eco 2315 final
Other things equal, rising interest rates lead to a _____in investment spending and a____ in_____spending.
fall; fall; consumer
When banks borrow from and lend reserves to each other, they are participating in the______market.
federal funds
If the interest rate on CDs rises from 5% to 10%, the opportunity cost of holding money will______and the quantity demanded of money will
increase; decrease
The aggregate production function does NOT depend on:
the amount of natural resources.
If the inflation rate is higher than a borrower expects it to be during the duration of a loan, which of the following is true?
the borrower will pay a lower real interest rate on the loan than expected
Money is neutral in____ since it cannot alter____
the long run; real aggregate output
Suppose that the economy enters a recession and real GDP falls. All else equal, we would expect:
the money demand curve to shift inward.
Which item would not be included in this year's GDP?
the purchase of your neighbor's house, which was built in 1994
If supply is upward sloping, an increase in demand, all other things unchanged, will result in a(n)____ in equilibrium price and a(n)_____ in equilibrium quantity.
increase; increase
Real per capita GDP is:
real GDP divided by the population.
If nominal GDP increases from one year to the next,_____ must have risen.
real GDP or prices or both
In an economy whose aggregate real output is growing faster than the total population:
real GDP per capita is rising.
Examples of fiscal policy do NOT include:
reducing the interest rate by increasing the money supply.
The major tools of monetary policy available to the Federal Reserve System include:
reserve requiremer open-market operations, and the discount rate.
If inflation increases from 2% to 5%, the money demand curve will:
shift to the right.
An example of an intermediate good is:
steel purchased by aircraft manufacturers.
Assume the United States imposes a new tariff on wines imported from France. Who benefits from this action?
US wine makers
A survey reveals that, on a small island, 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for work. The unemployment rate on the island is %.
20
Which statement about GDP is false?
GDP can be calculated by summing government spending and tax revenues.
Which example illustrates consumption expenditure?
Stephanie bought a laptop for her brother.
72. Consider the market for iPads. What happens if a fantastic new alternative tablet is developed by Samsung and, at the same time, a boat carrying a large shipment of iPads is attacked by pirates and sunk?
The change in price is indeterminate and quantity decreases.
Consider the market for corn. What happens if there is an increased demand for corn tortillas and, at the same time, a new corn seed becomes available that dramatically increases the yield per acre?
The change in price is indeterminate; quantity increases.
Suppose that supply increases and demand decreases. What is the most likely effect on price and quantity?
The price will decrease, but quantity may increase, decrease, or stay the same.
Raising taxes shifts the ____curve to the____
aggregate demand; left
The money supply curve is:
an increase in the money supply lowers the equilibrium rate of interest.
The quantity equation, M-V P-Y, where M is the quantity of money, V is the velocity of money, P is the price of output, and Y is the amount of output. If we assume stable (unchanged) in the long run, then we can expect that an increase in the money supply (M) by the Federal that the velocity of money and output are relatively Reserve Bank will result in
an increase in the price level in the long run
Investment in human capital causes____the aggregate production function.
an upward shift of
Productivity is equal to:
real GDP divided by the number of workers.
12. If a country has a population of 1,000 people, an area of 100 square miles, and a GDP of $5 million, then its GDP per capita is:
$5,000.
If a checking account has an interest rate of 1% and a Treasury bill has an interest rate of 2%, the opportunity cost of holding the checking account as money is:
1%.
If the labor force totals 100 million workers and 90 million are working, then the unemployment rate is
10%
A negative demand shock can cause:
a recessionary gap.
technology remain fixed, each successive increase in physical capital leads to Diminishing returns to physical capital implies that, when the human capital per worker and the state to_____productivity
a smaller increase in
An increase in capital stock would:
cause a movement to the right along a stationary production function.
Real GDP is nominal GDP adjusted for:
changes in prices.
Gross domestic product is defined as:
consumer spending + government purchases of goods and services + investment spending + exports -imports.
33. If the economy is at potential output and the Fed decreases the money supply so that actual output is less than potential output, eventually nominal wages will_____ and short-run aggregate supply will_____
decrease; increase
2. An economy is said to have a comparative advantage in the production of a good if it can produce that good:
d. at a lower opportunity cost than another economy.
Consider the supply curve for cotton shirts. An increase in the price of cotton will:
decrease the supply of cotton shirts.
When a currency depreciates, the prices of its exports to other countries will:
decrease,
A decrease in the supply of money will lead to a(n)____ in equilibrium real GDP and a_____ equilibrium interest rate.
decrease; higher
43. Suppose the economy is operating in long-run equilibrium and a positive demand shock hits. We expect a short-run increase in real GDP and the price level and a long-run____ in real GDP and____ the price level.
decrease; increase
75. A decrease in demand and a decrease in supply will lead to a(n)______ in equilibrium quantity and a(n)____ in equilibrium price.
decrease; indeterminate change
A decrease in the supply of money with no change in demand for money will lead to a(n)______in the equilibrium quantity of money and a____in the equilibrium interest rate.
decrease; rise
Monetary policy that lowers the interest rate is called____ because it____
expansionary; increases aggregate demand
Discouraged workers:
have given up looking for a job.
A positive demand shock leads to:
higher prices and higher employment.
Long-run economic growth will be sustainable:
if it can continue in spite of the limited supply of natural resources and the impact of growth on environment.
The economy is in a recession. The desired FISCAL policy is a(n):
increase in government purchases of goods and services.
When the Federal Reserve buys Treasury bills, this leads to a(n):
increase in the money supply.
If the economy is at potential output and the Fed increases the money supply, in the short run real GDP will likely:
increase.
If the U.S. dollar appreciates relative to currencies in other countries, then U.S. imports will ____and exports will____
increase; decrease
Expansionary monetary policy____ the money supply,_____ interest rates, and_____ consumption and investment spending.
increases; decreases; increases
When actual output is above potential output, over time:
nominal wages will increase, and the short-run supply curve will shift to the left.
Purchases of imported products are:
not a part of the GDP calculation.
A person who is NOT working or looking for work is:
not counted in the unemployment rate.
The labor force is the total:
number of people who are employed or unemployed.
Investment spending is spending on:
productive physical capital.
The Taylor rule:
provides guidance for setting a federal funds rate target.
A sale of Treasury bills by the Federal Reserve___ interest rates and_____ the money supply.
raises; reduces
If countries engage in international trade:
they can consume outside of their production possibility frontier
An inflationary gap will be eliminated because there is_____ pressure on wages, shifting the____
upward; short-run aggregate supply curve to the left
