Econ Midterm 1
GDP, C, I, G, X-M 420, 210, 70, 200, 15 480, 210, 70, 200, 15 540, 255, 70, 200, 15 600, 300, 70, 200, 15 660, 345, 70, 200, 15 720, 390, 70, 200, 15 Consider the economy table 1. What is the equilibrium real GDP?
$540 C + I + G + (X-M) 255+70+200+15 = 540
Consider Orkaland economy producing three goods. The price and output data for each year are as follows: 2001, Price, Output Good 1: 3,2 Good 2: 5,3 Good 3: 10,10 2002(BY) Good 1: 4,3 Good 2: 5,2 Good 3: 9,12 2003 Good 1: 5,5 Good 2: 5,5 Good 3: 8,10 Based on GDP Deflator concept, how much is inflation rate in 2003 relative to 2002?
-3.70% Nominal GDP: 2002: 130 2003:130 Real GDP: 2002: 130 2003: 135 GDP Deflator: 2002: (130/130)*100 = 100 2003: (130/135)*100 = 96.3 (96.3-100)/100 = -0.037 or -3.70%
During the Great Depression of the 1930's how much did output fall between 1929 and 1933?
-31%
The graph shows two points A and B on the consumption function, C, of a small country Tynika. A: (1000,900) B: (1600,1200) Marginal Propensity to Consume (MPC) is:
0.50 (1200-900)/(1600-1000) = 300/600 = 1/2 or 0.50 MPC is slope of consumption function
The FOMC (Federal Open Market Committee) consists of _____________(1) voting members. (Enter your response as an integer.) Seven of the members are ___________(2) ____(3) if the 12 presidents of the Federal Reserve district banks vote on a rotating basis. (Enter your response as an integer.) The president of the NY Federal Reserve Bank __________(4) gets a vote
1. 12 2. the Board of Governors 3. 4 4. always
Use the diagram on the right to answer the following questions: (round all numerical responses to two decimal places) Consumer surplus at a price of $12 and production of 500 thousand flu vaccinations per day is (1) ___________ million. For the same equilibrium, total producer surplus is (2) __________ million. Assuming price remained at $12 but production was cut to 200 thousand vaccinations per day, producer surplus is now (3) _____________ million and consumer surplus is (4) _____________ million. The deadweight loss from underproduction is (5) ______________ million. https://imgur.com/a/c5wFVaI
1. 3.25 2. 1.65 3. 1.06 4. 2.1 5. 1.74
Suppose that the world price of oil is $70 per barrel and that the United States can buy all the oil it wants at this price. Suppose also that the demand and supply schedules for oil in the United States are as follows: https://imgur.com/a/fFO9jcv The equilibrium price in the United states is (1) __________ per barrel and the equilibrium quantity is (2) _____________ million barrels. If the United States imposed a price ceiling of $70 per barrel on the oil market and prohibited imports, there would be a (3) _______________ of (4) ________________ million barrels of oil. If the price ceiling is below $70, quantity supplied and quantity demanded differ. (5) _________________ will determine how much oil is purchased.
1. 70 per barrel 2. 20 million barrels 3. quantity supplied 4. 20 million barrels 5. Quantity supplied
Gorgonzola is a small island nation with a simple economy that produces only six goods: sugar cane, yo-yos, rum, peanuts, harmonicas, and peanut butter. Assume that one-quarter of all the sugar cane is used to produce rum and one-half of all the peanuts are used to produce peanut butter. https://imgur.com/a/EAhbEBp Nominal GDP for 2015 is (1): Use the production and price information in the table to calculate real GDP for 2013, 2014, and 2015 using 2013 as the base year. (Round your responses to two decimal places.) Real GDP(2013 base year)(2): Calculate the growth rate of real GDP from 2013 to 2014 and from 2014 to 2015 using 2013 as the base year. (Round your responses to two decimal places.) Growth rate of real GDP(2013-2014)(3): Use the production and price information in the table to calculate real GDP for 2013, 2014, and 2015 using 2014 as the base year. (Round your responses to two decimal places.) Real GDP(2014 Base Year)(4): Calculate the growth rate of real GDP from 2013 to 2014 and from 2014 to 2015 using 2014 as the base year. (Round your responses to two decimal places.) Growth rate of Real GDP(5):
1. 9496.25 2. 2013: 5969 2014: 6201.5 2015: 6812.5 3. 2013-2014: 3.9 2014-2015: 9.85 4. 2013: 7105 2014: 7395 2015: 8130
Which of the following is true?(1): Macroeconomists use microeconomic theory to guide them in their work since(2):
1. Macroeconomics is the study of the economy as a whole, while microeconomics deals with the individual decision-making units. 2. macroeconomics studies the aggregate versions of microeconomic topics therefore the conclusion from microeconomic theory serves as an important reference for macroeconomists.
Determine whether each of the following is covered by microeconomics or macroeconomics. 1. Number of employees in the steel industry: 2. Changes in the aggregate price level (inflation): 3. The price of gasoline: 4. The unemployment rate:
1. Microeconomics 2. Macroeconomics 3. Microeconomics 4. Macroeconomics
Indicate whether the following statements are examples of positive economic analysis or normative economic analysis. 1. A devaluation of the U.S. dollar would increase exports from the United States: 2. Increasing the federal tax on gasoline would cause shipping costs in the United States to increase: 3. Florida should devote all revenues from its state lottery to improving public education: 4. Eliminating the trade embargo with Cuba would increase the number of Cuban cigars available in the United States: 5. As a public safety measure, the state of Texas should not pass legislation that allows people with concealed handgun permits to carry concealed weapons on college campuses:
1. Positive 2. Positive 3. Normative 4. Positive 5. Normative
The process of converting inputs into useful output is called ____________. These inputs are also known as _________________________. Which of the following is not included in this list of inputs?
1. Production 2. the factors of production 3. Energy
Do you agree or disagree with each of the following statements? The price of a good rises, causing the demand for another good to fall. Therefore, the two goods are complements(1): Two normal goods cannot be substitutes for each other(2):
1. True 2. False
The graph to the right represents the market for wheat. The equilibrium price is $4 per bushel and the equilibrium quantity is 20 million bushels. 1. If the government establishes a price floor of $5 per bushel of wheat in this market, there would be: 2. If a price ceiling was set at $5, there would be: https://imgur.com/a/ZiYzw6I
1. a surplus of 12 million bushels. 2. no impact on the market, since equilibrium price is already below the price ceiling.
The graph to the right represents the market for wheat. The equilibrium price is $4 per bushel and the equilibrium quantity is 20 million bushels. If the government establishes a price floor of $5 per bushel of wheat in this market, there would be(1): If a price ceiling was set at $5, there would be(2): https://imgur.com/a/vl0i6m1
1. a surplus of 12 million bushels. 2. no impact on the market, since equilibrium price is already below the price ceiling.
During a recession, output (1) ______________, unemployment (2) ______________, and employment (3) _______________.
1. falls 2. increases 3. falls
Consider Orkaland economy producing three goods. The price and output data for each year are as follows: 2001, Price, Output Good 1: 3,2 Good 2: 5,3 Good 3: 10,10 2002(BY) Good 1: 4,3 Good 2: 5,2 Good 3: 9,12 2003 Good 1: 5,5 Good 2: 5,5 Good 3: 8,10 At what rate did this economy grow between 2003 and 2002?
3.85% Use Real GDP for this, so 2003 should use 2002's prices Therefore, real GDP: 2002: 4*3+5*2+9*12 = 130 2003: 4*5+5*5+9*10 = 135 (135-130)/130=0.0385 = 3.85%
Consider the following equations for beer market: P = 10-0.4Q and P = -5 +0.6Q The equilibrium price for beer is _________.
4 Set the P's equal to each other. Find Q. Plug Q in and get the answer. 10-0.4Q = -5+0.6Q 10 = -5 + Q 15 = Q -5 + 0.6(15) -5 + 9 4
In the economy of Cycladia, the total unemployment rate is equal to 10.0 percent, the structural unemployment rate is 2.0 percent, and the frictional unemployment rate is 4.0 percent. The cyclical unemployment rate equals _________ percent. (Enter your response rounded to one decimal place.)
4 Structural unemployment + frictional unemployment + cyclical unemployment = total unemployment
Suppose, you are lending money to your friend Julia and you want a real rate of return of 6.50%. Furthermore, you expect the inflation rate to be 3.00%. Which of the following interest rates should you charge?
9.50% 6.5+3 = 9.5
Which of the following is part of the U.S. supply of foreign exchange?
A French citizen wishes to travel to the United States and stay in a hotel in New York City.
Which of the following is part of the U.S. demand for foreign exchange?
A U.S. citizen wishes to buy stock in a Japanese corporation
When the Fed adds new reserves to the system, some of these new reserves find their way out of the country into foreign banks or foreign investment funds. In addition, some portion of the new reserves ends up in people's pockets and under their mattresses instead of bank vaults. These "leakages" reduce the money multiplier and make it more difficult for the Fed to control the money supply because
A. public money holdings are volatile and it is difficult to predict how much the leakages will be at any given time. B. the money does not remain in the banking system and reserves only result in multiple expansion when they lead to additional loans. C. it is challenging for the Fed to accurately predict the money holdings of the public and thus difficult to know the exact affects of policy changes. D. All of the above. D is the correct answer
The equation for a consumption function in a simple economy, where there are no taxes, is given by C = 240+0.67Y, where Y denotes aggregate income.
Autonomous consumption is 240. MPC is 0.67
The diagram to the right illustrates a demand curve. Economists have learned the most important factor in determining an individual's demand for a single product is the relationship between price and quantity demanded. The demand curve depicts the specific relationship between price and quantity demanded. This is known as the law of demand. How do economists define the law of demand? https://imgur.com/a/qbmZL3r
A negative, or inverse, relationship between quantity demanded and price.
Which of the following statements would be associated with monetarism?
Because there are significant lags in recognizing and implementing activist policies, the best government policy is nonintervention.
Which of the following is not one of the types of unemployment?
Discouraged unemployment, which is unemployment from people not finding jobs. NOT: Cyclical unemployment, which is unemployment that occurs during recessions. Structural unemployment, which is unemployment due to the changing structure of the economy. Frictional unemployment, which is unemployment due to the normal workings of the labor market. All of the above are types of unemployment.
Assume the following for the economy of a country: bullet Consumption function: C=60+0.75Yd Investment: I = 89 Government spending: G = 52 Net taxes: T = 0.2Y - 25 Disposable income: Yd = Y - T Equilibrium: Y = C + I + G
Equilibrium income is $549.4 In equilibrium, the government collects net taxes of $84.9 In equilibrium, the government's budget deficit or surplus is $32.9
Assume that in 2015, the following prevails in the Republic of Nurd: Government spending (G) = $0 Net taxes (T) = $0 Planned investment (I) = $25 Assume that households in Nurd consume 75 percent of their income; they save 25 percent of their income. Thus, the consumption function and saving function of Nurd are: C = 0.75Yd and 0.25Yd, where disposable income Yd = Y-T Determine the equilibrium level of income.
Equilibrium income = $100. In equilibrium, Y = C + I + G Y = 0.75(Y - 0) + 25 + 0 [Since Yd = Y - T = Y - 0] Y = 0.75Y + 25 0.25Y = 25 Y = 25/0.25= 100 Y = $100
Ford Motor Co. produces a Focus automobile in its factory in Germany and sells it in India. This transaction is added to
German GDP under exports.
The price index that measures the changes in prices of ALL goods and services produced by the economy is the
Gross Domestic Product (GDP) deflator
Which of the following best describes the relationship between aggregate expenditure and real GDP ?
If aggregate expenditure falls short of real GDP, inventories will accumulate and real GDP and aggregate income will fall in future.
During the 1980 presidential campaign, Ronald Reagan promised to cut taxes, increase expenditures on national defense, and balance the budget. How could supply-side economists explain this outcome?
If taxes are cut, this would cause a substantial increase in work effort and investment which could actually result in greater tax revenues.
In the short run, if GDP exceeds AD then:
Inventories will rise and firms will reduce production In other words: if how much you are making exceeds what is demanded then your inventory will become stocked and you will stop making as much product
What happens to the demand when price is lowered?
It stays the same
Economists who advocate government intervention in the macroeconomy are known as
Keynesians
Which of the following is an economic resource?
Labor Not: Rent Scarcity Money
Suppose on your 21st birthday, your eccentric grandmother invites you over to her house, takes you into her library, removes a black velvet painting of Elvis Presley from the wall, and opens a hidden safe where she removes 50 crisp $100 bills and hands them to you as a present, claiming you are her favorite grandchild. After thanking your grandmother profusely (and helping her re-hang Elvis) you proceed to your bank and deposit half of your gift in your checking account and half in your savings account. Because of these transactions,
M1 will fall by $2,500, M2 will be unaffected.
U.S. Money Supply (in billions of dollars) currency held outside banks: $440 savings accounts: $2,100 other near monies: $1000 traveler's checks/ other checkable deposits: $60 money market accounts: $1,100 demand deposits: $700 The table on the right contains an approximate breakdown of the U.S. money supply in September 2001. Use this data to calculate M1 and M2. M1 was $1200 (answer) billion. (Enter your response as an integer.) M2 was $5400 (answer) billion. (Enter your response as an integer.) The main advantage of looking at M2 instead of M1 is that M2 is generally more stable. To illustrate, suppose banks raised the interest rate paid on checking accounts, while the rate paid on savings accounts remained unchanged, resulting in consumers transferring $175 billion from savings into their checking accounts. How would the money supply be affected?
M1: (Coin and currency in circulation) + (Checkable deposits) + (Travelers Check) = $(440 + 700 + 60) billions = $1200 billions M2: (M1) + (Savings accounts) + (Other near monies) + (money market accounts) = $(1200 + 2100 + 1000 + 1100) = 5400 billions M1 would increase by $175 billion, but M2 would remain unchanged.
The consumer price index (CPI) is a fixed-weight index. It compares the price of a fixed bundle of goods in one year with the price of the same bundle of goods in some base year. Suppose the market basket to compute the consumer price index consists of 100 units of good X, 300 units of goodY,and 25 units of good Z. Year 2013 is the base year. Prices of these goods for the years 2013, 2014, and 2015 are given below. Good, Amount in Market Basket, Prices in 2013, Prices in 2014, Prices in 2015 X: 100, $2.00, $2.80, $3.50 Y: 300, 1.50, 2.10, 2.40 Z: 25, 4.00, 5.00, 4.00 Using the information above, calculate the following:
The cost of the market basket in 2013 is $750 The cost of the market basket in 2014 is $1035 The cost of the market basket in 2015 is $1170 Multiply the Amount in Market Basket by the price in each year. Add them up. You get the cost of the market basket above. Calculate the CPI for each year. CPI in 2013: 100 CPI in 2014: 138 CPI in 2015: 156 Since 2013 is base year CPI is 100 because (750/750)*100 = 100 2014: (1035/750)*100 = 138 2015: (1170/750)*100 = 156 The rate of inflation between 2013 and 2014 is 38%. The rate of inflation between 2014 and 2015 is 13.04% (138-100)/100 = 0.38 or 38% (156-138)/138 = 0.13043 or 13.04%
Explain whether each of the following statements describes a change in demand or a change in quantity demanded, and specify whether each change represents an increase or a decrease. An increase in the federal minimum wage results in a decline in sales of fast food. (assume fast food is an inferior good)
The demand for fast food decreases.
We have the following information on the levels of income, consumption and planned investment for a country: Aggregate Income/Output, Consumption, Planned Investment $2,000, $2,100, $200 2,500, 2,500, 200 3,000, 2,900, 200 3,500, 3,300, 200 4,000, 3,700, 200 4,500, 4,100, 200 5,000, 4,500, 200 5,500, 4,900, 200
The equilibrium level of output is: $3500 3,300+200 = 3500
Cell phones and bluetooth headsets are complements. An increase in price of blue tooth headsets would cause which of the following in the market for cell phones?
The equilibrium price and quantity of cell phones would decrease
The following information is available for the country of Tappania: 2000, 2010 Labor Force: 140.0 million, 156.8 million Employment: 131.6 million, 142.1 million Calculate the unemployment rates for 2000 and 2010.
Unemployment Rate for 2000 = 6%. Unemployment Rate for 2010 = 9.38%. For 2000: 1-(131,600,000/140,000,000) = 0.06 or 6% For 2010: 1-(142,100,000/156,800,000) = 0.09375 or 9.38%
Suppose in the Republic of Sasquatch that the regulation of banking rested with the Sasquatchian Congress, including the determination of the reserve ratio. The Central Bank of Sasquatch is charged with regulating the money supply by using open market operations. In September 2015, the money supply was estimated to be 70 million yetis. At the same time, bank reserves were 8.4 million yetis and the reserve requirement was 12 percent. The banking industry, being "loaned up," lobbied the Congress to cut the reserve ratio. The Congress yielded and cut the reserve requirement to 10 percent. The potential impact of this action could increase (answer) the money supply by 14 million yetis. (answer) (Round your response to one decimal place.) Suppose the central bank decided that the money supply should not be increased. What countermeasure could it take to prevent the Congress from expanding the money supply?
Raise the discount rate to prevent the expansion of the money supply. 1/10% = 10 8.4*10 = 84 84-70 = 14 million yetis therefore it increases by 14 mil. yetis
Suppose in the Republic of Sasquatch that the regulation of banking rested with the Sasquatchian Congress, including the determination of the reserve ratio. The Central Bank of Sasquatch is charged with regulating the money supply by using open market operations. In September 2015, the money supply was estimated to be 60 million yetis. At the same time, bank reserves were 7.2 million yetis and the reserve requirement was 12 percent. The banking industry, being "loaned up," lobbied the Congress to cut the reserve ratio. The Congress yielded and cut the reserve requirement to 10 percent. The potential impact of this action could increase (answer) the money supply by 12 (answer) million yetis. (Round your response to one decimal place.) Suppose the central bank decided that the money supply should not be increased. What countermeasure could it take to prevent the Congress from expanding the money supply?
Sell government securities to prevent the expansion of the money supply
Assume there are no taxes. The equation for the consumption function is given to be: C = 150+0.70Y, where Y represents aggregate income. Determine the equation for the saving function:
S = -150+0.30Y.
In an effort to "support" the price of some agricultural goods, the Department of Agriculture pays farmers a subsidy in cash for every acre that they leave unplanted. The Agriculture Department argues that the subsidy increases the "cost" of planting and that it will reduce supply and increase the price of competitively produced agricultural goods. Critics argue that because the subsidy is a payment to farmers, it will reduce costs and lead to lower prices. Which argument is correct?
The Department of Agriculture's argument is correct. The subsidy does increase the "cost" of planting, but there is now an opportunity cost. By planting, the farmers must give up the subsidy. The subsidy will clearly lead to fewer acres of production and higher farm prices.
What institution has formal responsibility for setting U.S. monetary policy?
The FOMC (Federal Open Market Committee)
In 2000, the federal debt was being paid down because the federal budget was in surplus. Recall that surplus means that tax collections (T) exceed government spending (G). The surplus (T−G) was used to buy back government bonds from the public, reducing the federal debt. As discussed in the chapter, the main method by which the Fed increases the money supply is to buy government bonds by using open market operations. What is the impact on the money supply of the Treasury using the fiscal surplus (excess tax receipts) to buy back bonds relative to the Fed using open market purchases to buy bonds?
When the Treasury buys back bonds, there is no change in the money supply. When the Fed buys bonds in open market operations, there is an increase in reserves and thus an increase in the money supply.
Supply-side personal income tax cuts are expected to work by increasing work incentives. Which of the following explains why such tax cuts might not have the expected effect?
Workers may use their increased real income to purchase more leisure, and thus labor supply will not increase.
Which of the following a normative statement?
You should eat less candy
If both supply and demand curves shift to the left, then we can conclude that there will be:
a decrease in the equilibrium quantity sold
Deflation is a phenomenon that describes
a decrease in the overall price level.
A price ceiling is:
a maximum price that sellers may charge for a good, usually set by government.
The condition that exists when quantity "demanded" exceeds quantity "supplied" at the current price is:
a shortage or excess demand
Macroeconomists tend to combine many markets into one. For example, the behavior of all households and firms together is called _________________.
aggregate behavior
When government spending increases by $1, planned expenditures increase by $1
and the equilibrium level of income will increase by $1 times the spending multiplier.
The producer price index is used:
as a wholesale price index
An effective price ceiling is set ________ the market equilibrium price and results in a ________.
below; shortage
Short-Run fluctuations of an economy are called:
business cycles
Short-run fluctuations of an economy are called
business cycles.
A price index that is computed each month by the BLS using a bundle of goods and services that represents the "market basket" is the:
consumer price index.
What is the positive relationship between consumption and disposable income called?
consumption function
Imports are subtracted in the expenditure approach to calculatingGDP, because
consumption, investment, and government spending are overstated as these include expenditures on both domestic and foreign goods.
According to supply-side economics, when the economy is experiencing unemployment, the best course of action is to
cut taxes and increase incentives to save and invest.
Tamara lost her job as a cashier in the retail store when the store went out of business due to a downturn in general business conditions. Tamara was
cyclically unemployed.
Tamara lost her job as a cashier in the retail store when the store went out of business due to a downturn in general business conditions. Tamara was:
cyclically unemployed.
According to the Bureau of Economic Analysis, during the recession of 2007 minus 2009, household saving as a fraction of disposable personal income increased from a low of just over 1 percent in the first quarter of 2008 to 5 percent in the second quarter of 2009. All else equal, a higher saving rate would
decrease MPC, increase MPS, and decrease the multiplier so that changes in planned investment will have a smaller impact on equilibrium output.
Stabilization policy to reduce inflation consists of a(n)
decrease aggregate demand
The Republic of Yuck is a simple economy with no government, no taxes, and no imports and exports. Yuckers (citizens of Yuck) are creatures of habit. They have a rule that everyone saves exactly 24 percent of income. Assume that planned investment is fixed and remains at 72 billion Yuck dollars. Expert economists of the Republic of Yuck have estimated the following: Real GDP (Y): 197 billion Yuck dollars Planned Investment Spending (I): 72 billion Yuck dollars You are asked by the business editor of the Weird Herald, the local newspaper, to predict the economic events of the next few months. Based on the information given above you predict that the inventories will ____________and output will _______________.
decrease, increase
If the Fed increases the required reserve ratio, the money supply
decreases
Suppose government spending and lump sum taxes are both reduced by $100 billion. As a result, GDP will:
fall by $100 billion.
Banks borrow not only from the Fed but also from each other. What is the interest rate in this market called?
federal funds rate
Government policies that deal with taxes and spending are known as _____________, while other policies dealing with the control of the nation's short-term interest rates are called ________________
fiscal policy, monetary policy
Lex graduated from college two months ago with an undergraduate degree in Finance. He is now looking for a job in the financial sector. He is currently classified as:
frictionally unemployed
The following table contains nominal and real GDP data, in billions of dollars, from the U.S. Bureau of Economic Analysis for 2013 and 2014. The data is listed per quarter, and the real GDP data was calculated using 2009 as the base year. Fill in the columns for the GDP deflator and for the percent increase in price level. (Round your responses to two decimal places.)
https://imgur.com/a/FuQxNAl 106.48, 0.26 106.92, 0.41 107.30, 0.35 107.66, 0.33 108.23, 0.53 108.60, 0.34 108.64, 0.04
Harry loves both hot dogs and hamburgers. He receives about the same satisfaction from eating one hamburger as he does from eating one hot dog, and the two goods fill the same need in Harry's life. The price of hot dogs has been extremely volatile for the past several years, and this year is no exception. Hot dog prices "increased" tremendously this month. Assuming hot dogs and hamburgers are substitutes for Harry, what will happen to Harry's demand for hamburgers? Using the line drawing tool, depict the effect on Harry's demand for hamburgers due to the "increase" in the price of hot dogs. Properly label this line.
https://imgur.com/a/jTNHH84
When taxes are cut by $1, planned expenditures
increase by less than $1 and the equilibrium level of income will increase by $1 times the tax multiplier.
The term 'stagflation' was created in the 1970's to describe an economy experiencing both
inflation and economic stagnation.
In base year, nominal GDP:
is always equal to real GDP
In the base year, nominal GDP
is always equal to real GDP.
The opportunity cost of holding money
is the forgone interest from holding bonds.
A price floor placed on a good is a _____________ that will normally result in a _________________.
minimum price, surplus
Carlos got laid off from his job as a limo driver six months ago and gave up looking for a new job two months later. Carlos is:
not in the labor force
Which of the following relations between price(p) and quantity(q) portrays a demand relationship?
p = +10 -2q
A price index for products at all stages in the production process is the
producer price index.
According to Keynesian economics, when the economy is experiencing inflation, the best course of action is to
reduce government spending or increase taxes.
The Laffer curve demonstrates that
reducing tax rates can increase tax revenues
The three traditional tools the Fed can use to control the interest rate via changing the money supply are the ___________.
required reserve ratio, changing the discount rate, and engaging in open market operations.
John's grandfather was a coal miner in Pennsylvania. After the mines shut down in the 1940s he could not find a job. He was
structurally unemployed
John's grandfather was a coal miner in Pennsylvania. After the mines shut down in the 1940's he could not find a job. He was:
structurally unemployed.
A market will experience a __________ when the price is above equilibrium and a ______________ when the price is below equilibrium
surplus, shortage
The velocity of money can be defined as
the average number of times a dollar changes hands during the year.
GDP calculated by the expenditure approach will be "equal to" the GDP calculated by the income approach, because
the dollar value of the expenditure on new goods and services in a year must be equal to the dollar value of the income generated in that year.
If the FOMC orders the open market desk to sell government securities,
the money supply will decrease, and the interest rate will increase.
If the FOMC orders the open market desk to purchase government securities,
the money supply will increase, and the interest rate will decrease
The total labor force in an economy is
the number of people employed plus the number of unemployed.
In a black market, illegal trading takes place at market-determined prices.
true
According to Milton Friedman, when the economy is experiencing inflation, the best course of action is to
use a monetary rule that accommodates real growth but not inflation.
An inflationary gap occurs
when the equilibrium level of GDP exceeds potential GDP
Explain whether each of the following is an example of a macroeconomic concern or a microeconomic concern. The Federal Aviation Administration (FAA) is considering increasing the number of takeoff and landing slots available at Ronald Reagan Washington National Airport. This is an example of a (1)___________________ concern. The president has proposed increasing the marginal tax rate for people whose annual earnings exceed $275,000 and lowering the marginal tax rate for those who earn less than $275,000. This is an example of a (2) ________________________ concern. Walmart announced that it will increase its starting wage for employees to $10 per hour by February, 2016. This is an example of a (3) ____________________ concern. Congress extends the maximum duration for the collection of unemployment benefits from 26 weeks to 52 weeks. This is an example of a (4) ______________________ concern.
1. microeconomics 2. macroeconomics 3. microeconomics 4. macroeconomics
Consider Orkaland economy producing three goods. The price and output data for each year are as follows: 2001, Price, Output Good 1: 3,2 Good 2: 5,3 Good 3: 10,10 2002(BY) Good 1: 4,3 Good 2: 5,2 Good 3: 9,12 2003 Good 1: 5,5 Good 2: 5,5 Good 3: 8,10 If all three goods are included in its construction, CPI in 2002 is:
100 CPI is just price * output for all three goods in a year. Since 2002 is the base year the answer is 100 cause 4*3+5*2+9*12 = (130/130) * 100 = 100
