Econ Final
Which of the following best explains why productivity growth in the United States has been faster than in other leading industrialized nations? A) European countries have more flexible policies regarding the number of hours employees are permitted to work. B) The financial systems of foreign countries are generally more efficient than those in the United States. C) Job mobility in the United States is more restricted than it is in many foreign countries. D) There are fewer government regulations in the United States regarding the way firms can hire and fire workers
13. D There are fewer government regulations in the United States regarding the way firms can hire and fire workers
Year CPI 2015 207 2016 215 The inflation rate for 2016 was ____
3.9 percent
If in a closed economy, real GDP is 30 billion, consumption is 20 billion, and government purchases are 5 billion, what is total saving in economy A. 5 billion B. 15 billion C. 45 billion D. 55 billion
A. 5 billion
The demand for durable goods ____ A. Declines by a greater percentage than does GDP during a recession B. Has decreased overtime C. Declines by a smaller percentage than does GDP during a recession
A. Declines by a greater percentage than does GDP during a recession
Which of the following will increase interest rate? A. Increase in the demand for loanable funds B. Increase in the supply for loanable funds C. Increase in the Budget Surplus D. Increase in Household Saving
A. Increase in the Demand for Loanable Funds
If real GDP in a closed economy is $40 billion, consumption is $20 billion, and government purchases are $10 billion, what is investment? A)$10 billion B) $30 billion C) $40 billion D) $70 billion
A. $10 Billion
If the growth rate of real GDP rises from 3% to 4% per year, then the number of years required to double real GDP will decrease from A) 23.3 years to 17.5 years. B) 11.2 years to 10.8 years. C) 28.0 years to 21.0 years. D) 23.3 years to 20.6 years
A. 23.3 years to 17.5 years
At the beginning of the recession of 2007-2009, real GDP in the United States was __ potential GDP, and in June 2009, real GDP was ____potential GDP A. above; below B. above; above C. below; above D. below; below
A. Above; below
An economic growth model explains A. Changes in RGDP per capita in the long run B. Changes in government tax policies over time C. Growth rate of price level overtime
A. Changes in RGDP per capita in the long run
Which of the following is not counted in M1? A) credit card balances B) checking account balances C) coins in circulation D) currency in circulation E) traveler's check balances
A. Credit Card balances
The demand for durable goods A) declines by a greater percentage than does GDP during a recession. B) has decreased over time. C) declines by a smaller percentage than does GDP during a recession. D) rises by a greater percentage than does GDP during a recession
A. Declines by a greater percentage than does GDP during a recession
Which of the following explains the cause of the change in the unemployment rate at the end of a recession? A) Firms are hesitant to rehire laid off workers, as they continue to operate below capacity. B) Discouraged workers return to the labor force, and this makes the unemployment rate fall. C) Discouraged workers leave the labor force, and this makes the unemployment rate rise. D) Firms rapidly hire new workers at the first sign of an increase in demand for their goods
A. Firms are hesitant to rehire laid off workers, as they continue to operate below capacity
How do changes in income tax policies affect aggregate demand A. Higher taxes reduce disposable income, consumption, and aggregate demand B. Higher taxes increase aggregate supply and thus increase aggregate demand as well C. Higher taxes increate corporate investment and aggregate demand D. Higher taxes increase disposable income, consumption, and aggregate demand
A. Higher taxes reduce disposable income, consumption, and aggregate demand
When the economy enters a recessionary phase of the business cycle, unemployment tends to A) increase. B) be unchanged. C) decrease. D) change in the same direction as the rate of inflation
A. Increase
A decrease in the reserve requirement __ Bank Reserves and ___ the money supply A. Increases, Increases B. Decreases, Decreases C. Increase, Decrease D. Decrease, Increase
A. Increases, Increases
An increase in the price level will ___ A. Move the economy up along a stationary aggregate demand curve B. Shift the aggregate demand curve to the right C. Shift the aggregate demand curve to the left D. Move the economy down along a stationary aggregate demand curve
A. Move the economy up along a stationary aggregate demand curve
The budget deficit is defined as ___ A. T - (G + TR), and this is negative. B. T + (G - TR), and this is negative. C. T - (G + TR), and this is positive. D. T + (G + TR), and this is negative
A. T-(G+TR), and this is negative
German luxury car exports were hurt in 2009 as a result of the recession. How would this decrease in exports have affected Germany's aggregate demand curve? A. The aggregate demand curve would have shifted to the left B. The aggregate demand curve would have shifted to the right C. The aggregate demand curve would not have shifted, but there would have been a movement up the aggregate demand curve D. The aggregate demand curve would not have shifted, but there would have been a movement down the aggregate demand curve
A. The aggregate demand curve would have shifted to the left.
If technological change occurs in the economy A. the long-run aggregate supply curve will shift to the right. B. we will move up along the long-run aggregate supply curve. C. we will move down along the long-run aggregate supply curve. D. the long-run aggregate supply curve will shift to the left
A. The long-run aggregate supply curve will shift to the right
If the US dollar increases in value relative to other currencies, how does this affect the aggregate demand curve? A. This will shift the aggregate demand curve to the left B. This will move the economy down along a stationary aggregate demand curve C. This will move the economy up along a stationary aggregate demand curve D. This will shift the aggregate demand curve to the right
A. This will shift the Aggregate demand curve to the left
Why does the short-run aggregate supply curve shift to the left in the long run, following an increase in aggregate demand? A) Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices. B) Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices. C) Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices. D) Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices.
A. Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices
Private saving is defined as A. Y + TR - C - T. B. T - G + TR. C. Y + TR + C - T. D. T + G + TR
A. Y+TR-C-T
During a recession, spending on _____ tends to fall more dramatically than spending on ____. A) durable goods; nondurable goods B) nondurable goods; durable goods C) food; cars D) necessities; luxuries
A. durable goods; nondurable goods
Which of the following would encourage economic growth through increases in the capital stock? A) a decrease in the government deficit B) a change from an income tax to a consumption tax C) an increase in household saving D) all of the above
Any answer is correct
You lend $5,000 for one year at a nominal interest rate of 10%. The CPI over that year rises from 180 to 190. what is the real rate of interest you will earn? A. 0% B. 4.4% C. 5.5% D. 5.8%
B 4.4%
Lack of investment in strong education and health care systems A. causes a deterioration in human capital and an increase in physical capital B. causes a deterioration in human capital and a decrease in labor productivity C. Increases human capital and decline in labor productivity
B Causes a deterioration In human capital and a decrease in labor productivity
Inflation that is ______ than what is expected benefits ______ and hurts ____ A. less; borrowers; lenders B. less; lenders; borrowers C. greater; lenders; borrowers D. greater; borrowers; lenders
B Less; lenders; borrowers
The process of an economy adjusting from a recession back to potential GDP in the long run without any government intervention is known as A) fiscal policy. B) an automatic mechanism. C) monetary policy. D) "releasing sticky prices."
B. An automatic mechanism
Which of the following is a negative supply shock? A. An improvement in technology B. an unexpected decrease in the refining capacity for oil C. Increasing immigration in the economy causes the labor supply to rise D. Increase in unemployment
B. An unexpected decrease in the refining capacity for oil
What would happen to unemployment rate and labor force participation if the military was included A. Increase unemployment and Decrease participation B. Decrease unemployment and Increase participation C. Reduce both D. increase both
B. Decrease unemployment and increase participation rate
How can economic growth help a country combat "Brain Drain" A. Economic growth allows highly skilled persons to earn more in a foreign country than in their native country B. Economic growth opens up opportunities for better jobs and higher income for skilled workers C. Economic growth increases the incomes of low skilled workers
B. Economic growth opens up opportunities for better jobs and higher income for skilled workers
There is public dissaving if A) TR > G + T. B) G + TR > T. C) TR < G + T. D) G + TR < T
B. G+TR>T
You agree to lend $1000 for one year at a nominal interest rate of 10%. You anticipate the inflation will be 4% over that year. If inflation is 3% over that year, which of the following is true? A. The purchasing power of the money that will be repaid to you will be lower than you expected B. The person who borrowed the 1,000 will be worse off as a result of the unanticipated decrease in inflation C. The real interest rate you earn on your money will be lower than expected
B. The person who borrowed the 1,000 will be worse off as a result of the unanticipated decrease in inflation
What is investment in a closed economy if you have the following economic data? Y = $10 trillion C = $5 trillion TR = $2 trillion G = $2 trillion A) $2 trillion B) $3 trillion C) $5 trillion
B. $3 trillion
In the United States, the annual growth rate of real GDP per hour worked between 1996 and 2012 averaged A) -0.3%. B) 1.9%. C) 6.9%. D) 10.2%.
B. 1.9%
Year Nominal Average hourly earnings CPI 2014 10 188.9 2015 11 195.3 2016 13 201.6 Real average hourly earnings in 2015 were? 1. 3.67 2. 5.63 3. 10.24 4. 11.37
B. 5.63
If, between 2003 and 2013, the economy's real GDP grew from $20 billion to $40 billion, what was the average annual growth rate in the economy? A) 3% B) 7% C) 20% D) 100%
B. 7%
As a result of Kristy's deposit, Bank A's excess reserves increase by 8) __________ A) $2,000. B) $8,000. C) $10,000. D) $50,000
B. 8,000
As the recession persisted into 2009, the unemployment rate in the United States rose to __, the highest rate since the recession of 2001-2002 and the second highest since the Great Depression. A. 5.5% B. 9.3% C. 17.6% D. 25.1%
B. 9.3%
Which of the following would cause the short-run aggregate supply curve to shift to the left? A. A technological advance B. An increase in inflation expectations C. A decrease in interest rates D. An increase in the price level
B. An increase in inflation expectations
Which of the following goods would see the largest decline in demand during a recession? A) clothing B) automobiles C) haircuts D) food
B. Automobiles
A good can serve as money only if? A. It has intrinsic value or if it is backed by precious metals B. Citizens accept the good as a means of payment for transactions and debts C. Government mandates that the good must be accepted in payment of debts D. It is declared by authorities to be legal tender
B. Citizens accept the good as a means of payment for transactions and debts
Which of the following is counted as a liability for a bank? A.Bank reserves B.Customer Deposits C.Securities D.Bank Loans
B. Customer Deposits
Which of the following is not one of the key services provided by the financial system? A) liquidity B) decreasing taxes C) generating information D) risk sharing
B. Decreasing taxes
According to the U.S Treasury, A.Creditors do not have to accept cash in payment of debts B.Firms do not have to accept cash as payment for goods and services C.The government will not accept cash in payment of taxes
B. Firms do not have to accept cash as payment for goods and services
All of the following policies are ways for a country to promote long-run economic growth except A) undergoing political reform to decrease corruption. B) imposing stricter regulations to limit foreign direct investment. C) increasing vaccinations against infectious diseases. D) enacting stronger laws to protect property rights
B. Imposing stricter regulations to limit foreign direct investment
Because ____ in the government budget deficit increase the real interest rate, budget deficits can _____ firm investment A) increases; increase B) increases; decrease C) decreases; increase D) decreases; decrease
B. Increases; decrease
The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as A) real GDP. B) labor productivity. C) human capital. D) technology
B. Labor productivity
To increase the money supply, The Federal Reserve could? A.Decrease income taxes B.Lower the discount rate C.Raise the required reserve ration D.Conduct an open market sale of Treasury securities
B. Lower Discount Rate
If you transfer all of your currency to your checking account, then initially, M1 will ________ and M2 will ________ A) increase; not change B) not change; not change C) decrease; increase D) not change; increase
B. Not change; Not change
Dollar bills in the modern economy serve as money because A.They have value as a commodity independent of their use as a money B.People have confidence that others will accept them as money C.They can be redeemed for gold by the central bank D.They are backed by the gold stored in Fort Knox
B. People have confidence that others will accept them as money
A good measure of the standard of living is A) total nominal GDP. B) real GDP per capita. C) total real GDP. D) nominal GDP per capita
B. Real GDP per capita
Workers expect inflation to rise from 3% to 5% next year. As a result, this should A) shift the short-run aggregate supply curve to the right. B) shift the short-run aggregate supply curve to the left. C) move the economy up along a stationary short-run aggregate supply curve. D) move the economy down along a stationary short-run aggregate supply curve
B. Shift the short run aggregate supply curve to the left
Suppose the short run equilibrium GDP that lies above potential GDP. Which of the following will occur because the automatic mechanism adjusting the economy back to potential GDP? A. Prices will decline B. Short-run aggregate supply will shift to the left C. Output will increase D. Unemployment will decline
B. Short run Aggregate supply will shift to the left
When a grocery store accepts your $5 bill in exchange for bread ad milk, and the $5 bill serves as a A.Store of value B.Standard of deferred payment C.Medium of exchange
B. Standard of deferred payment
The budget deficit is defined as A) T + (G + TR), and this is negative. B) T - (G + TR), and this is negative. C) T - (G + TR), and this is positive. D) T + (G - TR), and this is negative.
B. T+(G+TR), and this is negative
Which of the following explains why fluctuations in real GDP have become less volatile in the US since 1950 A. Services have become a smaller fraction of GDP since 1950 B. Unemployment insurance and other government transfer programs are more prevalent since 1950 C. The government has become more reluctant to intervene when GDP declines an unemployment rises since 1950
B. Unemployment insurance and other government transfer programs and more prevalent since 1950
When the economy enters a recessionary phase of the business cycle, unemployment tends to A) increase. B) be unchanged. C) decrease. D) change in the same direction as the rate of inflation
B. be unchanged
Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason?
Banks create money to make a profit They create money when they make loans
Suppose that homemakers are included as employed in the labor force statistics, rather than being counted out of the labor force. This would... A. Decrease the number of persons in the working age-population B. Decrease the number of people in the labor force C. Increase the measured labor force participation rate D. Increase the measured unemployment rate
C Increase the measured labor force participation rate
Reserves Loans Deposits $10,000 $90,000 $100,000 If the required reserve ratio is lowered to 8 percent, how much can National City loan out? A. 10,000 B. 8,000 C. 2,000 D.0
C. 2,000
Stagflation is often a result of A) a decrease in aggregate demand. B) an increase in aggregate demand. C) a negative supply shock. D) an increase in aggregate supply.
C. A negative supply shock
Which of the following can explain why there is an increase in potential GDP but the equilibrium level of GDP falls A. AD shifted to the right by more than SRAS B. AD shifted to the right by less than SRAS C. AD did not shift and SRAS shifted to the left
C. AD did not shift and SRAS shifted to the left
) Interest rates in the economy have fallen. How will this affect aggregate demand and equilibrium in the short run? A) Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall. B) Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise. C) Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise. D) Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall.
C. Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise
Which of the following best describes the "Interest rate effect" A. An increase in the price level lowers the interest rate and chokes off government spending B. An increase in the price level raises the interest rate and chokes off government spending C. An increase in the price level raises the interest rate and chokes off investment and consumption spending D. An increase in the price level lowers the interest rate and chokes off investment and consumption spending
C. An increase in the price level raises the interest rate and chokes off investment and consumption spending
______ are financial securities that represent promises to repay a fixed amount of funds A. Stocks B. Interest Rates C. Bonds D. Mutual Funds
C. Bonds
A bank is legally required to hold a fraction of its ________ as ________. A) loans; excess reserves B) loans; required reserves C) deposits; required reserves D) deposits; excess reserves
C. Deposits; required reserves
Deflation will ___ A. Increase aggregate demand B. Decrease aggregate demand C. Increase the quantity of real GDP demanded D. Decrease the quantity of real GDP demanded
C. Increase the quantity of real GDP demanded
Last week, 13 Mexican pesos could purchase one U.S. dollar. This week, it takes 11 Mexican pesos to purchase one U.S. dollar. This change in the value of the dollar will __ exports from the United States to Mexico and ____ U.S. aggregate demand. A. increase; decrease B. decrease; increase C. increase; increase D. decrease; decrease
C. Increase; Increase
Suppose there has been an increase in investment. As a result, real GDP will ________ in the short run, and ________ in the long run. A) decrease; decrease further B) decrease; increase to its initial level C) increase; decrease to its initial value D) increase; increase further
C. Increase; decrease to its initial value
In a closed economy, what is the relationship between saving and investment? A) Investment may be greater or smaller than saving. B) Saving is greater than investment. C) Investment is equal to saving. D) Investment is greater than saving.
C. Investment is equal to saving
Purchases of Huggies diapers should___ A) increase in recessions and remain constant in expansions. B) increase in recessions and decrease in expansions. C) remain fairly constant over the business cycle. D) decrease in recessions and increase in expansions
C. Remain fairly constant over the business cycle
If banks do not loan out all their excess reserves, then the real world multiplier is? A. Larger than 1/RR B. Not related to 1/RR C. Smaller than 1/RR D. Equal to 1/RR
C. Smaller than 1/RR
The seven members of the Board of Governors of the Federal Reserve are appointed by? A.Leaders in the banking industry B. The Treasury Department C. The President D. Congress
C. The President
The long-run aggregate supply curve will shift to the right if A) the economy experiences high levels of inflation. B) there is a decrease in population. C) the economy experiences technological change. D) net exports decrease
C. The economy experiences technological change
In the long run, _____ A. LRAS and SRAS lie on the same line B. GDP> potential GDP C. Unemployment is at its natural rate D. The inflation rate is zero
C. Unemployment is at its natural rate
The largest proportion of M1 is made up of A. Currency B. Savings account deposits C. Checking account deposits
Checking account deposits
The impact of Hurricane Katrina on consumers in this economy was to make them very pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve? A. This will shift the Aggregate Demand curve to the right B. This will move the economy up along a stationary aggregate demand curve C. This will move the economy down along a stationary aggregate demand curve D. This will shift the Aggregate Demand curve to the right
D This will shift the Aggregate Demand curve to the right
) Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico. This subsequently drove up natural gas, gasoline, and heating oil prices. As a result, this should A) move the economy down along a stationary short-run aggregate supply curve. B) shift the short-run aggregate supply curve to the right. C) move the economy up along a stationary short-run aggregate supply curve. D) shift the short-run aggregate supply curve to the left.
D. Shift the short-run aggregate supply curve to the left
Suppose you withdraw $500 from your checking account deposit and bury it in a jar in your back yard. If the required reserve ratio is 10 percent, checking account deposits in the banking system as a whole could drop up to a maximum of. A. 0 B. 50 C.500 D. 5000
D. $5,000
Most economists believe that biases cause changes in the CPI to overstate the inflation rate by ____ percentage points A. 0.1-0.2 B. 0.2-2.0 C. 0.4 D. 0.5-1.0
D. 0.5-1.0
If technological change increases the profitability of new investments for firms , then the ___ curve for loanable funds will shift to the A. Supply; left B. Demand; left C. Supply; right D. Demand; right
D. Demand; right
The purchase or building by a corporation of a facility in a foreign country is called A) globally-directed investment. B) foreign capital depreciation. C) foreign portfolio investment. D) foreign direct investment.
D. Foreign direct investment
Suppose there has been an increase in investment. As a result, real GDP will __ in the short run, and ___ in the long run. A. decrease; increase to its initial level B. decrease; decrease further C. increase; increase further D. increase; decrease to its initial value
D. Increase; decrease to its initial value
Developing countries with low saving rates and poor levels of health and education are likely to experience A) rapid growth in household incomes. B) high levels of foreign direct investment. C) easy access to financial backing from banks. D) low rates of growth in real GDP per capita
D. Low rates of growth in real GDP per capita
When production in an economy grows more quickly than the population in that economy, which of the following must be occurring? A) Incomes are growing at a slower rate than the population. B) Living standards are falling. C) Real GDP is falling. D) Real GDP per capita is rising
D. Real GDP per capita is rising
If workers leave a country to seek out better opportunities in another country, then this will. A. Shift the short-run aggregate supply curve of the original country to the right B. Move the original economy up along a stationary short-run aggregate supply curve C. Move the original economy down along a stationary short run aggregate supply curve D. Shift the short-run aggregate supply curve of the original country to the left
D. Shift the short-run aggregate supply curve of the original country to the left
The East Asian financial crisis was triggered by a A) Rise in interest rates in the U.S. B. Speculative attack on the Japanese Yen C. Speculative attack on the Chinese renminbi D. Speculative attack on the Thai baht
D. Speculative attack on Thai Baht
Are financial securities that represent partial ownership of a firm___ A) Bonds B) Certificates of deposit C) Treasury bills D) Stocks
D. Stocks
In response to the destructive bank panics of the Great Depression, future bank panics are designed to be prevented by A) increasing the required reserve ratio to 100%. B) the Federal Reserve System conducting open market operations. C) the Federal Reserve System acting as a lender of last resort. D) the establishment of the Federal Deposit Insurance Corporation.
D. The establishment of the Federal Deposit Insurance Corporation
Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. Which of the following will happen in the short run? A) The aggregate demand curve will shift to the left. B) Prices will decline. C) Output will decline. D) Unemployment will decline
D. Unemployment will decline
The nominal interest rate will be less than the real interest rate when A. The real interest rate is negative B. The rate of inflation is positive but decreasing C. The rate of inflation is positive and increasing D. The rate of inflation is negative
D. the rate of inflation Is negative
Why does the short-run aggregate supply curve shift to the right in the long run. Following a decrease in aggregate demand... Workers and firms adjust their expectations of wages and price ______ and they ____ for ____wages and prices
Downward, Accept, Lower
T/F Your checking account balance is included in your bank's assets.
False
T/F An increase in government spending will result in an increase in the price level and an increase in real GDP in the long run
False
T/F Centrally-planned economies tend to grow more quickly than market economies
False
T/F If bankers become more uncertain regarding future deposits and withdrawals and choose to hold more excess reserves against deposits, the money multiplier will increase.
False
T/F Retained earnings are sufficient to finance a firm's rapid expansion in a high-growth economy
False
The short-term unemployment rate arising from the process of matching workers with jobs is called
Frictional unemployment
An increase of investments causes the price level to ____ in the short run and _____ in the long run
Increase, increase further
Company lays off 50,000 workers. The laid off workers could not find another job at a bank due to a permanent decline in demand in the banking industry would be considered what kind of unemployment
Structurally unemployed
What is the name of the organization that defines business cycle peaks and troughs in the united states
The National Bureau of Economic Research
When the aggregate demand curve and short run aggregate supply curve intersect ________
The economy is in short-run macroeconomic equilibrium
Outline the various actions the government sector could take to promote growth
The government should secure private property rights. Private property rights are crucial for a smoothly functioning market system. The government should create a court system that will enforce contracts. It should also assist in the development of the country's financial system. Additional endeavors include strengthening the education, communication, and transportation systems
T/F The Fed has more control over open market operations as compared to discount policy
True
