Econ 002 Macroeconomics Chapter Quiz 1-12

The required reserve ratio for Jack's bank is 10 percent. If Jack deposits $2,000 cash in his checking account, what is the amount of new money the bank would create when it lends out its excess reserves?

$1,800

Which of the following BEST describes the effect inflation has on purchasing power in the United States over the past several decades?

$100 today has the same purchasing power as $15 in 1972

If Nominal GDP is $12,000 billion and the GDP deflator is 80, then Real GDP is ________.

$15,000 billion

If government spending increased by $5 billion and the expenditure multiplier is 3.2, what would be the increase in the real GDP?

$16 billion

You are charged with setting the price for your company's lawn mower product that has been on the market for a year and is lagging in sales. After researching and discovering the needed data you create a supply and demand curve. Here is what you have discovered.and ends at (240,250). There is a blue downward sloping line that starts at (70,250) and ends at (240,150).) What sales price should you select to meet the equilibrium price for the lawn mower?

$190

The country of Russia had a Gross Domestic Product of about $4 trillion in 2016 and a population of 142 million people, the GDP per capita would be ________.

$28,000

Suppose the European Union has a Nominal GDP of 20 trillion Euros, and their GDP deflator is 125. What is the European Union's Real GDP?

16 trillion Euros

Of the following inflation rates, which is most likely to affect consumer behavior?

17%

With a Real GDP of $100 billion in 2016 and of $140 billion in 2017, the real growth would be ________.

40%

Which one of the following statements is accurate in explaining the expenditure multiplier effect?

A cash infusion has less of an impact on an economy than an increase in spending.

Which of the following scenarios illustrates a different market other than the financial market for money?

A child's lemonade stand where she charges $1 cash per glass.

If Ricardian Equivalence theory holds completely true, then any change in budget deficits or budget surpluses would be completely offset by which of the following?

A corresponding change in private saving.

If Keynesian economists were analyzing the oncoming recession starting in 2007 from the housing market crash, what might they have predicted?

A decline in household wealth leading to a decrease in consumption expenditure

What else will probably happen if a neoclassical model shows increasing wages in the economy in the short run?

A leftward shift of the short-run aggregate supply curve.

What is the Gross Domestic Product (GDP) designed to measure?

A nation's total production of final goods and services.

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

You have been given the task as a macroeconomist, to reflect the collective interconnections and relationships of the market as a whole (both the market supply and demand). To best capture this you choose the ________ model?

AD-AS model

If aggregate supply is vertical, then which of the following statements must be true of the long-run?

Aggregate demand does not affect the quantity of output

What is the one area in which both Neoclassical and Keynes economic perspectives agree when it comes to the macroeconomy?

Aggregate demand is a useful tool for controlling inflation.

The supply curve will shift to the right if which of the following occurs?

An improvement in technology

If money supply expansion falls below expected amounts predicted by the money multiplier, what has most likely occurred?

Banks have failed to loan out all of their excess reserves.

Which is true of banks' deposits?

Banks lend out most, but not all, of the deposits to earn income.

________ is defined as goods are exchanged directly for other goods.

Barter

Why does the impact lag influence monetary policy effectiveness?

Because it takes time for businesses to change investment spending decisions.

Why is it that temporary tax cuts cause less of an impact than permanent ones?

Because temporary tax cuts are for a short amount of time, firms and individuals only slightly change their behavior.

What is one of the main methods of borrowing for firms?

Bonds

After the 1970s, what did economists learn?

Changes in the economy in the short-run are best understood by looking at both aggregate demand and aggregate supply.

Which factor other than income can also cause the entire consumption function to shift?

Changes in wealth

Charlie searched for a model and discovered one on which to base his theory. For his model he used the circular flow diagram, applied math functions to predict economic actions, and identified the economic aspects and associations used in the model. All of his actions are in line, but what has Charlie forgotten to do with his model?

Charlie forgot to explain assumptions he used to simplify the model.

Jerusha lives in a country with a large amount of protection under the law for conducting business or bringing her ideas to the market with patten production. Because of the economic conditions what will Jerusha most likely do with her rainwater collecting invention?

Develop her invention and bring it to market with ease and minimal cost.

The market for hot dogs has been recently affected by a decrease in input prices. Following this change, how does the new equilibrium compare to the old?

Equilibrium price decreases and quantity increases.

A critical function of the private banking system is ________?

Establishing the links between savers and borrowers.

Consider the graph of the production possibility frontier for country X. What is a combination of MP3 players and watches that would be inefficient production for country X?

F

What function is a horizontal line when Aggregate Expenditure = C + I + G + (X - M)?

Government spending

Which of the following is NOT true about government spending as function of national income?

Government spending will fluctuate

Cross-country comparisons of unemployment rates are difficult for all the following reasons except:

Higher government employment in developed countries

Cross-country comparisons of unemployment rates are difficult for all the following reasons except:

Higher government employment in developed countries.

Identify which of the following microeconomic topics can have an impact on macroeconomic topics?

How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means?

Which of the following statements reflects marginal decision-making?

If we double the order to a dozen cookies, we will pay only 15 percent more.

Which of the following statement(s) about economic models is true?

In the neoclassical model, the real wage adjusts to move the economy to full employment.

________ means that consumers make decisions across time about when they will consuming goods, including money, either in the future or at the present time.

Intertemporal decision making

Considering that Aggregate Expenditure = C + I + G + (X - M), which function is drawn as a horizontal line?

Investment

Which of the following describes inflation?

It is an increase in the cost of a given basket of goods.

Information campaigns about tobacco hazards and taxes on tobacco are two ways to discourage its use. Which one causes a movement along the demand curve?

The Information campaign on hazards of tobacco.

If supply creates its own demand as Say's Law states, then in the neoclassical zone on the graph above when supply is at its potential GDP, what happens if demand shifts to the right?

The aggregate demand prices increase as AD shifts to the right.

Say's Law states that supply creates its own demand. In the neoclassical zone on the graph above, supply is at its potential GDP, at full capacity. When aggregate supplies have reached their full potential output, what happens if demand shifts to the right?

The aggregate demand prices increase as AD shifts to the right.

What can be assumed if a model can accurately predict outcomes?

The assumptions of the model are generally accurate.

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?

The boat rental was worth the additional fish caught, regardless of how little fish we left behind.

Imagine that a high school junior sold her old car at the end of the summer and now has the funds from the sale in her bank. She decides to purchase a much needed new automobile instead of saving that money to pay for her senior trip coming up next year. From an economist's perspective, which of the following statements about this decision is likely to be true?

The decision is rational in the sense that it reflects the junior's preference for a new automobile over a senior trip.

The price of printers at the big box technology stores increases as a new type of print technology is rolled out to consumers. Which of the following scenarios for a complementary printer good would likely take place?

The demand for printer ink decreases as less people are buying printers.

In the past 50 years the unemployment rate has only reached 10% on two occasions. When did these two unemployment spikes occur?

The early 1980s and 2007-2009.

When using the aggregate demand-aggregate supply (AD-AS) model to illustrate growth and changes in the economy, which of the following things are considered?

The efficiency of the capital and financial sector

The country of Bratislaka hired Gudurn to assist with government policies regarding the macroeconomy. Gudrun is a neoclassical economist and makes all decisions based on those economic philosophies. What policies will Gudrun tell the government to enact in order to foster a health economy?

The government should keep inflation low and maintain low tax levels over the long run

What are the components used to create a consolidation view or stacked graph (or stacking on top of each other) of the aggregate expenditure function?

The graph would include the consumption function (after taxes), the investment function, the government spending function, and the net export function.

A company starts a technology organization dedicated to training high school students in the use of the latest program languages. How can the company justify creating and funding such an organization since it is not about its primary products?

The money spent will boost the company's image and create potential employees with needed skills.

Say that Fed policy requires all banks to hold 8% of deposits in reserves. If Ventura Bank does not hold any excess reserves and the Fed increases the reserve requirement to 10%, what will be the result?

The money supply in the economy decreases

Say that Fed policy requires all banks to hold 8% of deposits in reserves. If Ventura Bank does not hold any excess reserves and the Fed increases the reserve requirement to 10%, what will be the result?

The money supply in the economy decreases.

Which correctly describes the AD-AS model?

The price level is shown on the vertical axis

Which topic below best applies to microeconomics?

The price that a farmer asks for her watermelons.

Becky is tasked with analyzing the market supply and demand for potatoes. Right now, she plotted the supply and demand curves for potatoes which you see in the graph. The current potato price is $150/ton. If the demand is at 120 million tons, what is the market situation for potatoes? How much must prices change before the market is in equilibrium?

There is a potato surplus. The price must drop by $40/ton to reach equilibrium.

Which one of the following statements about a certificate of deposit (CD) is correct?

There is an early withdrawal penalty.

As an economist George is analyzing a consumption function graph and notices that the slope has flattened. What would cause this to occur?

There was a decrease in the Marginal Propensity to Consume (MPC)

Sandra, an economist is discussing a consumption function graph and sees that the slope has steepened from a prior graph. What would cause this change in the consumption function?

There was an increase in the Marginal Propensity to Consume (MPC)

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?

There will be an increase in quantity supplied.

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 the results for that country?

There would be both a human and economic loss.

Which of the following statements is true concerning real GDP in the short run?

This is a period of time for real GDP when wages are sticky in response to a change in demand

This year the cost of iron used in manufacturing cars has increased by 15%. With the costs for manufacturing cars now up, what effect will this have on the car market?

This will decrease the quantity demanded.

Which is a true statement about marginal benefit?

To an individual, one good may have a larger marginal benefit than than another.

Julie's entertainment budget for the next six months is $150 per month. She enjoys watching the latest movies and loves the ballet. A movie ticket costs $15 while a ballet ticket costs $35. This month Julie already attended one ballet show and three movies. If Julie decides she would rather see ballet shows for the remainder of this month, how many ballet shows can she attend and stay within her budget?

Two ballet shows.

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.

The fictional country of Zambezi's economy is operating at its potential GDP and is looking to expand its output levels. What would increase Zambezi's output according to neoclassical thinking?

Zambezi has technological breakthroughs or improvements

Shifts in the aggregate supply curve can be caused by

a change in input prices

In the long run, the Phillips curve will be ________ at the natural rate of unemployment.

a vertical line

A price index is

a weighted average price of some type of good or service (e.g. consumer prices)

The town of Franklin has an economy composed entirely of two equally sized specialized tire manufacturers. Both company X and company Z produce race car tires and airplane tires. Company X is better at producing race car tires than Company Z which is better at producing airplane tires. In order to maximize output, Company X should

abandon the production of airplane tires to fully specialize in the production of race car tires and then trade with Company Z for airplane tires.

Over the long run, a surge in aggregate demand from a neoclassical perspective will most likely result in

an increase in price level.

Which of the following factors are excluded from shifting the aggregate demand curve?

an increase in the price level

Economic indicators can help give us

an understanding of the state of the economy.

A combination of clothing and cell phones that would meet the allocative efficiency would be:

any combination on the production possibilities frontier that brings the highest level of satisfaction to the people in the economy.

A positive statement is

can be shown to be correct or incorrect.

Suppose that a rise in business confidence has led to more investment in the economy and higher levels of output. In the short-run, Keynesian analysis says the rise in aggregate demand will ________ while the neoclassical model predicts ________ in the long-run.

cause lower unemployment; full employment

Which type of depository institution is considered safest?

credit unions

If equilibrium occurs in the flat range of the AS curve, then the:

economy is experiencing unemployment.

The idea that firms will get the most for their money when they pay wages higher than the equilibrium wage is called:

efficiency-wage theory.

After 2008, quantitative easing was distinctively different from traditional central bank intervention because it focused on

encourage long-term capital projects and ease mortgage conditions by purchasing long-term government securities.

Equilibrium in financial markets occurs at an interest rate where the quantity of loanable funds demanded is

equal to the quantity of loanable funds supplied.

If the aggregate demand (AD)-aggregate supply (AS) model are equal

equilibrium occurs

Lower reserves requirements, lead to a ________ in interest rates and a/an ________ in the money supply.

fall; increase

Tom graduated from college in June but was still looking for work in August. This is an example of ________.

frictional unemployment

There are certain types of unemployment that exist at all times and determine the natural rate of unemployment. Which of the following types fit this description?

frictional unemployment and structural unemployment

Which of the following is included in the computation of GDP in a particular year?

government expenditure on public schools

What is the economic risk of using quantitative easing?

inflation

When a Central Bank decides to make a policy intervention it must be mindful of the trade off between

inflation and unemployment.

Aggregate Demand (AD) is defined as C + I + G + (X-M). I refers to ________.

investment spending

A profit-maximizing decision must be made about whether to keep a bed & breakfast operating. Until the place sells, the mortgage of $3000/month must be paid, since it is a sunk cost. If the restaurant operates, costs rise by $4000 per month, but revenue will be only $6000 per month. Until the building can be sold,

it is best to ignore sunk costs and keep the bed & breakfast operating.

An economy is considered to be in an expansion if:

it is moving from the trough to the peak of the business cycle.

The main reason that fiscal policy has lags is that

it needs legislative approval.

In a neoclassical economist's world, an increase in taxes will

lower the price level.

Which of the following actions by the Fed will increase the money supply?

lowering the discount rate and the selling bonds.

Consider an economic graph where the aggregate supply curve is flatter than the market supply curve for services or labor or goods (micro) where price-levels don't fall. This graph is an example of a(n)

macroeconomic externality.

Congress must vote whether to increase the government budget so as not to shut down the government this year. The vote passed and the budget ceiling has been increased to keep the government running. This is an example of what type of policy?

macroeconomic fiscal policy

The country of Armenia has an economy that includes people buying and selling freely, a government setting some price restrictions such as a minimum wage equivalent to $5 hour and regulates certain industries (pharmaceutical, mining, and farming). Armenia's economy is likely a ________ economy.

mixed market

Macroeconomic policies that focus on banking and interest rates or controlling the money supply are called

monetary policies.

A decision by the Federal Reserve to change reserve requirements for banks is an example of:

monetary policy.

Debit cards are a form of

money.

Economic capital is productive, so it does NOT include

money.

Keynesians government policies include investments in capital. These include

physical capital investments such as roads and bridges.

If an economic decision is based on the Keynesian perspective, it proposes that the government should ________ in managing the macroeconomy when ________.

play a role; the aggregate demand has a significant gap with the aggregate supply

The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called

potential GDP

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.

The distinguishing feature of economic capital (as opposed to financial capital, like money) is that it is

productive.

Capital deepening generally

results in greater economic growth.

An interest rate is the price of borrowing money and the ________.

reward for lending money

Economic growth is shown in the AS-AD model as a

rightward shift in the long run AS curve

An asset in a bank's T-account is ________.

something owned by the bank

The relationship between the price in a market and the amount that producers collectively make available for sale, is referred to as

supply.

Economic growth has been

sustained and rapid since the 1800's.

A recognition policy lag describes the length of time it ________.

takes before policy makers recognize that a recession or expansion is occurring.

When choosing a college major in a rational way, Minty should consider

the cost of the degree and the benefit each degree would bring

When choosing a college major in a rational way, Minty should consider

the cost of the degree and the benefit each degree would bring.

After 2008, the reasoning for the Fed to undertake quantitative easing was because ________.

the demand for loanable funds remained stagnant even as the federal funds rate was at historic lows.

Neoclassical economists argue that

the long run aggregate supply curve is vertical.

If the central bank raises the reserve requirement on deposits

the money supply decreases and interest rates increase.

Scarcity is imposed on individual households in the form of income and

the prices of the goods that a person may purchase.

A budget constraint model differs from production possibilities model in that, typically

the production possibilities model demonstrates diminishing returns.

Because of ________ if a city government decides to spend money on beautifying its downtown and attracting tourism to its city when no money has been devoted to those efforts before, then gains in tourism may be significant.

the production possibility frontier

Fiat money is backed by

the public's trust that it can be exchanged for goods and services.

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 direct.

If a data line on a graph slopes down as it goes to the right, it is depicting that

the relationship between the variables on the axes is inverse.

The slope of a budget constraint line is influenced by

the relative prices of the two goods competing to satisfy wants.

The vertical, long-run aggregate supply curve indicates that the long-run level of economic output is dependent upon ________.

the stock of productive factors

Indi and Indrani are sisters who own a software development company. Demand has been increasing for their products and services and the sisters are contemplating whether to open up a satellite office in Austin. They estimate it would add $7 million in expenses with their profit increasing by $2.5 million each year for the next 5 years (all other things equal). Indi and Indrani decide

to open an new office because the expected marginal benefit ($12.5 million over 5 years) is greater than the estimated marginal cost ($7 million).

Economists would say that the decisions we make are influenced by

trade-offs.

Keynes argued that the private sector was ________. As a result, government should ________ in managing the economy.

unable to keep the economy at full employment; take an active role

When considering which monetary policy to implement, the Central Bank needs to also be conscious of the tradeoff between

unemployment and inflation.

Consider an economy at full employment. If consumers and firms become less optimistic about the future economy then

unemployment will rise

The Phillips curve illustrates a trade-off between ________ and ________.

unemployment; inflation

The very best models have an unusual combination of characteristics. They are both

useful and simple.

What combination of model characteristics are frequently used in the most effective models?

useful and simple.

Normative statements are based upon

value judgments.

Which of the following is considered a Federal Reserve monetary policy tool?

varying the discount rate

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

The house that Jamalla inherited from her mother can rent for $2000/month, but Jeanne 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.

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 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.

The point at which an economy transitions from an expansion to a recession is called a/an ________.

peak

The term "full employment GDP" is synonymous with which of the following?

potential GDP

Using the context of an economy's existing inputs, market and legal institutions, what term is used to describe the maximum quantity that an economy can produce?

potential GDP

Once a model of reality is constructed around certain assumptions, it can be tested to determine its value in

predicting outcomes.

If Mikael decides to go out with his friends instead of study for his biology test, what is the opportunity cost?

preparation for his biology test

Aggregate supply (AS) denotes, while holding the price of inputs fixed, the ________ that firms choose to produce and ________.

price level for output; GDP

Which of the following descriptions is excluded from being a function of money?

price level, measurement of wealth, unit of scale

One benefit to falling aggregate demand is that

price levels go down

An interest rate is the ________ and the reward for lending money.

price of borrowing money

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.

Take the scenario where an economist is analyzing data for an economy in which Ricardian equivalence holds true. If there is an increase by 25 in the budget deficit, then:

private savings will increase by 25 or less.

Suppose you are analyzing data for an economy in which Ricardian equivalence holds true. If the budget deficit increases by 50, then:

private savings will increase by 50 or less.

Considering the graph for microchips, if prices increase from $150 to $200, suppliers will want to

produce almost 70 more microchips.

The Producer Price Index is based on prices paid for supplies and inputs by ________.

producers of goods and services

Which of the following is excluded from the Federal Reserve Bank's crucial role?

producing profits

Contractual laws, by establishing recourse (protection) for parties involved,

promotes economic transactions and growth.

A demand curve shows the graphical relationship between price and

quantity demanded.

Decreasing taxes according to a neoclassical economist will

raise the price level.

A central bank that desires to reduce the quantity of money in the economy can:

raise the reserve requirement.

The theory of ________ assumes that individuals will use all information available to them to form the most accurate possible expectations about the future.

rational expectations

In an AD-AS model:

real GDP is shown on the horizontal axis

As interest rates rise, the effect on aggregate demand is to

reduce consumer borrowing and consumption spending

Countercyclical fiscal policies that stimulate an economy in a recession do NOT:

reduce unemployment below the natural rate without eventually increasing inflation.

A contractionary or tight monetary policy

reduces borrowing.

Aggregate supply curves are ________ for low levels of output, and ________ for high levels of output.

relatively flat; relatively steep

In the Keynesian model, the government can respond to a recessionary or inflationary gap by

relying on the spending multiplier to generate a change in real GDP that is a multiple of the change in autonomous spending.

Corporate stock ________.

represents ownership in a firm.

Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank?

reserve requirement

The proportion of deposits that banks are legally required to deposit with the central bank are called

reserve requirements.

Economic growth is shown in the AS-AD model as a

rightward shift in the long run AS curve.

Inflationary pressure in the AS-AD model can be shown as a

rightward shift of the AD curve when the economy is already producing at its potential GDP

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.

A negative supply shock will cause price levels and unemployment to ________.

rise

Inflationary pressure in the AS-AD model can be shown as a

rise in input prices affecting most firms across the economy shifting AS curve to the left

If the Fed raises reserves requirements, then interest rates will ________ and the money supply will ________.

rise; decrease

In the neoclassical view, the economy has a ________ to move back to potential GDP.

self-correcting tendency

If the Fed wants to decrease the quantity of money in the economy, it can

sell bonds.

Which component of spending has steadily gained over the past fifty years?

services

By increasing its reserves.

setting minimum reserve requirements, ensuring bank net worth remains positive, and setting restrictions on investments.

Jontel got a raise, which may help the economy since

she will likely consume more goods and services

Jontel got a raise, which may help the economy since

she will likely consume more goods and services.

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

One of the goals of the economic model of aggregate demand curve and aggregate supply curve is to help explain the

shifts in the price level and the real GDP

An expansionary monetary policy increases investment and consumption spending, which

shifts the AD curve to the right and increases equilibrium GDP

The Keynesian model focuses more on ________ and the neoclassical model focuses more on long-run determinants of output and employment.

short-term fluctuations caused by business cycles

Quantitative easing undertaken after 2008 was deemed to be necessary because ________.

short-term interest rates had already been driven down to zero and could not go lower

In order to satisfy as many wants as possible, it is necessary to achieve allocative efficiency,

since otherwise output may go to where it is less valued.

A typical Keynesian Phillips curve ________.

slopes downward

According to Keynesian views, the aggregate supply curve ________.

slopes upward

Society gains advantages through trade because of its ability to

specialize resources to the uses where opportunity cost is minimized.

The advantages that society gains through trade lie in the ability to

specialize resources to the uses where opportunity cost is minimized.

Say's Law:

states supply creates its own demand.

An increase in the Marginal Propensity to Consume (MPC) ________ the consumption function.

steepens

If the print media is taken over by the electronic media, thereby causing employees in the print media industry to be permanently laid off, ________ unemployment would increase.

structural

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.

Of the examples below, which is an example of debt?

student loan

In the short run, aggregate demand is more likely than aggregate supply to

substantially shift

In the short run, aggregate demand is more likely than aggregate supply to

substantially shift.

If technological growth and innovation is halted over a protracted period, which CPI bias problem is likely to persist?

substitution bias

The country of Zanzibar has experienced a halt in its technological growth and innovation over a protracted period. Which CPI bias problem is likely to persist in this scenario?

substitution bias

In the neoclassical model, economic growth through technological change over time shifts potential GDP and the ________ gradually to the right.

vertical AS curve

If aggregate demand decreases, neoclassical theory suggests that in the long-term, prices

will be flexible and adjust back to equilibrium along the aggregate supply curve

A nation that bans trade with other nations

will be unable to specialize in what they are good at and therefore end up consuming less.

A positive statement is always

without value judgments.

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

x represents income earned.

A graph in the xy plane with a single point at 4 on the x (horizontal) axis and a vertical line upwards from that point to infinity would be represented by the equation

x=4

The house that Jeanne inherited from her mother can rent for $1500/month, but Jeanne decides to allow her brother to stay there for only $500 per month. This decision carried with it a

zero monetary cost but a $1000 per month opportunity cost.

The country of Wakanda in 2017 had a GDP of $500 billion, with a total of 1.75 million workers, each of which averages 1600 work hours a year. What is the value of the output per worker per hour of work?

$179

The number of people employed in one country is 230 million, with a total number of unemployed people at 40 million. The total population for the country is 500 million. What is the unemployment rate?14.8%

14.8%

Suppose the European Union has a real GDP of 12.2 trillion Euros, and their GDP deflator is 125. What is the European Union's nominal GDP?

15.25 trillion Euros

In the scenario where the Central Bank creates policies which increase the money supply but the aggregate demand is unchanged, is created by following what type of monetary policy?

An expansionary policy.

Which of the following would cause the supply curve to shift to the right?

An improvement in technology

Which of the following is unlikely to result in economic growth?

An increase in consumption and decline in savings.

If a neoclassical model shows increasing wages in the economy in the short run, what else will likely occur?

An inflationary increase in price level.

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.

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.

China had special economic zones originally in places such as Hong Kong and Shenzhen set up back in the 1980s. Why would the Chinese government support these areas with different rules like no tax on trade or different economic laws?

To facilitate a healthy economic environment and grow international trade.

The United States will have a trade deficit in which of the following scenarios?

U.S. imports are greater than U.S. exports

Which of the following is a building block of neoclassical economics?

Wages and prices will adjust in a flexible manner

Last year Canada's economy had a surge in exports and increased demand for additional economic outputs. Because of the great demand, industry's now have a labor shortage and wages have begun to rise. If you are looking at Canada's macroeconomy through the lense of a neoclassical economic understanding, what you will expect to see over time?

Wages and prices will rise in the short-term, and over the long-term they will be flexible and move to a higher equilibrium price along the vertical AS curve (potential GDP).

The country of Wakanda has an economy that will double in 10 years. According to what you've learned about compound growth, what type of economy does Wakanda have?

Wakanda has a thriving and rapidly growing economy growing over 7% per year.

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.

How would Keynesian and neoclassical economics propose dealing with cyclical unemployment?

Keynesians would suggest an increase government spending, while neoclassicals would suggest doing nothing because the labor market will correct itself.

Which of the following scenarios would be MOST beneficial to a bank?

Kim and Micah decide to move most of their money from a checking account into a savings account.

Which of the following Federal Reserve bank functions is related to moral hazards?

Lender of last resort

What might shift aggregate demand?

Loss of business confidence

The most liquid source of money is ________.

M1

Which source of money is most liquid, or available for consumers to use?

M1

When describing the economy's aggregate expenditure components impacted by the real level of income, which of the following terms is excluded from that description?

Macroeconomic Equilibrium

Which answer is true for how money is created in the United States?

Many banks lend out deposited money.

In 1985 inflation in Israel reached a record 500%. How did this period of high inflation affect market adjustments towards equilibrium price and quantity?

Markets adjusted to equilibrium more erratically and slowly

If you lived in a country where literacy was high and 90% of the children completed their education with a high percentage going on to a higher education, what would probably be the results for the country?

More technological breakthroughs would happen in this country.

Which following factor is powerless to influence autonomous expenditure?

National income

You are an economist studying the small country of Mardodus. As you look at the data, you see Mardodus has experienced an influx of updated technology to its manufacturing plants, service industry and the medical field in the last three years. This change boosted the growth of the country's productivity by 75%, yet you see that wages have been very slow to respond to this growth. As you begin to analyze the natural unemployment rate for this time frame, what do you most likely discover?

Natural rate of unemployment will decrease because the productivity growth in the short term has passed up wage growth.

During the 1990s worker productivity growth spiked as computers and the internet were introduced to many businesses for the first time. How did this affect the natural unemployment rate?

Natural unemployment decreased as productivity growth outstripped wage growth.

What type of economic viewpoint puts an emphasis on long run economic performance?

Neoclassical

Your friend asks what you are studying and you tell them neoclassical policies in a macroeconomy. Which of the following statements would explain neoclassical economic policy the best to your friend?

Neoclassical policies would call for no government intervention during a recession

________ economists place an emphasis on ________-run economic performance

Neoclassical; long

Which of the following is an example of a financial market?

New York Stock Exchange

Which one of the following statements best represents the Keynesian Perspective?

People's demand determines what is built

The AD-AS model and the ________ are different ways of showing the same relationship between unemployment and inflation.

Phillips Curve

If the theory of rational expectations is correct, then the ________, even in the short run.

Phillips curve should be vertical

Lian is a production analyst at the cardboard box manufacturer Flexpac. Last year, because of an increase in online shopping, shipping companies have increased the use of boxes for shipping. Management has charged Lian with generating a supply curve graph to illustrate the rise in price and supply of their boxes. These are the figures Lian discovered and put in a table. If you were assisting Lian, what steps would you tell her to take next? Price ($)Quantity Supplied$100100$125150$150200$175250$200280$225310$250350

Plot these points on a graph sloping up to the right with price on the y-axis and quantity supplied on the x-axis.

Robert is tasked with analyzing the market supply and demand for potatoes. Right now, he plotted the supply and demand curves for potatoes which you see in the graph. The current potato price is $70/ton. If the demand is at 200 million tons, what is the market situation for potatoes? How much must prices change before the market is in equilibrium?

There is a potato shortage. The price must increase by $40/ton to reach equilibrium.

The Bank of Merica has been making risky mortgage loans to high risk individuals. A recession then takes place and the Bank of Merica has the potential to experience

a growing possibility of depositors creating a run on the bank.

The relationship between the circumference of a student's head and their test scores can best be represented on a graph by

a line with zero slope (no relationship between size of student head and test scores).

Considering the Neoclassical aggregate supply curve. If there is a rightwards shift of the AD curve along this AS curve, the result will be that

a price level increase.

A decrease in aggregate demand (AD) can cause

a recession in the economy

In an AD/AS diagram, ________ could explain a rise in cyclical unemployment.

a shift in AS to the left

An equation where X=5 could be represented on a graph where Y is on the vertical axis and X is on the horizontal axis as

a single point (X=5) and a vertical line upwards from that point.

In the chart below concerning the shifts in aggregate supply, arrow B represents an economy that is moving in response to ________

an decrease in input prices

An increase in aggregate demand (AD) can cause

an expansion in the economy

If the economy is in a recessionary period, appropriate policies to pursue may include:

an income tax cut that shifts the AD curve to the right

Referring to a Keynesian Phillips curve, a reduction in inflation is likely to cause:

at least a slight increase in unemployment.

From a neoclassical perspective, when the economy is in a recession if the government increases its spending it is

at the risk of crowding out private investment.

From a neoclassical point of view effective government policies to promote long term economic growth might include:

creating a stable economic environment through government taking a hands off approach.

M1, the narrowest of the Fed's money supply definitions include(s)

currency in circulation.

Loan defaults are when ________.

customers do not repay their loans

Fluctuations in the unemployment rates over the past 50 years can best be explained by

cycles of economic expansions and recessions.

Hannah has a small business making clothing alterations. Which of the following products would dramatically affect her profit margins if the price were to decrease for that product?

dresses

Assuming there are only two types of outputs in a country: consumer goods and nuclear missiles. All else being constant, as the nation produces more missiles,

every additional missile will reduce consumer goods production by more and more.

When the interest rate in an economy decreases, it is likely the result of either a/an ________ or a/an ________.

expansionary practice; open market purchase of securities by the Fed

When the interest rate in an economy decreases, it is likely the result of either a/an ________ or a/an ________.

expansionary practice; open market purchase of securities by the Fed.

If a person owns stock in a corporation, what do they own?

Corporate stock represents ownership in a firm.

What is an example of a security?

Credit cards

A contraction in the business cycle is likely to result in which form of unemployment increasing?

Cyclical

What makes all financial markets linked directly or indirectly?

Financial markets are vehicles for both borrowing funds and also where funds are saved.

How are all financial markets linked indirectly or directly?

Financial markets whether directly or indirectly have access to both borrowing funds and saving funds through various financial vehicles.

In this time series graph, the unemployment rate fluctuates from around 4% to 10%. Given this information, 1987 had an unemployment rate of around 6%. Look at the year 2015 and compare whether it was easier or harder to find employment with 1986 and why?

Finding work was equally as effortful in 2015 as it was in 1986 because both of those years had economic conditions where unemployment was around 6%.

Why are certain policy decisions (like those undertaken by the Federal Reserve) best informed by using the core inflation index as opposed to the CPI?

Fluctuations in food and energy prices can be transitory

Henry has accepted a new position in the Federal government after working at ball bearing manufacturing plant. He has been put to the task to measure the economic growth as accurately as possible for the nation's last year. What would Henry use in this instance to produce the most accurate growth analysis?

GDP Deflator

What is true about the expenditure multiplier?

GDP changes when the aggregate expenditure changes.

Autonomous expenditure does NOT depend on what factor?

GDP/output

Which of the following is an example of discretionary countercyclical fiscal policy?

Government infrastructure spending in a recession

Which of the following statements reflects marginal decision-making?

If we double the order to a dozen doughnuts, we will pay only 20 percent more

Identify the following statement consistent with Say's law?

In the economy a supply value must create an equivalent demand value

Identify the following statement consistent with Say's law?

In the economy a supply value must create an equivalent demand value.

What would economic conditions potentially be like in the U.S if the Federal Reserve did not regulate fiscal policy, monitor banks and provide services for banks?

In the economy, transactions would likely be more costly and less efficient.

Which of the following scenarios, from the Keynesian perspective, increases aggregate demand?

Increase in net exports because of foreign demand

Khloe is the owner of a wellness center in Los Angeles. Her business has been growing over three years and she is now considering expanding her business by adding a healthy cafe in her center. Khloe is analyzing the estimated costs, projected potential revenue and costs and benefits of a cafe. Khloe is behaving rationally because

her decision will be based on her self interest.

In the long run, important sources of an increase in a nation's economic growth include(s):

high rate of labor force growth.

Which of the following will cause the supply curve to shift to the left?

higher product taxes

The government decides to increase its spending by $3 billion. Over time the real GDP increased by $12 billion. The expenditure multiplier is ________ 3.5.

higher than

New classical economists argue that a tax cut does not shift the aggregate demand curve because:

households reduce their consumption so they can pay afford to pay higher taxes in the future.

New Classical economists believe fiscal policy is ineffective because any increase in government spending will cause:

households to spend less.

According to Keynesian, policy during a recession government should investment in capital, which includes

human capital investments such as primary education.

If you are explaining the theory of rational expectations to a friend, you would say that the change in an agents' expectations is ________ and therefore ________ the effectiveness of monetary or fiscal policy.

immediate; precludes

The theory of rational expectations indicates that agents' expectations change ________ and therefore ________ the effectiveness of monetary or fiscal policy.

immediately; preclude

In calculating GDP, which component of spending must be subtracted from total spending to account for the fact that not all private or public spending by U.S. households is directed to U.S. businesses?

import

In calculating GDP, which component of spending must be subtracted from total spending?

import

Aggregate Demand (AD) is defined as C + I + G + (X-M). M = ________.

import expenditure

Which of the following is excluded from being a component of the aggregate expenditure model?

import spending

Quantitative easing can be described as a means of

improving credit conditions for private firms and encouraging them to commit to capital expansion projects.

With accelerated inflation In the 1980s middle-class Americans benefited primarily because

in real terms, their home mortgage debts decreased in value

The consumption function is a graphical relationship between ________.

income and consumer spending

According to Keynes what should the government do 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

What are the main ways in which government influences aggregate demand?

increase or decrease spending; lower or raise tax rates

Keynes theorized of a time when the Fed purchased in the open market but sellers held on to the funds instead of depositing them in banks. These circumstances stalled the decreasing interest rate. This scenario called a(n) ________ occurred during the Great Recession and the best monetary policy response to it is to ________.

liquidity trap; continue with an expansionary policy

What makes it difficult for the central bank to know when a policy will take effect and often causes counterproductive monetary policies?

long and variable time lags

The neoclassical model focuses more on long-run determinants of output and employment as well as

long term fluctuations caused by business cycles

A Phillips curve shows the tradeoff between inflation and unemployment, so if one is ________.

low the other must be high

Bank regulation requires that banks

maintain a minimum net worth in order to protect depositors and creditors.

One of the goals of monetary policy is

maintaining price stability.

If the public and community loses trust in banks it affects the entire U.S. financial system. In order to keep this type of financial contagion from happening, the Fed

makes as needed short-term emergency loans, by acting as the lender of last resort.

A bank is more likely to face bank runs by depositors if it

makes risky loans to investors.

To make an economically rational decision, marginal cost should be compared to

marginal benefit.

A company is trying to accurately predict how many more units of a product will be purchased by their customers if the product is discounted by 15%. What tool will assist the company to most accurately run this assessment?

mathematical equations

Carla just started her new job working at the Department of Commerce. In order to see whether Carla "knows her stuff," her boss asks her to put together a presentation on the current state of the economy. What is one of the economic indicators Carla could look at?

the inflation rate

The argument of neoclassical economists is that

the long run aggregate supply curve is at the level of potential GDP

The argument of neoclassical economists is that

the long run aggregate supply curve is at the level of potential GDP.

Keynesian economics explains that recessions and depressions occur because:

the macroeconomy may adjust only slowly to shifts in aggregate demand because wages are sticky

Keynesian economics explains that recessions and depressions occur because:

the macroeconomy may adjust only slowly to shifts in aggregate demand because wages are sticky.

The construction estimator told the storage unit owner that building another section of storage units will likely add 100 more storage space renters to the bottom line. The rational storage business owner considered the rental prices of an additional 100 units, but he would decide to add more units if and only if

the marginal benefit is greater than the marginal cost of additional units.

The musician was known for multiple encore performances, but had limited stamina and a rational mind. Even she would eventually call it a night when, by her judgement

the marginal cost is greater than the marginal benefit of an additional encore.

A keynote speaker was known for his many speaking engagements, but now he has limited time and a rational mind. Even he would eventually start to turn down speaking engagement when, by his judgement

the marginal cost is greater than the marginal benefit of an speaking engagement.

When the central bank lowers the reserve requirement on deposits

the money supply increases and interest rates decrease.

If you are focusing on the value of output per hour worked you are considering

the most important determinant of the average wage level in the economy.

An increase in aggregate demand would cause

the price levels to rise

Assume the economy of country C produces hotdogs and buns in the following quantities and prices in 2016 and 2017. Assume also that 2016 is the base year and the real GDP will be calculated using 2016 prices. What is the real GDP 2017? Hot DogsBunsQuantityPriceQuantityPriceYear 2016 (base year)6 million$24 million$1Year 20178 million$36 million$2

$22 million.

If Nominal GDP is $16,000 billion and the GDP deflator is 50, then Real GDP is ________.

$32,000 billion

You own an auto dealership that has recently received many five star customer reviews at online review sites stating you sell quality cars and are very trustworthy. The diagram represents your demand curve before the online reviews. You find that the positive online reviews increase the demand by 20 cars at any given price. What two points will the new demand curve probably pass through?

($20,000, 120) and ($15,000, 220)

Danielle is planning a cruise to Mexico and has a budget for new clothes of $300. The average price for a pair of shoes is $50 while the average price for a suit is $100. Danielle already has 4 pairs of shoes purchased for her cruise, what is the opportunity cost of buying two more pairs of shoes?

1 dress

Given the table above, what is the price index for 2013, with 2012 as the base year having a price index of 100 (round your answer to the nearest whole number). Items Quantity in Basket 2012 Price 2013 Price Cake3$12.00$13.00 Pie4$8.00$10.00 Cupcake10$2.00$2.50

118

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%

shows that in 1970, people 19 and under made up 77.2 million or 37.6% of the population; people between ages 20 and 64 made up 107.7 million or 52.5% of the population; and people 65 or older made up 20.1 million or 9.8% of the population. Image (b) shows that in 2000, people 19 and under made up 78.4 million or 28.5% of the population; people between ages 20 and 64 made up 162.2 million or 58.9% of the population; and people 65 or older made up 34.8 million or 12.6% of the population. Image (c) projects that in 2030, people 19 and under will make up 92.6 million or 26.4% of the population; people between ages 20 and 64 made up 188.2 million or 53.6% of the population; and people 65 or older made up 70.3 million or 20% of the population.) According to this pie chart, which age group population has been continually shrinking since 1970?

19 and under

Consider the Production Possibility Frontier for country X producing 2 groups of goods, MP3 players and watches. The opportunity cost of moving from the combination of MP3 players and watches B to C is

2 watches.

If government spending increases by $4 billion and real GDP increases by $8 billion, the expenditure multiplier must be ________.

2.0

The Department of Economic Health in the country of Cavia has calculated the price index for a basket of goods from 2014 to 2018. January 2014 is the standardized price index (at 100) for a basket of consumer goods. The price index increased in 2015 to 105.7, in 2016 to 108.6, in 2017 to 115.9, and in 2018 it increased to 120.4. What are the inflation rates in Cavia for 2015, 2016, 2017, and 2018?

2015: 5.7%; 2016: 2.7%; 2017: 6.7%; 2018: 3.9%

If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals ________.

25%

There is a small fictitious island country, called Noil, floating in the south Pacific ocean. Many years ago there was an abundance of fish and the population grew rapidly. Now the adult population has reached a total of 35 thousand people. This year fishing and other jobs have been on the decline and now 1 thousand people are looking to find work. With an increasing elderly population 3 thousand are now retired. Noil does not have an army, but it does have a small coast guard of 432 citizens serving the country and patrolling the waters where needed. What is the country of Noil's unemployment rate?

3.2%

In 2005 the price index was calculated at 115.3 with 2000 as the base year. In 2006 the price index increased to 119.5. What was the inflation from 2005-2006?

3.6%

Assume the economy of country C produces hotdogs and buns in the following quantities and prices in 2016 and 2017. Assume also that 2016 is the base year and the real GDP will be calculated using 2016 prices. What is the real yearly growth (between 2016 and 2017)? Hot DogsBunsQuantityPriceQuantityPriceYear 2016 (base year)6 million$24 million$1Year 20178 million$36 million$2

37.5%

If the MPC is 75%, what is the spending multiplier?

4

While the U.S. unemployment rate fluctuates over time, it normally returns to a long-run average somewhere between

4% and 6%.

Given X = 52+27-((3/15)*100), X is ________.

59

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%

The conditions of demand and supply are given in the table below. What is the equilibrium quantity? PriceQdQs$1.609,0005,000$2.008,5005,500$2.408,0006,400$2.807,5007,500$3.207,0009,000$3.606,50011,000$4.006,00015,000

7,500

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.

How can a bank strategize to protect itself from loan default levels that will potentially create recessions?

A bank could diversify its loans by lending to a variety of customers.

A new tool manufacturer opened a plant in town three months ago and hired 3000 new employees. People now have extra cash to spend and are out spending in the town. What is an example of how this extra money may shift the demand curve for goods and services in the town?

A local restaurant has a 40% increase in the number of dinners.

Of the following, which is an example of a type of business investment expenditure?

A producer's durable equipment

How would the equation x=0 and y=5 be represented in a XY graph, and what does it say about the relationship between X and Y?

A single point y=5 on the Y-axis has a horizontal line to the right from that point. This graph indicates that y is not dependent upon x.

When considering the Phillips Curve, which statement below is the most accurate?

Along the Keynesian zone of an AS curve, inflation is low when GDP is below potential.

Which of the following statements is true about the Phillips Curve and Aggregate Supply curve?

Along the Keynesian zone of an AS curve, inflation is low when unemployment is high.

With the introduction of robotics to automotive manufacturing, there have been sweeping changes to the automotive assembly line, management and operations at plants. As an example, in a truck manufacturing plant, identify who would most likely be impacted by this technology change and suffer long term structural unemployment?

An assembly line worker with 10 years of screwing together truck panels and a high school diploma

Why are banks considered financial intermediaries?

Because banks link borrowers of loans with savers who deposit money.

Why are bank runs in the United States relatively scarce since the 1930s?

Because of the guarantees that depositors will receive a portion, if no all, of their money from the FDIC deposit insurance.

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

Which of the following is true about export and imports as function of national income?

Both are horizontal lines with imports being negative as it relates to real GDP

Which of the following is true about export and imports as function of national income?

Both are horizontal lines with imports being negative as it relates to real GDP.

Silicon is used for the manufacturing of semiconductor chips. At the end of last year a large new source of silicon has been discovered this year and the price of silicon has decreased by 15%. Semiconductor chips are used in devices, cell phones, gaming systems, and this year many new devices are now using chips. If you were drawing a supply and demand graph to illustrate the changes to the semiconductor market since last year, what would you say has happened to the supply and demand curves and the equilibrium price and quantity this year?

Both the demand and supply of semiconductor chips will increase shifting the curves to the right with equilibrium quantity increasing but it is impossible to pinpoint the equilibrium price change

Atlantic Bank is required to hold 10% of deposits as reserves. If the central bank increases the discount rate, how would Atlantic Bank respond?

By increasing its reserves.

Algebraically, the consumption function is represented as ________.

C = a + MPC*Y, where a is autonomous consumption (the amount of consumption expenditure when Y = 0), MPC is the marginal propensity to consume, and Y is national income

To represent the consumption function through algebra, it would be expressed as ________.

C = a + MPC*Y, where a is autonomous consumption (the amount of consumption expenditure when Y = 0), MPC is the marginal propensity to consume, and Y is national income

In the country of Cardonia, the natural rate of unemployment is 3.5% according to the Ministry of Economics. Last year there was an economic slow down where the actual rate of unemployment increased to 4.5%. Assuming that the unemployment percentages are accurate for Cardonia, what is the likely outcome for the economy of Cardonia?

Cardonia's economy will grow until real GDP is equal to potential real GDP and the unemployment rate equals 3.5%

Which of the following statements is correct?

Central Bank intervention reflects its goals for inflation, unemployment and economic growth.

Which of the following assumptions is based on a Keynesian economic framework?

Changes in aggregate demand prices does not cause wages and prices to quickly adjust because they are both sticky.

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 1,400 airplanes. If the price of time is $20/hour in San Francisco and $15/hour in Chicago, which airport incurs the largest opportunity cost?

Chicago

Identify the positive statement among the following statements

College tuition is higher for out-of-state students than it is for in-state students.

Assume that you are an economist looking at economic indicators for both the United States as well as several European countries. What do these economic indicators enable you to do?

Compare how well the U.S. economy is doing relative to the European countries.

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

Other than income, which factor can also shift the entire consumption function?

Consumer expectations about the future

What are the components included in aggregate demand?

Consumption, investment, government spending, and net exports

What are the components included in aggregate demand?

Consumption, investment, government spending, and net exports.

The operations vice president is adjusting the production quantities for the upcoming month of March for the coal company. Last month the price of a ton of coal was $45, and in February it increased to $64 per ton. According to the law of supply, what would be a rational response of the VP of operations in adjusting his coal output with the change in the market price?

Increase output and hire more workers.

Which of the following statements represents a Keynesian point of view of macroeconomics?

Increases in aggregate demand can reduce unemployment

Which of the following statements represents a Keynesian point of view of macroeconomics?

Increases in aggregate demand can reduce unemployment.

What two economic areas is the Phillips curve illustrating that have an inverse relationship with each other?

Inflation and unemployment.

Two common ways to discourage tobacco use are taxes on tobacco and information campaigns on the hazards of tobacco use. Which one causes a shift in the demand curve for smoking?

Information campaign on hazards of tobacco.

The Krisp Kracker company which makes unique kettle chips for restaurants, clubs, and events, has just lost a large client that made up 55% of its total revenue. Management finds it necessary to reduce staff or wages. This comes only three months after hiring 35 new people to support this big client. While there are rumors of wage reductions in the short run, the 100 employees who have been with the company for the past two years are grumbling that they are more valuable that the new hires which should be let go and the wages not reduced. The situation at Krisp Kracker illustrates which wage stickiness theory best?

Insider-outsider model

Which of the following statements is normative?

Installing solar panels is better for society.

The current competitive economy has caused the Doggie Dog Food company to brainstorm in their latest meeting on how to become more productive and efficient. Larry the VP of operations suggests that they deepen the company's capital. Which of the follow steps should the Doggie Dog Food company take to deepen its capital?

Invest in additional training for their dog food scientist and nutritionist updating with the latest dog food and health knowledge.

Looking at the figure above, why does the line for the consumption function not start at zero?

It does not start a zero because of autonomous consumption

In comparison with an expenditure module, the multiplier effect produces a great change in GDP and therefore its value is ________.

greater than one

Based on the following table comparing fictional international country unemployment rates, the country of Ulidia seems to have had fairly low unemployment rate throughout the years until 1985. Ulidia is however, a developing country and with the Ministry of the Economy reporting there is 65% of the labor force participation and 6% unemployment rate in 1985. Knowing it is a developing economy, why might the 6% rate be inaccurate? International Comparison of Unemployment Rates Country1970197519801985 Ulidia 4% 2.8% 3.4% 6.0% Agreriven 7% 6.0% 5.7% 4.5% Saede 3% 4.5% 3.4% 5.2% Galoiri 5% 7.0% 5.5%2.5%

It is inaccurate because Ulidia has a large portion of the working-age population that participates in the informal economy of short-term work, bartering, or other subsistence activities.

Which is a true statement about marginal cost?

It is the difference (or change) in cost of a different choice.

Of the following descriptions, which characteristic is a true statement about money?

It must represent value.

Which of the following characteristics is true of money?

It must represent value.

In this time series graph, the unemployment rate fluctuates from around 4% to 10%. Given this information, if 2017 had an unemployment rate of around 4-5%, was 2017 a year where it was easier or harder to find employment than 1986 and why?

It was more difficult to find work in 1986 because the unemployment rate was close to 6% and thus an economy worse off than the economy of 2017.

If a government expands its fiscal policy to raise equilibrium output, what will happen in the long term, according to the neoclassical view of the economy?

It will not work because the flexible prices will eventually choke off any increase in aggregate demand

If a government expands its fiscal policy to raise equilibrium output, what will happen in the long term, according to the neoclassical view of the economy?

It will not work because the flexible prices will eventually choke off any increase in aggregate demand.

This year the economy is takes a hit as another housing market bubble bursts and there is every expectation that the economy is in for a rough patch. What would most likely take place for the consumption function with this lack of confidence in the economy?

It will shift the consumption function downward

This year the economy is strong and there is every expectation that it will continue to be strong over the next few years. With this confidence in the economy, what would most likely happen to the consumption function?

It will shift the consumption function upward

If a country experienced a natural disaster which wiped out a quarter of its capital stock, what would happen in the long run to its potential GDP?

It would fall in the short-term and then rise back to pre-disaster levels in the long-term.

The country of South Wales experienced a tsunami which wiped out half of its capital stock. What will happen, according to neoclassical perspective, to the country's potential GDP?

It would fall in the short-term and then rise back to pre-tsunami levels in the long-term

The country of South Wales experienced a tsunami which wiped out half of its capital stock. What will happen, according to neoclassical perspective, to the country's potential GDP?

It would fall in the short-term and then rise back to pre-tsunami levels in the long-term.

Which of the following is a true statement about a credit union?

Its main focus is to make loan funds to its members

Janice has calculated the GDP for 2018 by using the total final goods times the 2018 prices of total goods. 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.

Among all high-income countries, which consistently has the lowest long-run unemployment rate in the past 30 years?

Japan

While Japan has enjoyed a persistent low unemployment rate compared to other high-income countries, this may paint too rosy a picture of unemployment in Japan because

Japanese employers are reluctant to formally lay off workers even when there is little real work.

The Phillips curve is a ________ viewpoint.

Keynesian

Which model is known to do a good job explaining recessions and the rise and fall of cyclical employment?

Keynesian

Which of the following viewpoints uses the Phillips curve?

Keynesian

The country of Botalava hired Gustav to assist with government policies regarding the macroeconomy. Gustav is a neoclassical economist and makes all decisions based on that economic philosophy. What policies will Gustavo tell the government to enact in order to foster a health economy?

Policies should be set up to keep inflation low and maintain low tax levels over the long run.

Which of the following promotes economic growth?

Political stability and property rights protection.

The regional soda company in Michigan, Faygo, has recently run viral advertisements online and has increased their prices and number of supplied sodas to regional grocery stores. The graph of Faygo's supply schedule is shown below. and ends at (170,1200).) Which supply schedule is correct for creating Faygo's soda supply curve graph?

Price ($)Quantity Supplied$40050$60070$70090$800110$900130$1,100150$1,200170

Under ideal conditions inflation should not have any blurring effect on price signals. If wages and prices are rising at a constant 20% then individuals should be able to adjust their expectations accordingly. For example, if the price of bread increased by 20% and the price of the input flour also rose by 20%, the sellers should know that the real price of bread has not changed. The market equilibrium quantity and price has not changed. Why does inflation in the real world result in shortages and surpluses?

Price adjustments are not synchronized or smooth

What accurately describes the AD-AS model?

Price level is shown on the vertical axis and real GDP is shown on the horizontal axis

What is one of the cornerstones on which neoclassical economics is built?

Prices and wages will adjust in a flexible manner.

What does a Keynesian analysis of economics assume?

Prices are sticky

If the aggregate demand in a macroeconomy increases, according to neoclassical theory, what happens to prices over the long term?

Prices will be flexible and adjust back to equilibrium in the aggregate supply curve or potential GDP.

Which of the following is the name used to describe the price index that consists of raw materials and intermediate goods?

Producer Price Index

If demand increases and supply remains constant, what happens to the market equilibrium?​

Quantity and price both rise.

When creating a graph for your economics course, which axis is most commonly used to represent quantity (q)?

Quantity is most commonly represented on the x-axis.

Which of the following best defines real GDP?

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 of the following descriptions reflects the AD-AS model most accurately?

Real GDP is shown on the horizontal axis and price level is shown on the vertical axis

The Campus Collective company, which creates unique apps for colleges, has recently lost three large university clients that made up 40% of its total revenue. This has hit the company hard and management finds it necessary to reduce staff or wages. The economy also appears to be headed toward a recession and gaining more clients will most likely be harder to accomplish. Because it is a smaller company everyone knows each other and knows there are tough choices ahead. Management brings up the idea of an across the board wage reduction so that no one be let go, but some employees don't believe that a wage cut will be equally applied to all. The employees are also not sure if other people working their same jobs in the economy are getting reduced wages. They start to argue against wage reduction and things get a bit heated. Which of the following theories best illustrate this wage stickiness scenario?

Relative wage coordination argument

Which of the following statements is normative?

Retired professionals should work less and get out more.

Sarah lives in Montana and works remotely with a company in Portland. She lives in Montana because of the fresh air, clean water and wide open spaces to go hiking on her time after work. Is Sarah's environmental quality reflected in factoring the Gross Domestic Product and why or why not?

Sarah's environmental quality is left out of GDP because GDP focuses on productivity rather than Sarah's well being or standard of living.

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

The classic quote from the movie Field of Dreams, "If you build (produce) it they will come (purchase)," can be used to describe ________.

Say's Law

Which of the following is a step in calculating a price index?

Selecting the kinds and quantities of goods and services to be included in the index.

Acting from a Keynesian viewpoint, with inflation and unemployment negatively related, what should the Fed choose as its policy in an inflationary economy to move down the Phillips Curve and decrease inflation?

Sell securities in the OMO (Open Market Operations).

Which of the following individuals would be included in the unemployment rate?

Sharon who has been looking for work this last month

How does an economist depict cyclical unemployment on an aggregate demand-aggregate supply (AD-AS) diagram?

Showing how close the economy is to potential or full employment level of GDP

According to the order of operations in solving equations, which step should come first?

Simplify inside parentheses and brackets.

Which of the following is unlikely to be a neoclassical policy to address unemployment?

Stimulating aggregate demand using fiscal or monetary policy.

What is excluded from the official calculation of the unemployment rate?

Students who are attending to school full time and not working.

and ends at 600,0) Which of the following data sets depicts the correct version of the above quantity Demand graph representing the number and price of watches. The x-axis shows quantity and the y-axis shows price.

Table 2Prices ($)Quantity Demanded$30010$25050$200100$150200$100300$50400$25500$5600

If the country of Switzerland has its economy operating at its potential GDP, but plans to expand its output levels, according to neoclassical thinking, what would increase the country's outputs?

Technological improvements

Which of the following government policies is a neoclassical response to an economic recession?

Terminating labor unions

Consider the following scenario. If foreign goods are relatively more expensive than U.S. goods, exports from the U.S. rise. How would this scenario make the aggregate demand curve change?

The AD curve would shift to the right

Who is responsible for monitoring the money supply and the general stability and safety of the U.S. banking system?

The Federal Reserve

If the government saw that consumer confidence was high, what step can it take to shift the AD to the left?

The Federal Reserve can increase interest rates

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?

The GDP using nominal values.

If an economist is using the macroeconomic theory that low inflation may be associated with high unemployment, and high inflation may contribute to low unemployment, what theory is the economist considering?

The Keynesian Phillips curve tradeoff.

Which of the following is an example of Say's law?

The automotive industry, in order to create more output, need to focus on increasing production rather than demand.

Which of the following aptly describes the mission of the Federal Reserve Bank?

The banking industry's private bank.

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.

The distinction between real GDP and nominal GDP is important to determine which of the following?

The change in real output produced.

Say's Law is displayed in which of the following examples?

The clothing industry, in order to create more output, needs to focus on increasing production rather than demand.

How would you interpret a graph of a nation when its production possibilities frontier shifts outward?

The country is achieving economic growth.

What best explains the fluctuations in the unemployment rates over the past 50 years?

The cycles of economic recessions and expansions.

Consider the following schedule. If the potential GDP is at 8.0, what can you conclude about price levels and the unemployment rate? Current Price LevelReal GDP-quantity demanded per trillionReal GDP-quantity supplied per trillion 12017.08.011515.015.011013.012.010010.011.2

The economy is experiencing rising price levels and has a low unemployment rate because it is operating above the potential GDP

If the Federal Reserve did not regulate fiscal policy, monitor banks and provide services for banks, what would most likely be the economic conditions to transact business in the U.S.?

The economy would be less efficient and transactions most likely more costly.

Considering the figure above, at what point does the equilibrium occur? (Price level , Real GDP) (X, Y) (10t, 20t, 30t rGDP) (103, 105, 100 pl)

The equilibrium point occurs at a price level of 105 and an output level of 20t.

Consider the following schedule to find where the equilibrium occur. Where does real GDP supplied and equilibrium price level occur? Current Price LevelReal GDP-quantity demanded per trillionReal GDP-quantity supplied per trillion78520.013.061017.817.850015.519.047812.021.7 (Look where it equals on supply and demand)

The equilibrium point occurs at a price level of 610 and an output level of 17.8

Identify the normative statement(s) among the following statement(s).

The federal government spends too much.

When the federal government calculates the cost of living they use the core inflation index instead of CPI, and use it to make policy decisions. What is one of the reasons to use the core inflation index as opposed to the CPI?

The fluctuations in food and energy prices can be momentary

Of the following examples, which one has little or no effect on labor productivity?

The frequency of business cycles.

The country of Bratislaka hired Gudurn to assist with government policies regarding the macroeconomy. Gudrun is a neoclassical economist and makes all decisions based on those economic philosophies. What policies will Gudrun tell the government to enact in order to foster a health economy?

The government should keep inflation low and maintain low tax levels over the long run.

What are the components used to create a consolidation view or stacked graph (or stacking on top of each other) of the aggregate expenditure function?

The graph would include the consumption function (after taxes), the investment function, the government spending function, and the net export function

What are some of the reasons, according to Keynesian analysis, of why economies have recessions and depressions?

The larger macroeconomy tends to adjust slowly to shifts in aggregate demand because of sticky prices.

If you were to explain to a friend how the macroeconomy would be influenced by neoclassical policies, which of the following statements would be the correct explanation?

The macroeconomy has flexible prices and wages and it is self correcting and not in need of governmental intervention for correction.

Alejandra is calculating the nondurable goods value for 2017. She is calculating the value by using the quantity of each final nondurable good produced in 2017, multiplied by the price at which the nondurable goods were sold in 2017. What type of calculation is Alejandra creating?

The nondurable goods nominal values.

The owner of a national construction company has been watching current economic changes. They have gathered historical data from their company's business experiences through up and down markets and have decided on a plan to follow as demand changes over the next year, three years and five year plan, with alternative options based on past data. Why is the owner making these type of decisions for the long-run?

The owner is using adaptive expectation reasoning to change important aspects of the company to be ready for future demands as the long-term economy shifts.

The owner of a national software company has been watching current economic information for the past two quarters and a rapid rise in demand for its software suites. Last month 30 new software engineers were hired to meet the demand. Even though these new hires will finish their project work in a few months, the owner plans to retain them in anticipation of future demand. Why is the owner making these type of decisions for the long-run?

The owner is using rational expectation reasoning to hire more engineers to quickly be ready now for future demands of a long-term economic shift

The owner of a national software company has been watching current economic information for the past two quarters and a rapid rise in demand for its software suites. Last month 30 new software engineers were hired to meet the demand. Even though these new hires will finish their project work in a few months, the owner plans to retain them in anticipation of future demand. Why is the owner making these type of decisions for the long-run?

The owner is using rational expectation reasoning to hire more engineers to quickly be ready now for future demands of a long-term economic shift.

Money creation in the United States results from which of the following?

The process of multiple banks' lending out deposits.

How does a production possibilities model differ from a budget constraint model?

The production possibilities model demonstrates diminishing returns.

Which of the following is counted as part of GDP?

The purchase of a snow plough by the city of Minneapolis.

Which of the following is left out of being counted as part of GDP?

The purchase of your next door neighbor's house.

In the chart below concerning the shifts in aggregate supply, arrow A represents an economy that is moving in response to ________

a decrease in productivity

How do central bank policies affect interest rates?

When the central bank decides to increase the discount rate, then interest rates increase.

Last year Hawaii did not received many rain storms and with eight months of little rain there was low demand for umbrellas. This year however, there have been three months of big rain storms and only a few weeks of sunny weather. If you were to draw a graph depicting the changing market for umbrellas from last year to this, how would the new equilibrium price and quantity demanded compare to last year's market?

With supply of umbrellas being constant, equilibrium price and quantity demanded increase for umbrellas compared to last year.

You have older parents who have been saving for retirement for decades. They are now getting close to retirement age and are looking at their options. One would like to leave everything in the pension fund and draw out a fixed, unchangeable amount over their retirement time. Your other parent wants to take out a chunk of retirement funds and purchase a business and use the profit from it to generate funds on which to live. You have noticed that inflation over the last year is on a rapid rise. What would you advise your parents to do based on what you know of inflation and its redistribution of purchasing power?

You would advise them to buy a business with their retirement funds and keep their money working for them to keep up with inflation.

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 Costa Rica, Canada has

a comparative advantage with corn.

The town of Chester has an economy composed entirely of two equally sized food companies. Both company Q and company R produce peanut butter and jam. Company Q is better at producing jam than Company R which is better at producing peanut butter. In order to maximize output, Company R should

abandon the production of jam to fully specialize in the production of peanut butter and then trade with Company Q for jam.

Which economic theory assumes individuals will use past values of inflation to predict the possible expected future values of inflation?

adaptive expectations

In macroeconomics, ________ denotes the total quantity of spending on domestic goods and services.

aggregate demand (AD)

According to neoclassical theory, changes in GDP, or the vertical AS curve, will be caused by

aggregate demand changes

A key part of the Income-Expenditure model is understanding that as GDP (or national income) rises, so does ________.

aggregate expenditure

The neoclassical economists believe to help grow the economy, they should focus on ________?

aggregate supply

The relationship between the total quantity of output or real GDP firms will produce and sell is known as

aggregate supply

If you are looking at a graph where a cumulative upward sloping curve plots the relationship between price level and output for suppliers, you are looking at a

aggregate supply curve graph

The money supply may expand by less than the amount predicted by the money multiplier if

banks do not loan out all of their excess reserves.

Homemade pies can be used as a form of ________.

barter

In the long run, real GDP will

be close to or on the horizontal part of the AS curve

In order to satisfy as many wants as possible, it is necessary to achieve productive efficiency

because otherwise resources are idle.

In a recessionary period of low economic output, a neoclassical economist would:

believe decreases in prices will eventually return the economy to potential output.

On the far left side of the AS curve, the economy is producing ________ potential, and on the far right of the curve, it is producing ________ potential.

below; above

According to this graph, which age group will experience the greatest decline in population growth between 2000 and 2030?

between 20-64

According to this graph, which age group will make up most of the population in the United States in 2030?

between 20-64

Which of the following scenarios would most likely be viewed from a neoclassical perspective as an undermining element of the long-run productivity growth in an economy?

business capital investment tax cuts

Which of the following is the alternating periods of expansion and contraction in real GDP?

business cycles

What policy actions should the Fed take, acting from a Keynesian viewpoint, with inflation and unemployment is inversely related, to move up the Phillips Curve in a recessionary economy and decrease unemployment?

buy securities in the Open Market Operations (OMO)

An open market operation increases the money supply when the Federal Reserve

buys bonds from banks, which increases bank reserves.

If a macroeconomy experiences a fall in business confidence which has led to less investment in the economy and lower levels of output. Keynesian analysis in the short-run, predicts that the fall in aggregate demand will ________, while the Neoclassical view says ________ in the long-run.

cause higher unemployment; there will be full employment

The M2 money supply consists of everything in the M1 money supply, savings deposits and which of the following?

certificates of deposit

A vertical AS curve means that changes in GDP will be caused by

changes in aggregate demand

Self-interest can include more than a concern for oneself. To the extent that the happiness of others contributes significantly to the our own happiness, actions taken in our own self-interest may have benefits for

close friends and family.

George owns a custom pottery business where he makes all types of mugs and drinkware. Which of the following products would dramatically affect his profit margins if the price were to decrease for that product?

coffee mugs

In describing what adaptive expectations means to a friend, you explain that in order to make their economic condition forecasts, agents ________.

consider only current information and ignore the past

Making an economically rational decision requires

considering the prospective benefits and costs to oneself.

The ________ is a graphical relationship between income and consumer spending.

consumption function

Aggregate Demand (AD) is defined as C + I + G + (X-M). C refers to ________.

consumption spending

Beth has been unemployed for two months from her accounting job. She has interviewed with a number of other firms, but has not received a job offer. Her debt are increasing and at this point she needs to find a job just to cover her expenses at least. She now begins to look for positions in places that pay lower wages that what she would like. What is Beth's experience called in economic terms?

cyclical unemployment

In order to ________ the money supply, government should sell bonds in open market operations.

decrease

When the housing market crashed in 2007, Keynesian economists might have predicted a

decrease in consumption expenditure, as household wealth declined

Keynes believed that the government should ________ to get the economy out of recession:

decrease taxes and/or increase government spending

Keynes believed that the government should ________ to get the economy out of recession:

decrease taxes and/or increase government spending.

A countercyclical fiscal policy during a recession that effectively boosts an economy does NOT:

decrease unemployment below the natural rate without eventually increasing inflation.

Which of the following would cause a negative demand shock (shift to the left) in aggregate demand?

decreased availability of business capital

The economy moves between recessions (high unemployment), and inflationary times causing inflationary problems. According to the Keynesian economic view, during a briskly productive economy which causes inflation and prices to rise, contractionary fiscal policies should be used. These type of policies include ________.

decreased government spending and tax increases

Cyclical unemployment is caused by the ________ for labor ________ during an economy moving from recession to expansion.

demand; moving to the right

Savings banks and credit unions are both examples of which of these?

depository institutions

What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks?

discount rate

An open market purchase of US Treasury bonds by the central bank will ________ credit conditions for private firms.

ease

Components of aggregate demand include all of the following EXCEPT

firms' demand for inputs

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.

When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is

following an expansionary monetary policy.

Tangi Tumolo carves and creates beautiful furniture on the island of Kiribati. Each month he takes the furniture to the capital city of South Tawara and sells what he can for the best prices he can. He also takes orders from people each month to build certain furniture indicating what is currently in demand. Each month the prices and products very a bit depending on the demand in the market. Tangi enjoys the ebb and flow of the changing market as it keeps his business interesting and current with demand. Kiribati's government takes a 'hands off' approach with the economy and the market is thriving on its own. Tangi Tumolo lives in what type of economy?

free Market

When calculating GDP as the sum total of all spending, which of the following should be included?

government purchases of labor, goods, and services

From a neoclassical viewpoint, government should focus less on

government stimulus spending

In the AS-AD model depicting economic growth, the vertical line that represents potential GDP will

gradually shift to the right in the long run

If Stan's Shoemaker Shop practices the division of labor and employees concentrate on one step of the shoe-making process, this will likely result in

greater production output.

If the economy has cyclical unemployment, appropriate policies to pursue may include

increased government spending that shifts the AD curve to the right

From a neoclassical view, which of the following is least important?

increasing aggregate demand to fight unemployment

Which of the following is least important according to the neoclassical viewpoint?

increasing aggregate demand to fight unemployment

Tax cuts that are explicitly temporary have less impact than permanent ones because

individuals and businesses do not change their behavior very much, since they do not expect the tax cuts to last.

A midwest bank with new managers and loan officers loaned out large amounts on very risky home loans. The bank sold off some of its real estate assets, but did not have enough to cover its liabilities when the majority of the loans defaulted. The bank is now considered

insolvent.

What is a key component considered by businesses when determining the amount to take on with investment spending?

interest rates

In order for there to be an accurate reflection of the aggregate economic indicators in a model the equilibrium aggregate real GDP and the equilibrium aggregate price level needs to

intersect

If a data line on a graph has a slope of zero it means that there

is a constant relationship between x and y.

If a graph data line indicates that there is a zero slope, this means there

is a constant relationship between x and y.

Investment in human capital

is an important source of labor productivity.

Sustained economic growth

is key because over a long period of time small yearly growth rate compound

Sustained economic growth

is key because over a long period of time small yearly growth rate compound.

According to growth accounting studies, investing in research and education

is the best way to achieve greater technological progress.

Say's Law:

is widely held to be more accurate in the long run rather than the short term

When a shift in aggregate demand occurs, rational expectations hold that ________.

its impact on employment and output will only be minimal

What are the factors of production?

land, economic capital, labor, entrepreneurship

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the

law of demand.

Banks create money through which of the following processes?

lending money

Which of the lines represents the C + I stacked functions?

line 2

Which line represents the C + I + G stacked functions in the graph?

line 3

A manufacturer is trying to accurately predict how many more units of a product will be purchased by their business customers if a product is discounted by 5%. What tool will assist the manufacturer to most accurately predict the purchase behavior?

mathematical equations

If an economist is trying to predict the outcome from particular causes and effects, what is the best tool(s) for her to use in order to test out her economic model?

mathematical functions

Because money functions as a ________ it eliminates the need for bartering.

medium of exchange

An example of a ________ is when the changes in prices happen often enough to cause customers and consumers to be confused or angry.

menu cost

If price changes happen frequently, customers and consumers can become irritated or confused. An example like this is called a ________.

menu cost

An example of ________ is when price changes cost a firm substantial resources.

menu costs

Price changes can cause substantial cost to company resources. An example of this is called ________.

menu costs

The total amount households and businesses plan to spend on goods and services at every level of income is determined by the aggregate expenditure. This model focuses on the short run relationship between real spending and ________.

national income or GDP

If trade between nations is prohibited,

nations will be unable to specialize in what they are good at and therefore end up consuming less.

The ________ perspective tends to view inflation as a cost that offers no offsetting gains in terms of lower unemployment.

neoclassical

Which component of aggregate demand would initially be affected by a change in exchange rates?

net exports

Compared to developed countries, developing countries...

often lack reliable or regular unemployment statistics.

Government, from a neoclassical perspective, should have the intent to focus less

on stimulus spending.

When banks receive new deposits, they can make new loans and thus create money

only up to the amount of their excess reserves.

If Kendrick decides to watch t.v. instead of go to the gym, the ________ is a missed workout.

opportunity cost

Which is the smallest expenditure category in the US CPI?

other goods and services

An Uber driver faces costs for driving that include sunk costs like insurance that contribute to the average cost per mile of $.50. Yet when a rider offers to pay less than that for a ride, the driver agrees because

sunk costs like auto insurance (in this case) do not increase as driving increases.

When there is an excess supply of goods

suppliers lower prices, which encourages consumers to demand more.

In general, neoclassical economists focus on aggregate ________ to help stimulate the economy?

supply

Which economics principle is present in financial markets?

supply and demand

In the supply-demand diagram used to represent events such as cyclical unemployment, the supply (upward-sloping) curve represents ________.

supply of workers for labor

An implementation policy lag describes the length of time it

takes to enact a monetary or fiscal policy.

From a neoclassical perspective, which of the following would most likely be viewed as an element that undermines long-run productivity growth in the economy?

tax cuts on business capital investment

Select the reason below that helps to stabilize the economy by effective policy making?

tax cuts that are permanent

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

Modern economic growth finds its roots in

technological progress and industrialization.

Since the 1930s, bank runs are not problematic in the United States because

the FDIC provides deposit insurance and guarantees that depositors will receive a portion, if no all, of their money.

Marginal benefit is

the additional benefit that one more unit of something will provide.

The money multiplier is defined as

the change in the money supply divided by the change in deposits newly deposited into the banking system.

The ________ shows the interaction between household and firms in the goods and services market as well as in the labor market. This simplifies a complex economy, enabling economists to better observe and understand behavior.

the circular flow diagram

The ________ simplifies the economy into two groups, firms and households, and allows us to make predictions about economic behavior.

the circular flow diagram

Amka is the head analyst for the Alaska Department of Fish and Game Service. Recently the agency has become concerned about overfishing in the waters off Alaska. Amka is estimating the demand curve for salmon as part of the agency's mitigation efforts. From past statistics she knows that when the price of a freshly caught salmon is $400, the public will demand a quantity of 1 million fish. If the price is $200 then the public will demand 5.6 million fish. Finally, if the price was $125 consumers will demand a quantity of 8 million fish. Which curve below could be the correct demand curve for Alaskan salmon given these three data points?

the silver curve

A severe freeze has damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of

the supply curve.

The most important determinant of the average wage level in the economy is ________.

the value of output per hour worked

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.

In the case of a positive relationship between two variables, all else remaining constant:

the values of the two variables will move in the same direction.

Scarcity is a condition that is everywhere and always, since it is based upon two assumptions that reflect permanent universal conditions. The assumptions are that more output will satisfy more wants and

the world has limited productive resources.

If a person has zero income, consumption still exists because ________.

there are basic needs people still have to meet

When quantity demanded decreases in response to a change in price

there is a movement from one point to another along the demand curve.

From the graph above, one could conclude that, all else remaining constant

there is a trade-off between X and Y.

Frictional unemployment occurs because in a world of imperfect information, it takes ________ for people to find jobs.

time

Last year, in calculating the GDP of the United States imports were found to be greater than U.S. export. This is known as a

trade deficit

Last year, in calculating the GDP of the United States imports were found to be greater than U.S. export. This is known as a

trade deficit.

When decisions need to be made, economists assume a decision will be influenced by its

trade-offs.

When picking up a rental car at an airport car rental agency, some travelers stand in line waiting to sign paperwork and pick up car keys at the rental desk while other travelers can go right to their rental car by using their rental car loyalty club card. In this example, the travelers who move quickly through to the parking lot pick up their car are probably

travelers who value convenience more than those waiting in line and are willing to pay additional club fees for the option of avoiding them.

Concerning the four phases in the economic cycle above, what does point D depict?

trough

Which of the following is an example of what backs fiat money?

trust the public has that it can be exchanged for services and goods

Keynes argued that the private sector was ________. As a result, government should ________ in managing the economy

unable to keep the economy at full employment; take an active role