MACRO FINAL
Arlo is offered a job in Des Moines, where the CPI is 60, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $48,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?
$100,000
If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to
$14,000 of new money.
If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to
$14,000 of new money. Equation: Money Mult.=1/Reserves=1/0.1=10 Additional reserves*Money Mul.=10*$1.400= $14.000
A farmer sells five pounds of pecans to a Smith's Fresh Pecans for $10. Smith's Fresh Pecans resells three pounds for $4.50 per pound. The remaining pecans are shelled and canned and sold for a total of $8.00 Taking these transactions into account, how much is added to GDP?
$21.50
Quality Motors is a Japanese-owned company that produces automobiles; all of its automobiles are produced in American plants. In 2008, Quality Motors produced $25 million worth of automobiles and sold $12 million in the U.S. and $13 million in Mexico. In addition, it sold $2 million from the previous year's inventory in the U.S. The transactions just described contribute how much to U.S. GDP for 2008?
$25 million
Consider two cars manufactured by Chevrolet in 2014. During 2014, Chevrolet sells one of the two cars to Emily for $20,000. Later in the same year, Emily sells the car to Jim for $18,000. The second automobile, with a market value of $19,000, is unsold at the end of 2014 and it remains in Chevrolet's inventory. The transactions just described contribute how much to GDP for 2014?
$39,000
The slope of a line passing through the points (15, 3) and (10, 6) is
-3/5.
Karena was laid off, but she is expecting to be recalled. She has not looked for work since being laid off. Nathan is not employed, nor was he laid off. Who is counted as "unemployed" in the U.S. labor force statistics?
1) Karena and 2) Nathan, if Nathan has looked for work during the previous four weeks
Suppose that the Bureau of Labor Statistics reports that the entire adult population of Mankiwland can be categorized as follows: 25 million people employed, 3 million people unemployed, 1 million discouraged workers, and 1 million people who are either students, homemakers, retirees, or other people not seeking employment. What is the unemployment rate?
10.7%
An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below. If all banks in the economy have the same reserve ratio as this bank, then the value of the economy's money multiplier is
11.76. Deposits *(reserve rate/100) = $amount of reserve $50,000*(RR/100)= $4250 Solving for RR then RR=8.5 Money mult.= 1/RR *100
For an imaginary economy, the value of the consumer price index was 140 in 2013, and the inflation rate was 5.0 percent between 2013 and 2014. The consumer price index in 2014 was
147.0.
In the nation of Wiknam, the money supply is $80,000 and reserves are $18,000. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is
22.5 percent. Equation: $80.000*(A/100)=$18.000 solving A then A=22.5
Suppose that the adult population in the town of Springfield is 225 million. If 40 million are unemployed and 100 million are employed, then the unemployment rate is approximately
29%.
The adult population in the town of Shelbyville is 150 thousand. If 100 thousand people are employed and 20 thousand are unemployed, then the labor force participation rate is approximately
67%.
Which of the following is an example of barter?
A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.
Betty's Bakery bakes fresh bread every morning. Any bread not sold by the end of the day is thrown away. A loaf of bread costs Betty $2.00 to produce, and she prices loaves of bread at $3.50 per loaf. Suppose near the end of one day Betty still has 12 loaves of bread on hand. Which of the following is correct?
Betty should be willing to sell the remaining bread for any price above $0 per loaf since she will have to throw it away if she does not sell it for something.
Suppose that in 2018 and 2019, households and firms reduced desired expenditures. During the same period inflation fell and unemployment rose.
Both the change in inflation and the change in unemployment are consistent with what a given short-run Phillips curve implies.
If macaroni and cheese is an inferior good, what would happen to the equilibrium price and quantity of macaroni and cheese if consumers' incomes rise?
Both the equilibrium price and quantity would decrease.
Both Dave and Caroline produce sweaters and socks. If Dave's opportunity cost of 1 sweater is 3 socks and Caroline's opportunity cost of 1 sweater is 5 socks, then
Dave has a comparative advantage in the production of sweaters.
Three employers have justified their actions as follows. Whose logic is not consistent with the logic of efficiency wage theory?
Dick pays his workers less than the equilibrium wage so that they will not have the time or money to look for work somewhere else.
If it could increase its growth rates slightly, a country with low income would catch up with rich countries in about ten years.
False
International data on the history of real GDP growth rates shows that over the last 120 years or so, rich countries got richer and poor countries got poorer.
False
Which of the following demonstrates human capital and physical capital in that order?
For a restaurant: the chefs' knowledge about preparing food and the equipment in the kitchen
Suppose a basket of goods and services has been selected to calculate the consumer price index. In 2005, the basket of goods cost $108.00; in 2006, it cost $135.00; and in 2007, it cost $168.75. Which of the following statements is correct?
If the CPI is 156.2 in 2007, then 2005 is the base year.
Suppose Americans become optimistic about the future of the economy and, as a result, increase their current consumption expenditures. Which of the following would you expect to occur as a result of this change?
In the short run, unemployment will decrease and inflation will rise.
Suppose Jim and Tom can both produce baseball bats. If Jim's opportunity cost of producing baseball bats is lower than Tom's opportunity cost of producing baseball bats, then
Jim has a comparative advantage in the production of baseball bats
Suppose that bartenders and waiters have no unions. Now suppose that bartenders form a union. What does this do the labor supply and wages of waiters?
Labor supply increases, and wages decrease.
Suppose that garbage collectors and landscaping workers have no unions. Now suppose that garbage collectors form unions. What does this do the labor supply and wages of landscaping workers?
Labor supply increases, and wages decrease.
Each day Sue works 8 hours and produces 7 units of goods and services. Mary works 10 hours each day and produces 10 units of goods and services. It follows that
Mary's productivity is higher than Sue's.
You purchase a beer at a bar using cash. The fact that the bar accepts your cash for the beer beUt illustrates which function of money?
Medium of exchange
A Mexican oil field service company works on oil rigs in the U.S. The value of the company's services produced by Mexican citizens and the equipment they own is included in
Mexican GNP and U.S. GDP.
Which of the following would reduce the natural rate of unemployment?
Neither an increase in unemployment compensation nor an increase in the rate of money growth
Political Instability AbroadSuppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S assets. Refer to Political Instability Abroad. What would the change in the exchange rate make happen to U.S. net exports and U.S. aggregate demand?
Net exports would fall which by itself would decrease U.S. aggregate demand.
Jennifer lives in a home that was newly constructed in 2011 for which she paid $240,000. In 2014 she sold the house for $260,000. Which of the following statements is correct regarding the sale of the house?
The 2014 sale affected neither 2014 GDP nor 2011 GDP.
Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was lower between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption?
The CPI was 100 in 2003, 120 in 2004, and 135 in 2005.
In 2011, the average American earned about $48,000 while the average Nigerian earned about $1,200. Which of the following statements is likely?
The average American purchases more televisions than the average Nigerian, The average American has better nutrition and healthcare than the average Nigerian, and The average American has a longer life expectancy than the average Nigerian.
Which of the following is not correct?
The consumer price index is used to measure the quantity of goods and services that the economy is producing.
The Stock Market Boom of 2015Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. Refer to Stock Market Boom 2015. What happens to the expected price level and what impact does this have on wage bargaining?
The expected price level rises. Bargains are struck for higher wages.
Out of the following economic statistics, which is the best measure of economic prosperity?
The level of real GDP
After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision?
The marginal cost of going to Ft. Lauderdale decreases.
When monetary and fiscal policymakers decrease aggregate demand, which of the following costs to the economy is incurred in the short run?
The price level decreases.
An American company operates a fast food restaurant in Paris, France. Which of the following statements is accurate?
The value of the goods and services produced by the restaurant is included in French GDP, but not in U.S. GDP.
An increase in a country's saving rate permanently raises its productivity.
True
Economists generally believe that policies such as reducing barriers to trade are likely to foster economic growth.
True
If a production function has constant returns to scale, then if all inputs double so does production.
True
In countries where women are discriminated against, policies that increase the likelihood of career success and educational opportunities for women are likely to decrease the birth rate.
True
Increases in both human capital per worker and physical capital per worker increase productivity.
True
Over the period 1890-2017, Japan experienced a 2.59 percent average annual growth rate of real GDP per person.
True
Over the period 1900-2014, Brazil's rate of economic growth exceeded that of China.
True
Real GDP per person in rich countries, such as Germany, is sometimes more than 10 times that of poor countries like India.
True
Which of the following is not included in either M1 or M2?
U.S. Treasury bills
Which of the following is correct?
Union membership in the United States peaked in the 1940s and 1950s.
Janet is a farmer. Which of the following are included in her human capital?
What she's learned from experience but not her tractor
Which of the following is correct?
When real GDP falls, the rate of unemployment rises.
Which of the following is not a question that macroeconomists address?
Why does the price of oil rise when war erupts in the Middle East?
An organization that tries to encourage the flow of investment from advanced countries to poor countries is the
World Bank.
Which of the following affected aggregate demand during the recession of 2008-2009?
a decline in residential construction and a decrease in lending
A decrease in U.S. interest rates leads to
a depreciation of the dollar that leads to greater net exports.
Assume the analysis of Friedman and Phelps is correct, so that the following equation is valid: Unemployment rate = Natural rate of unemployment − a * (Αctual inflation − x). In this equation,
a is a parameter that measures how much actual inflation responds to expected inflation.
Over time, continued budget deficits lead to
a lower capital stock and lower productivity.
A U.S. publisher purchases new computers that were manufactured in the U.S. This purchase by itself makes
a positive contribution both to investment and to GDP.
An increase in the interest rate could have been caused by
a rise in the price level causing the money-demand curve to shift rightward.
The classical dichotomy and monetary neutrality are represented graphically by
a vertical long-run aggregate-supply curve.
Paying efficiency wages means that wages are
above equilibrium, and profits are higher than otherwise.
A 2009 Chevrolet model has more horsepower than the 2008 version and is included in the BLS basket of goods. BLS attempts to account for this change in the market basket by
adjusting the price of the good to account for the quality change.
Suppose businesses in general believe that the economy is likely to head into recession and so they reduce capital purchases. Their reaction would initially shift
aggregate demand left.
Other things the same, an increase in the amount of capital firms wish to purchase would initially shift
aggregate demand right.
Other things the same, when the government spends more, the initial effect is that
aggregate demand shifts right.
An increase in government spending initially and primarily shifts
aggregate demand to the right.
The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the
amount of the other good that must be given up.
Which of the following is the primary cause of inflation?
an increase in the quantity of money
If an unemployed person quits looking for work, then, eventually the unemployment rate
and the labor-force participation rate both decrease.
Labor unions
are similar to cartels.
In a system of 100-percent-reserve banking,
banks do not influence the supply of money.
Opponents of active stabilization policy
believe that the political process creates lags in the implementation of fiscal policy.
Adam is looking for a job in marketing. He has had some offers and his prospects are promising, but he has not yet accepted a job. Amanda lost her job working for Mercury Bicycles because many customers decided they prefer bicycles manufactured by Ultimate Bicycles instead. Who is frictionally unemployed?
both Adam and Amanda
Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. To explain this
both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must be shifting farther.
In 2009 Congress passed legislation providing states with funds to build roads and bridges. It also instituted tax cuts. Which of these shifts aggregate demand right?
both the increased funding for states and the tax cuts
The Central Bank of Wiknam increases the money supply at the same time the Parliament of Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to the right?
both the money supply increase and the investment tax credit
Some persons are counted as out of the labor force because they have made no serious or recent effort to look for work. However, some of these individuals may want to work even though they are too discouraged to make a serious effort to look for work. If these individuals were counted as unemployed instead of out of the labor force, then
both the unemployment rate and labor-force participation rate would be higher.
When the "invisible hand" guides economic activity, prices of products reflect
both the values that society places on those products and the costs to society of producing those products.
The outer loop of the circular-flow diagram represents the flows of dollars in the economy. Which of the following does not appear on the outer loop?
capital
Which of the following is both a store of value and regularly used as a medium of exchange?
cash but not stocks
If an economy used gold as money, its money would be
commodity money, but not fiat money.
In the calculation of the CPI, tea is given greater weight than beer if
consumers buy more tea than beer.
Other things the same, continued increases in technology lead to
continued increases in real GDP and continued decreases in the price level.
Over the last fifty years both real GDP and prices have trended upward in most countries. Continuing real GDP growth and inflation can be explained by
continued technological progress and continuing increases in the money supply.
Proponents of rational expectations argued that the sacrifice ratio
could be low because people might adjust their expectations quickly if they found anti-inflation policy credible.
Minimum-wage laws
create unemployment.
An increase in government purchases is likely to
crowd out investment spending by business firms.
To increase the money supply, the Fed could
decrease the discount rate.
Aggregate demand shifts right when the government
decreases taxes.
On a bank's T-account, which are part of the banks liabilities?
deposits made by its customers but not reserves
Reserves are
deposits that banks have received but have not yet loaned out.
If your firm's production function has constant returns to scale, then if you double all your inputs, your firm's output will
double but productivity will not change.
To say that government intervenes in the economy to promote efficiency is to say that government is attempting to
enlarge the economic pie.
Proponents of zero inflation argue that a successful program to reduce inflation
eventually reduces inflation expectations.
Which of the following examples of household spending is categorized as investment rather than consumption?
expenditures on new housing
Causes of market failure include
externalities and market power.
Market failure can be caused by
externalities and market power.
The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, we would expect that the growth rate in Turan will
fall and remain lower for a long time.
If the quality of a good deteriorates while its price remains the same, then the value of a dollar
falls and the cost of living increases.
Economists generally believe that inward-oriented policies are more likely to foster growth than outward-oriented policies.
false
In the markets for goods and services in the circular-flow diagram,
firms provide households with output.
You know that a candy bar cost five cents in 1962. You also know the CPI for 1962 and the CPI for today. Which of the following would you use to compute the price of the candy bar in today's prices?
five cents (today's CPI / 1962 CPI)
Which of the following do unions not cause?
frictional unemployment
If changing consumer preferences increase the demand for satellite radios and decrease the demand for video cassette recorders, the economy will likely exhibit
frictional unemployment.
People who are unemployed because they are in search of a job that suits their skills are included within
frictional unemployment.
People who are unemployed because of job search are best classified as
frictionally unemployed.
Sandy has graduated from college and is devoting her time to searching for a job. She has seen plenty of openings but has not yet been offered one that best suits her tastes and skills. Sandy is
frictionally unemployed. Frictional unemployment exists even in the long run.
Aggregate demand shifts left if
government purchases decrease and shifts left if stock prices fall.
Aggregate demand shifts right if
government purchases increase and shifts left if stock prices fall.
The basic principles of economics suggest that
government should become involved in markets when those markets fail to produce efficient or fair outcomes.
Malthus predicted that the power of population growth was
greater than the power of the earth to produce subsistence. His forecast was off the mark.
Which of the following is an important cause of inflation in an economy?
growth in the quantity of money in the economy
According to liquidity preference theory, the money-supply curve would shift rightward
if the Federal Reserve chose to increase the money supply.
Goods produced abroad and sold domestically are called
imports.
A firm may pay efficiency wages in an attempt to
improve productivity by reducing turnover.
Jackie, a Canadian citizen, works only in the United States. The value of the output she produces is
included in U.S. GDP, but it is not included in U.S. GNP.
If the public decides to hold less currency and more deposits in banks, bank reserves
increase and the money supply eventually increases.
Other things the same, if the price level rises, people
increase domestic bond purchases, so the dollar appreciates.
Part of the argument against deficits is that they
increase interest rates and decrease investment.
In 2008, the United States was in recession. Which of the following things would you not expect to have happened?
increased real GDP.
When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good
increases as more of the good is produced.
An increase in the MPC
increases the multiplier, so that changes in government expenditures have a larger effect on aggregate demand.
If the minimum wage is currently above the equilibrium wage, then a decrease in the minimum wage
increases the quantity of labor demanded but decreases the quantity of labor supplied.
In less than two years in the early 1920s, the cost of a German newspaper rose from 0.30 marks to 70,000,000 marks. This is a spectacular example of
inflation caused by an increase in the quantity of money in the economy.
An increase in the overall level of prices in an economy is referred to as
inflation.
Factors of production are
inputs into the production process.
To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant?
introduction of new goods
A double coincidence of wants
is required when there is no item in an economy that is widely accepted in exchange for goods and services., is required in an economy that relies on barter, and is a hindrance to the allocation of resources when it is required for trade.
Money is the most liquid asset available because
it is a medium of exchange.
If the government cut expenditures during an expansion
it would tend to stabilize the economy
In a fractional-reserve banking system, a bank
keeps only a fraction of its deposits in reserve.
Benefits from trade would not include
less competition.
Other things the same, a decrease in the price level motivates people to hold
less money, so they lend more, and the interest rate falls.
As compared to a tax cut, an increase in government expenditures is likely to affect aggregate demand
less quickly and is more likely to be spent on projects with little benefit.
In the short run, an increase in the money supply is likely to lead to
lower unemployment and higher inflation.
Money
makes trade easier, is more efficient than barter, and allows greater specialization.
The existence of money
makes trade easier.
Gross domestic product adds together many different kinds of goods and services into a single measure of the value of economic activity. To do this, GDP makes use of
market prices.
Real GDP
measures economic activity and income.
GDP excludes most items that are produced and sold illegally and most items that are produced and consumed at home because
measuring them is so difficult.
Which of the following causes of unemployment is associated with a wage rate above the market equilibrium level?
minimum-wage laws, unions, and efficiency wages
If people decide to hold less money, then
money demand decreases, there is an excess supply of money, and interest rates fall.
The consumer price index is used to
monitor changes in the cost of living over time.
Reports on the current consumer price index are released every
month.
The Bureau of Labor Statistics produces data on unemployment
monthly.
If the discount rate is lowered, banks borrow
more from the Fed so reserves increase.
Other things the same, a decrease in the price level makes consumers feel
more wealthy, so the quantity of goods and services demanded rises.
Real GDP
moves in the opposite direction as unemployment.
The amount of unemployment that an economy normally experiences is called the
natural rate of unemployment.
An added benefit of inflation is that it allows for the possibility of
negative real interest rates. EX: nominal interest rate - inflation = real interest rate
Josh is a full-time college student who is not working or looking for a job. The Bureau of Labor Statistics counts Josh as
neither in the labor force nor unemployed.
Consider a small economy in which consumers buy only two goods: apples and pears. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that
neither the number of apples nor the number of pears bought by the typical consumer changes from year to year.
Suppose an economy produces only eggs and ham. In 2009, 100 dozen eggs are sold at $3 per dozen and 50 pounds of ham sold at $4 per pound. In 2010, the base year, eggs sold at $1.50 per dozen and ham sold at $5 per pound. For 2009,
nominal GDP is $500, real GDP is $400, and the GDP deflator is 125.
"Ensuring that Social Security is financially sound for future generations is an important use of taxpayer dollars" is an example of a
normative economic statement.
Suppose that the country of Xenophobia chose to isolate itself from the rest of the world. Its ruler proclaimed that Xenophobia should become self-sufficient, so it would not engage in foreign trade. From an economic perspective, this idea would
not make sense as long as Xenophobia had a comparative advantage in some good.
Suppose that dental hygienists are unionized in the eastern region of the country but not in the western region. If the unionized workers in the eastern region abolished their unions, employment
of dental hygienists in the eastern region would rise, but wages of dental hygienists in the eastern region would fall.
Production is efficient if the economy is producing at a point
on the production possibilities frontier.
Comparative advantage is related most closely to which of the following?
opportunity cost
The Bureau of Labor Statistics counts discouraged workers as
out of the labor force. If the were counted as unemployed the unemployment rate would be higher.
By not taking into account the possibility of consumer substitution, the CPI
overstates the cost of living.
Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that
people face tradeoffs.
The economy's inflation rate is the
percentage change in the price level from the previous period.
"Prices rise when the quantity of money rises rapidly" is an example of a
positive economic statement.
Apple founder Steve Jobs received patents on many of his ideas. While the patents existed, his ideas were
private goods and proprietary knowledge.
The Fed can increase the money supply by conducting open-market
purchases or by lowering the discount rate.
More generous unemployment insurance would
raise frictional unemployment.
When a minimum-wage law forces the wage to remain above the equilibrium level, it
raises the quantity of labor supplied and reduces the quantity of labor demanded compared to the equilibrium level.
Which of the following is most commonly used to monitor short-run changes in economic activity?
real GDP.
An increase in the money supply will
reduce interest rates, increasing investment and aggregate demand.
If the minimum wage were currently above the equilibrium wage, then a decrease in the minimum wage that kept it above the equilibrium wage would
reduce the surplus of labor.
In 2009, Congress and President Obama approved tax cuts and increased government spending. According to the short-run Phillips curve these policies should have
reduced unemployment and raised inflation.
An increase in the money supply
reduces interest rates and shifts aggregate demand to the right.
On a bank's T-account, which are part of the bank's assets?
reserves but not deposits made by its customers
Assume the multiplier is 5 and that the crowding-out effect is $30 billion. An increase in government purchases of $20 billion will shift the aggregate-demand curve to the
right by $70 billion.
If banks and speculators in the U.S. decided to exchange U.S. dollars for the foreign currencies of other countries, but foreigners do not desire to increase their holdings of U.S. dollars, then U.S. net exports would
rise and aggregate demand would shift right.
Suppose that neither food-service workers nor retail salespeople are unionized. If food-service workers unionize, then the supply of retail salespeople will
rise, and the wages of retail salespeople will fall.
Other things the same, when the price level rises, interest rates
rise, which means consumers will want to spend less on homebuilding.
If the quality of a good improves while its price remains the same, then the value of a dollar
rises and the cost of living decreases.
If the price level falls, the real value of a dollar
rises, so people will want to buy more. This response helps explain the slope of the aggregate demand curve.
Which of the following is included in M2 but not in M1?
savings deposits
Which of the following is not included in M1?
savings deposits
Resources are
scarce for households and scarce for economies.
The production possibilities frontier is used to illustrate some basic economic ideas, including
scarcity, opportunity cost, and economic growth.
Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally good conditions for growing crops. The good weather would
shift the short-run aggregate supply curve to the right and the short-run Phillips curve to the left.
Which of the following is a cost of inflation?
shoeleather costs, menu costs, and relative price variability
A decrease in the money supply might indicate that the Fed had
sold bonds in an attempt to increase the federal funds rate.
U.S. public policy discourages saving because
some forms of capital income are taxed twice.
The aggregate demand curve shifts left if either
speculators gain confidence in U.S. assets or foreign countries enter into recession.
Unions contribute to
structural unemployment.
Workers waiting for jobs to open up is most closely associated with
structural unemployment.
The amount of unemployment varies
substantially over time and across countries.
The introduction of a union into an industry creates a
surplus of labor and so raises unemployment.
Which of the following institutions is a central bank?
the Bank of Japan, the Bank of England, and the Federal Reserve System
Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because
the Federal Reserve is worried about unemployment.
A Korean steel company produces steel in the United States, with some of its steel being exported to other nations and some of it being sold within the United States. If the prices of this steel increase, then
the GDP deflator and the CPI will both increase.
In 1979 and 1980,
the U.S. inflation rate as measured by the CPI was higher than that measured by the GDP deflator, and the difference was explained by rapidly rising oil prices.
The Fed's control of the money supply is not precise because
the amount of money in the economy depends in part on the behavior of depositors and bankers.
The production possibilities frontier illustrates
the combinations of output that an economy can produce.
A COLA automatically raises the wage when
the consumer price index increases.
Other things the same, the aggregate quantity of goods demanded decreases if
the dollar appreciates, the interest rate rises, and real wealth falls.
If speculators lost confidence in foreign economies and so wanted to buy more U.S. bonds
the dollar would appreciate which would cause aggregate demand to shift left.
A production possibilities frontier shifts outward when
the economy experiences economic growth.
The economy will move to a point on the short-run Phillips curve where unemployment is higher if
the inflation rate decreases.
According to liquidity preference theory, the opportunity cost of holding money is
the interest rate on bonds.
According to liquidity preference theory, a decrease in money demand for some reason other than a change in the price level causes
the interest rate to fall, so aggregate demand shifts right.
For the U.S. economy, which of the following is the most important reason for the downward slope of the aggregate-demand curve?
the interest-rate effect
The self-interest of the participants in an economy is guided into promoting general economic self-interest by
the invisible hand.
During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that
the rate of growth of the quantity of money was slower in the United Kingdom than in Turkey.
If net exports is a negative number for a particular year, then
the value of foreign goods purchased exceeded the value of goods sold to foreigners during the year.
Imagine an economy in which: (1) pieces of paper called yollars are the only thing that buyers give to sellers when they buy goods and services, so it would be common to use, say, 50 yollars to buy a pair of shoes; (2) prices are posted in terms of yardsticks, so you might walk into a grocery store and see that, today, an apple is worth 2 yardsticks; and (3) yardsticks disintegrate overnight, so no yardstick has any value for more than 24 hours. In this economy,
the yardstick is a unit of account but it cannot serve as a store of value.
The six debates over macroeconomic policy exist mostly because
there are tradeoffs and people disagree about the best way to deal with them.
The long-run aggregate supply curve shifts left if
there is a natural disaster.
During the third quarter of this year a firm produces consumer goods and adds some of those goods to its inventory. During the fourth quarter of this year, the firm sells the goods at a retail outlet, with the result that the value of its inventory at the end of the fourth quarter is smaller than the value of its inventory at the end of the third quarter. These actions affect which component(s) of fourth-quarter GDP?
they increase consumption and decrease investment
When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,
those assets are government bonds and the Fed's reason for selling them is to decrease the money supply.
A decrease in taxes shifts aggregate demand
to the right. The larger the multiplier is, the farther it shifts.
In 2017 income per person in the United States was about 10 times that in India.
true
The amount of unemployment that a country typically experiences is a determinant of that country's standard of living, and some degree of unemployment is inevitable in a complex economy.
true
High-school athletes who skip college to become professional athletes
understand that the opportunity cost of attending college is very high.
The aggregate supply curve is
vertical in the long run and slopes upward in the short run.
