FINAL ECON 2105 UGA
If saving is $850 billion, investment is $500 billion, government expenditure on goods and services is $700 billion, net exports is $50 billion and net taxes is $800 billion, then calculate government sector balance.
$100 billion
Australia's real GDP was 1 comma 599 billion dollars in 2014 and 1 comma 637 billion dollars in 2015. Australia's population growth rate in 2015 was 1.4 percent. Calculate a. The growth rate of real GDP. b. The growth rate of real GDP per person. c. The approximate number of years it takes for real GDP per person in Australia to double if the 2015 growth rate of real GDP and the population growth rate are maintained.
-The growth rate of real GDP in Australia in 2015 was 2.4 percent. -The growth rate of real GDP per person in Australia in 2015 was 1 percent. -The approximate number of years it takes for real GDP per person in Australia to double if the 2015 growth rate of real GDP and population growth rate are maintained is 70.
Gross domestic product is the
-total amount of income earned in producing the final goods and services in a country during a specific time. -total amount that buyers spent on the final goods and services produced in a country during a specific time. -value of the final goods and services produced in a country during a specific time.
If the US interest rate is 1.5 per cent, Canada's interest rate is 1 per cent, the US inflation rate is 1.2 per cent and Canada's inflation rate is 0.70 per cent, then calculate the US interest rate differential.
0.5%
Suppose the economy is experiencing frictional unemployment of 1 percent, structural unemployment of 3 percent and cyclical unemployment of 4 percent. What is the natural unemployment rate?
4 percent.
Suppose a country is producing $20 million of real GDP. If the economy grows at 10 percent per year, approximately how many years will to take for real GDP to grow to $80 million?
14
The CPI basket contains 400 oranges and 800 pens. In the base year, the price of an orange is $1.00 and the price of a pen is $0.75. This year, urban consumers each buy 300 oranges at $2.00 each and 850 pens at $1.00 each. The CPI this year is ________.
160
If the nominal interest rate is 11 percent and the inflation rate is 9 percent, then the real interest rate is approximately
2 percent.
Suppose the price level this year is 150 and the price level last year was 125. The inflation rate between last year and this year was
20 percent.
If higher inflation is expected in the future, then the
AD curve shifts rightward.
The table shows answers given by people interviewed in the Current Population Survey. Which people are structurally unemployed? https://imgur.com/MdYB1Lu
B and C.
The figure shows the circular flow model. During 2016, flow A was $321 billion, flow B was $198 billion, flow D was $54 billion, and flow E was $ 18 billion. Calculate GDP and government expenditure. https://imgur.com/Vlz3foj
GDP is $321 billion. Government expenditure is $51 billion.
Lori is a student who teaches golf on Saturdays. In a year she earns $30 comma 000 after paying her taxes. At the beginning of 2017, Lori owned $2 comma 000 worth of books, DVDs, and golf clubs and she had $4 comma 000 in a savings account at the bank. During 2017, the interest on her savings account was $120 and she spent a total of $20 comma 000 on consumption goods and services. There was no change in the market values of her books, DVDs, and golf clubs. How much did Lori save in 2017? What was her wealth at the end of 2017?
In 2017, Lori saved $10,120. Lori's wealth at the end of 2017 was $16,120.
________ economists believe that active help from fiscal and monetary policy is needed to insure that the economy is operating at full employment.
Keynesian
The first table describes an economy's labor market in 2018 and the second table describes its production function in 2018. What are labor productivity and potential GDP in 2018? https://imgur.com/mp6FWfT
Potential GDP is $10500. Labor productivity is $105 per hour of labor.
An economy produces only apples and oranges. The base year is 2015, and the table gives the quantities produced and the prices. Calculate real GDP in 2015 and 2016 expressed in base- year prices. https://imgur.com/XmlIeKp
Real GDP in 2015 expressed in base-year prices is $60. Real GDP in 2016 expressed in base-year prices is $255.
A south sea island produces only coconuts. In 2014, the price of a coconut is $2.50 and the quantity produced is 350. In 2017, the price of a coconut is $2.00 and the quantity produced is 250. 2014 is the reference base year. What is real GDP in 2017 in terms of base-year prices?
Real GDP in 2017 in terms of base-year prices is $625.
On January 1, 2017 Terry's Towing Service owned 10 tow trucks valued at $800 comma 000. During 2017, Terry's bought 4 new trucks for a total of $400 comma 000. At the end of 2017, the market value of all the firm's trucks was $1 comma 120 comma 000. What was Terry's gross investment? Calculate Terry's depreciation, and net investment.
Terry's gross investment was $400,000. Terry's depreciation was $80,000. Terry's net investment was 320000 dollars.
The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2013 (the reference base year). The average household spent $28 on juice and $72 on cloth in 2013 when the price of juice was $2 a bottle and the price of cloth was $9 a yard. In 2014, juice is $6 a bottle and cloth is $5 a yard. Calculate the CPI and the inflation rate in 2014.
The CPI in 2014 is 124. The inflation rate in 2014 is 24 percent.
Calculate the M1 and M2 money multipliers using the information below. In June 2018, individuals and businesses held: -$50 billion in currency and no traveler's checks -$1,000 billion in checkable deposits -$5,000 billion in savings deposits -$500 billion in time deposits -$250 billion in money market funds and other In June 2018, banks held: -$450 billion in currency -$100 billion in reserves at the central bank -$800 billion in loans to households and businesses
The M1 money multiplier is 1.75 and the M2 money multiplier is 11.33.
Suppose that yesterday, the U.S. dollar was trading on the foreign exchange market at 100 yen per U.S. dollar and today the U.S. dollar is trading at 95 yen per U.S. dollar. Which of the two currencies (the dollar or the yen) has appreciated and which has depreciated today?
The dollar depreciated and the yen appreciated
The first table describes an economy's labor market in 2018 and the second table describes its production function in 2018. -What are the equilibrium real wage rate, the quantity of labor employed in 2018, labor productivity, and potential GDP in 2018? https://imgur.com/JYzQbfR
The equilibrium real wage rate is $40 an hour. The quantity of labor employed is 125 hours. Potential GDP is $8125. Labor productivity is $65 per hour of labor.
The table gives some items from the national income and product accounts. Calculate the government sector balance, the private sector balance, and net exports https://imgur.com/Hq083wt
The government sector balance is 50 billion dollars. The private sector balance is negative 100 billion dollars. Net exports is negative 50 billion dollars.
In Japan, potential GDP is 600 trillion yen and the graph shows the aggregate demand curve, the short-run aggregate supply curve, and the long-run aggregate supply curve. Does Japan have an inflationary gap or a recessionary gap and what is its magnitude? https://imgur.com/Z15CnS4
The graph shows that Japan has an output gap that is a recessionary gap.
The table provides some data on real GDP and the population of Eastiana in 2015 and 2016. -What is the growth rate of real GDP in Eastiana in 2016? -What is the growth rate of real GDP per person in Eastiana in 2016? https://imgur.com/by2fWEk
The growth rate of real GDP in Eastiana in 2016 is 12 percent. The growth rate of real GDP per person in Eastiana in 2016 is 8 percent.
The table provides some data on real GDP and the population of Japan in 2011 and 2012. Calculate the growth rate of real GDP and the growth rate of real GDP per person. Calculate the approximate number of years it takes for real GDP per person in Japan to double if the population growth rate and the real GDP growth rate are maintained at their 2012 levels. https://imgur.com/RrGwkPe
The growth rate of real GDP is 1.49 percent. The growth rate of real GDP per person is 1.56 percent. If the population growth rate and the real GDP growth rate are maintained at their 2012 levels, real GDP per person in Japan will double in approximately 42 years .
In 2016 and in 2017, consumers in Dexter consumed only books and pens. The prices and quantities for 2016 and 2017 are listed in the table. The reference base period for Dexter's CPI is 2016, and 2016 is also the year of the Consumer Expenditure Survey. -Calculate the inflation rate in 2017. https://imgur.com/HDZx4H8
The inflation rate in 2017 is 310.0 percent.
What is the present value of $500 three years in the future if the interest rate is 2 percent?
The present value of $500, three years in the future if the interest rate is 2 percent is $471.16.
A firm agreed to pay its workers $31 an hour in 2016 and $38 an hour in 2017. The price level for these years was 241 in 2016 and 245 in 2017. -Calculate the real wage rate in each year (to the nearest cent). -What is the real wage increase received by these workers in 2017?
The real wage rate in 2016 was $12.86. The real wage rate in 2017 was $15.51. The change in the real wage rate between 2016 and 2017 is 2.65 dollars.
The table shows the amounts held as the various components of M1 and M2. What are the values of M1 and M2? https://imgur.com/q6beKup
The value of M1 is $175 billion. The value of M2 is $995 billion.
On the Fed's balance sheet, assets include
U.S. government securities and mortgage-backed securities.
Which of the following does NOT shift the short-run aggregate supply curve?
a change in the price level
A fixed exchange rate is an exchange rate that is determined by ______ and is achieved by central bank intervention in the foreign exchange market to block _____.
a decision of the government or the central bank; the unregulated forces of demand and supply
When the prices of U.S.-produced goods rise and the price of foreign-produced goods do not change, the result is
a decrease in exports.
Suppose there is an increase in the short-run aggregate supply with no change in the long-run aggregate supply. This situation could be the result of
a decrease in the money wage rate.
Other things equal, along the aggregate demand curve, a higher price level is associated with
a decrease in the quantity of real GDP demanded.
In the figure, when the real wage rate is $10 an hour, ________.
a shortage of labor exists and the real wage rate will rise
The graph shows _______ gap.
an inflationary
Suppose that the exchange rate rises from 0.75 euros per U.S. dollar to 0.78 euros per U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan to buy in the foreign exchange market? -The quantity of U.S. dollars that people plan to buy in the foreign exchange market _______.
and a movement up along the demand curve for U.S. dollars occurs
An increase in potential GDP increases ______.
both long-run aggregate supply and short-run aggregate supply
In the graph, the People's Bank of China must _______ U.S. dollars to maintain its target rate, and if it stopped the U.S. the yuan would _______. https://imgur.com/q6beKup
buy; appreciate
Suppose the exchange rate is 90 yen per U.S. dollar and the United States wants to keep the exchange rate at a target rate of 90 yen per U.S. dollar. If the demand for U.S. dollars decreases, the Fed ______.
buys dollars to raise the exchange rate
Population increases are the limiting factor in the growth process in
classical growth theory.
In the short run, the equilibrium level of real GDP
could be less than, equal to, or greater than potential GDP.
Which of the following exchange rate policies uses a target exchange rate, but allows the target to change?
crawling peg
We call the leakage of bank reserves into currency the currency drain, and we call the ratio of _____ to _____ the currency drain ratio.
currency; deposits
Unemployment caused by the fluctuation of the business cycle is called ________ unemployment.
cyclical
Currently, the United States is a _______.
debtor nation and a net borrower
Suppose that the money multiplier is 4. If the monetary base decreases by $2 million, the quantity of money will
decrease by $8 million.
An increase in the currency drain
decreases the size of the money multiplier.
Aggregate demand _______ when an increase in interest rates occurs. Aggregate demand _______ when an increase in expected future income occurs.
decreases; increases
Suppose real GDP for a country is $13 trillion in 2010, $14 trillion in 2011, $15 trillion in 2012, and $16 trillion in 2013. Over this time period, the real GDP growth rate is
decreasing
Which of the following most likely would decrease frictional unemployment?
effective Internet-based employment services and job registries
An increase in labor productivity increases potential GDP because ______.
employment increases and a given amount of employment produces more real GDP
When economists speak of full employment, they refer to the case in which the sum of frictional and structural unemployment is
equal to the actual amount of unemployment.
Federal Reserve policy tools include all of the following EXCEPT
excess reserve ratios.
Suppose the market for loanable funds is in equilibrium. If the expected profit falls, the equilibrium real interest rate ________ and the quantity of loanable funds ________.
falls; decreases
The price of a bond _______ and the interest rate _______.
falls; rises
The quantity of U.S. dollars demanded by foreign nations increases as
foreigners purchase more U.S. goods.
Structural unemployment
generally lasts longer than frictional unemployment.
In the absence of the Ricardo-Barro effect, an increase in the government deficit results in a ________ real interest rate and a ________ equilibrium quantity of investment.
higher; lower
-Draw a demand for loanable funds curve. Label it DLF0. -Draw a supply of loanable funds curve. Label it SLF0. -Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1. -Draw a curve that shows a decrease in the demand for loanable funds. Label it DLF1. -Draw a curve that shows an increase in the supply of loanable funds. Draw it in such a way that the equilibrium quantity of loanable funds does not change. Label it SLF1. -Draw a point at the new equilibrium real interest rate and quantity of loanable funds. Label it 2.
https://imgur.com/EOs3Mcl
The left graph shows an economy's labor market. Draw a point that shows equilibrium in the labor market. The right graph shows the economy's production function. Draw a point on the production function that shows potential GDP in this economy.
https://imgur.com/HSz3SkC
The graph shows the demand curve for U.S. dollars. -Draw a new demand curve that shows the effect of a decrease in the U.S. interest rate differential. Label it.
https://imgur.com/KvPxltV
Other things remaining the same, the
larger the value of U.S. imports, the greater is the quantity of U.S. dollars supplied to the foreign exchange market.
The graph shows the demand for money curve and the supply of money curve. The Fed decreases the quantity of real money supplied to $1.9 trillion. -Draw a new MS curve that shows the effect of the Fed's action. Label it. -Draw a point at the new equilibrium quantity of money and interest rate. What is the equilibrium interest rate?
https://imgur.com/LqCdSY3 Before the Fed decreases the quantity of money, the equilibrium interest rate is 8 percent a year.
The graph gives a long-run aggregate supply curve and a short-run aggregate supply curve. The quantity of capital increases and the full-employment price level remains constant. -Draw the new long-run aggregate supply curve and the new short-run aggregate supply curve. Label the curves. -Draw a point at the full-employment price level and the new potential GDP.
https://imgur.com/RkK6LMM
The graph shows an aggregate demand curve. Suppose there is an increase in interest rates. -Draw a new curve to show the effect of this change on aggregate demand. Label the new curve C1. Now suppose that there is an increase in expected future income. -Draw a new curve to show the effect of this change on the original AD curve. Label the new curve C2.
https://imgur.com/YteGiWW
Draw a horizontal arrow at the equilibrium price that shows the output gap. -what is the size of the gap?
https://imgur.com/Z15CnS4 The size of the recessionary gap is yen 100 trillion.
Draw a labor supply curve and a labor demand curve. Label them LS0 and LD0. Draw a point the equilibrium quantity of labor and the equilibrium real wage rate. Label it 1. Draw and label a curve that shows the effect of an increase in labor productivity. Draw a point at the new equilibrium quantity of labor and the equilibrium real wage rate. Label it 2.
https://imgur.com/aHVwHsm
Draw the long-run aggregate supply curve when potential GDP is $18.5 trillion. Label it.
https://imgur.com/ccNjWSn
The table gives an economy's aggregate demand, short-run aggregate supply, and long-run aggregate supply schedules. https://imgur.com/BfuBY5B Draw the LAS curve, the SAS curve and the AD curve. Label the curves. Draw a point at the short-run macroeconomic equilibrium. Draw a horizontal arrow at the equilibrium price that shows the output gap.
https://imgur.com/ptuHiDT
-Draw a horizontal line at the target exchange rate. Label it. -Draw an arrow to show the surplus or shortage of U.S. dollars at China's target rate. Label it.
https://imgur.com/q6beKup
If the exchange rate falls, then the expected profit from holding the domestic currency
increases.
How is the money multiplier influenced by the banks' reserve ratio? An increase in banks' reserves with no change in deposits _____ the banks' reserve ratio and _____ the money multiplier.
increases; decreases
The ________ the exchange rate, the ________ are foreign-produced goods and hence the smaller the quantity of dollars supplied.
lower; more expensive
After the Fed decreases the quantity of money, at an interest rate of 8 percent a year, people want to hold _______ money than the quantity supplied, so they _______ bonds.
more; sell
A country that is borrowing more from the rest of the world than it is lending to the rest of the world is a ______, and a country that during its entire history has borrowed more from the rest of the world than it has lent to it is a ______.
net borrower; debtor nation
In calculating GDP, household production is
not included because there is no market transaction.
A new 2017 Honda Civic produced in 2017 and purchased in 2018 is
part of GDP in 2017.
We distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. In the long run
real GDP equals potential GDP
The relationship between real GDP and potential GDP is that
real GDP fluctuates about potential GDP.
The demand for money curve shifts rightward if
real GDP increases.
An increase in the working-age population results in a
rightward shift of the supply of labor curve and an increase in potential GDP.
As labor continues to increase, a nation will
see a movement along the aggregate production function, but real GDP will increase less and less.
A technological advance ________ the long-run aggregate supply curve and ________ the short-run aggregate supply curve.
shifts; shifts
The short-run aggregate supply curve
shows the impact changes in the price level have on the quantity of real GDP when resource prices are constant.
If new capital increases labor productivity, the supply of labor ________ and the demand for labor ________.
stays the same; increases
Short-run equilibrium occurs at the intersection of
the SAS and AD curves.
The U.S. interest rate differential falls when ______.
the U.S. interest rate falls and the foreign interest rate rises
For a commercial bank, the term "reserves" refers to
the cash in its vaults and its deposits at the Federal Reserve.
A change in ________ creates a movement along the aggregate demand curve, while a change in ________ shifts the aggregate demand curve.
the price level; government expenditures
As we move up along the long-run aggregate supply curve, ______.
the real wage rate remains constant
In the figure, at the real wage rate of $50... https://imgur.com/EBOtVi5
there is a surplus of 60 billion hours per year.
An economy is at full employment when ______.
there is no cyclical unemployment
If you have $1,000 in wealth and the price level increases by 20 percent, then
the $1,000 will buy fewer goods and services.
Which of the following is NOT part of the monetary base?
the public's checking deposits at commercial banks
The long-run aggregate supply curve is ________ because along it, as prices rise, the money wage rate ________.
vertical; rises
The quantity theory of money asserts that an increase in the quantity of money
will lead to an equal percentage increase in the price level.
Michael, an Internet service provider, bought an existing business worth $400 comma 000 on December 31, 2017. During 2018, his business grew and he bought $200 comma 000 of new servers. The market value of his older servers fell by $50 comma 000. What was Michael's gross investment, depreciation and net investment during 2018?
Michael's gross investment during 2018 was $200,000. Michael's depreciation during 2018 was $50,000. Michael's net investment during 2018 was $150,000.