ECON Chap 8 & 9 HW

What effect do labor unions have on the unemployment​ rate?

Since few​ non-government workers are​ unionized, there is no significant effect on the unemployment rate.

Your father earned​ $34,000 per year in 1984. To the nearest​ dollar, what is that equivalent to in 2014 if the CPI in 2014 is 215 and the CPI in 1984 is​ 104?

$70,288

Using the table​ above, what is the approximate growth rate of real GDP from 2015 to​ 2016?

3%

Why does SRAS slope upward

Contracts keep wages​ "sticky". Prices of final goods rise more quickly than the prices of inputs. Firms and workers fail to predict changes in the price level.

Economists who believed that the Phillips curve represented a structural relationship believed that the curve represented

a permanent​ trade-off between unemployment and inflation

Which of the following is NOT a function of​ money? store of value, medium of exchange, unit of account, acceptability

acceptability

If actual inflation is higher than expected​ inflation, the

actual real wage is less than the expected real​ wage: unemployment falls.

Which of the following would you expect to increase the equilibrium interest​ rate?

an increase in the budget deficit

Which of the following will increase investment spending in the​ economy, all else being​ equal?

an increase in the federal government surplus

​One-time tax​ rebates, such as those in 2001 and​ 2008, increase consumption spending by less than a permanent tax cut because​ one-time tax rebates increase

current income

During the recession phase of the business​ cycle, production,​ employment, and income

decrease

An increase in the money supply will

decrease the interest rate

If the BLS counted persons that are on active military service in the totals for​ employment, the labor​ force, or the​ working-age population, this would

decrease the measured unemployment rate.

In the figure to the​ right, the opportunity cost of holding money ________ when moving from Point A to Point B on the money demand curve.

decreases

Consider the per-worker production function LOADING... to the right. Equal increases in the quantity of capital per hour worked lead to diminishing increases in output per hour worked

diminishing, graph going up

changes in price level _______________ affect GDP in long run

do not

Why​ doesn't the Phillips curve represent a permanent​ trade-off between unemployment and inflation in the long​ run?

in the long run, aggregate supply is vertical

Credit cards are

included in neither the M1 definition of the money supply nor in the M2 definition.

Evaluate the following​ statement:​"Saving money is not lending. How can it​ be? When I save my​ money, I put it in a bank. I​ don't loan it out to someone​ else."The statement is

incorrect. The supply of loanable funds is determined by household saving.

During the expansion phase of the business​ cycle, production,​ employment, and income

increase

Which of the following formulas does the Bureau of Labor Statistics use to calculate the unemployment​ rate?

number of unemployed / number in labor force * 100

The main tool the Federal Reserve uses to conduct monetary policy is

open market operations

Discouraged workers are classified by the BLS as

out of the labor force

If real GDP increases we know for sure that

output has risen

Foreign direct investment in the United States declined 42 percent in the first quarter of 2009. This means that

people or firms in other countries reduced their building of facilities or purchases of facilities in the United States by 42 percent in the first quarter of 2009.

Disposable personal income is

personal income minus personal taxes

Does government spending ever reduce private​ spending?

yes due to crowding out

Suppose that a simple economy produces only four goods and​ services: shoes,​ DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above​ table, nominal GDP for this simple economy equals

$6400

Real GDP per capita is often used as a measure of general​ well-being. While increases in real GDP often do lead to increases in the​ well-being of the​ population, why is real GDP not a perfect measure of​ well-being?

.GDP does not include crime rates or income distribution. The costs of pollution are not included. The value of leisure is not included.

f a​ 3-month Treasury bill pays​ 5.5% and the change in the consumer price index​ (CPI) is​ 4.7%, what is the real interest rate​ (the true return to​ lending)?

0.8%

1. Coffee beans purchased by coffee shop, 2One share of google stock 3 A new pick up truck purchased by consumer 4New home purchased by family

1 intermediate 2 neither 3 final4 final

A shift form A to C would cause 1 Decrease in the price level 2 Lower interest rates 3 Increased consumer optimism 4 Decrease in the U.S. exchange rate relative to other currencies 5 Inflation 6 Lower taxes

2,3,4,6

If real GDP equals​ $11,567 billion in 2006 and​ $11,916 billion in​ 2007, and assuming population is constant over those two​ years, how many years will it take for real GDP per capita LOADING... to​ double? ____ years. ​(Enter your response as a real number rounded to one decimal​ place.)

23.2

A very simple economy produces three​ goods: movies,​ burgers, and bikes. The quantities produced and their corresponding prices for 2011 and 2016 are shown in the table above. What is nominal GDP in​ 2011?

3320

If the reserve requirement ratio ​(RR​) is​ 0.20, the simple deposit multiplier is

5

Real GDP =

6680

What is the real average hourly wage in​ 2009?

8.21

Suppose the reserve requirement is 55%. What is the effect on total checkable deposits in the economy if bank reserves increase by ​$60 ​billion?

A $1200 billion increase

Why do economic growth rates​ matter?

A High levels of sustained economic growth reduce infant mortality.B.High growth rates coincide with improved living standards.C.When a country sustains high growth​ rates, life expectancy at birth increases. Final, intermediate, or neither good

Indicate which of the following is an explanation for the productivity slowdown of​ 1974-1995,

A shift from a​ goods-based economy to a​ service-based economy,BDeterioration of the U.S. educational system,C.Increased production and transportation costs

An improvement in technology is shown as a

A to B

The figure to the right illustrates the relationship between weak and strong rule-of-law LOADING... countries and economic growth. In addition to a​ country's failure to enforce​ rule-of-law, what else explains why more​ low-income countries do NOT experience rapid growth as the​ catch-up line​ predicts?

A.Inability to borrow money needed for investment B.Shortage of childhood vaccinations C.Lengthy civil wars

According to the dynamic​ AD-AS model, what is the most common cause of​ inflation?

AD increases by more than LRAS Total spending increases faster than total production

Contractionary Actual Real GDP, potential GDP, PL, unemployment

Act Real GDP : decreases Potential Real GDP : does not change PL decreases unemployment increases

Expansionary Actual Real GDP, potential GDP, PL, unemployment

Act Real GDP : increases Potential Real GDP : does not change PL increases unemployment decreases

Why is the unemployment​ rate, as measured by the Bureau of Labor​ Statistics, an imperfect measure of the extent of joblessness in the​ economy? A .It does not account for inaccurate responses to the Current Population Survey. B. Discouraged workers are not considered unemployed. C. Underemployed people are considered employed. D. It fails to account for illegal activities.

All of the above ******

Even perfectly anticipated inflation imposes costs.​ Why? A. Paper money loses its purchasing power by the rate of inflation. B.Menu costs. C.Some wages will fail to keep up with anticipated inflation.

All of the above***

When the economy is at full​ employment, A. the natural rate of unemployment prevails. B. all remaining unemployment is either frictional or structural. C. the unemployment rate is greater than zero.

All of the above****

Which of the following causes changes in the CPI to overstate the true inflation​ rate? A. Increase in quality bias B.Substitution bias C.New product bias

All of the above****

Refer to the table aboev. Which two countries are consistent with the predictions of the economic growth​ model?

Botswana and Thailand

CH 10

CH 10

CH 11

CH 11

CH 13

CH 13

CH 14

CH 14

CH 15

CH 15

CH 16

CH 16

CH 17

CH 17

CH 8

CH 8

CH 9

CH 9

he Soviet​ Union's economy grew rapidly in terms of GDP per hour worked in the​ 1950s, but eventually this growth slowed. Why did this​ occur?

Capital per hour worked grew rapidly from 1950 to​ 1980, but technological change occurred very slowly.

How does a budget deficit LOADING... act as an automatic stabilizer and reduce the severity of a​ recession?

Consumers spend more than they would in the absence of social insurance​ programs, like unemployment. Transfer payments to households increase. During​ recessions, tax obligations fall due to falling wages and profits.

What are the four major categories of​ expenditure?

Consumption, investment, government​ purchases, and net exports.

Problem: Rising Inflation

Contractionary policy Gov spending decreases or taxes increase Real GDP and price level fall

Suppose two​ countries, Country A and Country​ B, have a similar real GDP per capita. Country A has an average economic growth rate of​ 2% and Country B has an average economic growth rate of​ 3.3%. In the long​ run, what can we predict about living standards in the two​ countries?

Country​ B's living standards will increase much more rapidly in the long run.

Increased government debt can lead to higher interest rates​ and, as a​ result, crowding out of private investment spending. In terms of borrowing​ (debt-spending), what will offset the effect of crowding out in the long run so that government debt poses less of a problem to the​ economy?

Debt-spending on highways and ports. ​Debt-spending on education. ​Debt-spending on research and development.

What is the general relationship between the business cycle and unemployment and​ inflation?

During an​ expansion, unemployment falls and inflation increases.`

Problem: Recession What happens

Expansionary policy Gov spending increases or decrease tax Real GDP and price level rise

Monetary policy refers to the actions the

Federal Reserve takes to manage the money supply and interest rates to pursue its economic objectives.

Expansionary monetary policy refers to the​ ________ to increase real GDP.

Federal​ Reserve's increasing the money supply and decreasing interest rates

National income is

GDP - depreciation

Why is GDP an imperfect measurement of total production in the​ economy?

GDP does not include household production or production from the underground economy

If short run aggregate supply increases​ (shifts to the​ right) by less than long run aggregate​ supply, then, at the short run​ equilibrium,

GDP will be below potential GDP

What is the difference between federal government purchases​ (spending) and federal government​ expenditures?

Government purchases are included in government expenditures.

Gretchen expects the price level to rise from 104 this year to 108 next​ year, and she is able to incorporate these expectations into her wage contract. If the price level rises to 106 next year instead of​ 108, which of the following will​ occur?

Gretchen's real wage will rise.

The period of time from​ 1,000,000 B.C. to 1300 A.D. was a period of

no sustained economic growth

Use the graph to help determine which one of the following statements regarding flucuations in real GDP is​ true

In the first half of the twentieth​ century, real GDP had much more severe swings than in the second half of the twentieth century.

Which of the following does NOT lead to long-run economic growth LOADING... ​?

Increase in average wages

Which of the following is a monetary policy tool used by the Federal Reserve​ Bank?

Increasing the reserve requirement from 10 percent to 12.5 percent. Decreasing the rate at which banks can borrow money from the Federal Reserve. Buying​ $500 million worth of government​ securities, such as Treasury bills.

Coffee beans purchased by a coffee shop

Intermediate good

Refer to the graph to the right. According to the economic concept of catch-up ​, which of the following is​ CORRECT?

Poorer countries should grow more quickly and will be at point A.

Which of the following is true with respect to ​hyperinflation?

It can be hundredslong dash—even thousandslong dash—of percentage points per year. In the presence of​ hyperinflation, firms and households avoid holding money. It is caused by central banks increasing the money supply at a rate much greater than the growth rate of real GDP.

The invention of the integrated circuit by Jack Kilby of Texas Instruments gave rise to the information age. What did this technological change do the short−run supply​ curve?

It shifted the shortminus−run aggregate supply curve to the right.

The M2 definition of the money supply includes

M1, savings​ accounts, small time​ deposits, and money markets

One share of google stock

Neither

Refer to the diagram to the right. Which of the following is consistent with the​ diagram?

New government regulations decrease the profitability of new investment.

Can the fed target both the money supply and the interest rate simultaneously.

No. The Fed cannot target both the money supply and the interest rate simultaneously.

After September​ 11, 2001, the federal government increased military spending on wars in Iraq and Afghanistan. Is this increase in spending considered fiscal​ policy?

No. The increase in defense spending after that date was designed to achieve homeland security objectives.

Suppose the economy is in equilibrium in the first period at point A. In the second​ period, the economy reaches point B. What policy would the Fed likely pursue in order to move AD2 to AD2 policy and reach equilibrium​ (point C) in the second​ period?

Open market purchase of government securities

Strong​ rule-of-law countries grow more rapidly than weak​ rule-of-law countries. What factor will most likely improve economic growth in weak​ rule-of-law countries?

Political reform

In a closed​ economy, the values for​ GDP, consumption​ spending, investment​ spending, transfer​ payments, and taxes are as​ follows :Y​ =​$13 trillion C​ =​$10trillion I​ =​$4 trillionTR​ =​$3 trillion T​ =​$4 trillion Using the information​ above, what is the value of private saving and public​ saving?

Private saving equals ​$2 trillion and public saving equals ​$2 trillion.

Which of the following would be included in the gross national product​ (GNP) of the United​ States?

Production from a U.S. firm that operates in Mexico.

The economic growth model explains growth in real GDP per capita in the long run. Because of the importance of labor productivity in explaining economic​ growth, the economic growth model focuses on the causes of increases in​ long-run labor productivity. What are the key factors that determine labor​ productivity? ​(Mark all that​ apply.)

Quantity of capital per hour worked, technology changes

Use the graph to help determine which one of the following statements is​ true:

The average American in the year 2006 could buy nearly eight times as many goods and services as the average American in the year 1900.`

Panel​ (a) shows movements in real GDP for each quarter from the beginning of 1990 through the end of 2006. Panel​ (b) shows movements in the number of passenger aircraft shipped by Boeing for the same years. Use the graphs above to determine which one of the following statements is​ true:

The effects of the recession on Boeing are much more dramatic and​ long-lived than the effects on the economy as a whole.

Suppose the economy is at point B in the diagram to the right. Which of the following is​ true?

The expected rate of inflation is​ 3%.

The figure in the window on the right shows average annual growth rates in real GDP per hour worked in the United States.Based on the data from the figure on the right which one of the following statements is​ false

The growth rate of real GDP per hour worked has continually accelerated over time.

According to the quantity theory of money inflation results from which of the​ following?

The money supply grows faster than real GDP.

​If, in the long​ run, real GDP returns to its potential​ level, then in the long​ run,

The phillips curve is vertical

Use the graph to help determine which one of the following statements regarding unemployment and business cycles is true.

The unemployment rate usually continues to rise even after the recession has ended.

If the U.S. dollar decreases in value relative to other​ currencies, how does this affect the aggregate demand​ curve?

This will shift the aggregate demand curve to the right.

Use the graph to help determine which one of the following statements regarding inflation and business cycles is true. ​Note: The points on the figure represent the annual inflation rate measured by the change in the consumer price index​ (CPI) for the year ending in the indicated month.

Toward the end of the​ 1991-2001 expansion, the inflation rate began to rise.

Indicate whether the following statement is true or false and why. ​"A wage rising slower than the rate of inflation is actually​ falling."

True. If wages are increasing slower than the average price of goods and​ services, purchasing power falls.

When is it considered​ "good policy" for the government to run a budget​ deficit?

When borrowing is used for​ long-lived capital goods.

Private saving is defined as

Y + TR - C - T

Which of the following equations sums up the components of Gross Domestic Product​ (GDP)?

Y = C + I + G + NX

According to the shortminus−run Phillips​ curve, if unemployment is​ 3.2% and inflation is​ 1.3%, an increase in the inflation rate might result in which of the​ following?

a decrease in the unemployment rate to​ 3.0%

In​ economics, money is defined as

any asset people generally accept in exchange for goods and services.

Suppose the fixed interest rate on a loan is​ 5.75% and the rate of inflation is expected to be​ 4.25%. The real interest rate is​ 1.5%. Suppose now that instead of​ 4.25%, the inflation rate unexpectedly reaches​ 5.5%. Who gains and who loses from this unanticipated​ inflation? ​(Mark all that​ apply.)

borrowers gain from a lower real interest rate AND lenders lose from a lower real interest rate

FOMC decides to increase MS ______ decrease MS __________

buys US treasury bills sells us treasury bills

An initial increase in a​ bank's reserves will increase checkable deposits

by an amount greater than the increase in reserves.

In the figure to the​ right, at what point is the inflation rate​ stable? That​ is, at what point can we refer to the inflation rate as the nonaccelerating inflation rate of unemployment

c

​Investment, as defined by​ economists, would include the purchase of a

computer by accounting firm

According to​ Costco's CEO, Jim​ Sinegal: ​"Paying good wages and keeping your people working for you is good business...Imagine that you have​ 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for​ you." ​ What is​ Costco's CEO referring​ to?

efficiency wages

The use of money

eliminates the double coincidence of wants. allows for greater specialization. reduces the transaction costs of exchange

The government purchases multiplier equals the change in​ ________ divided by the change in​ ________.

equilibrium real​ GDP; government purchases

An increase in aggregate demand results in​ a(n) ________ in the​ ________.

expansion ; short run

Counting partminus−time workers who are looking for fullminus−time work as employed overstates the degree of joblessness in the economy.

false

What can we expect from the Federal Reserve Bank if it seeks to move the economy in the direction of​ long-run macroeconomic​ equilibrium?

fed will pursue expansionary policy

Which interest rate does the Fed​ target?

federal funds rate

The U.S. dollar can best be described as

fiat money

A new home purchased by a family

final good

A new pick-up truck purchased by a consumer

final good

A transfer payment is a payment by the government to an individual

for which the government does not receive a good or service in return.

Technological change is more important to​ long-run economic growth than changes in capital. The easiest way for firms to gain access to new technology is through

foreign direct investment.

Suppose John Q. Worker is currently unemployed. Each​ day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of​ skills, abilities, and interests. If someone asks John Q. what he does for​ work, he tells them that he is currently​ "in-between jobs." Which of the following best classifies John​ Q.'s unemployment​ status?

frictionally unemployed

Automatic stabilizers refer to

government spending and taxes that automatically increase or decrease along with the business cycle.

All of the following policies are ways for a country to promote​ long-run economic growth except

imposing stricter regulations to limit foreign direct investment.

When unemployment is below its natural​ rate, the inflation rate will eventually

increase

Deflation will

increase the quantity of real GDP demanded

Potential GDP

increases over time as technological change occurs. increases over time as the labor force grows

The multiplier effect refers to the series of

induced increases in consumption spending that result from an initial increase in autonomous expenditures.

Which of the following increases labor​ productivity?

inventions of new​ machinery, equipment, or software

The Phillips curve was developed by A.W. Phillips in 1957 and shows the relationship between unemployment and inflation. The​ curve, shown at the​ right, indicates what type of relationship between the two​ variables?

inverse relationship

The​ "interest rate​ effect" can be described as an increase in the price level that raises the interest rate and chokes off

investment and consumption spending

The purchase of a new house is included in

investment expenditures

The federal funds rate

is the rate that banks charge each other for​ short-term loans of excess reserves.

If the quantity of goods and services produced in the economy decreases

it may be possible for nominal GDP to increase

Because of the slope of the aggregate demand curve we can say that a decrease in the price level

leads to a higher level of real GDP demanded.

Which of the following is NOT a monetary policy goal of the Federal Reserve bank​ (the Fed)? low prices, low unemployment, stable financial markets, higher living standards

low prices

Rising prices erode the value of money as a​ ________ and as a​ ________.

medium of​ exchange; store of value

The United States is divided into 12 Federal Reserve Districts. The Federal Reserve​ Bank's Board of Governors consists of 7 members appointed by the president of the U.S. to​ 14-year, ​ non-renewable terms. One of the board members is appointed to a 4 ​year, renewable term as the chairman.

memorizarrrr

A change in price level causes a _____ along the SRAS curve

movement

The money demand curve has a

negative slope because an increase in the interest rate decreases the quantity of money demanded

Which of the following can give an early warning of future increases in the price​ level?

producer price index

What can​ low-income countries do in order to increase the amount of loanable funds available to firms for investment projects such as new factories or improved​ technology?

provide savings incentives

Potential GDP refers to the level of

real GDP in the long run.

What should the Federal Reserve do if it wants to move from point A to point B in the shortminus−run Phillips curve depicted in the diagram to the​ right?

sell treasury bills

The Fed can increase the federal funds rate by

selling Treasury​ bills, which decreases bank reserves.

A change in any factor besides price causes a _________ in SRAS curve

shift

An increase in the labor force or capital stock is illustrated as a

shift from A to B

An increase in the expected future price level causes

shift from B to A

An increase in the expected price of an important natural resource is indicated by

shift from B to A

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a​ result, the LRAS curve will

shift to the right

Suppose that Sally J. Society recently lost her job as an underwater welder. In looking for a new​ job, she discovers that the only available jobs are for economists and that there are no openings for underwater welders because the trade is now obsolete. If Sally J. Society decides to return to school to earn an Economics​ degree, what is the best classification of her unemployment​ status?

structurally unemployed

Policy that is specifically designed to affect aggregate supply and increase incentives to​ work, save, and start a​ business, by reducing the tax wedge is called

supply side economics

There is a government budget surplus if

t - Tr > G

​Healthier, more educated workers tend to be more productive. Greater overall productivity per hour worked is a fundamental component of​ long-term economic growth.​ However, many very successful individuals often find few opportunities in their own developing​ countries, and leave them for industrial countries. By improving health and​ education, developing countries can generate economic​ growth, and increase incomes. This will help combat the prevalence of educated people leaving their home countries for opportunities elsewhere. That​ is, it will combat

the brain drain

globalization refers to

the process of countries becoming more open to foreign trade and investment.

Equilibrium in the loanable funds market determines

the real interest rate

When an economy faces diminishing​ returns,

the slope of the​ per-worker production function becomes flatter as capital per hour worked increases.

What is the natural rate of​ unemployment?

the unemployment rate that exists when the economy is at potential GDP

​Suppose, in​ 2016, you purchased a house built in 2003. Which of the following would be included in the gross domestic product for​ 2016?

the value of the services of the real estate agent

If stricter immigration laws are imposed and many foreign workers in the United States are forced to go back to their home​ countries,

the​ long-run aggregate supply curve will shift to the left.

The key to understanding the short run trade off behind the Phillips curve is that an increase in inflation will decrease unemployment if the inflation is​ ________ by both workers and firms

unexpected

When the economy enters a​ recession, your employer is​ ___________ to reduce your wages because​ _______.

unlikely; lower wages reduce productivity and morale

Nominal GDP is GDP in a given yeae

valued in the prices of that year

In addition to the Federal Reserve​ Bank, what other economic actors influence the money​ supply?

​Households, firms, and banks.

An economic expansion tends to cause the federal budget deficit to​ ________ because tax revenues​ ________ and government spending on transfer payments​ ________.

​decrease; rise; fall

A cut in tax rates effects equilibrium real GDP through two​ channels: ________ disposable income and consumer​ spending, and​ ________ the size of the multiplier effect.

​increasing; increasing