macroeconomics final

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what are the functions of the federal reserve system?

1. The Fed supplies the economy with fiduciary currency. 2. The Fed holds depository​ institutions' reserves and provides​ payment-clearing systems. 3. The Fed acts as the​ government's fiscal agent. 4. The Fed supervises depository institutions. 5. The Fed conducts monetary policy. 6. The Fed intervenes in foreign currency markets. 7. The Fed acts as the​ "lender of last​ resort."

Suppose that in​ 2013, a typical U.S. student attending a​ state-supported college bought 10 textbooks at a price of ​$80 per book and enrolled in 30 credit hours of coursework at a price of ​$380 per credit hour. In​ 2014, the typical student continued to purchase 10 textbooks and enroll in 30 credit​ hours, but the price of a textbook rose to ​$100 per​ book, and the tuition price increased to ​$420 per credit hour. The base year for computing a​ "student price​ index" using this information is 2013.

100

The price index for any base year is

100

Adult​ population: 292 million Employed​ adults: 199 million Unemployed​ adults: 6 million a. The unemployment rate is nothing​%. ​(Enter your response rounded to two decimal​ places.)

2.93%

Rational, self-interested government officials seeking more funding for mass transit through higher taxes should consider A. how to spend the funds for their own individual gain. B. that taxpayers may prefer to commute in their own cars rather than depend on mass transit. C. the fact that raising taxes is generally unpopular and may result in a potential loss in a future election. D. that taxpayers may prefer to use mass transit to save on gas cost.

c

The biggest component of GDP using the expenditure approach is​ ____________ and the biggest component of GDP using the income approach is​ _____________. A. investment​ expenditures; profit B. government​ expenditures; taxes C. consumer​ expenditures; wages D. consumer​ expenditures; profit

c

The​ long-run aggregate supply curve is determined by A. the amount of inflation in the economy. B. the real value of cash balances. C. the​ full-employment level of real output. .D. the relationship between price and quantity supplied.

c

What is the difference between microeconomics and​ macroeconomics? A. Microeconomics lends itself to empirical analysis while macroeconomics uses the concept of incentives. B. Microeconomics examines the big picture while macroeconomics examines individual units. C. Microeconomics is the study of decision making undertaken by individuals while macroeconomics looks at the behavior of the economy as a whole. D. Microeconomics deals with positive analysis while macroeconomics deals with normative analysis.

c

What is the difference between the balance of trade and the balance of​ payments? A. Only the balance of payments includes exports and imports. B. Only the balance of trade includes exports and imports. C. Both the balance of trade and the balance of payments consider exports and​ imports, while the balance of payments also includes​ cross-border exchange of​ services, income and financial assets. .D. Both the balance of trade and the balance of payments consider exports and​ imports, while the balance of trade also includes​ cross-border exchange of​ services, income and financial assets.

c

Which of the following is not an argument against free​ trade? A. Infant industry. B. Dumping. C. Comparative advantage. D. Exporting technologies can pose a threat to national defense.

c

Which of the following statements is not true about the use of GDP as a measure of national​ welfare? A. GDP is limited as a measure of national welfare since it does not account for labor market discrimination. .B. GDP is limited as a measure of national welfare since it does not consider the amount of leisure time available to the​ nation's residents. C. GDP is a useful measure of national welfare since it excludes nonmarket transactions. .D. GDP is limited as a measure of national welfare since it does not consider environmental quality.

c

Which of the following would least likely​ be, for the typical​ student, the opportunity cost of attending a class at​ 11:00 a.m.? A. Taking a much needed course offered by another department. B. Accepting work at the mall as a​ part-time sales associate. .C. Partying with a close circle of friends. .D. Getting the​ "jump" on most students by getting to the dining hall for lunch before the​ mid-day rush.

c

is a statistical measure of a weighted average of prices of a specified set of goods and services purchased by typical consumers in urban areas.

consumer price index (cpi)

unemployment resulting from business recessions that occur when aggregate​ (total) demand is insufficient to create full employment.

cyclical unemployment

. A municipality taxing hotel guests to obtain funding for a new sports stadium should consider all of the​ following, except A. all other alternative sources of funding the sports stadium. B. the total cost of building the sports stadium. C. the impact of that tax on possible reduction of tourism in the local region. D. the winning potential of the sports team using the stadium.

d

A trade deficit implies that A. the number of items imported is larger than the number of items exported. B. the dollar value of exports exceeds the dollar value of imports. .C. the number of items exported is larger than the number of items imported. D. the dollar value of imports exceeds the dollar value of exports.

d

All of the following are key price indexes except the A. CPI. B. PPI. C. GDP deflator. D. KLB.

d

All of the following will shift the​ short-run aggregate supply and the​ long-run aggregate supply except for A. a depletion of raw materials. B. decreased competition. C. increased training and education of the labor force. D. a temporary change in input prices.

d

Contractionary monetary policy causes the A. price level to increase. .B. amount of government spending to increase. C. dollar value of real GDP to increase. D. interest rate to increase.

d

The opportunity cost of attending a class at​ 11:00 a.m. will likely differ from the opportunity cost of attending a class at​ 8:00 a.m. because A. a​ student's evaluation of any given set of alternatives is likely to be​ time-sensitive. B. nothing is going on at 8 a.m. C. the number and variety of alternatives at 11 a.m. are likely to differ from those available at 8 a.m. D. both A and C are correct.

d

When a country protects an infant industry in the hope that it will become efficient enough to compete effectively in the world market A. the​ import-restricting arrangements often remain after the time period allotted for the industry to mature. B. the stockholders of companies in the infant industry gain when they are protected from world competition. C. consumers in that country lose if they continue to pay a price higher than the world price for the good in question. D. All of the above. .E. A​ & C only.

d

is any item that sellers will accept as payment.

medium of exchange

AD SHIFT: Deflation has occurred during the past year.

movement down along

the price level has increased this year (ad shift)

movement up along

is the interest rate that does not take inflation into account.

nominal interest rate

are the values of variables such as GDP and investment expressed in current​ dollars, also called money​ values; measurement in terms of the actual market prices at which goods and services are sold.

nominal values

Everyone should enjoy open access to healthcare (p or n)

normative

Increasing the earnings of minimum wage employees is​ desirable, and raising the minimum wage is the best way to accomplish this. (p or n)

normative

how can the federal reserve monetary policy actions influence market interest rates?

open market​ operations, changes in the reserve​ ratio, changes in the interest rates paid on​ reserves, and discount rate changes.

statistical measure of average prices that uses annually updated weights based on surveys of consumer spending.

personal consumption expenditure (pce)

Categorize each of the following conclusions as being the result of positive analysis LOADING... or normative analysis LOADING... . a. A higher minimum wage will reduce employment opportunities for minimum wage workers.

positive

Heathcare subsidies will increase the consumption of health care (positive or normative statement)

positive

the cost of​ today's market basket of goods expressed as a percentage of the cost of the same market basket during a base year.

price index

is a statistical measure of a weighted average of prices of goods and services that firms produce and sell.

producer price index (ppi)

the hypothesis that changes in the money supply lead to equiproportional changes in the price level

quantity theory of money and prices

adjusts for the inflation and gives the real rate of a bond or a loan.

real interest rate

are measurement of economic values after adjustments have been made for changes in the average of prices between years.

real values

what is the difference between nominal gdp and real gdp?

real values are adjusted for inflation, while nominal values are not. As a result, nominal GDP will often appear higher than real GDP.

is a group of nations that grants members special trade privileges.

regional trade bloc

are regulations that nations in regional trade blocs establish to delineate product categories eligible for trading preferences.

rules of origin

is unemployment resulting from the seasonal pattern of work in specific industries. It is usually due to seasonal fluctuations in demand or to changing weather conditions that render work​ difficult, if not​ impossible, as in the​ agriculture, construction, and tourist industries.

seasonal unemployment

ad shift: Real GDP levels of all the​ nation's major trading partners have declined.

shifts to left

Real GDP levels of all the​ nation's major trading partners have declined. (ad shift)

shifts to right

is a property of an item that makes it desirable for use as a means of settling debts maturing in the​ future; an essential property of money.

standard of deferred payment

is the ability to hold value over​ time; a necessary property of money.

store of value

unemployment of workers over lengthy intervals resulting from skill mismatches with position requirements of employers and from fewer jobs being offered by employers constrained by governmental business regulations and labor market policies.

structural unemployment

Suppose that there is a temporary​, but​ significant, increase in oil prices in the economy depicted in the figure to the right. which way should sras be shifted?

to the left

is moving partially assembled products into a member nation of a regional trade​ bloc, completing​ assembly, and then exporting them to other nations within the​ bloc, so as to benefit from preferences granted by the trade bloc.

trade deflection

is shifting existing international trade from countries outside a regional trade bloc to nations within the bloc.

trade diversion

is a measure by which prices are​ expressed; the common denominator of the price​ system; a central property of money.

unit of accounting

is the successor organization to the GATT that handles trade disputes among its member nations.

world trade organization (wto)

what determines changes in equilibrium of exchange rates?

•Changes in real interest rates. •Changes in consumer preferences. •Perceptions of economic stability.

any event that causes the aggregate supply curve to shift inward or outward.

Aggregate supply shock

how to fix exchange rates?

Central banks can keep exchange rates fixed as long as they have enough foreign exchange reserves to deal with potentially​ long-lasting changes in the demand for or supply of their​ nation's currency.

the total market value of all final goods and services produced during a year by factors of production located within a​ nation's borders.

GDP

what are limitations of gdp as a measure of national welfare?

GDP is a measure of the value of production in terms of market prices and an indicator of economic activity. It is not a measure of a​ nation's overall welfare.

price index formula?

Price Index​ = Cost of Market Basket in 2014/ Cost of Market Basket in base year 2013 times 100 Cost of Market Basket in 2014/ Cost of Market Basket in base year, 2013×100.

equation of exchange formula?

Ms(V)=PY

what is the relationship between the price of existing bonds and rate of interest?

The market price of existing bonds​ (and all​ fixed-income assets) is inversely related to the rate of interest prevailing in the economy.

If a firm in China sells its product in the U.S. at a price below its cost of​ production, the firm is said to be A. experiencing diseconomies of scale. B. acting in the interest of consumers and producers in U.S. market. C. dumping its goods in the U.S. market. D. None of the above.

c

formula for counting unemployment?

Unemployment ​rate= Unemployed adults/ Labor force Unemployed adults/ Labor force times ×100 ​= 2.932.93​%

A politician states​ "taxes should be raised to provide more spending on school lunch​ programs." This is A. a normative economic statement. .B. a ceteris paribus assumption. C. a positive economic statement. D. an economic fact.

a

An increase in the price of gasoline will reduce the amount of gasoline purchased. This is A. a positive economic statement. .B. a negative economic statement. C. a normative economic statement. D. an economic assumption.

a

If federal budget deficits LOADING... ​increase, then a part of that deficit A. will be financed by foreign dollar​ holders, who will buy fewer U.S.​ exports, thus increasing the U.S. trade deficit. B. will be financed by domestic bond​ holders, who will buy fewer U.S.​ exports, thus decreasing the U.S. trade deficit. C. will be financed by domestic bond​ holders, who will buy fewer​ imports, thus increasing the U.S. trade deficit. D. will be financed by foreign dollar​ holders, who will sell fewer​ imports, thus decreasing the U.S. trade deficit.

a

Suppose that the wage rate of labor increased temporarily. The result of this would be best described by A. a decrease in the​ short-run aggregate supply curve only. .B. an increase in both the​ short-run aggregate supply and​ long-run aggregate supply curves. C. an increase in the​ short-run aggregate supply curve only. D. a decrease in both the​ short-run aggregate supply and long run aggregate supply curves.

a

The​ long-run aggregate supply curve shifts outward when A. there is economic growth. B. there are changes in the power of government. C. the​ real-balance effect takes hold. D. there is increased demand of real goods and services.

a

Which of the following will increase both the​ short-run and​ long-run aggregate supply​ curves? A. Younger workers in the labor force receive better and more training than their predecessors. B. The wage rate decreases throughout the economy temporarily. C. There are fewer firms involved in perfectly competitive and monopolistically competitive market structures as the economy features more oligopolies than before. D. The supply of key raw materials such as petroleum and bauxite are reduced.

a

If the U.S. federal government operates with a budget deficit it must borrow. In order to entice people to lend money to finance this​ deficit, the U.S. government must A. decrease taxes. B. retire previous debt first. C. pay a higher rate of interest on the bonds it sells. .D. increase the money supply.

c

any event that causes the aggregate demand curve to shift inward or outward.

aggregate demand shock

how can i find the long run equilibrium price level?

at the point where the aggregate demand curve​ (AD) crosses the​ long-run aggregate supply curve​ (LRAS)

Central banks can keep exchange rates fixed as long as A. the IMF would allow them to do so. B. they have enough foreign exchange reserves to deal with potentially​ long-run changes in the demand or supply of its currency. C. there is a constant amount of gold in the world. D. the central banks of each country are able to get the approval from the commercial banks of their respective countries.

b

If a country has a comparative advantage in the production of some good then A. that country should let other nations produce that good so that they may focus on new products that will expand job opportunities for their citizens. B. that country can produce the good at a lower opportunity cost compared to other producers. .C. that country should specialize in the production of that good and not trade with other nations so that they can keep all the gains for themselves. D. All of the above.

b

Many economists view the natural rate of unemployment as the level observed when real GDP is given by the position of the long-run aggregate supply curve LOADING... . There can be positive unemployment in this situation because A. business cycles are an inherent feature of the economy causing cyclical unemployment to naturally occur. B. information is costly and rigidities always exist causing some types of unemployment​ (frictional and​ structural) to occur even in the long run after everyone in the economy has fully adjusted to any changes. C. corporations need the presence of some unemployment to keep workers​ "in line." D. in a free society some people will always prefer idleness over work.

b

The expenditure approach to tabulating GDP A. excludes investment expenditures because they yield consumption in the future. B. adds up the total amount spent on newly produced domestic goods and services during the year. Your answer is correct.C. adds consumption​ expenditures, investment​ expenditures, government​ expenditures, interest payment and wages. D. adds up the total value of all income earnings during the year.

b

The​ long-run aggregate supply curve will not shift if there is a change in A. technology. B. the price level. .C. amount of labor. D. amount of capital.

b

What is the basic structure of the Federal Reserve​ Bank? A. There is one major bank with 25 branches. B. There are 12 district​ banks, a Board of Governors and a Federal Open Market Committee. .C. It is the combination of all private banks in the U.S. excluding Savings and Loans banks. D. There is one major bank located in Washington D.C. with branch banks located in every major city.

b

When a​ firm's production is subsidized by its government and then the firm sells its products in a foreign country at a price below the cost of​ production, this is called A. a tariff. B. dumping. .C. a quota. t.D. involuntary export expansion.

b

Which of the following is true concerning shifts of the​ long-run aggregate supply​ curve? A. An increase in the​ long-run aggregate supply curve causes its slope to become steeper as real GDP increases. B. An increase in the​ long-run aggregate supply curve is depicted as a rightward shift and an increase in real GDP. C. A decrease in the​ long-run aggregate supply curve cannot happen in the modern Keynesian Model. D. An increase in the​ long-run aggregate supply curve causes greater unemployment.

b

a.​ Suppose, there are new discoveries of key raw materials. Which of the following best describes the result of this​ event? A. The​ short-run aggregate supply curve shifts out while the​ long-run aggregate supply curve shifts in. B. Both the​ short-run and​ long-run aggregate supply curves shift outward. .C. Both the short and​ long-run aggregate supply curves shift inward. D. The​ short-run aggregate supply curve shifts inward while the​ long-run aggregate supply curve shifts outward.

b

​Long-run equilibrium in the economy will occur A. at the point of secular inflation. B. at the price level where total planned real expenditures equals real GDP at full employment. Your answer is correct.C. at the output level consistent with the vertical aggregate demand curve. D. where the production possibilities curve intersects the demand curve.

b

is a system of accounts that measures transactions of​ goods, services,​ income, and financial assets between domestic​ households, businesses, and governments and residents of the rest of the world during a specific time period.

balance of payments

is the difference between exports and imports of physical goods.

balance of trade

A rational LOADING... ​, ​self-interested student decides whether to purchase a textbook required for a particular class based on all of the​ following, except A. whether he can borrow the textbook from his friends. B. the price of the textbook. C. whether the textbook has an attractive dust jacket. D. his limited​ resources, such as income and time.

c

Between early 2005 and late​ 2007, total planned expenditures by U.S. households substantially increased in response to an increase in the quantity of money in circulation. From a​ short-run Keynesian​ perspective, the predicted effects of this event on the equilibrium U.S. price level and equilibrium U.S. real GDP were A. a decrease in the price level along with a decrease in equilibrium real GDP. B. an increase in the price level along with a decrease in equilibrium real GDP. C. an increase in the price level along with an increase in equilibrium real GDP. D. a decrease in the price level along with an increase in equilibrium real GDP.

c

If a country has an absolute advantage in the production of some good then A. that country should specialize in the production of that good and produce until the marginal benefit to society of the production of that good is zero. B. that country should specialize in the production of that good and not trade with other nations so that they can keep all the gains themselves. C. that country has the ability to produce more output from given inputs of resources than other producers can. Your answer is correct.D. All of the above.

c

is the degree to which an asset can be acquired or disposed of without much danger of any intervening loss in nominal value and with small transaction costs. Money is the most liquid asset.

liquidity

You and a friend decide to spend​ $100 each on concert tickets. Each of you alternatively could have spent the​ $100 to purchase a​ textbook, a meal at a highly rated local​ restaurant, or several internet movie downloads. As you are on the way to the​ concert, your friend tells you that if she had not bought the concert​ ticket, she would have opted for a restaurant​ meal, and you reply that you otherwise would have downloaded several movies. The relevant opportunity costs for you and your friend of the concert tickets that you purchased are A. Any one of the following for you and your​ friend: a meal at a highly rated local​ restaurant, several internet movie downloads or a textbook. B. a textbook. a meal at a highly rated local​ restaurant, and several internet movie downloads for you and a​ textbook, a meal at a highly rated local​ restaurant, and several internet movie downloads for your friend. C. ​$100 for you and​ $100 for your friend. D. internet movie downloads for you and a meal at a highly rated local restaurant for your friend.

d

the AD curve slopes downwards because

desired purchases of the​ economy's goods and services are inversely related to the price level

The government provides a subsidy to help keep an existing firm​ operating, even though a group of investors otherwise would have provided a cash infusion that would have kept the company in business. This is an example of

direct expenditure offset to a fiscal policy action

are actions on the part of the private sector in spending income that offset government fiscal policy actions. Any increase in government spending in an area that competes with the private sector will have some direct expenditure offset.

direct expenditure offsets

Government expenditures fund construction of a​ high-rise office building on a plot of land where a private company otherwise would have constructed an essentially identical building. This is an example of

direct expenditure offsets to a fiscal policy action

As can be​ expected, as the price of the euro​ rises, the quantity demanded will fall.

downward sloping derived demand

is the price of one​ nation's currency in terms of the currency of another country.

exchange rate

computing GDP by adding up the dollar value at current market prices of all final goods and services.

expenditure approach

A budget deficit occurs when

expenditures exceed revenue

serves as the​ nation's central​ bank, is one of the key banking institutions in the United States. It is partly a creature of government and partly privately directed.

federal reserve system

discretionary changing of government expenditures or taxes to achieve national economic​ goals, such as high employment with price stability.

fiscal policy

are exchange rates that are allowed to fluctuate in the open market in response to changes in supply and demand. Sometimes called floating exchange rates.

flexible exchange rates

unemployment due to the fact that workers must search for appropriate job offers. This activity takes​ time, and so they remain temporarily unemployed.

frictional

is a price index measuring the changes in prices of all new goods and services produced in the economy.

gdp deflator

is an excess of government spending over government revenues during a given period of time.

government budget deficit

is measuring GDP by adding up all components of national​ income, including​ wages, interest,​ rent, and profits.

income approach

the tendency of expansionary fiscal policy to cause a decrease in planned investment or planned consumption in the private sector. This decrease normally results from the rise in interest rates.

indirect crowding out effect

the government reduces its taxes without decreasing its​ expenditures; to cover the resulting budget​ deficit, it issues more​ bonds, thereby pushing up the market interest rate and discouraging private planned investment spending. This is an example of

indirect crowding out from a fiscal policy action


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