ECON 2101 Final

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

$604.49

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

$725.52

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

$927.35

Okun's Law

1 percent more unemployment results in 2 percent less output

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

Dodd-Frank Act

Which economic indicator tells you about the future expected profits of businesses

S&P 500

The Affordable Care Act is an example of:

discretionary spending

what indicator tells you how fast wages and benefits are rising

employment cost index

A budget deficit occurs when

government spending exceeds government revenue.

On which of the following is there a tax incentive in the United States?

health insurance purchased through employers, rental value on owner-occupied housing, your mortgage

contractionary monetary policy causes a

left shift of the aggregate demand curve

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

lower nominal wages by 1%

the four stages of the business cycle are

peak, recession, trough, and expansion

what kind of data adjustment removes the effect of sales spikes due to the holiday season

seasonally adjusted data

when the government increases spending, a multiplier effect will

shift the AD curve further to the right than the effect of the spending

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

social insurance

in the AD-AS framework, price and quantity are represented by _______ respectively

the GDP deflator and the real GDP

The government's debt is:

the accumulation of all the deficits

Aggregate Demand

the amount of goods and services in the economy that will be purchased at all possible price levels

which economic indicator tells you how fast wages and benefits are rising

the employment cost index

What was the Fed's inflation target in 2019?

2%.

when government expenditure rises by $180 million and the initial increase in government expenditure was $60 million, then the multiplier is

3

worries about the stock market caused consumer confidence to fall, what was the effect on aggregate demand

AD decreased, shift left

minimum wages rise sharply in the economy, whats the effect on the AD-AS framework

AS decreases, shift left

Which indicator is a cross-check on GDP

Real GDP

Which of the following services are provided by local government?

bus services

Aggregate Expenditure is the sum of

consumption, planned investment, government expenditure, and net exports

the Great Moderation refers to the

decreased volatility of the U.S. economy

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

expansionary; raises; lowers

expansionary monetary policy _________ consumption, investment, and net exports; ___________ aggregate expenditures; and ___________ aggregate demand

increases, boots, raises

S&P 500

index that shows the price changes of 500 different stocks

What will probably rise when the economy is in a recession

initial unemployment claimes

describe the business cycle

it is the fluctuation of GDP around the potential output

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

lower than the neutral interest rate

Fiscal policy is increased in its effectiveness through:

the multiplier effect

an economy's potential output level is

the output that is possible when all resources are fully employed

when prices rise in the united states what is the effect on consumption and aggregate expenditure

the real value of wealth decreases, leading to a decrease in consumption and a decrease in aggregate expenditure

an example of a leading indicator is

the stock market

what is a narrow indicator

the stock price for JPMorgan Chase & Co

aggregate output

the total quantity of goods and services produced in an economy in a given period

Fiscal policy works best when it is:

timely, targeted, and temporary

when interest rises what is the effect on net exports and aggregate expenditures

Inflows of foreign savings cause the dollar to appreciate, and this reduces exports and increases imports, leading to a fall in net exports and a fall in aggregate expenditure

the higher the GDP deflator in an economy the

lower the real wealth in the economy, more expensive the country's exports

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

lower; up

A bank run occurs when:

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

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

more; higher share of their income in taxes

a rise in prices leads to a

movement up and to the left, along the same aggregate demand curve

if you forecasted that the output gap will decline from 0% to -3% the unemployment rate will

raise by 1.5%

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

raise; cool inflationary pressures

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

raise; dowN

What is a broad indicator

real gross domestic income

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

real wages have fallen by 2.5%

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

raise; upward; decrease

According to Okun's rule of thumb, for every 1% fall in the actual output below potential output the unemployment rate

raises by 0.5%

Suppose the economy is in a recession, you would expect to see the unemployment rate:

rise above the equilibrium employment rate

if an economy has a positive output gap of 1.5% this means

GDP is 1.5% above potential GDP

Which of the following is a reason to worry about government debt?

High and rising debt slows economic growth

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

1.5%

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

2%

Which of the following did the New Deal create?

unemployment benefits

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

It is set higher than the federal funds rate

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

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

output gap equation

Output Gap = ((actual aggregate output - potential output) / potential output) x 100

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

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

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

The discount window

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

a commercial bank

A debt crisis occurs when:

a government cannot repay its loans

what will fall when the economy is expanding

applications for unemployment benefits

Suppose that the Kenyan government engages in expansionary fiscal policy. Ceteris paribus, which of the graphs shows the correct effect in the AD-AS framework?

increased AD, shift right

the stock market rises consistently and reaches a record high. Ceteris paribus, which of the graphs shows the correct effect on the AD-AS framework

increased AD, shift to the right

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

the high-income person

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

the high-income person

The Federal Reserve was created after:

a series of bank runs and bankruptcies

Monetary policy is defined as the:

adjustment of interest rates to influence economic conditions

What is a reserve requirement?

the minimum amount of reserves that each bank must hold