Macroeconomics Final Exam UWW
Component :Amount (billions of dollars) Money market mutual fund deposits 4,400 Time deposits 1,237 Savings deposits 1,589 Checking deposits 752 Currency 609 Based on the data in the table above, what is the value of M1?
$1,361 billion
In the above figure, at the price level of 140 and real GDP of
$15 trillion, firms will not be able to sell all their output.
In the figure above, potential GDP equals
$16.0 trillion (Where LAS hits the X axis)
In the figure above, the economy is at point A when the price level rises to 120. Money wage rates and other resource prices remain constant. Firms are willing to supply output equal to
$16.5 trillion
If the desired reserve ratio is 3 percent and deposits totaled $575 billion, banks would hold
$17.25 billion in reserves.
When disposable income equals $800 billion, planned consumption expenditure equals $600 billion, and when disposable income equals $1,000 billion, planned consumption expenditure equals $640 billion. What is planned saving when disposable income is $800 billion?
$200 billion
In an economy, there is $200 million in currency held outside banks, $100 million in traveler's checks, $250 million in currency held inside the banks, $300 million in checking deposits, and $600 million in savings deposits. The value of M1 is ________.
$600 million
Component :Amount (billions of dollars) Money market mutual fund deposits 4,400 Time deposits 1,237 Savings deposits 1,589 Checking deposits 752 Currency 609 Based on the data in the table above, what is the value of M2?
$8,587 billion
Component: Amount (billions of dollars) Currency 235 Checking deposits 570 Savings deposits 416 Traveler's checks 8 Time deposits 1,144 Money market mutual funds 930 Available credit on credit cards 675 According to the table above, the value of M1 is ________ and the value of M2 is ________.
$813 billion; $3303 billion
Between 2012 and 2013 real GDP increased by $600 billion and imports increased by $90 billion. Based on these data, the marginal propensity to import equals
0.15
Suppose a bank has $1,500,000 in deposits and the desired reserve ratio is 12 percent. If the bank is currently holding $200,000 in reserves, the excess reserves are equal to
0.20*1,500,00=180,000 200,000-18,000=20,000 $20,000
Based on the figure above, the marginal propensity to consume is
0.67
If consumption expenditures for a household increase from $1,000 to $1,800 when disposable income rises from $1,000 to $2,000, the marginal propensity to consume is
0.8
Suppose the money growth rate is 3 percent, velocity is constant, and real GDP is growing at 2 percent. What is the inflation rate?
1 percent
Assets Reserves $100 Loans $600 Total $700 Liabilities Deposits $400 Net Worth $300 Total $700 The above table gives the initial balance sheet for Mini Bank. Mini Bank's actual reserve ratio equals....
100/400 *100 25 percent
In the above figure, if aggregate demand does not change, the long-run equilibrium will be at the price level of ________ and real GDP of ________.
100; $16 trillion
In the above figure, the short-run equilibrium is at the price level of ________ and real GDP of ________.
110; $15.5 trillion
The data in the above figure indicate that the economy will be in a long-run macroeconomic equilibrium at a price level of
120
TBK Bank Balance Sheet Assets Liabilities Reserves $120 Deposits $600 Loans 580 Net worth 100 Total asset $700 Total liabilities $700 The above table presents the balance sheet of the TBK commercial bank. What is this bank's actual reserve ratio?
120/600 *100 20 Percent
Based on the figure above, short-run equilibrium occurs at the price level of
130 and real GDP of $10 trillion.
A bank with $100 million in deposits has $15 million of cash in the bank, $10 million in deposits with the Fed, and $15 million in government securities in its vault. Its total reserves equal
15+10 $25 million.
Nominal GDP, PY, is $7.5 trillion. The quantity of money is $3 trillion. The velocity of circulation is
2.5
In Zealand, banks' desired reserve ratio is 20 percent and the currency drain also equals 20 percent. The money multiplier equals ________.
3.0 (1+.02)/(.02+.02)
In Zealand, banks' desired reserve ratio is 20 percent and the currency drain also equals 20 percent. The money multiplier equals ________.
3.0 (1+.2)/(.2+.2)
According to interest rate parity, if the interest rate is 1 percent in the European Union and the euro is expected to appreciate 3 percent, the comparable interest rate in the United States will be
4 percent.
The banking system has just experienced an increase in deposits of $50,000. The currency drain ratio is 20 percent and the desired reserve ratio is 10 percent. What does the money multiplier equal?
4.00 (1+.2)/ (.2+.1)
In the figure above, autonomous consumption is
5 trillion
If the price level in the U.S. is 120, the price level in South Africa is 140, and the nominal exchange rate is 7 South African rands per dollar, then the real exchange rate is
6 South African goods per U.S. good
If an increase in the monetary base of $8 billion increases the quantity of money by $64 billion, then the money multiplier is equal to ________.
8 64/8
Suppose China Airlines wants to purchase a French Airbus. The price of the Airbus is 95 million Euro. If the exchange rate is 1 euro per 10 yuan, the price of this airplane to China Airlines is
950 million yuan
There are several reasons why the aggregate demand curve is downward sloping. Which of the following CORRECTLY describes one of these explanations?
A fall in the price level, holding foreign prices and the exchange rate constant, increases net exports.
Using the above figure, which of the following is CORRECT?
A surplus of guilders exists at an exchange rate above $0.60.
Suppose the exchange rate between the U.S. dollar and the Jamaican dollar was $1 U.S. = $40 Jamaican dollars. A beach towel sells for $20 in Miami and $60 Jamaican in Negril.
All of the above are correct.
Suppose the exchange rate between the U.S. dollar and the Jamaican dollar was $1 U.S. =$40 Jamaican dollars. A beach towel sells for $20 in Miami and $60 Jamaican in Negril.
All of the above are correct.
Which of the following statements is FALSE?
An increase in disposable income leads to a decrease in aggregate demand.
________ consumption is consumption that will occur ________ the level of GDP and disposable income.
Autonomous; independent of
The figure below illustrates the U.S. foreign exchange market. Illustrate how the exchange rate changes if the expected future exchange rate falls. Does the dollar appreciate or depreciate?
Both supply and demand shift downward and dollar depreciates
Aggregate Demand
C + I + G + (x-m)
In the economy of Brightland, the commercial banks have deposits of $600 billion. Their reserves are $60 billion. All reserves are in deposits with the Central Bank and the commercial banks hold no excess reserves. There is $120 billion in Central Bank notes outside the banks, and there are no coins. a) What is the economy's monetary base? b) What is the quantity of money in the economy? c) Calculate the money multiplier. d) Suppose the Central Bank of Brightland undertakes an open market purchase of securities of so that the monetary base increases by $5 billion. By how much will the quantity of money change?
C=120, R=60, D=600 a. MB=C+R (120+60=180) b. MS=M+D (600+120=720) c. MM= (1 + c/d) / (c/d + r/d) (1 + 120/600) / (60/600) = 4 d. MB=5 MS= MM*MB (4*5= 20)
In the above figure, which movement illustrates the impact of a constant price level and a rising money wage rate?
E to H
In the following figure, which movement illustrates the impact of a falling price level and a constant money wage rate?
E to I
In the above figure, which movement illustrates the impact of the price level and money wage rate falling at the same rate?
E to J
The components of aggregate expenditure include I. imports. II. consumption. III. government transfer payments
I and II
Which of the following explains why a bank holds reserves? I. Banks are required by law to hold reserves. II. To meet depositors' currency withdrawals III. To use them to make loans to households
I and II
The term "foreign currency" refers to foreign I. coins II. notes III. bank deposits
I, II, and III
Suppose you cash in a Certificate of Deposit (a small time deposit) to acquire the traveler's checks you'll need for your vacation. What happens to M1 and M2?
M1 increases and M2 stays the same.
M2
M1+ time deposits, savings deposits, money market mutual funds, and other
Monetary Base
MB = Currency + Reserves
Money Multiplier
MM= (1 + c/d) / (c/d + r/d)
Money
Money = Deposits + Currency
Suppose the current situation is such that the price level is 120, real GDP is $17 trillion, and GDP along the long-run aggregate supply curve is $16.6 trillion. What will take place to restore the long-run equilibrium?
Money wage rates will rise until real GDP reaches $16.6 trillion.
Current Account Balance
Net Exports+Net Interest+Net Transfer
If imports are $1,200 billion and exports are $1,300 billion, while net interest income and net transfers are zero, what is the current account balance?
Net Exports+Net Interest+Net Transfer 1300-1200 = 100
Long Run Real Exchange Rate
Nominal Exchange Rate = RER * (Foreign / U.S.)
The demand for dollars in the foreign exchange market will increase (so that the demand curve shifts rightward) if
None of the above answers is correct.
Suppose the exchange rate between the U.S. dollar and the Mexican peso was $1 = 5 pesos. A can of Pepsi sells for $2 in Boston and for 12 pesos in Mexico City
Purchasing power parity does not prevail with these prices.
Suppose the exchange rate between the U.S. dollar and the Mexican peso was $1 = 5 pesos. A can of Pepsi sells for $2 in Boston and for 12 pesos in Mexico City.
Purchasing power parity does not prevail with these prices.
Real Exchange Rate
RER = (Nominal Exchange Rate * U.S. Price Level) / Foreign Price Level
Which of the following institutions is NOT part of the structure of the Federal Reserve system?
The Federal Government
M1
Travelers checks, checking deposits owned my businesses and individuals and currency
Suppose a deposit in New York earns 6 percent a year and a deposit in London earns 4 percent a year. Interest rate parity holds if the
U.S. dollar depreciates by 2 percent a year
Which of the following directly shifts the short-run aggregate supply curve?
a change in resource prices
Which of the following would NOT shift the U.S. aggregate demand curve?
a change in the quantity of capital in the United States
The figure illustrates the effect of
a decrease in real GDP
In the above figure, consumption and disposable income are equal at
a disposable income level of $2 trillion.
Which of the following changes does NOT shift the long-run aggregate supply curve?
a fall in the price level
One result of a decrease in aggregate demand and no change in aggregate supply is
a recession.
The above figure illustrates
a recessionary gap.
Which of the following shifts the aggregate demand curve rightward?
a tax cut
Consider the market for euros. Suppose the exchange rate is ________ its equilibrium. This means that the quantity of euros ________ is greater than the quantity of euros ________ and the exchange rate will ________.
above; supplied; demanded; fall
In the macroeconomic short run
actual real GDP may be less than or more than potential GDP.
Excess reserves are
actual reserves minus desired reserves.
The graph of the aggregate expenditure curve has ________ on the y-axis and ________ on the x-axis.
aggregate planned expenditure; real GDP
Actual aggregate expenditure is
always equal to real GDP
Which of the following events will increase short-run aggregate supply?
an advance in technology
Which of the following will NOT shift the consumption function upward?
an increase in disposable income
Which of the following shifts the aggregate demand curve rightward?
an increase in investment
An economy is at full employment. Which of the following events can create a recessionary gap?
an increase in taxes
Which of the following changes does NOT shift the short-run aggregate supply curve?
an increase in the price level
Last year the exchange rate between U.S. dollars and Mexican pesos was 10 pesos per dollar. Today is it 11 pesos per dollar. Here, the dollar ________ against the peso, and the peso
appreciated; depreciated
The demand curve for U.S. dollars slopes downward because as the dollar ________ U.S. goods become ________ expensive to foreign residents, so they purchase fewer U.S. goods, and the quantity of dollars demanded decreases.
appreciates; more
The demand curve for U.S. dollars slopes downward because as the dollar ________ U.S. goods become ________ expensive to foreign residents, so they purchase fewer U.S. goods, and the quantity of dollars demanded decreases.
appreciates; more
If the Federal Reserve purchases government securities,
banks' reserves will increase
If the consumption function lies below the 45-degree line, then saving at these levels of disposable income will
be positive.
In a change to immigration policy during 2012, "people younger than 30 who came to the United States before the age of 16, pose no criminal or security threat, and were successful students or served in the military can get a two-year deferral from deportation", Homeland Security Secretary Janet Napolitano said, according to CNN, 06/16/2012. If many of these immigrants had previously been afraid to work, now as a result of being able to work legally
both the short-run and long-run aggregate supply curves shift rightward.
A highly liquid asset
can be converted into a means of payment easily without loss of value.
Induced consumption is equal to
consumption caused by an increase in disposable income.
If the marginal propensity to consume is 0.8, every $10 increase in disposable income increases
consumption expenditure by $8.00.
The AD curve shows the sum of
consumption expenditure, investment, government expenditures on goods and services, and net exports.
Disposable income ________ when ________.
decreases; taxes increase
Hyundai is a large South Korean company that produces finished steel products. Hyundai plans to buy raw steel from U.S. Steel. As a result, the
demand curve for U.S. Dollars shifts rightward.
If the interest rate on Swiss franc assets increases while interest rates in the United States remain constant, the
demand for dollars will decrease.
When people who are holding the money of some other country want to exchange it for U.S. dollars, they ________ U.S. dollars and ________ that other country's money.
demand; supply
M1 includes all the following items EXCEPT ________.
deposits in money market mutual funds
Last year in the country of Union, the price level increased and real GDP increased. Such an outcome might have occurred because short-run aggregate supply___and aggregate demand __.
did not change; increased
A movement along the consumption function is the result of changes in
disposable income.
If the equilibrium exchange rate for the dollar is 110 yen per dollar and the current exchange rate is 120 yen per dollar, then the
dollar will depreciate.
Substitution effects help explain the slope of the aggregate demand curve. One substitution effect refers to the
effect on investment expenditures that result from a change in interest rates produced by a change in the price level.
Short-run macroeconomic equilibrium occurs when the quantity of real GDP demanded ___.
equals the quantity of real GDP supplied
In the above figure, if aggregate demand does not change, the short-run equilibrium will
eventually adjust to a long-run equilibrium with a lower price level.
Federal Reserve policy tools include all of the following EXCEPT
excess reserve ratios.
The difference between actual reserves and required reserves is
excess reserves.
The data in the above table indicate that when the price level is 120
firms have unexpectedly high inventories, so prices fall.
The data in the above table indicate that when the price level is 100
firms have unexpectedly low inventories, so prices will rise
If the MPC equals 0.75, then
for every $100 increase in disposable income, saving increases by $25.
The marginal propensity to consume is the
fraction of a change in disposable income that is consumed.
The U.S. fiscal policy implemented in 2008 was an attempt to
give billions of dollars to businesses and low- and middle-income Americans in order to stimulate business investment and consumption expenditure, and thereby increasing AD.
As a nation's GDP increases, that nation's
imports increase
Disposable income is
income minus taxes plus transfer payments
Suppose the exchange rate falls from $1.20 Canadian per U.S. dollar to $1.10 Canadian per U.S. dollar. U.S. exports will ________, U.S. imports will ________, and U.S. aggregate demand will ________.
increase; decrease; increase
If the exchange rate falls, then the expected profit from holding the currency
increases
Suppose the economy was initially in a long-run equilibrium. Then the world economy expands so that foreign incomes rise. U.S. aggregate demand ________ and eventually the money wage rate ________.
increases; rises
The Federal Reserve lowers interest rates. As a result, in the short run, real GDP ________ and the price level ________.
increases; rises
As the price level falls and other things remain the same, real wealth ______ and ________.
increases; the quantity of real GDP demanded increases
Which of the following issues prominent in the presidential election of 2012 shifts the aggregate demand curve rightward?
increasing Medicare, Medicaid, and Social Security payments
If prices are fixed, when aggregate planned expenditure exceeds real GDP, then
inventories decrease, signaling firms to increase production and increase real GDP.
The data in the above table indicate that when the price level is 120
inventories rise and the price level falls
Suppose that the U.S. interest rate is 5 percent and the Turkish interest rate is 50 percent. The effect of this difference in the foreign exchange market is that
investors expect the Turkish currency to fall in value (depreciate) against the dollar.
Suppose that the U.S. interest rate is 5 percent and the Japanese interest rate is 1 percent. The effect of this difference in the foreign exchange market is that
investors expect the yen to appreciate against the dollar.
Business cycles are the result of
irregular shifts of both the AD and SAS curves.
The size of the marginal propensity to consume
is between 0 and 1.
Real GDP
is equal to aggregate income
With everything else the same, in the foreign exchange market the
larger the value of U.S. exports, the greater is the quantity of dollars demanded.
Along a short-run aggregate supply curve, a decrease in the price level means that
less output is produced as firms decrease production
The slope of the consumption function is
less than 1.
Depository institutions
make profit from the spread between the interest rate they pay on deposits and the interest rate they receive on loans
The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of money?
medium of exchange
Aside from being a means of payment, the other functions of money are
medium of exchange, unit of account, and store of value.
The aggregate demand curve shows the ____ relationship between the price level and _____.
negative; the quantity of real GDP demanded
Which of the following can be said about economic growth? I. Economic growth is the result of increases in long-run aggregate supply. II. Economic growth is the result of increases in aggregate demand.
neither I or II
By definition, currency depreciation occurs when the value of
one currency falls relative to another currency.
Use the figure to answer this question. Suppose the economy is operating at point a. A move to ________ could be explained by ________.
point d; an increase in real GDP
A consumption function shows a
positive (direct) relationship between consumption expenditure and disposable income.
The quantity of real GDP supplied depends on the
quantity of labor, the quantity of capital, and the state of technology.
If the Fed buys $100 in securities from a commercial bank, the
quantity of the bank's reserves will increase.
In the short-run macroeconomic equilibrium
real GDP and the price level are determined by short-run aggregate supply and aggregate demand.
An inflationary gap is occurs when
real GDP exceeds potential GDP.
In the long run
real GDP is equal to potential GDP
The real exchange rate is the
relative price of U.S. produced output relative to foreign-produced output.
If the nominal exchange rate rises and price levels stay constant, the real exchange rate will
rise
According to the intertemporal substitution effect, when the price level increases, the interest rate
rises and the quantity of real GDP demanded decreases.
"Dissaving" occurs when
saving is negative.
A commercial bank puts the funds it receives from various sources into
securities, cash assets and loans.
In the figure, if the interest rate is 4 percent, people
sell bonds so as to convert them into money
In a short-run macroeconomic equilibrium, real GDP exceeds potential GDP. If aggregate demand does not change, then the
short-run aggregate supply curve will shift leftward as the money wage rate rises.
Short-run equilibrium occurs at the intersection of
the SAS and AD curves.
Suppose that U.S. inflation is 3 percent and Turkish inflation is 70 percent. The effect of this discrepancy on the foreign exchange market is that
the Turkish currency will depreciate.
The money multiplier is
the amount by which a change in the monetary base is multiplied to determine the change in the quantity of money.
For a commercial bank, the term "reserves" refers to
the cash in its vaults and its deposits at the Federal Reserve.
In the short run, firms expand their production when the price level rises because
the money wage rate remains constant so the higher prices for their products makes it profitable for firms to expand production.
Moving along the short-run aggregate supply curve, ________.
the money wage rate, the prices of other resources, and potential GDP remain constant
Which of the following changes while moving along the aggregate demand curve?
the price level
For movements along the long-run aggregate supply curve
the price level and the money wage rate change by the same percentage.
A rise in the price level changes aggregate demand because
the real value of people's wealth decreases and so they decrease their consumption. (wealth effect)
The difference between planned and unplanned spending is
unplanned changes in inventories.
In the figure above, the induced consumption when real GDP is $15 trill
when disposable income is $10 trillion
In the above figure, at a disposable income level of $2 trillion, saving equals
zero
