Macroeconomics Final Exam

The reason business investment is sensitive to interest rates is that

most funds used for investment are borrowed, so firms incur an interest charge

One of the key concepts involved in the circular flow diagram is that:

one person's spending is another persons income

Which of the following is a tool of monetary policy?

open market operations

Chris places $1,000 from his savings account into his checking account at the same bank. Which is true?

M2 is unchanged, but M1 increases by $1,000

Which of the following persons is considered to be unemployed?

Tiffany, who is going on interviews, hoping to get her first job

(T/F) Normative questions involve societal beliefs on what should or should not be done

True

Which factor will cause an increase in the quantity demanded for iPhones?

a decrease in the price of iPhones

Which of these would MOST likely to cause the production possibilities frontier to shift to the left?

a decrease in the size of the labor force

A $20 minimum fare in a market for taxi service is an example of:

a price floor

Gross domestic product is a measure of:

an economy's total output

According to the textbook what brought the U.S. out of the Great Depression?

an increase in spending on WWII

Which event will cause an increase in the supply of yogurt?

an increase in the number of sellers in the yogurt market

When the supply curve shifts out (to the right) and the demand curve shifts in (to the left), the equilibrium quantity will:

be indeterminate

Which good is NOT typically considered a public good?

bottled water

Expansionary fiscal policy is typically used to

combat a recession due to deficient demand

Suppose that the price of a good is $650 and equilibrium price is $625. Compared to market equilibrium:

consumer surplus is decreased and deadweight loss is increased

The mortgage crisis caused a lot of consumer to stop spending money. The decrease in spending led to a decrease in production. Which type of unemployment resulted?

cyclical

When the economy is operating at the natural rate of unemployment:

cyclical unemployment is zero

All of the following are true for inflation EXCEPT:

debtors are hurt during inflationary times because the amount they pay creditors back increases

A decrease in the incomes of the other countries will cause a(n) ____ in the ____ US-made products

decrease; aggregate demand for

A(n) ______ in market power and a(n) _____ in regulations will shift the short-run aggregate supply curve to the right.

decrease; decrease

If a government collects $1,000 in tax revenue and spends $1,600, it has:

deficit of $600

Long-run growth MOST likely to be achieved by promoting

development of new technologies

In the United States, people are considered unemployed if and when they:

do not have a job but are available for work and have been actively seeking work

Net exports equal:

exports minus imports

If the Fed reduces supply of money in the market, bond prices will ____ and interest rates will ____

fall; rise

What type of money does not have any intrinsic value

fiat money

Gross domestic product is the total market value of all:

final goods and services produced in the United States by labor and property

In the Keynesian Model, the price level is _____: in the aggregate demand and supply model, the price level is ______

fixed; flexible

Inflation is a:

general rise in prices

Dave brags to his dad that his $45,000 starting salary as a computer programmer is much higher than his dad's $28000 starting salary some years ago. If the consumer price index the year Dave begins work is 108.5 while the consumer price index the year his dad started work was 110.8, Dave is:

incorrect; adjusting for price changes, his salary is less than his dad's salary

Gasoline is produced from crude oil. Ceteris paribus, if the supply of crude oil falls, the equilibrium price of gasoline will ____ and the equilibrium quantity will ____.

increase; decrease

The crowding-out effect can ____ interest rates, which _____ business investment

increase; reduces

A(n) ____ is government spending, a ____ domestic currency, and ____ interest rates will shift a country's aggregate demand to the right

increase; weaker; lower

In the long-run, attempts to expand beyond an economy's natural rate of unemployment tend to result in

increased inflation

As income increases, consumption _______

increases at a slower rate

Which is a source of positive productivity growth?

increasing the quality of labor

The largest source of federal government revenues is:

individual income taxes

The ____ lag is the time policymakers must wait for economic data to be collected, processed, and reported

information

Consumption

is the largest component of total spending

When government spending decreases, the aggregate demand curve shifts to the ____ and the multiplier effect is dampened by a _____ in the aggregate price level

left; fall

What would be a possible opportunity cost of you going to a doctor for a check-up?

lost income due to not being at work for those hours

The capital-to-labor ratio is

low in poor countries

Corporate bonds generally have a ____ ROI than do stocks because bonds are ____

lower; less risky

As a general rule, the less capital employed with workers, the ___ their productivity and ___ their earnings

lower; lower

The field of economics that is concerned about the broader issues in the economy, such as inflation, unemployment, and national output of goods and services is called:

macroeconomics

Physical capital includes...

manufactured products that are used to produce other goods and services

Institutions that bring buyers and sellers together so they can interact and transact with each other are called:

markets

What is considered a land resource?

mineral deposits

Which of the following is the most liquid?

money in a checking

Transfer payments are:

monies paid directly to individuals by the government

A country operating outside of the production possibilities frontier is:

operating impossibly because a country cannot operate outside the production possibilities

Which phase of the business cycle occurs immediately after a recovery?

peak

Allocative efficiency occurs when:

people who want a product the most get it

The expenditure category that accounts for the largest share of GDP is:

personal consumption expenditures

A(n)____ is the minimum legal price that can be charged for a product.

price floor

Suppose that the price of a good is $650 and equilibrium price is $675. Compared to market equilibrium:

producer surplus is decreased and deadweight loss is increased

Suppose that a customers willingness to pay for a product is $1480, and the sellers willingness to sell is $1210. If the negotiated price is $1479:

producer surplus is greater than consumer surplus

The ____ shows the combination of two goods that are possible for a society to produce at full employment.

production possibilities frontier

The ___ is the sum of past ____

public debt; budget deficits

When production technology improves, supply increases and the equilibrium:

quantity rises and the equilibrium price falls

Economic growth is most accurately measured using

real GDP per capita

The ______ lag is the time it takes for policymakers to confirm that the economy is trending in or out of a recession

recognition

The crowding out effect can ____ interest rates, which ____ business investment

reduces; reduces

A shift to the ____ of the ____ curve will cause the price level and employment to increase

right; aggregate demand

If investment increases from $500 to $500 and marginal propensity to consume is .66, then equilibrium income will

rise by $150 billion

If investment increases from $500 to $600 and marginal propensity to consume is .75, then equilibrium income will

rise by $400 billion

the law of supply states that as price ____ , the quantity ____

rise; supplied rises

The supply curve for loanable funds represents _____ and is ____

savers; upwards sloping

Economic growth is shown as a

shift to the right of the long-run aggregate supply curve

Which of these is NOT a public good?

shirts at a clothing store

A price ceiling usually results in a:

shortage and a misallocation of resources

A production function....

shows the output that is produced using different combination of inputs combined with existing technologies

In the context of the production possibilities frontier, opportunity cost can be measured by the:

slope of the frontier

Which of the following is not considered an automatic stabilizer?

spending on research and development

If Jack Sparrow buries a chest of gold on a deserted island and plans to come back for it later, then the gold is functioning as

store of value

If the marginal propensity to consume 0.75, by how much will $250 of government spending increase GDP?

$1,000

If the reserve requirement is 40%, a new deposit of $400 leads to a potential increase in the money supply of

$1,000

A bank has a reserve requirement of 15%. The bank currently has $1,000 in bank vaults, $4,000 in deposits at the Federal Reserve, and $25,000 in deposits. The bank has how many excess reserves?

$1,250

A bank has a reserve requirement of 5%. The bank currently has $1,000 in bank vaults, $4,000 in deposits at the Federal Reserve, and $25,000 in deposits. The bank has how many excess reserves?

$1,250

If you were studying economics, you could be doing one of the following: sleeping in (which you value at $5), playing cards with your friends (which you value at $10), or working (you would have earned an extra $8). The opportunity cost of studying economics is therefore:

$10

Based on the information provided in the graph, at an income level of $600, savings equals ___, and the APC equals ____.

$125; 0.79

If the marginal propensity to consume 0.75, by how much will $500 of government spending increase GDP?

$2,000

If disposable income is $4,000 and saving is $1,800, how much is consumption?

$2,200

If the reserve requirement is 15%, a new deposit of $400 leads to a potential increase in the money supply of

$2,666.66

If disposable income is $4,500 and saving is $1,400, how much is consumption?

$3,100

If disposable income is $5,000 and saving is $1,800, how much is consumption?

$3,200

What is your new salary if you earned $40,000 last year, the consumer price index increased from 120 to 125, and your salary is adjusted by the rate of inflation annually?

$41,666.67

If a person borrows $5,000 at 8% interest and never makes any payment, how much will the loan balance be after two years?

$5,832

Based on the information provided in the graph, at an income level of $500, savings equals ___, and the APC equals ____.

$50; 0.9

If a person borrows $5,000 at 12% interest and never makes any payment, how much will the loan balance be after two years?

$6,272

GDP is $10 trillion in 2001. If the GDP deflator is 100 in 2000 and is 110 in 2001, what is real GDP?

$9.09 trillion

Suppose the market basket of goods cost $10,000 in 2009, the base period, and that same basket of goods now cost $11,200. What has been the percentage change in cost of goods between the base period and the current period?

+11.2%

Suppose the government implements a policy increasing the rewards earned by savers. In this case, the ____ loanable funds shifts ____.

supply of; right

If a government collects $5,400 in tax revenue and spends $5,000, it has:

surplus of $400

A good is a normal goof if:

the demand curve shifts outward if income increases

If an economy's GDP will double in 40 years, then its growth rate must be about

1.75%

The money multiplier is 3. What is the reserve requirement?

1/3

If the marginal propensity to consume is 0.9 then the multiplier is...

10

Suppose a market basket of goods cost $10,000 in 2009, the base period, and that same basket of goods now cost $11,200. What is the consumer price index for the current period?

112

The Federal Reserve System includes _____ regional banks

12

Suppose that a bond has a face value of $1,000 and a coupon rate of 5%. If the bond sells at a price of $2,000 what is the yield?

2.5%

Suppose that a bond has a face value of $1,000 and a coupon rate of 5%. If the bond sells at a price of $500 what is the yield?

2.5%

Suppose that 10 cooks work 5 hours to produce 1,000 hamburgers. What is the productivity of these cooks?

20 hamburgers per hour

If a car is produced in Detroit in 2013 but not sold until 2015, it should be included in ____ GDP, and its value should be counted in ____.

2013's; inventory changes

The money multiplier is 4. What is the reserve requirement?

25%

If the growth rate in an economy is 2%, then its GDP will double in about

35 years

If an economy's GDP will double in 17.5 years, then its growth rate must be about

4%

The money multiplier is 25. What is the reserve requirement?

4%

If the marginal propensity to consume is 0.8 then the multiplier is...

5

Suppose that a bond has a face value of $1,000 and a coupon rate of 10%. If the bond sells at a price of $2,000 what is the yield?

5%

An economy has a population of 226,500, of whom 12,500 are unemployed and actively seeking work, and 35,000 have given up looking for a job. Also, 28,000 people work part-time and 151,000 people work full-time. This economy's unemployment rate is _____.

6.5%

If the growth rate in an economy is 10%, then its GDP will double in about

7 years

Last year the consumer price index (CPI) was 115 while the consumer price index for this year is 125. The rate of inflation is:

8.7%

According to the law of demand, people buy more of a good when:

the price falls

Flu vaccination shots provide external benefits. Thus:

too few flu vaccination shots are given

Markets tend to produce:

too little of a good exhibiting external benefits

Zach has been laid off from his job as an aircraft worker. He has been actively looking for a job but has no luck for the past six weeks. According to the Bureau of Labor Statistics, Zach is:

unemployed

Economists refer to the payment to labor as:

wages

The _____ effect is a reason for the negative slope of the aggregate demand curve.

wealth

Which of the following statements is true?

Economic growth leads to increased consumption of goods and services

What interest rate is the rate at which banks charge each other for overnight loans?

Federal Funds Rate

If a country's population increases at a slower rate than the growth in it real GDP

GDP per capita has increased

Suppose that a customers willingness to pay for a product is $5, and the sellers willingness to sell is $2. If the negotiated price is $3:

$1

What impact will a rising price level have on real GDP?

Changes in the price level do not impact real GDP

Suppose that the economy is expanding. To reduce demand using discretionary fiscal policy, the government can

raise taxes or reduce government spending

_____ government spending _____ transfer payments, and ____ taxes are all examples of expansionary fiscal policy

raising; increasing; reducing

What are the primary functions of money?

unit of account, medium of exchange, store of value

Scarcity is BEST defined as when:

unlimited wants exceed limited resources

Suppose that 6 cooks work 12 hours to produce 1,296 hamburgers. What is the productivity of these cooks?

18 hamburgers per hour

If the marginal propensity to consume is 0.6 then the multiplier is...

2.5

In the Keynesian Macroeconomic Equilibrium:

AE=Y and S=I

Refer to the graph of the loanable funds market below and assume that the market begins in equilibrium at point e. Which point best reflects the new equilibrium in the market following a reduction in business regulations?

B

Refer to the graph of the loanable funds market below and assume that the market begins in equilibrium at point e. Which point best reflects the new equilibrium in the market following a reduction in the government's budget deficit?

C

_____ unemployment is the result of changes in the business cycle.

Cyclical

_______ inflation occurs when aggregate demand expands so much that equilibrium output exceeds full employment output and the price level rises.

Demand-pull

If oil prices fall, the short-run aggregate supply curve will shift from SRAS0 to _____ and the price level will be at _____

SRAS1: P1

Which question is NOT an example involving marginal analysis?

Should K-Mart rebrand all its stores using the Sears name?

_____ are all examples of mandatory spending

Social security, interest on the national debt, and medicare

_____ unemployment is caused by changes in consumer demands or technology

Structural

Suppose that if the United States produced only oil, it could produce 25 million barrels; and if it produced only microchips it could produce 16 million barrels; and if it produced only microchips, it could produce 8 million chips. Which statement is then correct?

The United States has an absolute advantage over Mexico in producing both goods

If bagels and doughnuts are substitute goods, then which scenario is likely to occur if the price of bagels is reduced?

The demand curve for doughnuts will shift to the left

Disposable income is equal to

Y - T

Infrastructure is....

a country's public capital

What is considered a labor resource?

a trainee

Producer surplus is shown graphically as the area:

above the supply curve and below the market price

The 12 Federal Reserve banks and their branches do all of the following EXCEPT:

accept deposits from U.S. citizens

The GDP deflator for the base year is:

always equal to 100

Liquidity refers to

how quickly, easily, and reliably an asset can be converted into medium of exchange

Which of the following events causes a decrease in aggregate demand?

increase in interest rates