Macro Midterm Review
suppose that Tiger Woods buys a golf ball in england for $1 and the marginal propensity to consume in england is 0.75. What is the total increase in England's real GDP resulting from Mr. Wood's purchase
$4
Julia would spend $30 per week even if she made no income. her weekly income is $1,000 and her marginal propensity to consume is 0.5. How much does Julia save per week
$470
assume commercial banks save no excess reserves and the reserve requirements is 20%. how much money is created in new loans from all banks after this bank receives a deposit of $1000
4,000
according to the aggregate expenditure graph above, what is the value of the expenditure multiplier
5
having a fractional reserve banking system means that
a bank cannot lend out all of its deposits
according to theory of rational expectations, an increase in government spending to increase AD as illustrated in the figure above will be ,et with which of the following
a decrease in AS
a use of easy money (expansionary) policy by the Fed could result in which of the following
a decrease in net exports
which of the following will shift the demand curve for the mexican peso to the left
a decrease in the international demand for mexican made textiles
the money supply will increase as a result of which of the following
a decrease in the required reserve ratio
which of the following creates the trade-off depicted by the Phillips Curve
a rightward shift in the aggregate demand curve
in order to go from national income to GDP, one must
all of the above
the aggregate supply curve will shift to the right in response to
an increase in investment in capital
suppose an economy is in long-run equilibrium at full employment level of output. If government spending then increases
an inflationary gap is created because the aggregate demand curve shifts to the right
the domestic purchasing power of a currency
is inversely related to the price level
the formula for the money multiplier is
1/required reserve ratio
a difference between M1 and M2 is that
M2 includes savings deposits
when the value of the US dollar appreciates relative to other currencies, which of the following is most likely to occur
US residents will take more vacations in foreign countries
assume Astobia and Bonovia are countries that exercise free trade. If the real interest rate in Astobia decreases in comparison to Bonovias real interest rate, then for Bonovia which of the following would be true of capital flow, the value of its currency, and its exports
capital flow --> inflow currency --> appreciation exports --> decrease
which of the following must exist to allow for mutual benefit from specialization and trade between two countries
comparative advantage in the production of a good or service
country A has a current account surplus; this means that
country A has a financial account deficit
a decrease in real investment stemming from higher interest rates due to government purchases is most commonly called
crowding out
assuming there is no statistical discrepancy, a trade surplus must be offset elsewhere in the
current account or financial account only
which of the following is illustrated in the figure above
demand pull inflation
on a bank's balance sheet, which of the following is considered a liability
deposits
which of the following would shift the aggregate demand curve to the right
depreciation in the international value of the dollar
which of the following would be an example of fiat money
dollar bills
expansionary fiscal policy would be best be prescribed to
eliminate a recessionary gap
in order to reduce or eliminate crowding out, expansionary fiscal policy can be accompanied by
expansionary monetary policy
which of the following will cause the aggregate demand curve to shift to the left
expectations of surpluses of goods in the future
according to Keynesian economists
fiscal policy is more effective than monetary policy
a budget deficit exists when
government spending exceeds tax collections for a given period
which of the following is direct, accurate link within the circular flow
household expenditures result in revenues for firms via the product markets
classical economists believe
in the quantity theory of money- that both the velocity and the quantity of goods and services sold per period are fairly stable
the natural rate of unemployment
includes structural and frictional unemployment
the GDP Deflator differs from the CPI in that the GDP deflator
incorporates current year quantities in its calculations
which of the following is the most likely to be a deterrent to growth in the economy
increases in the interest rate
among those hurt by inflation are
individuals on fixed incomes, those with savings earned at fixed interest rates, restaurant owners
which of the following is true when expansionary fiscal and expansionary monetary policy are used at the same time
interest rates will remain relatively constant
Kevin wants shoes and grows turnips. Lisa wants turnips and makes sheet metal. Bob wants sheet metal and makes shoes. Which function of money will cater most directly to the situation at hand
medium of exchange
in a given period, the average price level in the country of sherwood tripled, and Robin's income increased from $30,000 to $60,000. What happened to Robin's nominal and real income
nominal income--> increased real income --> decreased
the aggregate demand curve is
not found by adding product demand curves horizontally or vertically
every choice results in the foregone best alternative, which economists call the
opportunity cost
which group of people will suffer the most from a rising price level
people with fixed money incomes
the figure illustrates
phillips curve
the government of a country decides to increase government spending and taxes by the same amount in order to keep a balanced budget. The MCP is 0.75. Which of the following is true of this situation
policy direction--> expansionary expenditure multiplier--> 4 tax multiplier --> -3
a dark room technician who develops film into photographs loses his job because few people use film cameras anymore. This is an example of which of the following
structural unemployment
according to Say's Law
supply creates its own demand
droughts, technical glitches, and restrictions on the use of resources can all result in
supply shocks
when a banks balance sheet shows that the bank has excessive reserves
the bank can make additional loans
suppose yesterday the euro was trading on the foreign exchange market at $1.36 US and today its trading at $1.40 US. Which of the following is true
the euro has appreciated
the aggregate demand curve has a negative slope in part because when the price level increases
the interest rate increases
which of the following is included in the US GDP
the market value of blue jeans made in the US and sold in japan, the market value of wine made in the US by canadian citizens
it is a monetarist point of view that
the money supply should be increased steadily
the real interest rate is
the nominal interest rate minus anticipated inflation
which of the following results from stagflation
the phillips curve shifts to the right
if technology makes production less expensive and at the same time exports decrease, which of the following will result with certainty
the price levels will decrease
if prices are expected to rise more slowly in the future,
these expectations will become reality
a fixed output level in the long run at full employment output corresponds with which of the following shapes of the long run phillips curve
vertical
the upward sloping section of the aggregate supply curve can be explained by
wages and other input prices that adjust more slowly than output prices
classical economists generally believe that
wages fluctuate quickly, input and output prices will stay in line with each other, the government should not worry about maintaining aggregate demand at an adequate level