015. Read the article and answer the question.
