Macro final study guide

The currency drain ratio is 0.4 of deposits and banks' reserve is 0.6. What is the money multiplier? The money multiplier is ______.

1.6

Real GDP _______.

does not include a measure of leisure time or environmental quality

A currency drain ____ bank deposits and ____ bank reserves.

decreases; decreases

When an economy is below full employment and the government has a budget deficit, that deficit ______.

exceeds the structural deficit

A typical business cycle can be described by the sequence _______.

expansion, peak, recession, trough

The supply of loanable funds is influenced by all of the following except ______.

expected profit

Net exports increase when ______.

exports increase by more than imports increase

For a given increase in the monetary base, ________

the resulting increase in M2 is greater than the resulting increase in M1

All of the following statements are correct except _____.

the return to full employment in an expansion phase of the business cycle is economic growth

Which of the following are included in the expenditure approach to calculating GDP?

investment, government expenditure, net exports of goods and services

One consequence of China operating a crawling peg is that China _____. China fixes its exchange rate _____.

is accumulating US dollars; as a way of achieving a low inflation rate

Choose the statement that is incorrect.

the return to full employment in an expansion phase of the business cycle is economic growth

In RBC theory, the lower the real interest rate, other things remaining the same, the _____ today.

smaller is the supply of labor

Potential GDP increases for all of the following reasons except _____.

the price level rises

Choose the statement that is incorrect.

In the long run, demand and supply in the loanable funds market depends on demand and supply in the market for bank reserves.

Examples of fiscal policy that increase aggregate demand include​ ______.

an increase in government​ expenditure, a decrease in​ taxes, and an increase in transfer payments

when the FED fights recession, _____.

an increase in the supply of loanable funds lowers the long term interest rate and increases investment

Biscotti bought by Delta Airlines and served to passengers is an example of ________ good. The waste basket you bought when you moved into residence is an example of _________ good.

an intermediate; a final

According to new growth theory ______.

growth can persist indefinitely

In the neoclassical growth theory

growth will stop if technology stops advancing

Click on the icon to study the Economics in the News article. Then answer the following questions. The appreciation of the yuan against the dollar​ ______ the U.S. current account deficit. The U.S. current account deficit arises because​ ______.

has negligible effect on; there is too little private and government saving relative to investment

Potential GDP is $10 trillion and actual GDP is $8 trillion. The economy has a structural deficit of $1.5 trillion and an actual deficit of $2 trillion. The cyclical deficit is _____.

$0.5 trillion

The money multiplier can be calculated as ______, where C is currency, D is deposits, and R is banks' reserves.

(1 + C/D) + (R/D + C/D)

When the price of an asset rises, ______.

The interest rate falls

According to classical growth theory, when real GDP per person _______, the population grows.

rises above the subsistence level

The table gives data about an economy in 2010. The value of GDP in 2010 is ______. Table: (amount in billions) Personal consumption expenditures: 760 Compensation of employees: 695 Indirect taxes less subsidies: 156 Gross private domestic investment: 265 Net exports of goods and services: 51 Government expenditure on goods and services: 297

$1.373 billion

Aggregate income in an economy in 2014 is $100 billion. Saving is $25 billion and imports are $30 billion. Aggregate expenditure in the economy in 2014 is

$100 billion

January 1, 2014, Sophie's Sunlounge owned 4 tanning beds valued at $20,000 During 2014, Sophie's bought 3 new beds at a total cost of $12,000, and at the end of the year the market value of all of Sophie's beds was $27,000. Calculate Sophie's gross investment and depreciation during 2014. Sophie's gross investment during 2014 was _______. Sophie's depreciation during 2014 was _______.

$12,000; $5,000

The figure show the labor market when an income tax is imposed. The tax wedge is _____.

$15 an hour

Rob takes a summer job with a landscaping firm. During the summer, he earns an after-tax income of $3,500 Everything else remaining the same, what was the change in Rob's wealth during the summer? The change Rob's wealth is ______.

$2500

Cindy takes a summer job painting houses. During the​ summer, she earns an​ after-tax income of ​$5,000 and she spends ​$2,000 on living expenses. What was​ Cindy's saving during the​ summer? ​Cindy's saving during the summer was ​______.

$3,000

Annie runs a fitness center. On december 31, 2013, she bought an existing business with exercise equipment and a building worth $400,000. At the end of 2014, her equipment and buildings were worth $685,000. Calculate Annie's gross investment, net investment, and depreciation during 2014. Annies gross investment during 2014 was _________. Annies net investment during 2014 was ________. Annies depreciation during 2014 was _________.

$300,000 $285,000 $15,000

Aggregate income in an economy in 2014 is $350 billion. Saving is $30 billion and imports are $35 billion. Aggregate expenditure in the economy in 2014 is ______.

$350 billion

In an economy, there is $125 million in currency held outside banks, $200 million in traveler's checks, $300 million in currency held inside the banks, $250 million in savings deposits, $2,000 million in time deposits, and $800 million in money market mutual funds and other deposits. The value of M1 is ______ and the value of M2 is ________.

$575 million; $3,875 million

A south sea island produces only coconuts. In 2011, the price of a coconut is $2.50 and the quantity produced is 300. In 2013, the price of a coconut is $2.00 and the quantity produced is 250. 2011 is the reference base year. Real GDP in 2013 in terms in terms of base-year prices is _______.

$625

January 1, 2014, Sophie's Sunlounge owned 4 tanning beds valued at $20,000 During 2014, Sophie's bought 3 new beds at a total cost of $14,000, and at the end of the year the market value of all of Sophie's beds was $27,000. What was Sophie's net investment? Sophie's net investment during 2014 was _______.

$7,000

Aggregate income in an economy in 2014 is $995 billion. Saving is $30 billion and imports are $35 billion. Aggregate expenditure in the economy in 2014 is _______.

$995 billion

In 2012, US exports were $2,196 billion and imports were $2,743 billion. What is the value of net exports? The value of net exports in 2012 was ______ billion dollars

-547

In 2008, US exports were $1,847 billion and imports were $2,557 billion. What was the value of net exports? The value of net exports in 2008 was ______ billion dollars

-710

The table shows the receipts and the outlays of a nation at each level of real GDP. What is the budget deficit when real GDP is ​$6 ​trillion? When real GDP is $6 trillion, the budget balance is ____ trillion dollars.

.2 (receipts - outlays)

Suppose that potential GDP and the velocity of circulation are constant. What is the change in the price level in the long run if the quantity of money increases by 1 percent a year? If the quantity of money increases by 1 percent a year, in the long run the change in the price level is ____ percent a year

1

A country has been in existence for only two years. In the first​ year, receipts were​ $1.0 million and outlays were​ $1.5 million. In the second​ year, receipts were​ $1.5 million and outlays were​ $2.0 million. At the end of the second​ year, the government had issued debt worth​ ______.

1 million

The people who live on Second Life Island consume only juice and cloth. Last year, which was the CPI base year, the price of juice was $4 a bottle, the price of cloth was $6 a length, and the average urban household spent $24 on juice and $24 on cloth. This year, the price of juice is $6 a bottle and the price of cloth is $3 a length. What is the CPI in the current year? The CPI in the current year is _______.

100

The people who who live on Second Life Island consume only juice cloth. Last year, which was the CPI base year, the price of juice was $6 a bottle, the price of cloth was $3 a length, and the average urban household spent $54 on juice $27 on cloth. This year, the price of juices is $3 a bottle and the price of cloth is $7 a length. What is the CPI in the current year? The CPI in the current year is

111.1

The CPI in 2013 is 220 and the CPI in 2014 is 246.4. The inflation rate in 2014 is _____ percent. The inflation rate is 2014 _______.

12; might b higher, lower, or the same as in 2013.

The table gives information about the US labor market in 2011. What is the number of people unemployed? The number of people unemployed is _______ million. Table: Working age population: 239.6 million Labor force: 153.6 million Employed: 139.9 million

13.7

The table provides some data on real GDP and the population of Eastiana in 2010 and 2011. What is the growth rate of real GDP in Eastiana in 2011? What is the growth rate of real GDP per person in Eastiana in 2011? The growth rate of real GDP in Eastiana in 2011 is ___ percent. The growth rate of real GDP per person in Eastiana in 2011 is ___ percent. Table: Year, Real GDP (trillions), Population (billions) 2010: 600,000; 750 2011: 719,840; 818

20; 10

Suppose an increase in the monetary base of $400,000 increases the quantity of money by $1,200,000. Calculate the money multiplier. The money multiplier is _____.

3

Suppose that potential GDP and the velocity of circulation are constant. What is the change in the price level in the long run if the quantity of money increases by 3 percent a year? If the quantity of money increases by 3 percent a year, in the long run the change in the price level is ____ percent a year

3

The quantity of money is $4 billion and GDP is $20 billion. What is the velocity of circulation? The velocity of circulation is ____.

5

The population survey in blogsville for the past month is given in the table. In blogsville last month, _______ million people were in the labor force and ______ million people were in the working-age population. Table: 1. 40 million people had full time jobs 2. 11 million people had part time jobs 3. 5 million people were without work but were available for work and had made specific efforts to find a job within the past four weeks or were waiting to be recalled from a layoff or had a new job to start within the next 30 days. 4. 3 million part-time workers were looking for full-time jobs 5. 24 million people of working age did not have jobs and did not want jobs

56; 80

The bank plans to hold ​$5 for every​ $100 in deposits. The bank holds actual reserves of ​$8,000 and desired reserves of ​$22,000. What is the​ bank's desired reserve ratio and its excess reserves​? The banks desired reserve ratio is ____ percent. The banks excess reserves are _____.

5; $14,000

The CPI in 2013 is 140 and the CPI in 2014 is 147. The inflation rate in 2014 is ___ percent. The inflation rate in 2014 ________.

5; might be higher, lower, or the same as in 2013

The table provides some data on real GDP and the population of Europa in 2010 and 2011. What is the growth rate of real GDP in Europa in 2011? What is the growth rate of real GDP per person in Europa in 2011? The growth rate of real GDP in Europa in 2011 is ___ percent. The growth rate of real GDP per person in Europa in 2011 is ___ percent. Table: Year, Real GDP (trillions), Population (billions) 2010: 100,000; 200 2011: 107,060; 202

7; 6

The CPI in 2013 is 140 and the CPI in 2014 is 149.8. The inflation rate in 2014 is _____ percent. The inflation rate in 2014 _______.

7; might be higher, lower, or the same as in 2013.

______ good in an item that is bought by its final user during a specific time period. ______ good is an item that is produced by one firm, bought by another firm, and used as a component of a final good or service.

A final; an intermediate

Choose the statement that is incorrect

A government budget surplus competes with investment funds

Choose the statement that is incorrect.

Along the LAS curve the money wage rate is constant and the real wage rate rises as the price level rises.

Choose the statement that is incorrect

Along the SAS​ curve, the real wage rate and the price level change by the same percentage.

Choose the statement that is incorrect.

An increase in government expenditure increases government borrowing (or decreases government lending if there is a budget surplus) and lowers the real interest rate.

Choose the statement about the long run Phillips curve that is incorrect.

An unexpected increase in aggregate demand shifts the long run Phillips curve rightward.

Choose the statement that is incorrect

An unexpected inflation or deflation has no effect on the economy

Choose the statement that is incorrect.

As the federal funds rate​ rises, the quantity of reserves supplied increases.

Choose the statement that is incorrect

Classical growth theory tells us that technological change induces a level of saving and investment that makes capital per hour of labor grow indefinitely

Choose the statement that is incorrect

Coins, which are issued by the Treasury are an asset of the Fed and a component of the monetary base

Choose the correct equation.

Depreciation = Gross investment - Net Investment

Click on the icon to read the news clip, then complete the following steps. The graph shows the market for loanable funds. Draw a curve to shows the effect of TransCanada going to the loanable funds market to finance the building of its pipeline. Draw a point to show the new equilibrium in the loanable funds market, When TransCanada goes to the loanable funds market to finance the building of its pipeline, the real interest rate _____, private saving ______, and investment _________.

Draw a curve above the demand curve so that it intersects one number above where the original did. draw a new equilibrium. Rises; increases; increases

Draw an aggregate demand curve. Label it AD. Draw an arrow on the AD cure that shows the international substitution effect when the price level falls. Label it 1. Draw an arrow in the AD curve that shows the international substitution effect when the price level rises. Label it 2. Other things remaining the same, when the US price level rises, US made goods and services become _____ expensive relative to foreign-made goods and services. People spend ____ on US made items and ____ on foreign made items. ________ decreases.

Draw a demand curve (straight line). Draw an arrow going along the demand curve going DOWN and label it 1. Draw an arrow along the demand curve GOING UP and label it 2. more less; more the quantity of US real GDP demanded.

The graph shows the demand curve for US dollars. Draw a new demand curve that shows the effect of an increase in the world demand for US exports. Label it A change in the expected future exchange rate changes the demand for US dollars ______, and a change in the world demand for US exports changes the demand for US dollars _________.

Draw a demand curve above the original demand curve. today, today

Choose the statement that is incorrect

In the federal funds market, the higher the federal funds rate, the smaller is the quantity of overnight loans supplied

The graph shows the demand curve for US dollars. Draw a new demand curve that shows the effect of an increase in the US interest rate differential. Label it. The US interest rate differential rises when _________.

Draw a demand curve above the original one. The US interest rate rises and the foreign interest rate falls.

The graph shows the demand curve for US dollars. Draw a new demand curve that shows the effect of a decrease in the US interest rate differential. Label it. The US interest rate differential falls when _________.

Draw a demand curve below the original demand curve. The US interest rate falls and the foreign interest rate rises.

The graph shows the demand curve for US dollars. Draw a new demand curve that shows the effect of a decrease in the world demand for US exports. Label it A change in the expected future exchange rate changes the demand for US dollars ______, and a change in the world demand for US exports changes the demand for US dollars _________.

Draw a demand curve below the original one today; today

Draw an aggregate demand curve. Label it AD. Draw a shirt run aggregate supply curve. Label it SAS. Draw a point at the short run macroeconomic equilibrium. Label it 1. Draw a point on the SAS curve at which inventories pile up. Label it 2. When unwanted inventories pile up, _____. Prices _____.

Draw a demand curve line. Label. Draw a supply curve line. Label. Draw a pint at equilibrium. Label. Draw a point on the supply curve above the equilibrium point. the quantity of real GDP supplied is greater than the quantity of real GDP demanded; fall

Draw an aggregate demand curve in an economy with an above full-employment equilibrium. Label it AD. Draw a point at the above full-employment equilibrium. Draw a horizontal arrow at the equilibrium price level that shows the output gap. The output gap in the graph is _______ because _________.

Draw a demand curve that is a regular demand curve that crosses above the LAS curve. it needs to cross the SAS curve to the right of the LAS curve. then draw point where SAS and AD curve cross. Put an arrow in the space between the equilibrium point and the LAS line an inflationary gap; potential GDP is less than real GDP.

Draw an aggregate demand curve in an economy with a below full-employment equilibrium. Label it AD. Draw a point at the below full-employment equilibrium. Draw a horizontal arrow at the equilibrium price level that shows the output gap. The output gap in the graph is _____ because _________.

Draw a demand curve that is a regular demand curve that crosses below the LAS curve. it needs to cross the SAS curve to the left of the LAS curve. then draw point where SAS and AD curve cross. Put an arrow in the space between the equilibrium point and the LAS line a recessionary gap; potential GDP exceeds real GDP

The table gives an economy's aggregate demand, short run aggregate supply, and long run aggregate supply schedules. 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. The graph shows _______ gap

Draw a graph based on the points. Draw an arrow in the space between the lAS and the equilibrium an inflationary

Draw a curve that shows the relationship between the tax rate and the amount of tax revenue collected. The relationship between the tax rate and the amount of tax revenue collected is called the _____ curve. The curve shows that _____.

Draw a laffer curve laffer; tax cuts can increase tax revenue

The graph shows the loanable funds market. During the 1990's, the invention and use of fiber-optic technologies required billions of dollars to be spent laying new cables under the oceans and launching communications satellites Draw a curve that shows the effect of this event. Label it. Draw a point to show the new equilibrium quantity of loanable funds and real interest rate.

Draw a line above the demand curve. so from top left to bottom right draw a point on the new equilibrium

The graph shows the economy in long run equilibrium. Then the world economy expands and the demand for US produced goods increases. Draw a curve that shows: 1: the effect of increased demand for US produced goods. Label it 1. 2: the effect of a rising money wage rate that returns the economy to full employment. Label it 2. Draw a point at the new long run equilibrium. An economy is in a long-run equilibrium. An increase in aggregate demand creates _____ gap. A rise in the money wage rate decreases ____ and returns the economy to a full employment equilibrium.

Draw a new demand curve above the AD curve. label 1. draw a new supply curve above the supply curve label 2. (both should be higher than original curve). draw a new point where new lines cross an inflationary; the quantity of real gdp demanded

The graph shows an aggregate demand curve. Draw a curve that shows the effect on aggregate demand of an increase in the unexpected future inflation rate. Label it. An increase in unexpected future income _____ aggregate demand. An increase in the expected future inflation rate _____ aggregate demand An increase in expected future profits _____ aggregate demand.

Draw a new demand curve above the original one (on top of) increases; increases; increases

The graph gives a long-run aggregate supply curve and a short-run aggregate supply curve. Draw a new curve that shows the effect of a rise in the money wage rate. Label it When a rise in the money wage rate _________.

Draw a new supply curve above the old one (on top of) the quantity that firms are willing to supply at each price level decreases

The graph shows the loanable funds market when there is neither a government budget surplus nor a government budget deficit. Draw a point at the equilibrium quantity of loanable funds and the equilibrium real interest rate. Label it 1. Now suppose the government has a budget deficit of $1 trillion. Draw a curve that shows the effect of this deficit in the loanable funds market. Label it. Draw a point at the new equilibrium real interest rate and quantity of saving. Label it 2. Draw a point to show investment when the government budget deficit is $1 trillion. Label it 3

Draw a point at equilibrium and label 1 Draw a curve above the PDLF (demand curve) (make it so the intersection of the new demand curve and supply curve is one number above the original) label curve Draw a point at new equilibrium Draw a point on the old demand curve that is parallel to the new demand curve equilibrium

The graph shows an economy's long run aggregate demand curve. Draw an aggregate demand curve and a short run aggregate supply curve such that when the economy is in long run equilibrium, the price level is 11. label the curve. Draw a point at the long run macroeconomic equilibrium. In the long run macroeconomic equilibrium _____.

Draw a supply curve and a demand curve that cross at 110. potential GDP and aggregate demand determine the price level, and the money wage rate adjusts so that the SAS curve intersects the LAS curve at the long run equilibrium price level.

Draw a demand for dollars curve, Label it D. Draw a supply curve, label is S. Draw a point at the equilibrium quantity and equilibrium exchange rate. Draw an arrow between the D and S curves that indicates a price at which there is a surplus of dollars, Label it. Then there is a surplus of dollars in the foreign exchange market, _________.

Draw a supply and demand curve (curved not straight) Draw a point at the equilibrium Draw a horizontal arrow above the equilibrium between the supply and demand curve that touches each curve the forces of supply and demand pull the foreign exchange market into equilibrium

Draw an aggregate demand curve. Label it AD. Draw a short run aggregate supply curve. Label it SAS. Draw a point at the short run macro equilibrium. label it 1. Draw a point on the SAS curve at which firms are unable to meet the demand for their output. label it 2. When firms are unable to meet the demand for their output, ______. Prices _________.

Draw a supply and demand curve and label them (with straight lines, not curved) Draw a point at the equilibrium. Draw point on the SAS curve below the equilibrium point. Label it 2. the quantity of real gdp demanded is greater than the quantity of real gdp supplied; rise

Draw a labor supply curve and a labor demand curve. Label the LSo and LDo Draw a point at the equilibrium real wage rate. Label it 1. Draw and label a curve that shows the effect of an increase in population. Draw a point at the new equilibrium quantity of labor and the equilibrium real wage rate. An increase in the population ______ potential GDP and ______ potential GDP per hour of labor.

Draw a supply curve (bottom left to top right) and a demand curve (top left to bottom right) (make sure both curves are actually curved not just straight lines, especially supply curve) Put a point at the equilibrium point Draw a new supply curve to the right of the original supply curve and label put a point at new equilibrium point increases; decreases

The graph shows the supply curve of US dollars. Draw a new supply curve that shows the effect of a decrease in the US demand for imports. Label it A change in the expected future exchange rate changes the supply of US dollars _____, and a change in US demand for imports changes the supply of US dollars _______.

Draw a supply curve above the original supply curve. today; today

The figure shows the demand for money curve in Epsilon. The quantity of money is $3.1 trillion. Draw the supply of money curve. label it Draw a point at the equilibrium in the money market. If the interest rate is 5 percent, people will ________.

Draw a vertical line (up and down) at 3.1 on the x axis and label it buy bonds, bid up their price, and the interest rate will fall

Draw the long run aggregate supply curve when potential GDP is $12.5 trillion. Label it. As we move up along the long run aggregate supply curve, _____.

Draw a vertical line at 12.5 on the x axis. label it. the real wage rate remains constant.

The graph shows the supply curve for US dollars. The exchange rate is currently 100 yen per dollar. Over time, the exchange rate rises to 120 yen per dollar. Show the effect in the graph. Draw either a new supply curve or an arrow along the curve showing the direction of change. The law of supply for foreign exchange states that other things remaining the same, the _____ the exchange rate, the ______ in the foreign exchange market. The graph ____ illustrate the law of supply of foreign exchange

Draw an arrow along the curve going (pointing) upwards from where 100 on the graph is to 120 on the graph higher; greater is the quantity of US dollars supplied does

The graph shows the demand curve for US dollars. The exchange rate is currently 100 yen per dollar. Over time, the exchange rate rises to 120 yen per dollar. Show the effect in the graph. Draw either a new demand curve or an arrow along the curve showing the direction of change. The law of demand for foreign exchange states that other things remaining the same, the _____ the exchange rate, the smaller is the ______ in the foreign exchange market.

Draw an arrow along the curve going (pointing) upwards from where 100 on the graph is to 120 on the graph higher; quantity of US dollars demanded

The graph gives a long run aggregate supply curve and a short run aggregate supply curve. Draw an arrow along one of the curves that illustrates a rise in the price level when the money wage rate remains unchanged. Label it 1. Draw an arrow along one of the curves that illustrates a rise in the price level accompanied by the same percentage rise in the money wage rate. Label it 2. an increase in the price level when the money wage rate remains unchanged increases _____.

Draw an arrow going up along the SAS curve (pointing up to the right). label it 1. and then draw going up along the LAS curve, label it 2. the quantity of real GDP supplied

Choose the statement that is incorrect.

If the inflation rate is below or expected to move below the bottom of the comfort zone, the Fed considers raising the interest rate

The graph shows a short run Phillips curve. Draw an arrow on the curve that shows the effect of an unexpected increase in aggregate demand. When aggregate demand unexpectedly increases, _________.

Draw an arrow on curve going up to the left. the natural unemployment rate does not change

The graph shows the production function of an economy. Currently, the full-employment quantity of labor is 200 billion hours a year. Population increases and the new full time employment quantity of labor is 300 billion hours. Draw an arrow that shows the effect of this increase in population. Draw a point at the new value of full-employment and potential GDP. label it B. An increase in the population ______ the equilibrium quantity of labor, _______ and potential GDP. An increase in the population _____ the real wage rate.

Draw an arrow on the function starting at point A going up and to the right (along the function) until you get to the new quantity of labor stated int he question. Label the new quantity of labor B. Increases; increases lowers

The graph shows a business cycle. Draw points on the curve that show when the economy is at: 1: full employment. label it 1. 2: a below full employment equilibrium. Label it 2. 3: an above full employment equilibrium. label it 3. In the graph, the vertical distance between the horizontal line and point 2 is ______ gap. At point 2, the intersection of the AD and SAS curves is to the _____ of the LAS curve. The vertical distance between the horizontal line and point 3 is ____ gap. At point 3, the intersection of the AD and SAS curves is to the _____ of the LAS curve.

Draw one point at where potential GDP and Actual GDP meet, label 1. draw a point below potential gdp on actual gdp label 2. draw a point above potential gdp on actual gdp label3. a recessionary; left an inflationary; right

The graph shows the demand for money curve. Draw a point to show the interest rate and quantity of money demanded when the interest rate is 5 percent a year. Draw an arrow to show the effect of an increase in the interest rate above 5 percent a year. Label it 1. Draw an arrow to show the effect of a decrease in the interest rate 5 percent a year. Label it 2. When the interest rate falls, other things remaining the same, the opportunity cost of holding money _______ and ________.

Draw point on the demand curve where 5 percent is on the interest rate. Draw an arrow on the demand curve from the point going up and to the left. label it Draw an arrow form on the demand curve from the point going down and to the right and label it falls; the quantity of money demanded increases

Choose the statement that is incorrect.

Each additional hour of labor increases real GDP by successively larger amounts.

The liabilities of the Fed are _____, and these liabilities along with ____ make up the monetary base.

Federal Reserve notes held by households and businesses and reserves of depository institutions; coins issued by the Treasury

The graph shows the private demand for loanable funds curve and the supply of loanable funds curve. Draw a curve that shows the effect on the loanable funds market when the government has a budget deficit. Label it C1 Draw a curve that shows the Ricardo-Barro effect on the loanable funds market. Label it C2 Draw a point at the new real interest rate and quantity of loanable funds. The Ricardo-Barro effect ______ crowding out.

For C1, draw a new line above the demand curve. so from top left to bottom right. For C2, draw a new line below the supply curve so from bottom left to to right. the lines need to be so they intersect parallel to where the original curves intersected. One whole number over Draw a new equilibrium point Eliminates

Choose the statement that is incorrect

If a financial institution's net worth is positive, the institution must be solvent and liquid

Choose the statement that is incorrect

Inflation brings a rising value of money

if in the long run, the US dollar appreciates against the Japanese yen, then ______.

Japan has created money at a faster pace than the has the United States, and the price level in Japan has risen more rapidly than the US price level

Once a month, the bureau of _______ statistics calculates the consumer price index, which is a measure of the ______ consumers for a fixed basket of consumers goods and services.

Labor; average of the prices paid by urban

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.

Left graph: Draw a point at equilibrium, where two graphs meet. Right graph: Draw a point on the function at the same labor number. (so in this case on the function line where the labor is 200)

What is the objective of US monetary policy?

Maximum employment, stable prices, and moderate long term interest rates.

Choose the statement that is incorrect

Most economists believe that the Ricardo-Barro effect holds in the loanable funds market

The table shows the only international transactions that the citizens of​ Nickleodeon, whose currency is the​ dime, conducted in 2010. What is​ Nickleodeon's current account​ balance, capital and financial account​ balance, and official settlements account​ balance? Imports of goods and services: 350 Exports of goods and services: 400 Foreign investment in Nickleodeon: 210 ​Nickleodeon's investment abroad: 350 Decrease in official holdings of foreign currency: 90

Nickleodeon's current account balance is 50 billion dimes. ​Nickleodeon's capital and financial account balance is - 140 billion dimes. ​Nickleodeon's official settlements account balance is 90 billion dimes.

The graph shows the unemployment rate and the natural unemployment rate from 1960 to 2014. Draw a point on the Unemployment rate curve that shows a year in which the economy experiences full employment.

Pick a spot on the graph where the unemployment rate and natural unemployment rate meet

The Ukraine article: 1. What happened to Ukraine in February 2014? 2. What is Ukraine's immediate economic problem? 3. How will the withdrawal of Russia's financial support affect the interest rate in Ukraine? 4. How will the financial support from Europe and the IMF affect the interest rate in Ukraine? 5. Graph: Ukraine's lightning-speed revolution has ushered in uncertainty about how the country will pay its way and avoid economic collapse. Acting finance minister Yuriy Kolobov said that Ukraine needs​ $35 billion over the next two years. 1. Draw a private demand curve for loanable funds and label it DLFo. 2. Draw a supply curve of loanable funds and label it SLFo. 3. Draw a point at the equilibrium and label it 1. 4. Draw and label a new curve to show the effect on the loanable funds market of Ukraine getting financial support from Europe and the IMF. 5. Draw a point at the new equilibrium and label it 2.

President Viktor Yanukovych has been removed from power; lack of funds to pay for its imports; raise the interest rate; lower the interest rate; Draw a supply and demand curve (curved lines). label them Draw a curve below the supply curve, label Draw point on the new equilibrium

Real GDP per person grows when ________.

Real GDP grows at a faster rate than the population grows

By measuring ______, we can see that the economy of Singapore has caught up to and surpassed the economy of the United States, but that the economies of Central and South America have not.

Real GDP per person

Between 1914 and 2014, the average growth rate of real GDP per person in the United States was 2 percent a year. During this period, ________ grew at a faster rate than _______.

Real GDP, the population

I =

S + (T-G) + (M-X)

Choose the correct statements. 1. Foreign currency is the money of other countries 2. In a growing economy, the exchange is always rising. 3. Foreign currency is always in the form of notes or coins 4. The foreign exchange market is made up of thousands of people including international tourists and foreign exchange brokers

Statements 1 and 4 are correct

Choose the statements concerning neoclassical growth theory that are true. 1. technological change results from the choices people make in the pursuit of profit 2. neoclassical growth theory was developed in the late 19th century. 3. Neoclassical growth theory is the proposition that real GDP per person grows because technological change induces a level of saving and investment that makes capital per hour of labor grow. 4. The rate of technological change influences the economic growth rate but economic growth does not influence the pace of technological change

Statements 3 and 4 are correct

Draw a Laffer curve. Label it. Draw a point on the curve at the tax rate that generates the maximum tax revenue. Label it ​T*. Draw a point on the curve that shows the approximate location of the United States on the curve. Label it United States. Choose the correct statement

T* is top point. US is around 60, about half way down the curve on the left side of it. tax cuts can increase tax revenue

Which of the following statements about the Keynesian view of the macroeconomy is incorrect?

Technological change is the most significant influence on both aggregate demand and aggregate supply.

Choose the statement that is incorrect.

The Fed tries to maximize the output gap, especially when the gap is positive.

When the price level, the money wage rate, and other factor prices rise by the same percentage , there is a movement along ______. Potential GDP _____. When the price level rises but the money wage rate and other factor prices remain the same, there is a movement along _______. The quantity of real GDP supplied __________.

The LAS curve; does not change The SAS curve; increases

China currency article: 1. What does the Treasury Department say about​ China's currency? 2. What type of exchange rate policy does China​ practice? 3. How might it be determined whether the yuan is​ "significantly undervalued"? It might be determined whether the yuan is​ "significantly undervalued" from​ _____ and​ _____. Graphical Analysis. In its​ semi-annual report on international exchange​ rates, the Treasury Department called​ China's currency, the​ yuan, "significantly​ undervalued." 1. Draw a demand curve for U.S. dollars. Label it D0. 2. Draw a supply curve of U.S. dollars. Label it S0. 3. Draw a point at the equilibrium. Label it 1. 4. Draw a line to show​ China's target exchange rate such that the​ yuan-U.S. dollar exchange rate rises. Label it.

The Treasury Department says that​ China's currency is undervalued China practices a crawling peg exchange rate policy. PPP prices; the change in foreign exchange reserves Draw a supply and demand curve, label them. draw equilibrium and label. Draw a horizontal line above equilibrium all the way across intersecting the s and d curves

the federal reserve act makes _____ responsible for the conduct of monetary policy.

The board of Governors of the federal reserve system and the federal open market comittee

How can the change in US wealth differ from US saving?

The change in wealth includes changes in the prices of assets owned and saving excludes these items.

The table shows the balance of payments accounts in the United Kingdom in 2004. What is the United Kingdoms current balance, capital and financial account balance, and official settlements account balance?

The current account balance is -43billion dollars The capital and financial account balance is 43 billion dollars The official settlements account balance is 0 billion dollars

The table shows the balance of payments accounts in Canada in 2004. What is canadas current balance, capital and financial account balance, and official settlements account balance? Imports of goods and services: 437 Foreign investment in canada: 62 Exports of goods and services: 491 Canadian investment abroad: 88 Net interest income: -50 Net transfers: 25 Statistical discrepancy: -6

The current account balance is 29 billion dollars The capital and financial account balance is -32 billion dollars The official settlements account balance is 3 billion dollars

Choose the statement that is incorrect

The demand for labor is the relationship between the quantity of labor demanded and the money wage rate.

Choose the statement that is incorrect

The demand-side effects of a tax cut are likely to be larger than an equivalent increase in government expenditure.

Potential GDP increases for all of the following reasons except

The government increases its expenditures

The table gives some items from the national income and product accounts. Calculate the government sector balance, the private sector balance, and net exports.

The government sector balance is 350 billion dollars The private sector balance is 50 billion dollars Net exports is 400 billion dollars

The table gives some items from the national income and product accounts. Calculate the government sector balance, the private sector balance, and net exports. Government expenditures: 200 Net Taxes: 250 Investment: 500 Saving: 400

The government sector balance is 50 billion dollars The private sector balance is -100 billion dollars Net exports is -50 billion dollars

Choose the statement that is incorrect

The unemployment rate includes all underutilized labor

Choose the statement that is incorrect

The nominal interest rate is the real interest rate adjusted to remove the effects of inflation on the buying power of money.

Consider the following statements about factors that influence the standard of living and choose the statement that is incorrect.

The omission of household production from GDP means that the growth rate of GDP underestimates the growth rate of total production

Choose the statement about the Fed that is incorrect

The policy decisions of the Federal Open Market Committee are implemented each month by a different Federal Reserve Bank

Choose the statement that is incorrect

The presence of a banking system in Britain in the middle 1700s started the industrial revolution

The CPI tells us _______.

The prices level in a given period expressed as a percentage of the price level in the base period, which by definition equal to 100.

Choose the statement about an increase in the population that is incorrect

The production function shifts upward

Choose the statement about flexible exchange rates that is incorrect.

The world economy has operated a flexible exchange rate regime since the end of World War II.

Choose the correct statement.

To isolate the increase in production from the rise in prices, we distinguish between real GDP and nominal GDP

The quantity of U.S. dollars demanded in the foreign exchange market depends on all of the following except​ ______.

US demand for imports

Choose the correct statement about the US short run Phillips curve.

We can interpret US inflation and unemployment data in terms of a shifting short run Phillips curve, which sometimes shifts upward and sometimes shifts downward

Choose the correct statement.

We measure the change in production by comparing the value of real GDP in two different years

Choose the statement about a crawling peg that is incorrect

a crawling peg makes the exchange rate fluctuate wildly

when the Fed fights inflation, _____.

a decrease in bank reserves decreases the quantity of money demanded.

An increase in labor productivity results in all of the following except _______.

a decrease in potential GDP per hour of labor because of diminishing returns

Examples of monetary policy that decrease aggregate demand include, _____.

a decrease in the quantity of money and an increase in interest rate

the waste basket you bought when you moved into residence is an example of _______ good. Your checking account is an example of ______ good.

a final; neither a final nor an intermediate

All of the following are examples of investment except

a person's annual medical checkup

which of the following is included in the measure of US GDP?

a pizza produced and sold in the United States

All of the following are examples of investment except ________.

a student increasing his human capital by attending college

The business cycle occurs because ______.

aggregate demand and short run aggregate supply fluctuate, but the money wage rate does not adjust quickly enough to keep real GDP at potential GDP

During the 100 years from 1914 to​ 2014, real GDP per person in the United States grew at​ ______.

an average of 2 percent a year

In the United States, the CPI basket consists of items that ______. _______ has the greatest weight in the CPI basket.

an average urban household buys; Housing

Potential GDP per person _______.

grows at a steady pace but not a constant pace

flour purchased by Chef Bondi to make pizza dough is an example of ________ good. The piano your parents bought when you started piano lessons is an example of ________ good.

an intermediate; a final

Lumber purchased by the Table and Chair Manufacturing Company is an example of _______ good. Sugar purchased by Angelo's bakery to make pies and cakes in an example of _______ good.

an intermediate; an intermediate

suppose a Canadian dollar bank deposit in Toronto earns 5 percent a year and a US dollar bank deposit in Chicago earns 1 percent a year. What expectations do people hold if interest rate parity to to hold. For interest rate parity to hold, people expect that the US dollar will _____ by ____ percent a year

appreciate; 4

If the U.S. exchange rate changes from​ $1.00 Canadian to​ $1.05 Canadian, then the U.S. dollar has​ _______ and the Canadian dollar has​ _______.

appreciated; depreciated

A fall in real GDP that results in a decrease in personal income tax receipts is an example of _____.

automatic fiscal policy

In real business cycle theory, all of the following events can be sources of fluctuating in productivity except _____.

changes in the growth rate of money

Which of the following are included in the income approach to calculating GDP?

compensation of employees; proprietors' income; corporate profits

Which of the following are included in the expenditure approach to calculating GDP?

consumption expenditure; investment; government expenditure

To make comparisons of real GDP between two countries we must ______.

convert the real GDP of one country into the same currency units as the real GDP of the other country, and use the same prices to value the goods and services in the countries being compared

Depository institutions provide four benefits, which are ______.

creating liquidity, lowering the cost of borrowing, lowering the cost of monitoring borrowers, and pooling risk

An electrician who is laid off because the economy is in a recession experiences ______.

cyclical unemployment

Suppose the Fed sells $50 million of government securities to the Bank of America. The Fed's total assets ________ and its total liabilities _______. The Bank of America's Total assets _____ and its total liabilities ______.

decrease by $50 million; decrease by $50 million do not change; do not change

An increase in expected future income _____.

decreases the supply of loanable funds today because households with larger expected future income will save less today

Aggregate demand decreases if expected future income, inflation, or profits _______. And Aggregate demand decreases if fiscal policy ______ government expenditure.

decreases; decreases

Tax revenues _____ during a recession. Needs-tested spending _____ during an expansion.

decreases; decreases

A rise in the federal funds rate ____ reserves and _____ the quantity of deposits and bank loans created. The quantity of money demanded _____. Consumers and firms spend _____.

decreases; decreases decreases; less

An increase in current income taxes _______ the supply of loanable funds today because it _____.

decreases; decreases disposable income, which decreases saving

Aggregate demand decreases if monetary policy _______ the quantity of money and _______ interest rates.

decreases; increases

Aggregate demand increases if fiscal policy ______ taxes or ______ transfer payments.

decreases; increases

Aggregate demand increases if the exchange rate _____ or foreign income ________.

decreases; increases

suppose a Canadian dollar bank deposit in Toronto earns 1 percent a year and a US dollar bank deposit in Chicago earns 5 percent a yea. What expectations do people hold if interest rate parity to to hold. For interest rate parity to hold, people expect that the US dollar will _____ by ____ percent a year

depreciate; 4

The ratio of reserves to deposits that a bank plans to hold is its _____. If a bank has $10 million in actual reserves and $8 million in desired reserves, then it has ______.

desired reserve ratio; excess reserves

Real GDP ________.

does not include a measure of household production or underground economic activity.

The graph shows the demand curve for reserves in the market for bank reserves. The federal funds target rate is 4 percent. Draw the supply curve of reserves to achieve the federal funds target rate. Label it. Draw a point at the equilibrium in the market for bank reserves. Choose the statement that is incorrect.

draw a vertical line so that it crosses the demand curve at 4. label and then label equilibrium point. The Fed's open market operations determine the demand for reserves.

interest rate parity means ______.

equal rates of return

When an economy is below full employment and the government has a budget deficit, that deficit _____.

exceeds the structural defecit

US gross domestic products is the market value of all the ______ produced ______ in a given time period.

final goods and services; within the United States

Students who leave school in the spring and look for work are one source of _______.

frictional unemployment

When the unemployment rate is less than the natural unemployment rate, real GDP is ______ than potential GDP and the output gap is ______.

greater; positive

Suppose the Fed buys $50 million of government securities from the Bank of America. The Fed's total assets ________ and its total liabilities _______. The Bank of America's Total assets _____ and its total liabilities ______.

increase by $50 million; increase by $50 million do not change; do not change

As part of its policy to contain the financial crisis, the Fed extended deposit insurance. This action ______ bank deposits and ______ bank reserves.

increased; increased

A government budget deficit occurs, which ______. The real interest rate ______. Private saving __________ and investment __________.

increases the demand for loanable funds; rises increases; decreases

A decrease in expected future income ________.

increases the supply of loanable funds today because households with smaller expected future income will save more today.

Aggregate demand decreases if fiscal policy ______ taxes or _____ transfer payments.

increases; decreases

Aggregate demand decreases if the exchange rate _______ or foreign income _______.

increases; decreases

Aggregate demand increases if monetary policy ____ the quantity of money and ______ interest rates.

increases; decreases

If the interest rate on treasury bills is lower than the federal funds rate, the quantity of overnight loans supplied _____ and the demand for treasury bills _____. The price of treasury bills _____ and the interest rate _____.

increases; decreases falls, rises

Aggregate demand increases if expected future income, inflation, or profits ______. And aggregate demand increases if fiscal policy ______ government expenditure.

increases; increases

From 2009 to 2012, the long term real interest rate paid by the safest US corporations fell from 4 percent to 2 percent. During that same period, the federal funds rate was roughly constant at0.25 percent a year. A fall in the federal funds rate _____ the supply of bank loans and the supply of loanable funds, and _____ the equilibrium real interest rate

increases; lowers

An increase in real GDP ______ the demand for money and financial innovation _________.

increases; might increase the demand for some types of deposits and decrease the demand for others

Expansionary fiscal policy when the economy is below full employment _______ aggregate demand and real GDP, and the price level _____.

increases; rises

The core inflation rate _____.

is the rate of increase in the core PCE deflator, which is the PCE deflator excluding food and fuel.

The natural unemployment rate _______.

is the unemployment rate when there is no cyclical unemployment

The bias in the CPI is a problem because ________.

it distorts wage agreements linked to the CPI

During 2012, the inflation rate increased but remained int he "comfort zone" and the unemployment rate remained high. During this period, the Fed would have raised the interest rate. If _____.

it thought that the rising inflation rate was a greater problem than unemployment.

According to new growth theory, ______ experience diminishing returns.

knowledge is capital that does not

Choose the statement that is incorrect

liquid assets have a higher interest rate than securities

Demand and supply in the market for _____ determine the long-term interest rate. In the short run, a change in the _____ changes the equilibrium real interest rate.

loanable funds; federal funds rate

Suppose the Fed increases the quantity of money. In the long run, supply and demand in the ____ market determines the real interest rate. The ______ adjusts to make the quantity of real money supplied equal to quantity demanded.

loanable funds; price level

The graph shows an economy in a below​ full-employment equilibrium. To restore full​ employment, the government increases government expenditure by​ $0.5 trillion. Draw a curve that shows the effect if this increase in government expenditure is the only change in spending plans. Label it AD0​+Upper DeltaE. The increase in government expenditure sets off a multiplier process. Draw a curve that shows the multiplier effect that returns the economy to full employment. Label it AD1. Draw a point at the​ long-run equilibrium.

look at pic

The graph shows the demand for labor curve and supply of labor curve for an economy. Draw a point at the equilibrium real wage rate and equilibrium quantity of labor. Label it 1. Now the government imposes a tax on labor income. Draw a curve that shows the effect of this tax. Label it. Draw points at the new equilibrium quantity of labor to show: 1) the before tax wage rate. Label it 2. 2) the after tax wage rate. Label it 3. When the government imposes a tax on labor income, _____, the production function occurs and potential GDP _____.

look at pic a leftward movement along, decreases

The graph shows the demand for labor curve and supply of labor curve for an economy. Draw a point at the equilibrium real wage rate and equilibrium quantity of labor. Label it 1. Now the government imposes a tax on labor income. Draw a curve that shows the effect of this tax. Label it. Draw a points at the new equilibrium quantity of labor to show: before tax wage rate and after tax wage rate When the government imposes a tax on labor income, ______ the production function occurs and potential GDP ______.

look at pic a leftward movement along; decreases

The table gives the aggregate demand schedule, the short run aggregate supply schedule, and the long run aggregate supply schedule for an economy. What is the quantity of real GDP at the short run macroeconomic equilibrium? The quantity of real GDP at the short run macroeconomic equilibrium is ______. The economy has _____.

look at pic for graph. $550 an inflationary gap of $50 billion

Draw the short run Phillips curve if the expected inflation rate is 5 percent a year. Label it SRPC1. Draw a point at the expected inflation rate and the natural unemployment rate. Label it 1. Draw the shirt run Phillips curve if the expected inflation rate is 15 percent a year. Label is SRPC2. Draw a point at the expected inflation rate and the natural unemployment rate. Label it 2. A movement _____ along the short run Phillips curve occurs when there is an _____ increase in aggregate demand.

look at picture up; unexpected

Money serves as a _______.

medium of exchange, which means that it is generally accepted in exchange for goods and services

The money multiplier is the ratio of the change in the quantity of _____ to the change in the quantity of ______.

money; monetary base

Which of the following are included in the expenditure approach to calculating GDP?

net exports of goods and services; investment; consumption expenditure

In ______ cycle theory, the rational expectation of the price level, which is determined by potential GDP and expected aggregate demand, determines the money wage rate and the position of the SAS curve. In _____ cycle theory, past rational expectations of the current price level influence the money wage rate and position of the SAS curve.

new classical, new Keynesian

A ______ macroeconomist believes that business cycle fluctuations are the efficient responses of a well functioning market economy that is bombarded by shocks that arise from the ......(didn't get it all in pic) A ______ macroeconomist believes that the short run aggregate supply curve is horizontal at a fixed price level

new classical; new Keynesian

The main sources of bias in the CPI are _______.

new goods bias, quality change bias, commodity substitution bias, and outlet substitution bias

The demand for money is the relationship between the quantity of real money demanded and the ______ when all other influences on the amount of money that people wish to hold remain the same. When the nominal interest rate rises, the opportunity cost of holding money _______.

nominal interest rate rises; decreases

The private sector balance and the government sector balance tend to move in _____. Net exports respond _____.

opposite directions; to the sum of the government sector and private sector balances

Draw the short run phillips curve if the natural unemployment rate is 6 percent and the expected inflation rate is 4 percent a year. Label it. Draw a point at the natural unemployment rate and the unexpected inflation rate. Along the short run phillips curve, ________

picture the expected inflation rate and the natural unemployment rate are constant

Assume that the preconditions for labor productivity growth are in place. The pace of labor productivity growth is influenced by all of the following except _______

population growth

Economic growth is the persistent increase in _____. Economic growth is accompanied by inflation when the ______.

potential GDP; AD curve shifts rightward at a faster rate than the LAS curve shifts rightward

According to mainstream business cycle theory, ______ grows at a steady rate and _____ grows at a fluctuating rate.

potential GDP; aggregate demand

Which of the following are included in the income approach to calculating GDP?

proprietors' income; compensation of employees; net income

The United States is experiencing low inflation and real GDP is less than potential GDP. Describe the Fed's actions that will restore full employment. The New York Fed conducts and open market _____ to hit the new ______ federal funds rate target. The monetary base ____. The supply of money ____ and the interest rate _____. The supply of loanable funds _____ and the long term interest rate _____. Investment _______, and aggregate demand _____ with a multiplier effect.

purchase; lower increases; increases; falls increases; rises increases; increases

The quantity of real GDP supplied depends on all of the following except the _____.

quantity of real GDP demanded

In real business cycle theory, _____ are the main source of economic fluctuations.

random fluctuations in productivity

If a structural surplus exists but the​ government's budget is​ balanced, then​ ______.

real GDP is less than potential GDP

Republican politicians insist that tax cuts "pay for themselves," increasing receipts by goosing economic growth. Democrats and virtually all economists say they're wrong. A tax cut pays for itself if the economy lies to the _____ of the maximum point of the Laffer curve. This statements implies that the absolute value of the tax multiplier is _____. Tax cuts will not pay for themselves is _____.

right, greater than 1 the economy lies tot he left of the maximum point on the laffer curve

on average in the United States, the inflation rate and the money growth rate minus the real GDP growth rate ________

rise and fall together

Suppose the Fed raises the fed funds rate. Describe the ripple effects of this monetary policy. Other short term interest rates and the exchange rate _____. The quantity of money and supply of loanable funds _____ The long term real interest rate____. Consumption expenditure, investment, and net exports _____. Aggregate demand _____. Real GDP growth and inflation rate _____.

rise; decrease; rises decrease; decreases; decrease

Suppose a country has a crawling peg exchange rate policy against the U.S. dollar and the equilibrium exchange rate in units of foreign currency per U.S. dollar is above the target rate. To keep the exchange rate pegged at its target​ level, the​ country's central bank must​ ______ U.S. dollars and​ ______ its foreign currency reserves.

sell; decrease

An increase in labor productivity _______.

shifts the demand for labor curve rightward and the production function upward

An increase in the population ______.

shifts the supply of labor curve rightward and creates a movement along the production function.

The business cycle is actually a continuous series of different ______.

short-run macroeconomic equilibriums

The U.S. M1 multiplier is ____ than the U.S. M2 multiplier. The currency drain ratio for M1 is ____ than for M2 , and the banks reserve ration for M1 is _______ than for M2.

smaller; larger; larger

Choose the correct statements. a. The Fed permits the quantity of money to find its own equilibrium and has no present view about what that equilibrium value should be. b. The fed normally changes the federal funds rate by only a quarter of a percentage point at a time. c. The fed has preset views about the exchange rate and frequently participates in the foreign exchange market to move the exchange rate closer to its target. d. the federal funds rate has never been set above 5 percent a year.

statements a and b are correct

The unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the location of jobs is _____ unemployment.

structural

The government budget surplus occurs, which increases the ______ loanable funds. The real interest rate ______, household saving ________.

supply of falls; decreases and investment increases

The demand for U.S. dollars changes when there is a change in any of the following except​ ______.

the foreign exchange rate

The fundamental precondition for labor productivity growth is ______.

the incentive system created by firms, markets, property rights, and money

One of the Fed's main policy tools is _________.

the last resort loan, which means that if a bank is short of reserves, it can borrow from the Fed

If the natural unemployment rate increases and the expected inflation rate remains constant, then __________.

the long-run Phillips curve shifts rightward and the short-run Phillips curve shifts rightward.

According to mainstream business cycle theory, _____.

the money wage rate is sticky and consequently if aggregate demand grows faster than potential GDP, an inflationary gap emerges

When cyclical unemployment increases and other things remain the same, _______.

the natural unemployment rate does not change.

An open market operation is ______.

the purchase or sale of securities by the Federal Reserve System in the loanable funds market

If most prices increase in Japan and other countries but remain constant in the United States, _________.

then for purchasing power parity to hold, the demand for US dollars increases and the supply of US dollars decreases

If most prices have decreased in the United States and not decreased in Japan and other​ countries, ______.

then for purchasing power parity to​ hold, the value of the U.S. dollar in the foreign exchange market will rise

______ is an example of US consumption expenditure.

your purchase of a model car kit