ECON 202- final

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the Federal Reserve System was established in

1913

when government spending rises

aggregate demand rises

in using the income approach to GDP, the largest category is

compensation of employees

When the Bureau of Labor Statistics calculates the consumer price index (CPI), it assumes that

consumers do not substitute cheaper goods for goods whose prices have risen

if the reserve requirement is 25%, then a $1 increase in deposits means that the money supply

has the potential to increase by $4

the ________ let economists judge our nation's economic performance, compare U.S. income and output to that of other nations, and track the economy's condition over the course of the business cycle.

national income and product accounts

monetary targeting is setting a steady growth rate in

the money supply

If the Bureau of Economic Analysis reports that the annualized U.S. growth rate was 2.5% for the second quarter, then the actual growth rate from the first quarter to the second quarter was:

0.625%

suppose an economist breaks the unemployment rate into the following components: frictional (2%), structural (1%), and cyclical (4%). Based on these estimates, the natural rate of unemployment is:

3%

if the marginal propensity to save is 0.25, the multiplier is

4

over the past 150 years, the U.S. economy has endured a recession on average about every

4 to 5 years

if the Federal Reserve tries to target inflation near 2%, the inflation rate is 3%, and output is 3% below potential GDP, the target federal funds rate according to the Taylor rule is

4%

if the reserve requirement is 20%, the money multiplier is

5

if the reserve requirement is 18.5%, what is the money multiplier?

5.4

prices from about ________ goods and services are collected each month by the Bureau of Labor Statistics data collectors to be used in calculating the CPI

800,000

suppose there is news of rising unemployment. which scenario is most likely?

Households save in anticipation of bad times; the supply of loanable funds rises; interest rates fall; firms take advantage of lower interest rates and make more investments, which stimulates the economy.

which country has the largest public debt percentage of GDP

Japan

the study of macroeconomics as a specific discipline is due primarily to

John Maynard Keynes

for defining money, _______ and also include _____.

M2 includes M1; near money

which of the following is not involved in regulating financial markets?

New York Stock Exchange

Which of the following is not a criticism of the Fed's handling of the 2007-2009 financial crisis?

The Fed should have strengthened the dollar to shore up exports

(Figure) Which of the following would shift the aggregate demand curve from AD1 to AD2

a decrease in interest rates

which of the following would not cause a shift in the short-run aggregate supply curve?

a decrease in real interest rates

which of the following items is not a function of money?

a double coincidence of wants

_____ keeps the growth of money stocks, such as M1 and M2, on a steady path, following the equation of exchange

a monetary rule

which of the following does not increase productivity

an increased money supply

which of the following factors will cause the aggregate demand curve to shift to the left?

appreciation of the dollar

if the intersection of the short-run aggregate supply and the aggregate demand curves also intersects the long-run aggregate supply curve, then the economy is

at full employment

when the economy is at full employment, an expansionary fiscal policy results in a new long-run equilibrium at an output level ______ full employment and a _____ price level

at; higher

The use of money as a medium of exchange helps reduce the inefficiencies inherent in:

barter

Which of the following statements about stopping hyperinflation is not correct?

borrowing from foreign governments must take place.

(Figure) which of the following might be a cause of the change in the short-run aggregate supply curve?

businesses are increasingly optimistic about the future

which of the following lists represents monetary policy actions that are consistent with one another?

buy government bonds, lower reserve requirements, lower the discount rate

which of the following measures would increase the money supply?

buying government bonds

Quantitative easing refers to the process whereby the Fed

buys securities to stimulate the economy

which of the following actions is not a tool of monetary policy?

changing government spending and taxes

according to the crowing out effect, if the government sells bonds to finance spending, _______ can eventually fall

consumption and investment

the most common type of short-term debt is

credit card debt

when the economy is operating at the natural rate of unemployment:

cyclical unemployment is zero

automatic stabilizers are most associated with the ______ balanced budget

cyclically

which group is helped by inflation?

debtors

assuming full employment in the classical model, if velocity increases and the government wants stable prices, the government should

decrease the money supply

which of the following is not a source of productivity growth?

decreasing the capital-to-labor ratio

according to public choice economists, the federal government has expanded because

deficit spending has reduced the perceived cost of current government operations

which of the following assets is the most liquid

demand deposits

the situation when aggregate demand expands so much that equilibrium output exceeds full employment output and the price level rises is known as _______ inflation

demand-pull

Thelma grew some carrots in her garden. She needs a winter coat. John has an extra coat he doesn't need but would like to bake some carrot cake. The two find each other and make an exchange. This situation is called the:

double coincidence of wants

the three types of consumption are

durables, nondurables, and services

use of tax receipts to modernize the air traffic control system promotes economic growth by

enhancing physical and human capital

when the government funds Head Start, it is acting in its role to promote economic growth by

enhancing physical and human capital

an economy has historically grown at a rate of 2.25%. Currently, this economy is growing at a rate of 3%, and the unemployment rate is low by historical standards. The economy is expected to continue to grow in the near future, and the monetary authorities ________ stage of the business cycle.

expansion

what is the interest rate for money borrowed to satisfy daily reserve requirements?

federal funds rate

Arlina got a 5% raise while the rate of inflation was 6%. Arlina's standard of living:

fell by about 1%

gross private domestic investment, which consists of ________ and changes in private inventories, is an important determinant of ___________.

fixed investments; swings in the business cycle

economists who favor a ________ approach to the federal budget believe that the first priority of policymakers should be to keep the economy at full employment with stable prices

functional finance

in the circular flow diagram, the clockwise direction shows the flow of __________, where households supply __________ and businesses supply __________.

goods and services; labor; goods and services

the four types of spending in GDP are personal consumer spending, _________ private domestic investment, government spending, and _________.

gross; net exports

if the reserve requirement is %, then a $6000 decrease in deposits means that they money supply

has the potential to decrease by $60,000

As a rule, the more capital employed with workers, the ________ their productivity and the ________ their earnings.

higher; higher

which of the following actions would reduce frictional unemployment?

holding job fairs

a change in the Leading Economic Index is supposed to reflect

how the economy will behave in the near future

the ____ lag is the time required to turn fiscal policy into law and affect the economy

implementation

which two important leakages helped reduce the real life spending multiplier during the stimulus that was implemented during 2009?

imports and taxes

Technology

improves the productivity of all factors

which of the following factors is NOT a component of aggregate demand

income

which of the following is NOT a reason the aggregate demand curve is negatively sloped

income effect

For your purchasing power to stay the same, your wages must:

increase at the same rate as inflation

government spending on Social Security

increases aggregate demand

a lower reserve requirement

increases the ability of banks to make loans

a rising aggregate price level ________ an economy's interest rates and therefore ________ output demanded

increases; reduces

the housing bubble of 2004-2006 cause _____ pressure, leading the Fed to _____ interest rates

inflationary; raise

property rights consist of _____ goods that ______ be easily measured

intangible; cannot

the National Bureau of Economic Research

is a nonprofit research organization that dates business cycles in the United States

One important reason economists track business investment is that

it is a leading indicator of the business cycle

the costs of cyclical unemployment can be minimized by

keeping the economy on a steady, low-inflationary growth path

bonds are considered to be _____ than stocks because _______.

less risky; bondholders are less affected by a firm's bankruptcy

one of the reasons that property rights are important for economic development is that without legal ownership

loans are very difficult to obtain

the main reason people were unemployed in the U.S. in 2012 was because they

lost their job

some analysts blame the last economic crisis on Fed policy. They argue that

low interest rates encouraged excessive mortgage borrowing, leading to the housing bubble

according to the Taylor rule, the lower the inflation rate, other things equal, the

lower the federal funds rate

a criticism of GDP per capita is that it

might not fully reflect the standard of living of the typical citizen.

in a liquidity trap

monetary policy is ineffective in changing income and output

the U.S. Treasury sells $2 billion in bonds to the Federal Reserve. The Federal Reserve credits the Treasury's account by $2 billion. this exchange is best described as

monetizing the debt

which of the following assets is most liquid

money

the _____ measures the maximum amount the money supply can increase when new deposits enter the system

money multiplier

transfer payments are

monies paid directly to individuals by the government

*Tom is living with his parents. He looks at the help wanted ads but has not replied to any in the past four weeks. Tom is:

not in the labor force

Jordan Meadows lost his job as an airline pilot and has not been able to find another job as a pilot. Since he is old enough to be eligible for his pension, he decides to retire and devote himself to caring for his elderly parents. According to the Bureau of Labor Statistics, Jordan is:

not in the labor force

the classical form of the production function states that

output= f(L,K)

checking account balances are

part of M1 and part of M2

in the national income accounts, which of the following is not classified as government spending?

payments to Social Security recipients

when main street bank buys new automatic teller machines, the quantity of ______ in the economy increases

physical capital

one argument against using taxation to pay off the public debt is that it will redistribute wealth from

poorer people who do not own bonds to richer bondholders

advantages of coins over bills include all of the following except that

production costs are lower for coins than for bills

the consumer price index does NOT include

property taxes

tight monetary refers to the Fed

raising interest rates, usually to fight inflation

over the past century, when worker productivity rose,

real wages rose

because of the wealth effect, a rising aggregate price level ______ the purchasing power of wealth and therefore ________ output demanded

reduces; reduces

a monetary rule would make it difficult to

respond to unforeseen events

If Zachary deposits $500 cash into his checking account, then his bank's assets:

rise by $500, and its liabilities rise by $500

tightening monetary policy causes interest rates to ______ and aggregate _____ to ________.

rise; demand; decrease

when the Fed wants to decrease money supply, it will

sell bonds

which action is the Fed most likely to take to curb inflation?

sell securities in the open market

the membership of the Board of Governors of the Federal Reserve System consists of

seven persons appointed by the POTUS

the Great Depression demonstrated that

short-run equilibrium can occur at substantially less than full employment

the aggregate demand curve

shows the amount of real GDP that will be demanded at each possible price level

which of the following is not a form of U.S. public debt?

stocks

which of the following occurrences is the key explanation for the high economic growth in the United States in the past century

technology improvements

which of the following statements concerning the structure of the Federal Reserve System is correct

the chairman and vice-chairman of the Board of Governors are appointed by the president and confirmed by the Senate for terms of 4 years

suppose the Federal Reserve Bank of Chicago's National Activity Index drops to -0.83 this month after being above +0.36 for the previous three months. this movement in the index indicates that:

the economy has probably moved into a recession

which of the following is likely to lead to higher interest rates?

the end of a government program that provides taxpayers with additional incentives to invest in their retirement plans

the notion of functional finance says that

the government should not focus on any deficits or surpluses caused by the budget and focus on maintaining the economy at full employment

one issue regarding the national debt is that

the proportion of the debt held by foreigners is rising

short-run macroeconomic equilibrium cannot be achieved when

the quantity of short-run aggregate supply exceeds the quantity of aggregate demand

The labor force is defined as

the total number of the employed and unemployed

as the aggregate price level declines

there is a movement down along the aggregate demand curve

*Zach has been laid off from his job as an aircraft worker and is afraid that he will not be recalled. He has been actively looking for a job but has had no luck for the past six weeks. According to the Bureau of Labor Statistics, Zach is:

unemployed

which of the following fiscal items is not a component in the equation of exchange in classical economies

unemployment rate

the corporate income tax constitutes ______ of federal government revenues

up to 25%

the short-run aggregate supply curve is _____ and the long-run aggregate supply curve is _____.

upward sloping; vertical

policymakers look at ______ to compare growth rates over an entire year without seasonal ups and downs

year-over-year GDP growth rates

According to the table, when using the expenditure approach, GDP is

$1770 billion

If a person borrows $2,000 at 5% interest and never makes any payments, how much will the loan balance be after five years?

$2552.56

(Table) From the information in the table, the near monies for June 2010 amounted to

$6886.7 billion

the recent global financial instability

All of the answers are correct. (slowed down economic growth, harmed standards of living, and caused severe credit crunches)

If a country's population increases at a slower rate than the growth in its real GDP

GDP per capita has increased

one reasonably objective measure of intangible infrastructure is the

Index of Economic Freedom

which of the following statements is not a potential problem associated with cyclically balancing the federal budget?

Inflationary pressures can take hold, leading to the need later to enact extreme contractionary policy measures

which of the following Eurozone countries had to be bailed out by the European Central Bank?

Ireland

(Figure) If households decide to save a larger portion of their income because they fear job loss due to a recession, the loanable funds supply curve will shift from ___ to _____, and the new equilibrium point will be at point______.

S0; S1; b

in which city is the Federal Reserve's Board of Governors?

Washington, DC

without government spending, which of the following equations is true?

Y=C+S

Which of the following is an example of gross private domestic investment?

a change in business inventories

If Abigail withdraws $300 cash from her checking account, then her bank's assets:

fall by $300, and its liabilities fall by $300

which is NOT a criticism of the official unemployment rate

it is not reported frequently enough to provide a good picture of the state of the economy

the most important function of money is

medium of exchange


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