macro final study guide

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Joseph earns​ $75,000. If his average tax rate is 18​ percent, what is the total amount of money that he pays in​ tax?

$13,500

Which of the following financial securities is most​ liquid?

$20 bill

If a Japanese Toyota sells for​ 2,500,000 yen and the nominal exchange rate is 110 yen per​ dollar, then the dollar price of the Japanese automobile is

$22,727

A bagel costs​ $1 in New York and 0.5 euros in Paris. If the real exchange rate is​ one-half of a New York bagel for a Parisian​ bagel, how many euros should you receive in exchange for​ $1?

0.25

A bottle of wine costs​ $50 in New​ York, and it takes 0.92 euros to buy 1 U.S. dollar. How much would the bottle of wine cost in ​Paris?

46 euros

Which of the following would be considered a fiscal policy​ action?

A tax cut is designed to stimulate spending during a recession.

Are federal expenditures higher today than they were in​ 1960?

As a percentage of​ GDP, federal expenditures have increased since 1960.

Are federal purchases higher today than they were in​ 1960?

As a percentage of​ GDP, federal purchases have decreased since 1960.

Rob Crusoe and Bill Friday spent their week−long vacation on a desert island where they had to find and prepare their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced. Use the table above to select the statement that accurately interprets the data in the table. GRAPH

Bill has a comparative advantage in picking berries.

Rob Crusoe and Bill Friday spent their week−long vacation on a desert island where they had to find and prepare their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced. GRAPH

Bill has an absolute advantage in picking berries and Rob has an absolute advantage in catching fish.

Fiscal policy is determined by

Congress and the President

Which of the following is considered expansionary fiscal​ policy?

Congress decreases the income tax rate.

What is the difference between federal purchases and federal​ expenditures?

Federal purchases require that the government receives a good or service in​ return, whereas federal expenditures include transfer payments.

Expansionary monetary policy refers to the​ ________ to increase real GDP.

Federal​ Reserve's increasing the money supply and decreasing interest rates

Which of the following best explains the difference between commodity money and fiat​ money?

Fiat money has no value except as​ money, whereas commodity money has value independent of its use as money.

The​ catch-up prediction of economic growth models predicts that​ ________ across countries will converge over time.

GDP per capita

Which of the following is true of a progressive tax​ system?

High−income households pay a higher percentage of their income in taxes.

Assume that Honduras has a comparative advantage in producing bananas and exports bananas to Brazil. We can conclude that

Honduras has a lower opportunity cost of producing bananas relative to Brazil.

The narrowest official definition of the money supply is

M1

Madison and Austin own Cafe​ Ole'. The table above lists the number of empanadas and tacos Madison and Austin can each make in one hour.GRAPH

Madison has a comparative advantage in making tacos.

Madison and Austin own Cafe​ Ole'. The table above lists the number of empanadas and tacos Madison and Austin can each make in one hour.GRAPH

Madison has an absolute advantage in making empanadas and tacos.

Rob Crusoe and Bill Friday spent their week−long vacation on a desert island where they had to find and prepare their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced. Use the table above to select the statement that accurately interprets the data in the table. GRAPH

Rob has a comparative advantage in catching fish.

Rob Crusoe and Bill Friday spent their week−long vacation on a desert island where they had to find and prepare their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced. Use the table above to select the statement that accurately interprets the data in the table. GRAPH

Rob has a greater opportunity cost than Bill for picking berries.

What is one difference between stocks and​ bonds?

Stocks represent partial ownership in a​ firm, while bonds do not.

If Sweden exports cell phones to Denmark and Denmark exports butter to​ Sweden, which of the following would explain this pattern of​ trade?

Sweden has a lower opportunity cost of producing cell phones than Denmark and Denmark has a comparative advantage in producing butter.

Which of the following is true in the United​ States?

The central and local governments collect taxes.

How are intermediate goods treated in the calculation of​ GDP?

Their value is not counted​ separately, but included as part of the value of the final good for which they are an input.

If the dollar depreciates against the Indian​ rupee,

U.S. exports to India become less expensive.

The purchase by a household in China of an automobile produced in the United States is included in

U.S. net exports.

Contractionary monetary policy on the part of the Fed results in

a decrease in the money​ supply, an increase in interest​ rates, and a decrease in GDP.

Suppose that you are available to go to work but have not looked for a job for at least the last four weeks because you believe that there​ aren't any jobs available. You would be counted as

a discouraged worker.

The​ statement, "My iPhone is worth​ $700" represents​ money's function as

a unit of account

​________ is the ability to produce more of a good or service than competitors when using the same amount of resources.

absolute advantage

The​ ________ shows the relationship between the price level and quantity of real GDP demanded.

aggregate demand curve

Which of the following would cause the dollar to​ appreciate?

an increase in the demand for dollars

An increase in wealth in the U.S. will lead to which one of the following in the foreign exchange​ market?

an increase in the supply of dollars

Government spending​ ________ is included in gross domestic product.

at​ federal, state, and local levels of government

In an economy with​ ________, there are more prices than in an economy with​ ________.

barter; money

Why do many​ low-income countries have low growth​ rates?

because of wars and revolutions; because of low rates of saving and investment; because of poor public education and health

​________ are financial securities that represent promises to repay a fixed amount of funds.

bonds

A​ ________ occurs when government spending exceeds tax revenue.

budget deficit

In comparison to a government that runs a balanced​ budget, when the government runs a budget​ deficit,

business investments will fall

Transfer payments refer to payments from the government to​ ________.

certain individuals or groups such as the elderly or the unemployed

The level of long−run aggregate supply is affected by all of the following except

changes in the price level.

has no or very little value except as money.

citizens accept the good as a means of payment for transactions and debts.

Silver is an example of a

commodity money

An economic principle that explains why people pursue different occupations is

comparative advantage.

The largest component of spending in GDP is

consumption spending.

The real exchange rate is defined as the

cost of a basket of goods and services in one country compared to the cost of the same basket in another country.

Which countries grow​ faster?

countries that have a strong rule of law

M1 does not include

credit card balances

The response of investment spending to an increase in the government budget deficit is called

crowding out

Workers who lose their jobs because of a recession are experiencing

cyclical unemployment.

An expected appreciation of the​ dollar, everything else held​ constant, should cause the

demand for dollars to increase.

Purchasing power parity says that

differences in inflation rates between countries will create changes in exchange rates.

Venmo is an example of a​ peer-to-peer payment system where funds are transferred

directly from one user to another

When an unemployed person drops out of the labor​ force, it

does not affect the​ employment-population ratio.

Autarky is a situation in which a country

does not trade with other countries.

Gross domestic product in the economy is measured by the

dollar value of all final goods and services produced in the economy.

The Industrial Revolution began in

england around 1750

The theory of purchasing power parity

extends the law of one price to a basket of goods.

An increase in the money supply is a discretionary fiscal policy which will increase aggregate demand.

false

Monetary policy is conducted by the U.S. Treasury Department.

false

Fiscal policy refers to changes in

federal taxes and purchases that are intended to achieve macroeconomic policy objectives.

A transfer payment is a payment by the government to an individual

for which the government does not receive a good or service in return.

When the economy is at full​ employment, which types of unemployment​ remain?

frictional and structural

Congress and the president carry out fiscal policy through changes in

government purchases and taxes

Fiat money

has no or very little value except as money.

Commodity money

has value independent of its use as money.

Which of the following is an objective of fiscal​ policy?

high rates of economic growth

Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be​ ________ and real GDP to be​ ________.

higher; higher

Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be​ ________ and real GDP to be​ ________.

higher; higher

Increasing growth rates of GDP per capita and sustaining these growth rates in an economy can

increase standards of living

technological advances generally result in

increased life expectancy

During the recession phase of the business​ cycle,

interest rates are usually falling.

what increases labor productivity

inventions of new machinery, equipment, or software

social security

is a system whereby current retirees are paid from taxes collected from current workers.

The law of one price

is based on arbitrage

the law of one price

is based on arbitrage

If the per−worker production function shifts​ down,

it now takes more capital per hour worked to get the same amount of real GDP per hour worked.

Which is not one of the criteria necessary for a commodity to make a suitable medium of​ exchange?

it should have intrinsic value

the quantity of goods and services that can be produced by one worker or one hour of work is referred to as

labor productivity

When interest rates on Treasury bills and other financial assets are​ low, the opportunity cost of holding money is​ _________, so the quantity of money demanded will be​ _________.

low; high

Contractionary fiscal policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be​ ________ and real GDP to be​ ________.

lower; lower

In a regressive tax​ system, ________.

low−income households pay a higher percentage of their income in taxes

The Fed is said to have​ a" dual​ mandate" because

maintaining price stability and high employment are the two most important goals of the Fed that are explicitly mentioned in the Employment Act of 1946.

Appreciation of the real exchange rate

makes U.S. exports more expensive to foreigners.

The​ Fed's two main monetary policy targets are

money supply and interest rate

The difference between a nominal variable and a real variable is that

nominal variables are calculated in​ current-year prices and the real variables are measured in dollars of the base year for the price index to correct the effects of inflation.

If households in the economy decide to take money out of checking account deposits and hold it as​ currency, this will initially

not change M1 and not change M2

If credit card balances rise in the​ economy, then M1 will​ ________ and M2 will​ ________.

not​ change; not change

If the​ ________ cost of production for two goods is different between two countries then mutually beneficial trade is possible.

opportunity

The​ employment-population ratio measures the

percentage of the working age population that is employed.

The long run aggregate supply curve shows the relationship between the​ ________ and​ ________.

price​ level; quantity of real GDP supplied

Which of the following are goals of monetary​ policy?

price​ stability, economic​ growth, and high employment

The Federal​ Reserve's four goals of monetary policy are

price​ stability, high​ employment, economic​ growth, and stability of financial markets and institutions.

A baseball fan with a Mike Trout baseball card wants to trade it for a Manny Machado baseball​ card, but everyone the fan knows who has a Machado card​ doesn't want a Trout card. Part 2 Economists characterize this problem as a failure of the

principle of a double coincidence of wants.

good measure of the standard of living is

real GDP per capita

Which piece of information is needed in order to determine whether a U.S. dollar will buy more in the U.S. or in a foreign​ country?

real exchange rate

The period between a business cycle peak and a business cycle trough is called

recession

One reason governments impose taxes is to​ ________.

redistribute funds via transfer payments

A restaurant charges its customers 12 percent of the total food price in tax. This is an example of a​ ________ tax.

sales

The Fed can attempt to increase the federal funds rate by

selling Treasury​ bills, which decreases bank reserves.

The unemployment rate

shows the percentage of the labor force that is considered unemployed.

If labor productivity growth slows down in a​ country, this will

slow down the increase in real GDP per capita.

The type of unemployment most likely to result in hardship for the people who are unemployed is

structural because this type of unemployment requires retraining to acquire new job skills.

A budget surplus occurs when​ ________.

tax revenue exceeds government spending

Fiscal policy is defined as changes in federal​ ________ and​ ________ to achieve macroeconomic objectives such as price​ stability, high rates of economic​ growth, and high employment.

taxes; expenditures

An example of an intermediate good would be

the bread that goes into a sub sandwich that is sold by Quiznos.

A period of expansion in the business cycle ends when

the business cycle reaches its peak.

Liquidity refers to

the ease with which a financial security can be traded for cash.

Liquidity is defined as

the ease with which a given asset can be converted to a medium of exchange.

Which of the following is true about the Federal Reserve and its ability to prevent​ recessions?

the federal reserve cannot realistically fine-tune the​ economy, but seeks to keep recessions shorter and milder than they would otherwise be.

What two factors are the keys to determining labor​ productivity

the level of technology and the quantity of capital per hour worked

The real and nominal exchange rates differ in the sense that

the nominal exchange rate does not reflect differences in purchasing power between currencies.

When the Fed uses contractionary​ policy,

the price level rises less than it would if the Fed did not pursue policy.

The price of domestic goods in terms of foreign goods is referred to as

the real exchange rate.

Because of diminishing​ returns, an economy can continue to increase real GDP per hour worked only if

there is technological change.

The largest and fastest−growing category of federal government expenditures is

transfer payments

When an unemployed person drops out of the labor​ force, the unemployment rate

understates the true degree of joblessness in the economy.

Madison and Austin own Cafe​ Ole'. The table above lists the number of empanadas and tacos Madison and Austin can each make in one hour.GFRAPH

​Madison's opportunity cost for making tacos is less than​ Austin's.

The three types of unemployment are

​frictional, structural, and cyclical unemploment.

Assuming that the United States is the domestic​ economy, ________ are goods and services produced by​ ________ and purchased by​ ________.

​imports; foreign​ countries; the United States

Inflation tends to​ ________ during the expansion phase of the business cycle and​ ________ during the recession phase of the business cycle.

​increase; decrease


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