Macroeconomics Answers

C=0.01Q^3+0.5Q^2+Q+1000

derive

Fixed cost

variable cost

average fixed cost

average variable cost

Suppose the economy is initially at its long run equilibrium. If the nominal money supply increases, which of the following is a correct statement regarding how the economy will respond in the short-run?

The natural rate of unemployment will fall and the economy will experience demand pull inflation.

The economy will experience cost push inflation since firms face a higher cost of borrowing.

The unemployment rate will rise above the natural rate and inflation will fall.

The unemployment rate will decline below the natural rate.

According to the short-run Phillips curve, which of the following will occur when the SARB increases the money supply?

Both the unemployment rate and the inflation rate will decrease.

The inflation rate will decrease.

The unemployment rate will decrease.

Both the unemployment rate and the inflation rate will increase.

The trade-off between inflation and unemployment:

(i) Is depicted by the long-run Phillips curve.

(ii) Is consistent with the theory of money neutrality.

(iii) Shows the possible effects of monetary policy in the short-run.

i and ii are correct.

ii and iii are correct.

i and iii are correct

Only iii is correct.

A Phillips curve shows that, in the:

long run there is a trade-off between GDP and prices.

short run there is a trade-off between unemployment and inflation.

long run there is a trade-off between unemployment and inflation.

short run there is a trade-off between unemployment and wages.

Now we look at the role taxes play in determining equilibrium income. Suppose we have an 

economy of the type in Sections 9-4 and 9-5, described by the following functions:

C -

 50  .8YD

 −

I -

 70 

 −−G -

 200

 −−TR -

 100

 t -

 .20 

 a. Calculate the equilibrium level of income and the multiplier in this model. 

 b. Calculate also the budget surplus, BS.

c. Suppose that t increases to .25. What is the new equilibrium income? The new multiplier? 

 d. Calculate the change in the budget surplus. Would you expect the change in the surplus 

to be more or less if c -

 .9 rather than .8? 

 e. Can you explain why the multiplier is 1 when t -

 1?

A Phillips curve shows that in the:

A. long run there is a trade-off between unemployment and inflation.

B. long run there is a trade-off between GDP and prices.

C. short run there is a trade-off between unemployment and inflation.

D. short run there is a trade-off between unemployment and wages.

The trade-off between inflation and unemployment:

i. Is depicted by the long-run Phillips curve.

ii. Is consistent with the theory of money neutrality.

iii. Shows the possible effects of monetary policy in the short-run.

A. Only ii is correct.

B. Only iii is correct.

C. i and iii are correct

D. ii and iii are correct

According to the short-run Phillips curve, which of the following will occur when the SARB increases 

the money supply?

A. Both the unemployment rate and the inflation rate will increase.

B. Both the unemployment rate and the inflation rate will decrease.

C. The unemployment rate will decrease.

D. The inflation rate will decrease.

Suppose the economy is initially at its long run equilibrium. If the nominal money supply increases, 

which of the following is a correct statement regarding how the economy will respond in the short-

run?

A. The unemployment rate will decline below the natural rate.

B. The economy will experience cost push inflation since firms face a higher cost of borrowing.

C. The unemployment rate will rise above the natural rate and inflation will fall.

D. The natural rate of unemployment will fall and the economy will experience demand pull 

inflation