Clemson Macroeconomics 2120 Final Exam
Birmingham Steel sells to Winston Golf Club Manufacturers for $300,000. Winston sells its golf clubs to Academy Sports for $1,000,000. Academy Sports sells Winston golf clubs for $1,500,000. How much is added to GDP?
$1,500,000
Sydney buys a used car form Lemon Drop Used Cars in 2015 for $3,000. Francis, a salesperson at Lemon Drop, receives $200 in commission for selling the car to Sydney. How much does this transaction contribute to 2015 GDP?
$200
What are the three main sources of funds for the U.S. federal government?
1. individual income tax 2. corporate income tax 3. social security and medicare taxes
If the adult population of a country is 200 million, 90 million are employed, and 10 million unemployed, this country's unemployment rate is....
10%
If the adult population of a country is 200 million, 90 million are employed, and 10 million are unemployed, this country's labor force is...
100 million
If a nation doubles its GDP per capita in 28 years, what is the annual growth rate?
2.5%
Which of the following is the largest source of tax revenue for the U.S. federal government... a. individual income tax b. corporate income tax c. social security and medicare taxes d. estate taxes
A.
A decrease in money supply growth will cause the....
AD curve to shift inward
Which of the following is not a duty performed by the Federal Reserve System? a. create money b. manage the borrowing and issuing of bonds for the U.S. Treasury c. manage the federal budget deficit d. act as a bank for large commercial banks
C
Last month Trevor purchased $177 of Swedish Fish from an online retailer in Sweden. How does this transaction contribute to GDP in 2016?
Consumption increases by $177 and net exports fall $177
About 2/3 of the U.S. federal budget is spend on all of the following programs, except... a. social security b. medicare c. medicaid d. unemployment insurance and welfare
D
Which of the following stocks can the Fed deal with most efficiently? a. a major oil shock b. a shock to the Solow Growth Curve c. a shock that shifts the short-run aggregate supply curve d. a shock to aggregate demand e. electrical
D
The growth rate of GDP is... a. GDP adjusted for changes in the inflation rate b. GDP adjusted changes in the price level c. GDP adjusted for changes in population growth d. none of these are correct
D. (current year's GDP - Last year's GDP) / Last year's GDP
_____ is federal government policy on taxes, spending, and borrowing that is designed to influence business fluctuations.
Fiscal Policy
In an effort to clean air, many communities impose restrictions on the burning of garbage. This policy causes more garbage to be buried underground, potentially increasing groundwater contamination. What concept does this example represent?
Trade-Offs
Consider the money multiplier that includes cash holding by the public and excess reserves held by the bank. An increase in the excess reserves, for a given monetary base, will result in....
a decrease in M1
When prices are slow to adjust to economic shocks as the New Keynesian model and people decide to hold more cash because of a decrease in consumer confidence would cause....
a decrease in both the growth rate of output and inflation
What are the institutions that help foster the appropriate incentives for economic growth?
a dependable legal system, property rights, & competitive & open markets
All else equal, an increase in the economy's savings will result in...
a higher steady state level of real per capita GDP
Who is part of the labor force?
a person who has been laid off and is now looking for work
Identify the "bad" that t is not counted in GDP. a. a decrease in water quality b. the purchase of a smokestack scrubber required by environmental regulation c. an increase in influenza vaccines d. a decrease in the average number of hours in the work week
a. a decrease in water quality
The best type of negative shock for fiscal policy to respond to is a negative shock to ....
aggregate demand
Monetary Policy is used to stabilize the economy by changing factors that shift the....
aggregate demand curve
The money multiplier (MM) is the ....
amount that the money supply expands with each dollar increase in the monetary base
The reserve ratio (rr) is the ....
amount the money supply expands with each dollar increase in reserves
If real GDP per capita in the US is currently $50,000 and it grows 1% per year, how many years will it take to reach $200,000?
approximately 140 years
what data is used to calculate GDP?
both quantities and prices of goods
In the short run, if the Federal Reserve responds to a negative real shock with an increase in money supply growth, the inflation rate will increase because of....
both the real shock and the increased money supply growth
It is often said that _____ is the "main driver" the economy because its share of GDP is larger than any of the other expenditure components.
consumption
what are the components of the National Spending Approach to calculating GDP?
consumption goods and services, investment goods, government purchases, & net exports
A person is classified as unemployed only if he/she is....
currently looking for work, but have been unsuccessful
To slow down an economy from overheating and having too much inflation the federal government can.....
decrease government spending
Crowding out is the _____ in private spending that occurs when government _____ spending.
decrease, increase
During the Great Recession, banks increased their desire to hold excess reserves and individuals decided to hold more cash. As a result of this, the money multiplier ______ and the Federal Reserve _____ the monetary base to increase in order to boost aggregate demand.
decrease, increase
Increases in the level of corruption in a country tend to...
decreased per capita GDP
Someone who consumes a resource without working or contributing to the resource's upkeep is call a(n):
free rider
Countries with higher levels of real per capita GDP tend to have i. better educational opportunities ii. higher infant death rates iii. higher life expectancy rates
i & iii
If you want to compare real GDP in 2010 and 2015, what prices can you use... i. 2010 prices for GDP in both years ii. 2015 prices for GDP in both years iii. 2007 prices for GDP in 2010 and 2015
i, ii, & iii
Which of the following tools can the Federal Reserve use to control the money supply? i. open market operations ii. discount lending iii. the term auction facility iv. paying interest on reserves
i, ii, iii, iv
Compared to Fiscal Policy, which type of lag tends to be shorter for monetary policy? i. recognition lag ii. implementation lag iii. decision lag
ii & iii
If a country's GDP per capita rises, this means that... i. the country has fewer poorer people ii. some people in the country have more wealth iii. the country's standard of living is rising
ii & iii
_______ protect private property, uphold laws, enforce private contracts and encourage free entry competition.
inclusive institutions
The goal of an open market purchase by the Federal Reserve is to
increase bank reserves and increase money supply
To fight a recession, the federal government can....
increase its spending
In the case of a negative shock to aggregate demand, the central bank should....
increase the rate of growth in the money supply to restore spending growth
In response to a negative economic shock, we would expect baks to ______ reserves, the currency-to-deposit ratio to ______ and M1 to ______.
increase, increase, fall
Shortly after September 11, 2001, the Federal Reserve....
increased its lending to banks
Adam Smith's metaphor of the "invisible hand" can lead to benefits to society when...
institutions align the private interest with the social interest
Private spending on tools, plant, and equipment that are used to produce future output is called...
investment
The most volatile component of GDP is....
investment
Because of spillovers, the social benefit of research and development
is greater than the private benefit
Discount rate lending occurs when the Federal Reserve....
lends reserves directly to banks
Which concept describes the ease with which an asset can be quickly converted into money with losing its value?
liquidity
According to the Solow Growth Model, countries that have _____ rates of population growth will tend to have a _____ real GDP per capita.
lower, higher level of
Gross Domestic Product (GDP) is best defined as the _____ value of all _____ goods and services that are produced _________.
market, final, within a country in 1 year
Most of the increase in planned spending over the next 50 years comes from....
medicare and medicaid
The Federal Reserve has direct control over ....
monetary base
The correlation between infant mortality and real GDP per capita is ....
negative
The federal funds rate is the...
overnight lending rate form one major bank to another
Enforced property rights are important to increase which of the following?
physical capital, human capital, and technological knowledge
Factors of production that contribute to growth in per capita GDP include:
physical capital, skilled labor, and technical know-how
In the course, we use _____ as a proxy for a country's standard of living.
real GDP per capita
Suppose the unemployment are mostly construction workers by profession. Which government spending project will most effectively target unused labor resources?
renovating the nation's highway system
Sometimes economists and analysts worry about Federal Reserve over-stimulating the economy because such overstimulation will lead to....
rising inflation
A negative real shock causes the Solow growth curve to....
shift inward
The marginal tax rate is the...
tax rate paid on each additional dollar earned
Open market operations refer to....
the buying and selling of government bonds by the Fed.
Consider an industrialized country where the growth rate of real GDP is -1% per year. However, the growth rate of real GDP per capita is positive. What is the most likely reason this is occurring?
the country's population is growing slower than the growth of nominal GDP
Expansionary fiscal policy to stimulate the economy may be less effective when...
the effects of fiscal policy can often be offset by monetary policy
What would deb the likely outcome if the Federal Reserve decided to lowe the required reserve ratio?
the money multiplier would increase M1 would expand
Why is Nigeria considered to be a growth disaster in spite of the fact that it has large deposits of oil?
the occurrence of civil war, rulers who were dictators and spent the wealth on arms purchases, & corruption that siphoned away oil wealth into secret Swiss bank accounts.
When people choose to recycle and buy appliances that conserve on energy, they are acting in ______ & _______.
the social interest, their self-interest
What is a result of a high level of government corruption?
there are few entrepreneurs
Why do economists think that GDP may overestimate the actual level of economic activity in an economy?
there is no negative adjustment for pollution.
What is meant by the steady-state level of capital?
there is no net investment or any growth
The opportunity cost of receiving a free ticked to the NCAA championship game with a face-value of $450 and attending the game is:
there resale value of the lost market value of selling the ticket and the time to go
Assume that prices are slow to adjust to economic shocks. When facing a negative real shock, a central bank will encounter a dilemma that forces it to choose between....
too high inflation and too low economic growth
Institutions and incentives are _______ causes and factors of productions are ______ causes of wealth nations.
ultimate; proximate
the factor income approach to calculating GDP can be summarized as the summation of ....
wages, interest, rent, & profit