Macro Final Exam
If in some year nominal GDP was $20 billion and the GDP deflator was 80, what was real GDP?
$25.0 billion Real GDP = 20 x 100 / 80 = 25
Price index was 128 in Year 2, and the inflation rate was 19.6 percent between Year 1 and Year 2. The price index in Year 1 was
107.0 128 / 1.196 = 107.0
Which of the following would shift the long-run aggregate supply curve right?
An increase in the capital stock, but not an increase in the price level
Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?
As the price level increases, the interest rate rises, so spending falls
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
Refer to Figure 34-7. Suppose the multiplier is 5 and the government increases its purchases by $15 billion. Also, suppose the AD curve would shift from AD1 to AD2 if there were no crowding out; the AD curve actually shifts from AD1 to AD3 with crowding out. Also, suppose the horizontal distance between the curves AD1 and AD3 is $55 billion. The extent of crowding out, for any particular level of the price level, is
$20 billion
Refer to Table 23-2. What was country Krugeveaux's net exports in 2019?
-$52 ($88 - $140) = -$52
If the law of demand applies to this good, then Q1 could be
0 (as price increases, quantity demanded falls; all of the other options are greater or equal to 100)
Refer to Figure 2-6. If the economy is currently producing at point D, what is the opportunity cost of moving to point B?
0 forks
Which of the following is included in GDP?
Both the market value of rental housing services and the market value of owner-occupied housing services
In 2008, the United States was in recession. Which of the following things would you not expect to have happened?
Increased real GDP
The following equations represent the demand and supply for kumquats. QD = 60 - 3PQS = -20 + 5P What is the equilibrium price (P) and quantity (Q - in thousands) of kumquats?
P = $10; Q = 30 thousand Put QD=QS for equilibrium 60-3P = -20+5P 80=8P P=10
Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for limo rides and that limo rides and helicopter rides are substitutes. What panel describes what happens in this market when the price of helicopter rides fall?
Panel D
In a closed economy, if Y, C, and T remained the same, a decrease in G would
increase public saving but not private saving
In the 1970s, in response to recessions caused by an increase in the price of oil, the central banks in many countries increased their money supplies. The central banks might have done this by
purchasing bonds on the open market, which would have lowered the value of money
Scenario 34-1. Take the following information as given for a small economy: • When income is $10,000, consumption spending is $6,500. • When income is $11,000, consumption spending is $7,250. Refer to Scenario 34-1. The marginal propensity to consume for this economy is
0.750 MPC=($7250-$6500)/($11000-$1000) = 0.75
Refer to Table 28-1. How many in the sample are in the labor force?
10 (Allen and Calvin are not in the labor force) -had to have looked for work in the past 4 weeks
Refer to Figure: Clorox Wipes. A decrease in the price of a complement (trashbags) would be represented by a movement from
D1 to D2
Consider a closed economy. If national saving is greater than zero, which of the following must be true?
Y - C - G > 0
Suppose a decrease in interest rates causes falling unemployment and rising output. To counter this, the Federal Reserve would
decrease the money supply
The following table pertains to Shishkaton, an economy in which the typical consumer's basket consists of 15 pounds of prunes and 7 dolls. The cost of the basket
decreased from Year 1 to Year 2 and decreased from Year 2 to Year 3 Year 1 = 12+7 = 19 Year 2 = 10+6 = 16 Year 3 = 8+5 = 13
During recessions, taxes tend to
fall and thereby increase aggregate demand
Aggregate demand includes
the quantity of goods and services the government, households, firms, and customers abroad want to buy
The inflation tax refers to
the revenue a government creates by printing money
Refer to Figure: Chase Rice Concert Tickets. If the price is $25,
there is a surplus of 300 tickets (at $25, supply is at 800 and demand is at 500) (800 supply - 500 demand = 300 surplus)
Refer to Table 23-1. The market value of all final goods and services produced within Mindalion in 2019 is
$200
A company sells steel to a scooter company for $150. The scooter company uses the steel to produce a scooter, which it sells for $290. Taken together, these two transactions contribute
$290 to GDP (GDP only includes the final value of goods and services sold in the economy and does not include the intermediate goods)
Will's expenditures on food for three consecutive years, along with other values, are presented in the following table. Refer to Table 24-4. To the nearest dollar, Will's Year 1 food expenditures in Year 2 dollars amount to
$4,160 (Yr 1 exp. on food in Yr 2 dollars = (exp. on food in Yr 1) x (CPI in Yr 2 / CPI in Yr 1) ($4000) x (182 / 175) = 4,160
If a bank with a required reserve ratio of 15 percent receives a deposit of $600, it now has a
$510 increase in excess reserves and a $90 increase in required reserves (600 x .15 = 90) (600 - 90 = 510)
The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Cedarland is $5 billion. For Cedarland, investment is
$6 billion and consumption is $6 billion
If velocity = 8, the quantity of money = 2,300, and the price level = 2.25, then the real value of output is approximately
$8,178 (2300 x 8) / 2.25
Suppose that in a closed economy GDP is equal to $33,000, consumption equal to $18,000, government purchases equal $6,500, and taxes equal $6,750. What are private saving, public saving, and national saving?
$8,250, $250, and $8,500, respectively
Suppose the consumer price index was 184 in Year 1 and 198.17 in Year 2. The nominal interest rate during this period was steady at 5.8 percent. What was the real interest rate during this period?
-1.9 percent (find inflation then use real interest rate formula)
If the nominal interest rate is 6% and the inflation rate is 9%, then the real interest rate is
-3% Real interest rate = nominal interest rate - inflation rate
Refer to Table 28-2. Suppose that the natural rate of unemployment is 5% for those under 55 and 3% for those 55 and older. The cyclical unemployment rate for those under 55 is
0.88%, which is less than the cyclical unemployment rate for those 55 and older (find total labor force then unemployment rate which = 5.88% then subtract natural rate of unemployment (5%) = 0.88%) -do the same for 55 and older and compare https://www.chegg.com/homework-help/questions-and-answers/labor-force-status-number-employed-number-unemployed-number-population-age-less-55-55-olde-q69917914
On the following graph, MS represents the money supply and MD represents money demand. Refer to Figure 30-3. Suppose the relevant money-supply curve is the one labeled MS1; also suppose the economy's real GDP is 30,000 for the year. If the market for money is in equilibrium, then the velocity of money is approximately
12.0
Refer to Figure 28-1. If the government imposes a minimum wage of $7, then how many workers will be unemployed?
20 at $7, demand is 40 and supply is 60 (60-40 = 20)
Suppose a burrito costs $6. Clara holds $120. What is the real value of the money she holds?
20 burritos. If the price of burritos rises, to maintain the real value of her money holdings she needs to hold more dollars.
In 2017, Smileytown consumed 50,000 tubes of toothpaste. In 2018, toothpaste consumption rose to 62,000 tubes. Calculate the percentage change in toothpaste consumption.
24% -% change in consumption formula = [(62,000 - 50,000) / 50,000]
Refer to Figure 2-6. If the economy is currently producing at point B, what is the opportunity cost of moving to point C?
26 thousand forks
If the consumer price index was 100 in the base year and 103 in the following year, then the inflation rate was
3 percent (103-100) / 100*100 = 3%
Refer to Figure 34-3. Which of the following sequences (numbered arrows) shows the logic of the interest-rate effect on the slope of aggregate demand?
3, 2, 1, 4
Katarina puts money into an account. One year later she sees that she has 6 percent more dollars and that her money will buy 2 percent more goods. The nominal interest rate was
6 percent and the inflation rate was 4 percent -the increase in dollar value is the nominal interest rate -inflation = nominal interest rate -real interest rate
Use the above graph to answer the following question. If this economy uses all of it's resources to produce quesadillas, what's the maximum amount of quesadillas it can possibly produce?
70 quesadillas
The following table pertains to Danishia, an economy in which the typical consumer's basket consists of 15 bushels of prunes and 5 bushels of macadamia . Refer to Table 24-1. If Year 1 is the base year, then the CPI for Year 2 was
83.33
If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, what is the labor force participation rate?
95% # in Labor force = 19/0.04 = 475 million Labor force participation rate = 475/500 = 95
The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. Refer to Figure 26-3. Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?
A movement from Point B to Point F
Which of the following is an example of an efficiency wage?
An above-equilibrium wage offered by a firm to attract a more talented pool of job applicants
Refer to Figure: Clorox Wipes. A decrease in the price of Clorox wipes would be represented by a movement from
B to A
Imagine that in the current year the economy is in long-run equilibrium. Then the federal government reduces its purchases of goods by 50%. In the short run what happens to the price level and real GDP?
Both the price level and real GDP fall
Country K had a population of 1,400, of whom 350 worked an average of 8 hours a day and had a productivity of 44. Country L had a population of 2,500, of whom 1,250 worked 6 hours a day and had productivity of 41.
Country L had the higher level of real GDP and real GDP per person GDP = 350 x 8 x 44 or 41 x 1250 x 6 Real GDP = 123200 / 1400 (population) or 307500 / 2500 (population)
Which of the following explains why many European countries have unemployment rates that are higher than in the United States?
European countries offer higher unemployment benefits than the United States
Suppose the government passes a law eliminating holidays and, as a result, the production of goods and services increases because people work more days per year (and thus enjoy less leisure per year). Based on this scenario, which of the following statements is correct?
GDP would definitely increase because GDP excludes leisure
Hideo and Hannah decide to go on a vacation. As a result, they withdraw $5,000 from their savings account to purchase $5,000 worth of traveler's checks. As a result of these changes,
M1 increases by $5,000 and M2 stays the same
The following table describes what traders in a small economy want versus what they have. Refer to Table 29-1. Which, if any, pairs of traders has a double coincidence of wants?
Only Christian with Ellie
Refer to Figure 2-1. ___________ is (are) considered inefficient given the current resources.
Only point A
Which of the following would likely be studied by a microeconomist rather than a macroeconomist?
The impact of minimum-wage laws on employment in the fast food industry
Suppose the state of Illinois passes a law that bans smoking in restaurants. As a result, residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there. Which of the following principles does this best illustrate?
People respond to incentives
Refer to Figure 33-5. Suppose the economy starts at Point R. If aggregate demand increases from AD2 to AD3, then in the short run the economy moves to
Point O
Which of the following policies can the Fed follow to increase the money supply?
Reduce the interest rate on reserves
Refer to Figure: Clorox Wipes. An increase in the price of bleach (an input for Clorox wipes) would be represented by a movement from
S2 to S1 (less quantity supplied; a shift from right to left)
Which of the following countries benefited significantly from the catch-up effect in the last half of the twentieth century?
South Korea
The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. Refer to Figure 26-1. Which of the following events would shift the supply curve from S2 to S1?
The government begins running a budget deficit
Refer to Table 4-4. Suppose that the quantity of labor supplied increases by 40,000 at each wage level. What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?
W = $9.50; Q = 610,000 (Equilibrium wage rate is where quantity demanded of labor is = to quantity supplied. With new quantity supplied equilibrium wage rate will be $9.50 per hour because at this rate quantity demanded and quantity supplied of labor both are 610,000 or both are equal.)
Figure 2-4 shows various points on three different production possibilities frontiers for a nation. Refer to Figure 2-4. A movement from ________ is the result of advancements in both plastics and food products production technology.
X to Y
For which of the following individuals would the opportunity cost of going to college be highest?
a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree
If net exports fall $40 billion, the MPC is 9/11, and there is a multiplier effect but no crowding out and no investment accelerator, then
aggregate demand falls by 11/2 × $40 billion
Refer to Table 2-1. Assume Love's kitchen only produces cakes and roast chicken. A combination of 40 cakes and 50 roast chickens would appear
along Love's production possibilities frontier
Efficiency wage
an above-market wage that a firm pays to increase workers' productivity
Electric car enthusiasts want to buy more electric cars at a lower price. All of the following events would have this effect except
an increase in the price of gasoline (a substitute for electric cars)
Other things the same, as the price level decreases it induces greater spending on
both net exports and investment
An increase in the price of bread produced domestically will be reflected in
both the GDP deflator and the consumer price index
Makeupville faces __________ opportunity costs in the production of mascara and eyeliner.
changing
Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the
demand for existing shares of the stock and the price will both fall
From 2001 to 2005 there was a dramatic rise in the value of houses. If this rise made homeowners feel wealthier, then it would have shifted aggregate
demand right
The traditional view of the production process is that capital is subject to
diminishing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries
Esmeralda is taking a three month leave from work to travel across Europe. The Bureau of Labor Statistics counts Esmeralda as
employed and in the labor force
One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI
fails to account for the introduction of new goods
Government purchases include spending on goods and services by
federal, state, and local governments
The demand for workers often rises in one region of the U.S. and falls in another. This illustrates
frictional unemployment created by sectoral shifts
A student who just graduated from college but has not found a job would most likely be
frictionally unemployed
Other things the same, a country that increases its savings rate will have
higher future capital and higher future real GDP per person
Suppose the government changed the tax laws, with the result that people were encouraged to consume more and save less. Using the loanable funds model, a consequence would be
higher interest rates and lower investment
According to liquidity preference theory, the money-supply curve would shift rightward
if the Federal Reserve chose to increase the money supply
Refer to Table 3-2. The table above shows the demand schedules for caviar of two individuals (Ari and Sonia) and the rest of the market. If the price of caviar falls from $45 to $35, the market quantity demanded would
increase by 70 oz
When taxes decrease, interest rates
increase, making the change in aggregate demand smaller
When the price level rises, the number of dollars needed to buy a representative basket of goods
increases, and so the value of money falls
The value of goods added to a firm's inventory in a certain year is treated as
investment, since GDP aims to measure the value of the economy's production that year
A mutual fund
is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of both stocks and bonds
When the government's budget deficit increases the government is borrowing
more and public savings falls
The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected, production is
more profitable and employment and output rises
The following table pertains to Shishkaton, an economy in which the typical consumer's basket consists of 15 pounds of prunes and 7 dolls. The inflation rate was
negative in Year 2 and negative in Year 3
In order to promote growth in living standards, policymakers must
protect property rights and maintain political stability
The overriding reason why households and societies face many decisions is that
resources are scarce
When conducting an open-market sale, the Fed
sells government bonds, and in so doing decreases the money supply
Suppose that when the price of strawberries decreases, Simone increases her purchase of whipped cream. To Simone
strawberries and whipped cream are complements
If the price in the market were $28, there would be a
surplus of 10 units (40 minus 30 = 10 surplus)
Refer to Figure 30-1. When the money supply curve shifts from MS1 to MS2,
the equilibrium value of money decreases
Economists assume that rational people do all of the following except
undertake activities that benefit others and hurt themselves
Frictional unemployment
unemployment that occurs when people take time to find a job
Structural unemployment
unemployment that occurs when workers' skills do not match the jobs that are available
Cyclical unemployment
unemployment that rises during economic downturns and falls when the economy improves