Macroeconomics Exam 3
If the reserve ratio is 5 percent, then $500 of additional reserves would ultimately generate
$10,000 of money.
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.
A bank's reserve ratio is 7 percent and the bank has $1,000 in deposits. Its reserves amount to
$70.
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
Which of the following will help to prevent bank runs?
100% reserve banking
If the reserve ratio is 4 percent, then the money multiplier is
25.
Alex buys 1,000 shares of stock issued by Greg Brewing. In turn, Greg uses the funds to buy new machinery for one of its breweries.
Alex is saving; Greg is investing.
Which of the following is an example of an efficiency wage?
An above-equilibrium wage paid by a firm to reduce turnover costs
Which of the following counts as part of the supply of loanable funds?
Bank deposits and purchases of bonds
Two bonds have the same term to maturity. The first was issued by a state government and the probability of default is believed to be low. The other was issued by a corporation and the probability of default is believed to be high. Which of the following is correct?
Because of the differences in tax treatment and credit risk, the corporate bond should have the higher interest rate.
Which of the following does the Federal Reserve not do?
Conduct fiscal policy
The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. Which of the following events would shift the supply curve from S1 to S2?
In response to tax reform, households are encouraged to save more than they previously saved.
A mutual fund
Is an institution that sellers shares to the public and uses the proceeds to buy a selection of various types of both stocks and bonds.
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.
Which of the following is not a function of money?
Protection against inflation
Which of the following is included in M2 but not in M1?
Small time deposits
Which of the following is not an example of monetary policy?
The Federal Reserve facilitates bank transactions by clearing checks.
We associate the term debt finance with
The bond market, and we associate the term equity finance with the stock market.
Of the following groups, who is eligible for unemployment insurance benefits?
The unemployed who were laid off because their previous employers no longer needed their skills
When you list prices for necklaces sold on your website, www.sparklingjewels.com, in dollars, this best illustrates money's function as
a unit of account.
If the Apple corporation sells a bond it is
borrowing directly from the public.
The natural rate of unemployment includes
both frictional and structural unemployment.
When a union bargains successfully with employers, in that industry,
both wages and unemployment increase.
A budget deficit
changes the supply of loanable funds.
If the public decides to hold more currency and fewer deposits in banks, bank reserves
decrease and the money supply eventually decreases.
Crowding out occurs when investment declines because a budget
deficit makes interest rates rise.
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.
Suppose the U.S. offered a tax credit for firms that built new factories in the U.S. Then the
demand for loanable funds would shift rightward, initially creating a shortage of loanable funds at the original interest rate.
The unemployment rate is computed as the number of unemployed
divided by the labor force, all times 100.
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.
Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called
frictional unemployment.
The existence of money leads to
greater specialization and to a higher standard of living.
The federal funds rate is the
interest rate at which banks lend reserves to each other overnight.
A bond that never matures is known as
perpetuity
The slope of the supply of loanable funds curve represents the
positive relation between the interest rate and saving.
Given that Sarah's income exceeds her expenditures, Sarah is best described as a
saver or as a supplier of funds.
As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,
sell bonds
When conducting an open-market sale, the Fed
sells government bonds, and in so doing decreases the money supply.
Table 26-1. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. GDP - $7.3 trillion Consumer spending - $5.2 trillion Taxes Minus Transfers - $1.1 trillion Government Purchases - $0.7 trillion Refer to Table 26-1. The quantity of loanable funds demanded is
$1.4 trillion
Suppose a closed economy had public saving of −$7 trillion and private saving of $16 trillion. What are national saving and investment for this country?
$9 trillion, $9 trillion
Suppose that the adult population in the country of Atlantis is 140 million. If 90 million people are employed and 10 million are unemployed, then
40 million are not in the labor force.
If the local government imposed a minimum wage of $7 in Productionville, how many people would be unemployed?
5,000
Suppose that the Bureau of Labor Statistics reported that there were 62 million people over age 25 whose highest level of education was some college or an associate degree. Of these, 45.3 million were employed and 3.6 million were unemployed. What were the labor-force participation rate and the unemployment rate for this group?
78.9% and 7.4%
Natalia worked part-time for her mother's business without pay. Tabitha was absent from work because she had strep throat. Who is counted as "employed" by the Bureau of Labor Statistics?
Both Natalia and Tabitha
Financial intermediaries are
Financial institutions through which savers can indirectly provide funds to borrowers.
Institutions that help to match one person's saving with another person's investment are collectively called the
Financial system
The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. Which of the following events would shift the demand curve from D1 to D2?
Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories.
Which of the following policies can the Fed follow to increase the money supply?
Reduce the interest rate on reserves
At the broadest level, the financial system moves the economy's scarce resources from
Savers to borrowers.
In a system of 100-percent-reserve banking,
banks do not influence the supply of money.
Hassan and Kevin buy the same pair of sneakers, but each in the wrong size. Hassan proposes a size swap with Kevin. This is an example of
barter, since the sneakers in the correct size have intrinsic value to both Hassan and Kevin.
If the natural rate of unemployment is 4.7 percent and the actual rate of unemployment is 5.5 percent, then by definition there is
cyclical unemployment amounting to 0.8 percent of the labor force.
Matilda loses her job and decides to sit on the beach rather than look for work during the next few months. Other things the same, the unemployment rate
increases, and the labor-force participation rate decreases.
The source of the supply of loanable funds
is saving and the source of demand for loanable funds is investment.
The slope of the demand for loanable funds curve represents the
negative relation between the real interest rate andinvestment.
Evidence from research studies by economists
shows that increased unemployment benefits decrease the job search efforts of the unemployed.
The discount rate is
the interest rate the Fed charges banks.
Money is
the most liquid asset but an imperfect store of value.
The Federal Reserve
was created in 1913.
The measure of the money stock called M1 includes
wealth held by people in currency.
The labor force equals the
number of people employed plus the number of people unemployed.
In a closed economy, national saving equals
private saving plus public saving.
Minimum wages create unemployment in markets where they create a
surplus of labor. Unemployment of this type is called structural.
In a closed economy, private saving is
the amount of income that households have left after paying for their taxes and consumption.
Collective bargaining refers to
the process by which unions and firms agree on the terms of employment.
Who of the following is not included in the Bureau of Labor Statistics' "employed" category?
Those waiting to be recalled to a job from which they had been laid off
Providing training for unemployed individuals is primarily intended to reduce
frictional unemployment.
The labor-force participation rate tells us the fraction of the population that
has chosen to participate in the labor market.
Efficiency wages
increase productivity but increase unemployment.
When the government's budget deficit increases the government is borrowing
more and public savings falls.
An increase in the government's budget surplus means public saving is
positive and increasing.
In a closed economy, public saving is the amount of
tax revenue that the government has left after paying for its spending.
Unions contribute to
the natural rate of unemployment but not frictional unemployment.
Cyclical unemployment refers to
year-to-year fluctuations in unemployment around its natural rate.