Macroeconomics Final Exam

Demarcus says that President Roosevelt was right to create the New Deal Programs, such as CCC, TVA, and others, that were created in order to end the Great Depression

Keynes

Federal gov't deficits are okay when used to end a recession.

Keynes

Lauren believes that gov't should create more jobs by increasing gov't spending in order to end the recession

Keynes

Benefits of free trade include

Lower Prices

This one waits for wages to fall to end a recession

Market

How does Caldwell Stock Brokerage Firm determine the amount of their stockbrokers' monthly paychecks? With a ___________ system.

Merit based

Which is true?

The largest single owner of US debt is US gov't entities

Seth knows that Croatia's total income earned for the year was $26 Billion. He also knows that _____________.

The value of Croatia's output of goods and services produced for the year was about $26 Billion

JSU issued these to help pay for the new Student Rec Center

Bonds

The owner of these will suffer capital losses when interest rates increase

Bonds

These assets are designed to pay out interest payments each year, with the owner getting his principal back upon maturity

Bonds

These assets can be issued by corporations and governments

Bonds

This is used to calculate inflation

Both the CPI and the GDP deflator

This measure overstates cost of living increases

CPI

This used to adjust Social Security checks for inflation

CPI

Jalyn says that struggling businesses should be allowed to fail. The gov't should not subsidize them

Classical

Tabitha says that people and businesses will make efficient choices that promote prosperity as long as the gov't doesn't meddle with the economy

Classical

Which believes that markets should be able to work freely without gov't interference?

Classical

These institutions make loans and take deposits

Commercial Banks

In which do you expect to have the most prosperous citizens?

Countries with high real GDP growth and low population growth

If the inflation rate is 6%, in how many years will average prices double?

12

The US produced about ___________ in goods and services.

$20 Trillion

Michelle bought a new computer for $1000. She used a new credit card to pay for it. The credit card interest rate is 17% annually and Michelle pays the minimum payment on time each month. She never charges another dime on the credit card and has no late fees. How long will it take her to pay off this purchase? About ___________

7 years

Suppose inflation spikes up to 16%. who will benefit from this?

James, who borrowed money for 30 years with a fixed rate loan

Which is true? a.) the US had a trade surplus of $2.5 Trillion in 2018 b.) A US tariff on toys will increase global toy sales c.) The US is the world's largest trading country d.) A US tariff on steel raises the price of US automobiles

A US tariff on steel raises the price of US automobiles

Assume a country has automatic stabilizers in place. When a recession begins, we can expect that _____________

All of the above

Investing in several different types of investments is critical because it

Allows the investor to lower his risk of catastrophic losses

Suppose Quin is a conservative and the economy is suffering from high inflation. Which fiscal policy does he recommend?

Decrease gov't spending

after a decrease in AD, there will immediately be

Deflation and a recession

Starting from potential GDP, what happens once the government spending is reduced (in the short run)?

Deflation and recession

What type of allocation is this? ___________ Jamara received Alfa's Farm Leadership College Scholarship because she scored a 34 on the ACT and passed 5 AP courses in high school. Research shows that those students with high ACT scores are most likely to graduate college.

Efficient

When a recession occurs, real GDP _________ and unemployment _____________

Falls; rises

This stabilization policy is done by elected officials

Fiscal

When this policy takes action to end a recession, federal budget deficits result

Fiscal

When this policy takes the appropriate steps to end a recession, higher interest rates will weaken its effectiveness

Fiscal

Something every smart investor should do is

Keep some assets that have high liquidity

Suppose that in 2015 Wyatt buys 300 shares of GE Corporation common stock at $70 a share and 300 GE Corporate Bonds which pay an interest rate of 4.7%. Suppose the company, GE, has declining profits in 2015, 2016, and early 2017. Also in January 2017, US interest rates fall to 10 year lows. Which will be true? Under normal conditions, if Wyatt sells his shares of stock and bonds in GE in early 2017, he will have a capital ___________ from the sale of stock and a capital _____________ from the sales of bonds.

Gain; loss

The drawbacks of having a low credit score include

Getting rejected for your dream job at BankAmerica

The 2 largest expenditures by the US federal gov't are

Healthcare and Social Security

Suppose Kentara is a liberal and the economy is in a recession. Which fiscal policy does she recommend?

Increase gov't spending

What will shift short-run aggregate supply to the left?

Increases in wages

This had the lowest fees, but is a diversified investment with a history of positive, long-term returns

Index fund

Starting from potential GDP, what happens once taxes are reduced (in the short run)?

Inflation and expansion

Why does $100 today buy fewer goods and services than $100 bought in 1943?

Inflation has eroded the purchasing power of the dollar since 1943

M&M Investments Inc. states that they are paying Yaril a 13% annual return on her investments. She noted that she earned a -5% real return for the year. What would explain this?

Inflation was 18%

Carmen wants to expand her business into many states. She needs large amounts of funding to do this. Name one sound, regularly used method she could consider.

Issue corporate bonds

Christopher believes inflation is excessive. He is hoping that policymakers will soon raise interest rates to lower it.

Monetarists

This stabilization policy can be done the fastest

Monetary

This will increase interest rates in order to lower excessive inflation

Monetary

This will attempt to increase AD in order to end a recession

Monetary and Fiscal

suppose inflation increases. In the short-run, we expect that

Most producers will increase their output production

These assets offer new investors diversification. They are actively managed by professional money managers

Mutual Funds

Spencer has $20,000 in an investment account paying 6.5% annual interest. If the inflation rate for the same time period is 9.25%, Spencer will have a _____________ real rate of return and see his purchasing power ______________.

Negative; decrease

What will most quickly improve your credit score?

Paying yours bills on time

in command control economies, ___________

Prices of goods and services are determined by the government

Caleb is very bright. When he wants to use gov't data to lobby for an overly generous cost of living salary boost, he will _________________.

Provide CPI inflation data to his boss

Most economists agree that the best measure of a country's living standard is its _________________.

Real GDP per capita

Assume a country has automatic stabilizers in place. What do we know?

Recessions will be shorter and less severe

Equity financing

Shares of Stock

If you have these, you will usually receive quarterly dividends

Shares of stock

Allie, a 56 year-old risk-averse woman, sold some inherited land and earned $148,500. She took earnings and made her first investment ever by putting $55,000 into a mutual fund and buying $4,500 of XYZ stock, a company stock with a P/E of 37 that was highly recommended by her close artist friends. She took $21,000 and made a down payment on a house valued at $195,000, using a fixed rate loan to finance the rest. She put the remainder in her checking account. It was the first time she had ever invested and she was very excited about the capital gains she could earn. From an investment viewpoint, what did she do right?

She adequately diversified her investments

Madison just got a new job earning $40,000. After a few anxiety-ridden weeks, she got her first career paycheck, which was $2500 after taxes. Once the paycheck was in her account, she paid $250 on her credit card bills and made her car payment. Then she decided to take the rest and go shopping for groceries and business clothing. What did Madison do wrong?

She didn't authorize an automatic withdrawal from her paycheck into an investment account

Wes reads that the US unemployment rate is 1.9% in September. He knows that there are labor ___________ and that wages will begin to ________________.

Shortages; rise

Which promotes the Earned Income Tax Credit, which provides tax credits to low income workers?

Supply-siders

Which says that income taxes should be reduced in order to promote higher economic growth?

Supply-siders

Which is true?

The US has been running federal budget deficits for several years

An efficient distribution of goods often has a flaw. What is it?

The allocation is often based entirely on one set of standards, which can result in harsh outcomes for some.

Why did US housing prices fall by 33% from 2006 to 2012?

There was a surplus of residential housing available

Which country has the largest total real GDP?

US

Which is true?

US Treasury bonds have low risks and pay low returns

Who suffers when a tariff is imposed on goods imported into the US?

US consumers, since they will pay higher prices for the goods with tariffs

Logan wants to invest in the stock market. After months of intense research, she finds a growing company that has shares with a P/E of 37.4. What should she do?

Wait for the price to fall before making a final decision

"Avengers: Endgame is the highest grossing movie of all time." What do we need to consider about this statement?

When considering this statement, we should be sure to adjust ticket prices for inflation so that we can compare older movie's lower- price ticket sales with the higher priced ticket prices today

Suppose Shawn's supervisor awards him with a 8.75% salary increase for 2019. With 2019 inflation at 13.25%, is Shawn worse or better off this year in terms of his purchasing power?

Worse off since his net real income has fallen by 4.5%

Which of the following would result in a recession with inflation?

a large increase in energy prices

What will cause an increase in US aggregate demand?

a reduction in corporate taxes

which is the nest description for life in a pure market economy?

a struggling company that declares bankruptcy

A tariff is

a tax on imported goods

A business cycle is

all of the above

The benefits of a high credit score include ___________

all of the above

What are some smart tips for college students?

all of the above

What can cause inflation?

an increase in AD and a decrease in SRAS

Suppose the economy is doing just fine. then a recession begins. Name the 2 possible causes of the recession. A _____________ in AD and a ____________ in SRAS.

decrease; decrease

Assume potential GDP is $4 Trillion. if the economy is at a short-run equilibrium where real GDP is a $6 Trillion, then there is a __________________ and a labor ______________.

expansion; shortage

What do money managers say that people should almost NEVER do?

get a Pay-Day loan

Rachel sees that US inflation is rising rapidly. She knows that

her purchasing power is falling

A problem with using fiscal policy to resolve economic problems is that

interest rates will increase as a result of expansionary fiscal policy

Deflation

is a sign of a recession

NASDAQ

is a stock exchange that facilitates stock trades

What did Allie do wrong?

the down-payment on her house was too small

The average city earns most of its revenues from __________ and spends most of its tax revenues on _____________.

property taxes; K12 education

Suppose SRAS decreases, in the short run there will be

recession and high unemployment

Suppose there is a shortage of dark chocolate. As long as the shortage exists, we expect the price of these chocolates to ____________. Given the shortage, candy producers will soon take action to ___________ production.

rise; increase

Which is the most liquid asset?

savings account

Julia notes that this morning's market price of gold is $1555 per ounce. At that price, ______________.

the amount of gold demanded equals the amount supplied

Which is true for the past few

the average wedding costs about $38,000

in a market economy, ______________

the prices of goods and services will automatically adjust such that shortages and surpluses will end over time

which is true?

wages are the most volatile component of GDP

Which is true? A wise money manager

will maintain an emergency savings account with a minimum of 6 weeks of take-home income

Something financially intelligent citizens do is ________________

write a budget, record income and spending, and adjust as needed