macroeconomics final plummer

According to the figure, if there is international trade in this market, and the world price of an engine is $1,000:

domestic producers will export 600 units

Suppose that the Federal Reserve has a 2% target on inflation. If the actual inflation is 1%, then the Fed will want the new real interest rate to be

lower than the neutral interest rate

The Federal Reserve's lender-of-last-resort function has been curtailed over time by the:

Dodd-Frank Act

Which of the following is a reason to worry about government debt? -Future generations can help repay the debt. - The government never really needs to repay the debt. - High and rising debt slows economic growth. - Most of the debt is domestic debt.

High and rising debt slows economic growth.

What is the floor framework that the Federal Reserve uses to influence the federal funds rate?

The Fed's approach of setting other interest rates to put a lower bound on how low the federal fund rates can go.

Which of the following graphs correctly represents the effect on the Phillips curve in Ethiopia if the Ethiopian birr appreciates?

Unexpected inflation vertical/output gap horizontal FALLING COSTS - line shifts downward

A budget deficit occurs when:

government spending exceeds government revenue

If you see a newspaper headline that says "Steel prices rise sharply," this is an example of __________ shock.

supply

The standard deduction for a single person is $12,200. Based on this table, if your total income is $84,200, what is the amount of tax you will pay on your taxable income?

$11,299

According to the figure, if there is international trade in this market, and the world price of an engine is $800, the value of the consumer surplus is

$250,000

Payroll taxes are 6.2%, and Medicare taxes are 2.9% If your employer owes you $665, approximately how much will you get after these deductions?

$604.49

Payroll taxes are 6.2%, and Medicare taxes are 2.9%. Your employer owes you $665. How much will your work cost your employer?

$725.52

Payroll taxes are 6.2%, and Medicare taxes are 2.9%. Your employer owes you $850. How much will your work cost your employer?

$927.35

You are sitting at your desk in your new job as the chair of the Federal Reserve Bank of the United States. The interest rate where potential GDP meets real GDP is 2%, the inflation rate is 1%, and the output gap is -1%. What is the appropriate new nominal federal funds rate that you should set for the economy?

1.5%

What was the Fed's inflation target in 2019?

2%

You are the Chair of the Federal Reserve Bank of the United States. The neutral rate of interest is 2%, the inflation rate is 1%, and the output gap is -0.5%. Using the Fed's rule of thumb, what is the appropriate new nominal federal funds rate that you should set for the economy?

2%

Take a look at the IS-MP-PC model shown here. The equilibrium real interest rate is:

3%

In the IS-MP analysis in the Fed model, contractionary fiscal policy will shift the:

IS curve to the left

The Fed model links the IS, MP, and Phillips curves. In the IS-MP analysis, an increase in exports will shift the:

IS curve to the right.

In the IS-MP analysis curve in the Fed model, a decrease in the risk-free rate shifts the :

MP curve down

Why don't most tax expenditures help much if your federal tax bill is zero.

Most tax breaks reduce taxable income, but reducing taxable income below zero does not reduce the tax bill.

Which of the following graphs correctly represents the effect of increased consumer spending on the IS curve?

Real interest rate vertical axis /output gap horizontal axis INCREASED SPENDING

You have $747. Where should you go if you want to open a checking account?

a commercial bank.

A debt crisis occurs when...

a government cannot repay its loans.

The Federal Reserve was created after:

a series of bank runs and bankruptcies

Monetary policy is defined as the:

adjustment of interest rates to influence economic conditions.

You are an economic adviser using the Fed model to analyze the economy. Now suppose that manufacturers in China face rising costs of rubber as an input. What is the effect on the economy?

an unchanged real interest rate, an unchanged output gap, and unexpected inflation.

On which of the following is there a tax incentive in the United States? i) health insurance purchased through employers ii) employer contributions for life insurance iii) rental value on owner-occupied housing iv) your mortgage

i, iii, iv

Countries benefit from trade by exporting goods in which their opportunity costs are relatively ________ and importing goods in which their opportunity costs are relatively ________.

low;high

If the output gap is negative, then the relative to the neutral interest rate, the Federal Reserve will ________ interest rate to drive _________ consumption and investment.

lower ; up

If inflation is 0%, and a firm wants to lower real wages by 1%, it will need to:

lower nominal wages by 1%

A bank run occurs when

many people want to withdraw their savings from a bank at the same time, and the bank does not have enough cash on hand

With a progressive tax, those with ________ income tend to pay a __________.

more; higher share of their income in taxes.

In the IS-MP analysis in the Fed model, a fall in the interest rate causes a:

movement to the right along the IS curve

Once you have identified the point of equilibrium in the IS-MP graph in the Fed model, the horizontal axis will show you the:

output gap

a supply shock is any change in

production costs that leads suppliers to change the prices they charge at any given level of output.

Forward guidance occurs when the Federal Reserve

provides information about the future course of monetary policy in order to influence expectations about future interest rates.

An import is a good or service...

purchased from a foreign seller.

If the output gap is positive, the Federal Reserve will _________ the real interest rate to _________.

raise; cool inflationary pressures

If the output gap is positive, then the Federal Reserve will use its floor framework to _______ the federal funds rate, influence short- and long-term interest rates ________, and ________ total spending in the economy.

raise; upward; decrease

If inflation is 4% and a firm gives its workers a 1.5% nominal wage raise, then:

real wages have fallen by 2.5%

If a spending shock increase aggregate expenditure by $35 billion and the multiplier is 2.5, then the IS curve will shift:

right by $87.5 billion.

The Philippines government provides retirement benefits, unemployment benefits, maternity leave benefits, death and funeral benefits, and other benefits. These are examples of:

social insurance

An export is a good or service...

sold to a foreign buyer

Which of the following is LEAST likely to be traded internationally? - sports arenas -sports trading cards - sporting equipment - sports broadcasts

sports arenas

Tariffs on inputs lead to a _______ shock.

supply

A tariff is a

tax on imported goods.

The government's debt is

the accumulation of all the deficits

Which of the following is NOT a trade cost? - dealing with foreign laws - the cost of producing a good - adapting to different ways of doing business - the hassle of working across language barriers

the cost of producing a good

Suppose a high-income person, a middle-income person, and a low-income person all purchase identical houses that are financed by similar mortgages. Who spends the most on tax-preferred goods?

the high-income person

Fiscal policy works best when it is

timely, targeted, and temporary.

Suppose that one hour of labor in Singapore can produce 20 computers or 40 cellphones. Further, suppose that one hour of labor in Ireland can produce 10 computers or 15 cellphones. ________ has a comparative advantage in the production of computers. ________ has a comparative advantage in the production of cellphones.

Ireland; Singapore

When using the Fed model, the first step is to

identify the shock and shift the curve.

Consider the following graph. One of the reasons that government spending rose during the 2007 to 2009 period was the introduction of:

the Affordable Care Act

Which of the following is an example of a trade cost associated with a US Citizen importing a sweater produced in India? - the final price of the sweater - the cost of the wool used in producing the sweater - the cost of the tariff on imported sweaters from India

the cost of the tariff on imported sweaters from India

Suppose a high-income person, a middle income person, and a low-income person purchase identical houses that are financed by similar mortgages. Who gets the largest tax benefit?

The high income person

If the US Dollar appreciates, which of the following graphs correctly represents the effect on the IS curve?

real interest rate vertical/output gap horizontal decreased spending - line shifts to left

You are the manager of a local bank. Due to unstable financial conditions, savers are worried that your bank may fail. When they show up in large numbers to withdraw their savings, you find that you do not have enough cash to meet the obligations. Where can you turn for a loan if no other bank will lend it to you?

The discount window

If the actual inflation rate is greater than the target inflation rate, then relative to the neutral interest rate, the Federal Reserve will _______ the real interest rate to drive ___________ consumption and interest.

raise; down

What is a reserve requirement?

the minimum amount of reserves that each bank must hold

Fiscal policy is increased in its effectiveness through:

the multiplier effect.

In 2018, the unemployment rate in the United States went as low as 3.7%, as measured by the Bureau of Labor Statistics. This historically low level of unemployment occurred simultaneously with a large trade deficit. This provides evidence against which of the following arguments against international trade? - International trade may hurt infant industries. - International trade may hurt national security - International trade may promote unfair competition - International trade may lead to job loss.

International trade may lead to job loss

In your current job, you earn $41,000. You take the standard deduction of $12,200. You have an offer of a new job working for a different employer. Your salary would go up by $6500. How much extra will you owe in federal income taxes if you take the new job?

$780

The economy shown here begins at a 0% output gap. Now suppose that manufacturers in China face rising costs of rubber as an input. This leads to:

unexpected inflation of 1%

If there is no international trade in this market, the value of the consumer surplus is

$360,000

According to the figure, if there is an international trade in this market, and the world price of a television is $500, buyers and sellers will make exchanges at a price of _______ because buyers will refuse to pay ________ than the world price.

$500, more

Suppose that the world price of TVs if $400, and the government imposes a $100 tariff. According to the figure, domestic consumers produce ________ units from domestic producers and _________ units from foreign producers after the tariff.

40,000; 30,000

A financial shock is any change in

borrowing conditions that changes the real interest rate at which people can borrow.

Which of the following services are provided by local government? - military defense - bus services - medicare - pell grants

bus services

Which of the following did the New Deal create? -quotas -tariffs - the stock exchange - unemployment benefits

unemployment benefits

Once you have connected the output gaps from the IS-MP model and the Phillips curve, the next step is to identify the

unexpected inflation from the Phillips curve.

The Fed model combines the ______ curve, the __________ curve, and the _________ curve to link interest rates, the output gap, and inflation.

IS;MP;Phillips

Why is the discount rate the upper bound for the federal funds rate?

It is set higher than the federal funds rate

During the 2008 to 2009 financial crisis, imports as a share of GDP fell in the United States. Which of the following could explain this phenomenon? - The percentage decrease in imports was less than the percentage decrease in GDP - The percentage increase in imports was less than the percentage decrease in GDP - The percentage decrease in imports was greater than the percentage decrease in GDP - The percentage increase in imports was greater than the percentage decrease in GDP

The percentage decrease in imports was greater than the percentage decrease in GDP

Russia and Kazakhstan both produce horses and oil. If Kazakhstan is much more efficient than Russia in the production of horses and slightly more efficient than Russia in the production of oil, __________ can benefit from trading with each other.

both countries

Argentina and Chile both produce copper and timber. If Chile produces copper much more efficiently than Argentina and timber slightly more efficiently than Argentina, __________ can benefit from trading copper and timber with each other.

both countries.

When a spending shock occurs, the IS curve shifts by the

change in spending times the multiplier

In the IS-MP analysis in the Fed Model, the MP curve shows you the

current real interest rate

The Affordable Care Act is an example of discretionary spending

discretionary spending.

According to the figure, if there is international trade in this market, and the world price of an engine is $800:

domestic producers will export 300 units

In order to boost output, the federal government engages in _____ fiscal policy, which _______ government spending and _______ taxes.

expansionary; raises; lowers

When using the Fed model to diagnose the economy, if a shock causes the real interest rate to rise, then the economy has been hit by a ___________ shock.

financial