Macroeconomics final exam study
Which of the following is an important source of labor productivity? a. The market demand for products. b. Human capital. c. Price of natural resources d. Low interest on business loans.
b. Human capital.
M1, the narrowest of the Fed's money supply definitions include(s)
currency in circulation.
If a country's Gross Domestic Product increased slower than its population increase, the country's GDP per capita would
fall.
Keynesian economists believe that the economy needs to be influenced in order to correct itself from the effects of unemployment and inflation. This can be done through ________ policies.
fiscal
When the government increases its spending, it is conducting
fiscal policy.
A key distinction between the Keynesian and neoclassical economists is that Keynesians believe the economy exhibits a ________ aggregate supply curve and neoclassicals believe it is ________.
flat; vertical
Economists who hold to Keynesian views are most aptly described as ________.
aggregate demand policy interventionists
In macroeconomics, ________ denotes the total quantity of output or the real GDP of what companies produce and sell.
aggregate supply (AS)
Tom graduated from college in June but was still looking for work in August. This is an example of ________.
frictional unemployment.
Your friend asked you what a business cycle means. You tell them that a business cycle reflects changes in real GDP. Then you tell them that the stages of a business cycle in correct order are:
expansion, peak, recession, trough.
Aggregate Demand (AD) is defined as C + I + G + (X-M). X refers to ________.
export expenditure
If a country's Gross Domestic Product increased slower than its population increase, the country's GDP per capita would
fall
The law of demand in the loanable funds market predicts a
fall in consumer credit card use if the interest rate rises.
According to Keynes what should the government do to improve economic conditions during a recession?
increase government spending and/or decrease taxes
According to the Keynesian perspective, reasons for an increase in aggregate demand include
increase in foreign demand for net exports.
Aggregate Demand (AD) is defined as C + I + G + (X-M). I refers to ________.
investment spending
The theory of rational behavior
is an assumption that economists make to have a useful model for how decisions are made.
If all else remains constant and the values of two variables move in the same direction it indicates a
positive slope relationship
Darryl is starting a company helping people put up and take down holiday lights on their homes. He determines that the larger the house, the more likely people are to use his company to put up their lights. If Darryl were to plot the relationship between home size and willingness to pay for holiday light installation services, the line on the graph would show a
positive slope.
The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called
potential GDP.
A supply curve is a graphical illustration of the relationship between quantity supplied and Select one:
price
Aggregate supply (AS) denotes, while holding the price of inputs fixed, the ________ that firms choose to produce and ________.
price level for output; GDP
If the aggregate supply increases, the ________.
price level in an economy rise
The macroeconomy
regroups the activity of all households, firms and government in a country.
According to growth accounting studies, a country would achieve better results by promoting
research and education.
A decrease in taxes will shift the AD curve to the ________, while a decrease in government expenditure will shift the curve to the ________.
right; left
Economic growth is shown in the AS-AD model as a
rightward shift in the long run AS curve.
Keynes understood that in the short-run wages and prices are ________ and therefore encourage the use of ________ to return an economy to equilibrium.
rigid; fiscal policy
Marcus is considering which college major to choose. In taking a rational approach, Marcus should consider
the benefit each major would bring and the cost of the degree.
Suppose that there are only two types of output in a country: nuclear missiles and consumer goods. All else being constant, as the nation produces more missiles,
the greater the opportunity cost will be of satisfying consumer wants.
According to Keynesian economics, when there is a increase in government purchases it causes a shift in the aggregate demand curve to the right by an amount equal to
the increase in government purchases times the expenditure multiplier.
If government spending increases by $4 billion and real GDP increases by $8 billion, the expenditure multiplier must be ________.
2.0
If the reserve requirement is 10 percent and a monetary expansion increases excess reserves by $5 million, the total change in the money supply after all rounds of lending are completed is ________.
50 million
If Pepsi goes on sale, what will happen to the demand for Coca-Cola?
Demand for Coca-Cola will decrease.
When creating a graph for your economics course, which axis is most commonly used to represent price (p)?
Price is most commonly represented on the y-axis.
Every day, 500 airplanes in San Francisco incur an additional 30 minutes of airport delays when flying into or out of the airport. In Chicago, the delays amount to 15 minutes for 1,200 airplanes. If the price of time is $30/hour in San Francisco and $20/hour in Chicago, which airport incurs the largest opportunity cost?
San Francisco
If you hear someone say, "If you build (produce) it they will come (purchase)" you know it is a good way to describe ________.
Say's Law
If aggregate supply is vertical, then which of the following statements must be true of the long-run? a. Aggregate demand does not affect the quantity of output. b. Inflation will accompany any rise in output. c. Aggregate demand does not cause changes in the price level. d. The COLA will start to move closer to output.
a. Aggregate demand does not affect the quantity of output.
Among all high-income countries, which consistently has the lowest long-run unemployment rate in the past 30 years? Select one: a. Japan b. United States c. France d. United Kingdom
a. Japan
If an economist needs to use a model that collectively reflects the interconnections and the entire market supply and demand relationships, which model is the best to use? a. The AD-AS model. b. The cyclical unemployment model. c. The general equilibrium model. d. The frictional employment model.
a. The AD-AS model.
Bill is a construction worker who was laid off because the market for new homes was adversely affected in the recession. Bill's unemployment experience is referred to as
cyclical unemployment
Fiscal policy is concerned with which of the following? a. Price controls b. Interest rate changes. c. Money supply changes. d. Government expenditure changes
d. Government expenditure changes.
Given that total spending for a certain household will always include a base amount of $1000/month, and that additional spending is equal to half of any income earned, we can predict total household spending with a model y=b+mx, where
y represents total spending.
If the expenditure multiplier is 2.5 and the government spending increases by $4 billion, what would be the increase in the real GDP?
$10 billion
If Nominal GDP is $12,000 billion and the GDP deflator is 80, then Real GDP is:
$15,000 billion
The country of Wakanda for 2018 has a GDP of $555 billion, with a total of 2 million workers, each of which averages 1400 work hours a year. What is the value of the output per worker per hour of work?
$198
If depreciation equals $32 billion, GNP equals $230 billion, and national income is $215 billion, then what is the Net National Product?
$198 billion
Normative statements are based upon
value judgments.
If Nominal GDP = $2.5 trillion and the GDP deflator is 125, then real GDP is equal to:
$2 trillion
If Nominal GDP is $17,000 billion and the GDP deflator is 75, then Real GDP is:
$22,667 billion.
The required reserve ratio for Julie's bank is 10 percent. If Julie deposits $5,000 cash into her checking account, what amount of new money could the bank create when it lends out its excess reserves?
$4,500
The country of Bolivia had a Gross Domestic Product of $79 billion in 2016 and a population of 11 million people, the GDP per capita would be
$7,182
Given X = 22+10-((5/25)*100), X is ________.
12
Calculate the unemployment rate based on the following data for a country: Population: 200, Employed workers: 140, Labor Force: 160, Discouraged workers: 10.
12.5% (Unemployment rate = # unemployed / labor force = (160-140)/160 = 12.5%)
A government annually collects $320 billion in tax revenue and allocates $80 billion to education spending. What percentage of this government's budget is spent on education?
25%
Country A's real GDP is growing at a rate of 2 percent per year. Using the rule of 72, it will take country A ________ to double its GDP.
36 years
If the MPC is 75%, what is the spending multiplier?
4
Sam wants to improve his GPA. to earn a 4.0 this semester. His prior GPA was a 2.75. Imagine that there is an equation that says his new GPA could be calculated based on the number of hours he spends studying, his class attendance, and his prior GPA. Written as an equation, it is Grade = (0.50 x hours spent studying) + (0.25 x class attendance hours) + (0.25 x prior GPA). Sam plans to attend class for 4 out of 4 hours each week. Use the equation to determine approximately how many hours per week Sam needs to study to earn a 4.0.
4.6 hours
With a Real GDP of $100 billion in 2016 and of $140 billion in 2017, the real growth would be
40%
In the far off kingdom of Viracien there is a healthy sized population of citizens over 16 years old. The last census indicated a total adult population of 5 million people. This year a recession hit and 237 thousand people were let go from their jobs and are on the hunt to find new work. Because of the recession many took early retirement and there is now a population of 1.3 million who are not working or looking for various reasons. Because of the unrest, the military of Viracein has increased its ranks and is now grown to a total of 50 thousand citizens serving the country. If Viracein uses the same calculation to find the unemployment rate, what is the country's unemployment rate?
6.5% (Unemployment rate = # unemployed / labor force)
In 2008 the price index was calculated at 165.2 with 2005 as the base year. In 2009 the price index increased to 181.6. What was the inflation from 2008-2009?
9.9%
What is a step a bank can take to protect itself from loan defaults which can lead to recessions?
A bank can diversify its loans.
Typically, if consumer and business confidence is high then ________ and if consumer and business confidence is low then ________.
AD shifts to the right; AD shifts to the left
Which factors contribute to economic growth?
An increase in university graduates.
According to the law of demand, assuming other factors are held constant
As the price of milk decreases, the quantity of milk demanded will increase.
Neoclassical economists have a tendency to put more emphasis on long-term growth than on fighting recession. Why is this the case?
Because over the long run, recessions end.
How would you need to shift the supply and demand curves in a market to result in a situation where equilibrium quantity increases while the equilibrium price change is indeterminate?
Both supply and demand must increase.
If the government saw that consumer confidence was low, what step can it take to shift the AD to the right?
Congress can pass tax cuts.
Which of the following statements is normative? a. Congress gives certain business corporations tax breaks. b. Tax breaks can lead to additional production. c. Tax breaks can change corporate behavior. d. Congress gives too many tax breaks to corporations
Congress gives too many tax breaks to corporations.
David's pay last year was $100,000. His pay this year increased to $115,000. The consumer price index increased from 100 to 115 over the same time period. What has happened to David's real income from last year to this year?
David's real income is unchanged.
Gross national product would include
Final goods and services produced by American resources
After getting her degree in Economics, Jeanine went to work for the Bureau of Labor Statistics. She compiles data on the unemployment rate, which serves as an economic indicator. What does this data help Jeanine to understand?
How well the economy is doing at a macro level.
Keynes' Law says that demand creates its own supply. In the Keynesian zone of the short-run aggregate supply curve, how is this law supported?
Increasing aggregate demand changes prices relatively little, but does effectively increase aggregate outputs because of the excess capacity in the economy.
Janice has calculated the GDP for 2018 by using the total final goods and services times the 2018 prices of total goods and services. If Janice wishes to create a real value GDP value for 2018, what must she do?
Janice must adjust the total value 2018 GDP for inflation.
According to macroeconomic theory, evidence that high unemployment may be accompanied by low inflation, and low unemployment may be accompanied by high inflation is illustrated by the
Keynesian Phillips curve tradeoff.
Demand deposits are considered a ________ to a bank.
Liability
The most liquid source of money is ________.
M1 (M1 is a definition used in the supply of money and includes those assets that are the most liquid such as cash, checkable (demand) deposits, and traveler's checks.)
A bill was introduced into Congress last year suggesting changes to the income tax code. Congress now passed this new tax reform act in the last session and over the next few years the new laws will begin to impact the nation. This is an example of what type of policy?
Macroeconomic fiscal policy
The additional benefit that one more unit of something will provide is known as
Marginal benefit.
Which is a true statement about marginal cost? a. The amount of benefit a person receives from a good or service remains constant. b. Marginal cost is constant c. It is the difference (or change) in the benefit you receive from a different choice. d. Marginal cost is the difference (or change) in cost of a different choice.
Marginal cost is the difference (or change) in cost of a different choice.
An example of a financial market is the ________.
NASDAQ Stock Market (Financial markets include the banking system, equity markets like the New York Stock Exchange, or the NASDAQ Stock Market, bond markets, and commodity markets.)
If an increase in the price of Nike shoes increases the demand for Adidas shoes, this means that
Nike shoes and Adidas shoes are substitutes.
Henry accepted a new position at a ball bearing manufacturing plant after graduation from college. With his macroeconomic education, Henry has been asked to advise the best way to measure inflation for the company to be able to accurately adjust its prices. What would Henry advise the company use?
Producer Price Index
According to the order of operations in solving equations, which step should come first?
Simplify inside parentheses and brackets.
According to the Laffer curve, as tax rates rise
Tax revenue first increase but eventually fall as tax rates reach certain levels.
How much money can a bank loan out, and make money on, of the banks' newly received deposits?
The bank can loan out only up to the amount of its excess reserves.
How would the equation where x=3 and y=4 be represented in a XY graph, and what does it say about the relationship between X and Y?
The beginning point y=4 on the Y axis has a horizontal line straight to the right, X-axis has a vertical line straight up from x=3. With the two points on the graph, there is an intersection point where the x and y will cross each other.
According to the Keynesian approach to fiscal policy
The crowding out effect is quite limited as the demand for private loans is low in times of recessions.
Assume that the government of country of Ostentia for its current budget plans to collect taxes in the amount of $10 billion and to spend $9 billion. A civil war breaks out and the government spends an additional $1 billion and tax collection is down by $1 billion. What is the result?
The expected budget surplus turns in to a $1 billion deficit
A free market is described by which of the following statements?
The government does not set or influence market prices in any way.
To find unemployment, you need to calculate
The number of unemployed workers divided by the labor force.
The unemployment rate measures:
The percentage of the labor force who do not have a job, but are looking for one. (Unemployment rate = # unemployed adults/labor force)
If a data line on a graph slopes upward as it goes to the right, it is depicting that
The relationship between the variables on the axes is positive.
In 1973 Arab countries imposed an oil embargo on the United States and other developed countries in the aftermath of the Yom Kippur war. At the same time improved infrastructure and increased income was altering consumer preferences in favor of automobiles over public transportation. If you were drawing a supply and demand graph to illustrate the change in the gasoline market in 1973-1974, what would you say has happened to the supply and demand curves and the equilibrium price and quantity during this time period?
The supply of gasoline will decrease shifting the curve to the left while the demand curve shifts to the right. As a result the equilibrium price will increase but it is impossible to pinpoint the equilibrium quantity change.
According to the growth accounting studies, if you lived in a country where illiteracy was high and 40% of the children left school early and did not complete their education what would probably be the results for that country?
There would be both a human and economic loss.
Juan has a monthly budget of $100 to spend on entertainment. A concert ticket costs $20 while a movie ticket costs $10. This month Juan has attended one concert and 5 movies so far. If Juan decides to only go to movies for the rest of the month. How many movie tickets can he afford to purchase and stay within his budget?
Three tickets.
What is one of the main differences between a bank and a credit union?
Typically a credit union is owned and run by its members.
An increase in foreign prices relative to the price level in the U.S. will cause:
U.S. net exports to rise.
The country of Wachovia has an economy that will double in 144 years. From what you've learned of the power of compound growth what does this mean for Wachovia?
Wachovia has a slow growing economy at a growth rate of .5% per year.
Shifts in the aggregate supply curve can be caused by
a change in input prices.
Two countries are trying to decide which product should have an increased production. Both Canada and Costa Rica produce coffee and corn, but it is easier for Canada to raise corn than grow coffee. Costa Rica easily grows coffee, but has a more difficult time growing corn. In comparison with Canada, Costa Rica has
a comparative advantage with coffee.
An example of a bank asset is ________.
a loan made out to a customer
The aggregate demand represents total spending on ________.
a nation's domestic output of goods and services
An equation where Y=6 could be represented on a graph where Y is on the vertical axis and X is on the horizontal axis as
a single point (Y=6) and a horizontal line rightwards from that point.
Dawnell is a skilled dancer. She is currently teaching modern dance full time for three high schools and makes $44,000 a year. She is now giving up her work and joining a touring dance company for the next two years. She will make $24,000 a year dancing, but gain much more in experience and connections. Dawnell's decision will result in
a two year opportunity cost of $40,000 after leaving her teaching position
The house that Jamalla inherited from her mother can rent for $2000/month, but Jamalla decides to allow her brother to stay there for only half of that. This decision carried with it
a zero monetary cost but a $1000 per month opportunity cost.
Which of the following captures all the components of GDP? a. C + I + G + (X - M) b. C + I + G c. C + I + G - Tax d. C + I + G + M
a. C + I + G + (X - M)
Identify which of the following microeconomic topics can have an impact on macroeconomic topics? a. How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means? b. What determines the quantity to be produced by a firm? c. What determines what prices a firm will charge? d. What combination of goods and services will best fit their needs and wants, given the budget they have to spend?
a. How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means?
Bob is measuring the GDP in 2018 by using the quantity of each final good and service produced in 2018, multiplied by the price at which the goods and services were sold in 2018. What type of calculation is Bob creating? a. The GDP using nominal values. b. The GDP using real values. c. The National Income using nominal values d. The GDP using both nominal and real values.
a. The GDP using nominal values.
Money creation in the United States results from which of the following? a. The process of multiple banks' lending out deposits. b. The purchases of government securities. c. The rise in the value of gold.
a. The process of multiple banks' lending out deposits.
What factors are left out of the Gross Domestic Product calculation but are still necessary in determining and reflecting our standard of living? a. The value of leisure, the quality of our environment, improvements in products quality. b. The value of our imports and exports, the value of leisure. c. Improvements in product quality, profit for shareholders ad business owners d. The value of our imports, the improvements in product quality.
a. The value of leisure, the quality of our environment, improvements in products quality.
The M2 money supply consists of everything in the M1 money supply, savings deposits and which of the following? a. certificates of deposit b. long term debt c. personal checks d. bitcoin
a. certificates of deposit
Which of the following concepts describes an economy producing at its potential and unemployment at the natural rate of unemployment? a. full employment GDP b. GDP deflator c. stagflation d. the foreign price effect
a. full employment GDP
From a neoclassical view, which of the following is least important? a. increasing aggregate demand to fight unemployment. b. improving the corporate portfolio c. encouraging long-term growth d. stimulating potential GDP
a. increasing aggregate demand to fight unemployment.
Zander read a report about the nation's GDP from last year. The report talks about the investment expenditures. What is included in the GDP calculation of investment?
additions to inventories.
The base year for the price index is
an arbitrary year from which to measure price changes.
An increase in aggregate demand (AD) can cause
an expansion in the economy.
A rightwards shift of the AD curve along the Neoclassical portion of the aggregate supply curve will result in
an increase in the price level.
If an economy moves into a recessionary period, examples of fiscal policies that act as automatic stabilizers include
an increase in transfer payments or social spending, such as unemployment benefits.
A price index is NOT
an inflation rate.
An example of a bank liability is ________.
an interest payment made on a savings account
According to the law of supply, assuming other factors are held constant
as the price of milk decreases, the quantity of milk supplied will decrease.
A well-run bank will ________.
assume some borrowers will not repay their loans on time
If an economy moves into an inflationary period, causing that country to produce more than potential GDP, then
automatic stabilizers will cause tax revenue to increase and government spending to decrease.
Which of the following statements reflects marginal decision-making? Select one: a. The total cost of the program is equal to the total benefits. b. Booking this condo in a better location is worth the extra $100. c. If we double the order to a dozen doughnuts, we will pay only 20 percent more. d. Staying in this rental cottage longer would be nice, but the cottage next door is more attractive.
b. Booking this condo in a better location is worth the extra $100.
Which of the following statements is positive? a. Social security payments to retirees should not be taxed. b. Social security benefits are not taxed. c. There is a limit to the income each year to which the FICA tax applies, but that is fair, since there is a limit to social security benefits. d. I am absolutely positive that there is a better way.
b. Social security benefits are not taxed.
Which of the following would fall in the Investment component of GDP? a. The amount households save b. The amount spent on new factories. c. The amount spent on stocks and bonds. d. The amount spent on consumer durable goods.
b. The amount spent on new factories.
It is said that the rational consumer will act according to his or her self-interest, and that self-interest can include a concern for one's family and friends, but not often society as a whole. Which of the following illustrates this type of decision? a. Our time was very valuable at that moment, but we stopped to put out the fire before it spread. b. The boat rental was worth the additional fish caught, regardless of how little fish we left behind. c. Mr. T. decides not to purchase any case of water bottle so there could be more left for other consumers. d. The rental of recreational vehicles for use in national parks is responsive to concerns of noise pollution
b. The boat rental was worth the additional fish caught, regardless of how little fish we left behind.
You have just started your new job in Washington D.C. at the Bureau of Economic Analysis department. Your first task is to calculate economic indicators from 2017 to assess the macroeconomic state of the country. Which answer fits what you need? a. The trade balance between the US and some Asian nations. b. The quantitative measurements of the nation's economic activity for 2017. c. Total profit and loss statistics from the city of Washington D.C. for 2017. d. The housing trends for the Western United States for 2017.
b. The quantitative measurements of the nation's economic activity for 2017.
Gross Domestic Product (GDP) is designed to measure: a. a nation's total imports of final goods and services b. a nation's total production of final goods and services. c. a nation's total consumption of final goods and services by households. d. a nation's total investment level
b. a nation's total production of final goods and services.
Joseph is an unemployed yard landscaping worker who is trying to find employment as he last had work seven months ago. He is now at a point where he will take any wage even if low to get money to pay the bills. He talks to businesses and landscaping companies on a daily basis but none are hiring due to an ongoing recession. How would you describe his experience with the correct economic term? a. labor shortage b. cyclical unemployment c. frictional unemployment d. out of the labor force
b. cyclical unemployment
If the Consumer Price Index was 120 at the end of last year and 125 at the end of this year, Americans experienced which of the following? Select one: a. a recession b. inflation c. a rise in the purchasing power of a dollar. d. deflation
b. inflation
Which of the following is considered a security? a. M1 b. savings bond c. debit card d. $20 bill
b. savings bond
A ________ means that government spending and tax revenues are equal.
balanced budget
Cigarettes can be used as a form of ________.
barter
Excess demand occurs when the actual price in some market is ________ the equilibrium price.
below
A ________ is created each time the federal government spends more than it collects in taxes in a given year.
budget deficit
Fluctuations in real GDP are called ________?
business cycles
Because of our limited money, time, and effort, we are best off when we allocate things
by constantly assessing the opportunity costs of our choices.
Using your understanding of economic history and inflation, which inflation target is most advisable a. 10-20% b. 0% c. 1-2% d. 5-10%
c. 1-2%
Which is a factor that drives economic growth? a. Decreased unemployment. b. Low prices c. Increased human capital. d. Government spending.
c. Increased human capital.
Which of the following choices is a true statement about the roots of modern economic growth? a. Modern economic growth finds its roots in cultural factors. b. Modern economic growth finds its roots in democratic political systems. c. Modern economic growth finds its roots in technological progress and industrialization. d. Modern economic growth finds its roots in religious factors.
c. Modern economic growth finds its roots in technological progress and industrialization.
Which of the following best defines real GDP? a. Real GDP is defined as the total dollar value of final goods and services produced within a country in one year divided by the real quantity produced. b. Real GDP is defined as the current total dollar value of final goods and services produced within a country. c. Real GDP is defined as the total dollar value of final goods and services produced within a country in one year after adjustment for inflation. d. Real GDP is defined as the total dollar value of final goods and services produced within a country in one year before adjustment for inflation.
c. Real GDP is defined as the total dollar value of final goods and services produced within a country in one year after adjustment for inflation.
Which assumption below best reflects a basic understanding economists have about the world? a. Output will always satisfy the needs of a society. b. More output creates more wants. c. The world has limited productive resources. d. There are limited wants.
c. The world has limited productive resources.
The country of Norway has offered free college to students and some universities even offer free tuition to international students. Why would the Norwegian government support this tuition free environment? a. to contribute to economic health and growth by keeping more money in the pockets of students b. to reduce unemployment numbers by showing more people as full time students. c. to facilitate growth by getting a better educated labor force d. to increase the number of programs where national taxes can be applied
c. to facilitate growth by getting a better educated labor force
A positive statement is
can be shown to be correct or incorrect.
Functions are often described as cause and effect in economics. In an economics function, if the variable is on the right-hand side and is doing the explaining, it represents a ________?
cause
Self-interest is not necessarily selfish, some say. In fact, self-interest likely includes an individual's consideration for
close friends and family.
Some critics of the unemployment rate say that it under-reports the actual unemployment problem by:
considering discouraged workers to be out of the labor force
Making an economically rational decision requires
considering the prospective benefits and costs to oneself.
An increase in government borrowing can
crowd out private investment.
Identify the normative statement(s) among the following statement(s). a. The federal government's spending is greater than its revenue to the treasury. b. the federal government has increased its spending by 5% last year. c. The federal government budget deficit reached 4% of GDP last year. d. The federal government spends too much.
d. The federal government spends too much.
Which of the following demographic has the highest unemployment rate according to U.S. Census Bureau data? Select one: a. Older caucasian men b. Asian men c. Middle-aged Hispanic Women d. Young African-American men
d. Young African-American men
An increase in government autonomous spending may result in which of the following? a. reduced government borrowing. b. deficit reduction. c. a decline in the interest rate. d. crowding out of private investment.
d. crowding out of private investment
An expansionary fiscal policy can increase the level of aggregate demand by all of the following EXCEPT a. cutting tax rates to increase disposable income and spending. b. reducing corporate tax rates to increase investment spending. c. government policies to facilitate US exports to other nations. d. decreasing government purchases.
d. decreasing government purchases.
Which topic below best applies to microeconomics? Select one: a. inflation b. the unemployment rate c. fiscal policy d. the price that a farmer asks for her watermelons
d. the price that a farmer asks for her watermelons
A decrease in the quantity supplied can result from
decrease in price.
Keynes believed that economies are ________ driven in the ________ .
demand; short-run.
The consequences of unemployment are likely more serious in developing countries because...
developing countries are more likely to lack unemployment assistance programs.
When the government passes a new law that explicitly increases overall tax rates and reduces spending levels, it is enacting:
discretionary and contractionary
If a government reduces tax rates in order to increase the level of aggregate demand, what type of fiscal policy is being used?
discretionary and expansionary
A macroeconomist would study
economic policies designed to stimulate the country's economy out of a recession.
The government decides to increase its spending by $6 billion. Over time the real GDP increased by $9 billion. The expenditure multiplier is ________ 1.5.
equal to
In the neoclassical view of the economy, expansionary fiscal policy cannot work to raise equilibrium output because
flexible prices will eventually choke off any increase in aggregate demand.
From a neoclassical viewpoint, government should focus less on
government stimulus spending.
Cocoa nibs from Nigeria last year was supplied at $9 per 10 pounds. This year the demand has increased and that same supply of Nigerian cocoa nibs is priced at $12 per 10 pounds. What will most likely happen to supply of Nigerian cocoa nibs this year?
here will be an increase in quantity supplied.
Decreased competition because of fewer producers in a market will cause
higher prices due to an decrease in the quantity supplied at every price.
A major concern of fiscal policy is
how federal government taxing and spending affects aggregate demand.
The slope of a budget constraint line is influenced by
how much one product costs compared to the other.
Gross Domestic Product is a ________measurement of standard of living because ________.
imperfect; not all important determinants of standard of living are incorporated
Assume the government has a balanced budget and that the economy is experiencing a period of growth higher than predicted. The tax revenue collected by the government is likely to ________, which would lead to a ________.
increase; budget surplus
When ________ contractionary fiscal policy is the recommended choice.
inflation has reached harmful levels
An economy is considered to be in a recession if
it is moving from the peak toward the trough of the business cycle.
What are the factors of production?
land, economic capital, labor, entrepreneurship
Banks create money through which of the following processes?
lending money
Banks are financial intermediaries because they
link savers who deposit money and borrowers who seek loans.
What might shift aggregate demand?
loss of business confidence
Excess supply will result in suppliers ________ prices, which encourages consumers to be willing and able to purchase ________ .
lowering; more
Charlie is researching the relationship between the number of hours he spends on social media and his success in his classes. He sets up an equation to better understand the implications of this relationship. This describes a ________.
mathematical function.
The money multiplier defines the amount of
money that the banking system can create.
If Ali grows hot peppers in his garden for his own consumption, the value of his production will
not be included in Gross Domestic Product and understate the value of the production in his country.
GDP includes
only final goods to avoid double counting when including intermediate goods.
A budget constraint model differs from production possibilities model in that, typically
only the production possibilities model demonstrates diminishing returns.
A year ago Parker reached his retirement and left the business to pursue other interests. He is now spending lots of time playing golf and visiting his grandchildren. For purposes of employment he is considered:
out of the labor force.
A supply side economist would advocate reducing income tax rates to encourage
people to work more.
An interest rate is the ________ and the reward for lending money.
price of borrowing money
A demand curve shows the graphical relationship between quantity demanded and
price.
The Keynesian economic framework is based on an assumption that
prices and wages are sticky and do not adjust rapidly to changes in aggregate demand.
Keynes argued that the ________ was unable to keep the economy at full employment. As a result, the ________ should take an active role in managing the economy.
private sector; government
The production possibilities model illustrates an inverse relationship between two goods or services because
production of different types will compete for limited resources.
A nation achieves economic growth when its:
production possibilities frontier shifts outward.
GDP includes
purchases of US made products by consumers, private businesses and the government sector.
Excess demand will result in suppliers ________ prices, which encourages consumers to buy ________ .
raising prices; less
The difference between nominal GDP and real GDP is:
real GDP adjust for the effects of inflation.
As interest rates rise, the effect on aggregate demand is to
reduce consumer borrowing and consumption spending.
Former President Ronald Reagan was a supporter of supply side economics. Supply side economists believe that
reducing tax rates increases aggregate supply.
Holding all else constant, while government is borrowing to cover budget deficits, the crowding out concept suggests that interest rates ________ borrowing and spending by business and households.
rise and discourage
In the neoclassical view, the economy has a ________ to move back to potential GDP.
self-correcting tendency
An increase in taxes through a new budget would
shift the aggregate demand left and reduce the Gross Domestic Product at the new equilibrium.
If U.S. goods are relatively cheaper compared with goods of foreign places, then U.S. exports are likely to rise. This would make the aggregate demand curve ________.
shift to the right
The Keynesian approach focuses on aggregate demand and sticky prices has proven useful in understanding how the economy fluctuates in the ________-run and why recessions and cyclical unemployment occur.
short
Fill in the blanks. According to the Keynesian perspective, the government ________ play a role in managing the macroeconomy ________.
should; when the aggregate demand does not match the aggregate supply.
In general, supply curves
slope upward from left to right.
An asset in a bank's T-account is ________.
something owned by the bank
A liability in a bank's T-account is
something the bank owes someone else.
After the success of the Apollo space program, in the mid-1970s NASA budget cuts results in a decrease in the number of jobs for aerospace engineers. This was an example of ________.
structural unemployment
Good weather and heavy winter rain increases the supply of agricultural products. This means that at any given price, a higher quantity will be supplied. Conversely, a drought would shift the
supply curve to the left.
Keynesians believe the economy is characterized by recessions and inflationary booms which can cause unemployment and inflationary concerns. The solutions to a boom causing inflation (high price levels) is contractionary fiscal policy in the form of ________.
tax increases and decreased government spending
Neoclassical economists argue that
the long run aggregate supply curve is vertical.
Keynesian economics explains that recessions and depressions occur because:
the macroeconomy may adjust only slowly to shifts in aggregate demand because wages are sticky.
An increase in aggregate demand would cause
the price levels to rise.
Scarcity is imposed on individual households in the form of income and
the prices of the goods that a person may purchase.
The GDP Deflator is
the ratio of nominal GDP to real GDP (GDP Deflator = (Nominal GDP / Real GDP ) x 100)
Suppose Congress passes legislation that offers subsidies to orange farmers. The impact on the market for orange juice will be a rightward shift of
the supply curve.
In the case of an negative relationship between two variables, all else remaining constant
the value of the two variables will move in opposite directions from each other.
A competitive market is one in which
there is a large number of buyers and sellers.
Frictional unemployment occurs because in a world of imperfect information, it takes ________ for people to find jobs.
time
A key function of a bank is
to be an intermediary between savers and borrowers.
During a recession, automatic stabilizers include
unemployment benefits.
Around the world oil is priced consistently in United States dollars. In economic terms this is an example of:
units of account
What combination of model characteristics are frequently used in the most effective models?
useful and simple.
A graph in the xy plane with a single point at 3 on the x (horizontal) axis and a vertical line upwards from that point to infinity would be represented by the equation
x=3
