ECON 302

One of money’s primary roles in the economy comes from the use of money to transfer purchasing power to the future. This role of money is known as...

• Store of value

• Unit of account

• Medium of exchange

• Standard of deferred payment

M1 does not include...

• Money market mutual funds

• Travelers’ checks

• Currency

• Transaction accounts

What’s the most common way for a central bank to reduce the money supply?

• Collect higher taxes

• Sell bonds to the public

• Buy bonds from the government

• Buy bonds from the public

Comovement is…

• The tendency for declines in economic activity to be followed by further declines, and for growth in economic activity to be followed by more growth

• The idea that the standard pattern of contraction - trough - expansion - peak occurs again in industrial economies

• The tendency of many economic variables to move together in a predictable way over the business cycle

• The idea that peaks and troughs of the business cycle occur at regular intervals

The fact that business cycles are recurrent, but not periodic means that…

• Business cycles occur at predictable intervals, but do not last a predetermined length of time

• The business cycle's standard contraction-trough-expansion-peak pattern has been observed to occur over and over again, but not at predictable intervals

• Business cycles occur at predictable intervals, but do not all follow a standard contraction-trough-expansion-peak pattern

• Business cycles last a predetermined length of time, but do not all follow a standard contraction-trough-expansion-peak pattern

Persistence is…

• The tendency for declines in economic activity to be followed by further declines, and for growth in economic activity to be followed by more growth

• The idea that the standard pattern of contraction-trough-expansion-peak occurs again and again in industrial economies

• The tendency of many economic variables to move together in a predictable way over the business cycle

• The idea that peaks and troughs of the business cycle occur at regular intervals

Suppose the intersection of the IS and LM curves is to the left of the FE line. A decrease in the price level would most likely eliminate a disequilibrium among the asset, labor, and goods markets by…

• Shifting the LM curve down and to the right

• Shifting the IS curve up and to the right

• Shifting the IS curve down and to the left

• Shifting the FE curve to the left

Suppose the intersection of the IS and LM curves is to the left of the FE line. What would most likely eliminate a disequilibrium among the asset, labor, and goods markets?

• A rise in the price level, shifting the LM curve up and to the left

• A fall in the price level, shifting the LM curve down and to the right

• A rise in the price level, shifting the IS curve up and to the right

• A rise in the price level, shifting the IS curve up and to the right

A temporary supply shock, such as an increase in oil prices. Would…

• shift the IS curve down and to the left and leave the FE line unchanged

• Shift the IS curve down and to the left and shift the FE line to left

• Shift the IS curve up and to the right, but leave the FE line unchanged

• Have no effect on the IS curve

Due to hiring and firing costs, sometimes firms will retain workers during a recession that they would otherwise lay off. This is known as…

• Labor hoarding

• A decline in capacity utilization

• Voluntary unemployment

• Involuntary unemployment