ECO 2302 Final

commercial banks create new money:

through multiple rounds of lending.

If the desired reserve/deposit ratio is 0.25 and the banking system receives an additional $10 million in reserves, bank deposits will increase by: a. $10 million b. $250 million c. $40 million d. $4 million

10/.25 = 40 c

if real GDP/person = $2,000 in 1900 and grew at a one percent natural rate, what would be the value of real GDP/person 100 years later?

2,000(1.01)^100 = 5410

M1 differs from M2 in that:

M2 includes savings deposits, small-denomination time deposits, and money market mutual funds that are not included in M1

if the actual rate of unemployment = the natural rate of unemployment, then: a. potential output is greater than real GDP b. potential output = real GDP c. potential output is less than real GDP d. there is a recessionary gap

b

finding both parties to a trade who have something the other party wishes to trade for is called:

double coincidence of wants

according to okuns law, when cyclical unemployment increases from 1% to 2%, the recessionary gap increases from ___ a. -2% to -4% b. -1% to -2% c. 2% to 4% d. 1% to 2%

a

what activities are counted in GDP?

gail buys paper and crayons to donate

if the public switches from using cash for most transactions to using checks instead, then all else equal, the money supply will: a. increase b. decrease c. not change d. either increase or decrease

a

output gap formula

output gap = actual-potential/potential

if banks desired reserve ratio increases from .1 to .15, the public still desires to hold the same amount of currency, the money supply will: a. increase b. decrease c. not change d. either increase or decrease

b

globalization ____ the wages of workers in the exporting industries and ____ the wages of workers in the import-competing industries

raises; lowers

potential GDP = $20 billion and real GDP = $19.2 billion. there is a ___ gap equal to ____ percent of potential GDP

recessionary; -4 19.2-20/20

in an open market sale, the federal reserve ___ government bonds and the supply of the bank reserves ___

sells; decreases

three functions of money

serving as a medium of exchange, unit of account, and store of value

The consumer price index measures the cost of: A. a fixed basket of goods and services B. a changing basket of goods and services C. all goods and services purchased by consumers D. goods and services required to live above poverty level

A

All of the following describe economic conditions during the Great Depression in the United States except: A. high rates of unemployment B. high rates of inflation C. sharp decline in stock prices D. low levels of production

B

Major macroeconomic questions include all of the following except: A. what causes economic growth? B. what causes differences in wages between men and women? C. why does inflation vary over time and across countries? D. what are the causes of unemployment?

B

because of diminishing returns to capital, there is a limit to the measures in average labor productivity that can be gained from additional or improved A. availability of land and resources B. physical capital C. imports D. entrepreneurship

B

which of the following transactions would be included in the GDP of the United States? A. Coca Cola produces soft drinks in England B. honda produces cars in ohio C. mcdonalds sells hamburgers in russia

B

If total output increases from $1 trillion to $2 trillion as population increases from 100 million to 200 million, then output per person: A. doubles B. increases, but by less than 100 % C. remains constant D. decreases

C

each of the following increases avg labor productivity except: a. more human capital b. more physical capital c. more central planning d. more natural resources

C

which of the following would increase the investment component of U.S. GDP? A. you purchase a vacation at disney world in florida B. you purchase shares of disney stock C. Disney world purchases tires for the monorail from a firm in ohio D. a french man purchases a vacatoin at a disney them park in france

C

if the natural rate of unemployment = 5% and the actual rate of unemployment = 6%, then cyclical unemployment = a. 11% b. 1.2% c. 1% D. -1%

C Cyclical = actual-NRU

If Country A & B have the same population size, then the standard of living in these two countries can still be different depending on: A. their respective political systems B. their respective inflation rates C. their relative geographic size D. the relative sizes of total output

D

all of the following are nominal quantities except: A. price of a new car B. wages paid to workers at a restaurant C. cost of purchasing a new computer D. number of houses built in a month

D

Value added formula

Revenue-Cost

If real GDP equals 5,000, nominal GDP equals 10,000, and the price level equals 2, then what is velocity if the money stock equals 2,000? a. 2 b. 2.5 c. 5 d. 10

V=Nominal/money stock 10,000/2,000 = 5 c

the CPI in year one = 1.55 and year two = 1.64. the rate of inflation between years one and two was

Y2-Y1/Y1 1.64-1.55/1.55= 5.8%

the amount of money in the United States is determined by: a. the federal reserve b. the combined behavior of commercial banks and the public, as well as the federal reserve c. the combined behavior of commercial banks and the public

b

in reference to short term economic fluctuations, the "trough" refers to: a. period in which the economy is growing at a rate significantly below normal b. the low point of economic activity prior to a downturn c. the low point of economic activity prior to a recovery d. a particularly strong and protracted recession

c

structural unemployment occurs because: a. new jobs are created while old jobs cease to be viable b. jobs differ in their location, skills required, and working conditions c. there are long-term mismatches between workers skills and jobs available d. the economy is expecting a period of unusually low production

c

unplanned inventory investment equals zero when: a. planned investment is greater than actual investment b. planned investment is less than actual investment c. planned investment equals actual investment d. expected sales are greater than actual sells

c

menu cost =

changing prices

the largest component of planned aggregate expenditure is

consumption

four components of planned aggregate expenditure

consumption, planned investment, government purchases, and net exports

according to okuns law, each extra % point of ___ unemployment is associated with a ___ widening of a negative output gap, measured in relation to potential output.

cyclical; 2%

all of the following describe trends in U.S. labor markets except: a. growing wage inequality in United States decades b. a slowdown in real wage growth since the 1970s c. substantial growth in the level of unemployment in the United States since 2000 d. substantial growth in real wages during the last century

d

which of the following does not describe a characteristic of short-term economic fluctuation? a. expansions and recessions are felt throughout the economy b. expansions and recessions are irregular in length and severity c. the unemployment rate during recessions d. durable-goods industries are less sensitive to short term fluctuations than service and non-durable industries

d

as real wage decreases, the quantity of labor demanded ____ and the quantitiy of labor supplied ____

increases; decreases

the value of unpaid worker by a homemaker ____ included in GDP and the value of housekeeping services sold in a market ____ included in GDP

is not; is

Price Index

measure average prices relative to base year

a recession occurs when ___, when ____, or when both occur

potential output grows slowly; actual output falls below potential output