Econ Exam Two and Three

Suppose that velocity of circulation is 3 and the quantity of money is $500 million. According to the quantity theory of money, GDP equals __________.

$1.5 billion

An economy has no imports and no taxes. The marginal propensity to save is 0.2. A​ ______ increase in autonomous expenditure increases equilibrium expenditure by​ $60 billion. The multiplier is​ ______.

$12 ​billion; 5.00

If the CPI was 207 in 2007 and 225 in 2011, what pay raise would someone who earned $50,000 in income in 2007 have to receive in order to keep her purchasing power constant in 2011?

$4,348

If the marginal propensity to save (MPS) is 0.2, how much additional consumption will result from an increase of $100 billion in disposable income?

$80 billion

CPI​ = ______.

(Cost of CPI basket at​ current-period prices/Cost of CPI basket at​ base-period ​prices) x 100

Suppose the CPI in 2008 was 215.3 and the CPI in 2009 was 214.6, what was the inflation rate between 2008 and 2009?

-0.3 percent

If disposable income increases from​ $4 trillion to​ $7 trillion, saving increases from​ $1.5 trillion to​ $2 trillion, and nothing else​ changes, the marginal propensity to save is​ _____.

0.17

In February 2018​, the real interest rate was ___ percent.

1.68

If the exchange rate between the U.S. dollar and the Japanese yen is $1 = 100 yen, the price level in the United States is 90 and the price level in Japan is 100, what is the real exchange rate?

90

In the real business cycle model, which of these best explains an increase in real GDP above the full-employment level?

A positive technology shock

Choose the statement that is incorrect.

Along the LAS curve the money wage rate is constant and the real wage rate rises as the price level rises.

How can government policies shift the aggregate demand curve to the right?

By increasing government purchases

The marginal propensity to consume is equal to​ ______, and the marginal propensity to save is equal to​ ______.

C/D; S/Y (all with delta)

What is the largest component of​ M1?

Checkable deposits

Which of these factors can cause the natural rate of unemployment to change?

Demographic changes

Which of the following is a determinant of exchange rates?

Expected future exchange rate

Of the eight categories in the CPI market basket, which three categories make up more than 70% of the basket?

Housing, transportation, and food

Which of these terms refers to the accumulated knowledge and skills workers acquire from education and training, or with life experiences?

Human capital

Choose the statement that is incorrect.

If a financial​ institution's net worth is​ positive, the institution must be solvent and liquid.

Choose the correct statement about purchasing power parity.

If purchasing power parity does not​ prevail, the demand for U.S. dollars changes and the supply of U.S. dollars changes.

Choose the statement about fixed exchange rates that is incorrect.

If the Fed wanted to fix the U.S. dollar exchange rate against the Japanese​ yen, the Fed would have to buy U.S. dollars to prevent the exchange rate from rising above the target value.

Government policies can help to reduce the levels of frictional and structural unemployment, but they can also help to increase them. Which of these policies can cause an increase in the levels of frictional and structural unemployment?

Increasing the minimum wage

Choose the statement about money that is incorrect.

Inflation brings a rising value of money.

Which of these is most likely to increase productivity?

Investments in research and development

The actions the Federal Reserve takes to manage the money supply and interest rates in order to pursue economic objectives are called __________.

Monetary policy

Which of these policies affects the economy through intended changes in the quantity of money and interest rates?

Monetary policy

Choose the statement that is incorrect.

Most economists believe that the​ Ricardo-Barro effect holds in the loanable funds market.

Which of these factors does not contribute to economic growth?

Nationalization of foreign investments

The main sources of bias in the CPI are​ ______.

New goods​ bias, quality change​ bias, commodity substitution​ bias, and outlet substitution bias

______ sees the economy as a perpetual motion machine.

New growth theory

The role of technological progress in determining economic growth can be described by which statement?

Per capita output will rise when we discover new and more effective uses of capital and labor.

When we say that money serves as a unit of account, we mean that:

Prices are quoted in terms of money.

Which of these government policies can help economic growth?

Promoting higher rates of saving

According to the ____ theory of business cycles, a change in the monetary growth rate has no effect on real GDP.

Real Business Cycle

What is the largest component of​ M2?

Savings deposits

I​ = ______.

S​ + ​(T - G​) ​+ ​(M - X​)

Choose the statement about the Fed that is incorrect.

The policy decisions of the Federal Open Market Committee are implemented each month by a different Federal Reserve Bank.

Choose the statement that is incorrect.

The presence of a banking system in Britain in the middle 1700s started the Industrial Revolution.

Which of these groups is included in the labor force?

The unemployed

Which of these are included in the labor force?

Those who are employed and those who are unemployed

When is the opportunity cost of holding money higher?

When interest rates are high

The output gap in the graph is​ ______ because​ ______.

an inflationary​ gap; potential GDP is less than real GDP

The expansion of​ 2002-2008 created jobs at​ ______ rate. The first two years of the expansion created few jobs because​ ______.

an unusually​ slow; the expansion was very​ weak, so employment growth was weak

Over​ time, on average the demand for loanable funds​ ______, so the real interest rate​ ______.

and the supply of loanable funds increase at a similar​ pace; has no trend

A rise in the price of oil creates​ _______.

a​ one-time cost-push rise in the price level

A sustained decrease in the average level of prices in the economy is __________.

called deflation

Changes in consumption spending play a large role in the business cycle because​ _______ accounts for approximately​ ______ percent of GDP.

consumption​ expenditure; 70

Interest rate parity means​ ______.

equal rates of return

The quantity of labor demanded is the number of labor hours ______________ during a given period.

hired by all the firms in the economy

What are the three sources of global investment​ funds?

household savings, government budget surplus, and borrowing from the rest of the world

The flow of funds from __________ into the financial system makes it possible for government and firms to borrow.

households

A depository institution takes deposits from​ ______ and earns most of its income by​ _______.

households and​ firms; making loans and buying securities that earn a higher interest rate than that paid to depositors

In the long run, the amount of investment a firm can make is dependent on:

the amount of household savings

The amount by which consumption spending increases when disposable income increases is called __________.

the marginal propensity to consume

New classical theorists believe that:

the uneven pace of technological change is the most significant cause of business cycle fluctuations.

When the interest rate decreases, __________.

there is movement down a stationary money demand curve

If the MPC is 0.8, then a $100 million increase in government expenditures will increase equilibrium GDP by __________.

$500 million

If the marginal propensity to consume (MPC) is 0.9, how much additional consumption will result from an increase of $100 billion in disposable income?

$90 billion

The currency drain ratio for M1 is​ ______ than for​ M2, and the​ banks' reserve ratio for M1 is​ ______ than for M2.

. ​larger; larger

An economy with no income taxes or imports has a marginal propensity to consume of 0.75. The multiplier in the long run is​ _______.

0

If disposable income increases from​ $4 trillion to​ $7 trillion, consumption expenditure increases from​ $3.5 trillion to​ $5.5 trillion, and nothing else​ changes, the marginal propensity to consume is​ _____.

0.67

The table gives you information about the economy of Australia. Calculate the value of consumption expenditure at each value of disposable income and fill in the right column of the table. The marginal propensity to consume is _____.

0.7

Using PPP​ prices, China's standard of living in 2010 is ​$___

11000

An economy has a consumption function of C​ = 10​ + 0.8Y​, investment of​ 6, government expenditure of​ 10, exports of​ 10, and an import function of M​ = 0.1Y. What is equilibrium real​ GDP?

120

In 2013 and in​ 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for​ Dexter's CPI is 2013 and 2013 is also the year of the Consumer Expenditure Survey. The CPI in 2014 is​ ______.

128.0

An economy has a consumption function of C​ = 10​ + 0.8Y​, investment of​ 6, government expenditure of​ 10, exports of​ 10, and an import function of M​ = 0.1Y. If government expenditure increases to​ 15, what is the increase in equilibrium​ expenditure?

16.65

The BLS reported the CPI data shown in the table to the right. Calculate the inflation rates for the years ended December 2016 and December 2017. The inflation rate in the year ended December 2016 was ___ percent per year. The inflation rate in the year ended December 2017 was ___ percent per year. How did the inflation rate change in the year ended December 2017​? The inflation rate​ _____ .

2.1 2.1 didn't change

The level of disposable income at which all disposable income is consumed is ​$____ million.

200

The figure illustrates the components of aggregate planned expenditure on Turtle Island. Turtle Island has no imports or​ exports, no income​ taxes, and the price level is fixed. When real GDP is​ $6 billion, what is aggregate planned​ expenditure? Are inventories increasing or​ decreasing? When real GDP is​ $6 billion, aggregate planned expenditure is ​$__ billion. If real GDP is​ $6 billion, inventories are ________. If real GDP is​ $4 billion, inventories are

5.6 increasing decreasing

In 2013 and in​ 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for​ Dexter's CPI is​ 2013, and 2013 is also the year of the Consumer Expenditure Survey. The inflation rate in 2014 is​ ______ percent.

61.2

Which of these is a financial institution?

A commercial bank

Which of these statements about autonomous expenditure is correct?

Autonomous expenditure does not depend on the level of GDP.

The figure illustrates the components of aggregate planned expenditure on Turtle Island. Turtle Island has no imports or​ exports, no income​ taxes, and the price level is fixed. Calculate autonomous expenditure and the marginal propensity to consume in Turtle Island.

Autonomous expenditure is ​$2 billion. The marginal propensity to consume is .6.

Choose the statement that is incorrect.

Coins, which are issued by the Treasury are an asset of the Fed and a component of the monetary base.

Choose the correct statement.

Commercial banks are financial institutions that accept​ deposits, provide payment​ services, and make loans to firms and households.

Planned saving​ + Planned consumption expenditure​ = ______.

Disposable income

When the economy is at full employment, which types of unemployment remain?

Frictional and structural

The bias in the CPI is a problem because​ ______ .

It distorts wage agreements linked to the CPI

How can the change in U.S. wealth differ from U.S.​ saving?

The change in wealth includes changes in the prices of assets owned and saving excludes these items.

Choose the statement that is incorrect.

The demand for labor is the relationship between the quantity of labor demanded and the money wage rate.

If technological change increases the profitability of new investment to firms, which of these will occur?

The demand for loanable funds will increase.

The real interest rate is:

The nominal interest rate minus the inflation rate.

The table gives information about the U.S. labor market in 2001. What is the number of people unemployed?

The number of people unemployed is 6.8 million.

Choose the statement about an increase in the population that is incorrect.

The production function shifts upward.

Choose the correct statement.

The quantity of real GDP demanded is the sum of the real consumption​ expenditure, investment, government​ expenditure, and exports minus imports.

How would a reduction in income tax rates affect the loanable funds market?

The supply of loanable funds would increase.

An economy is at full employment when​ ______.

The unemployment rate equals the natural unemployment rate.

Choose the statement that is incorrect.

The unemployment rate includes all underutilized labor.

Which of these determines the supply of loanable funds?

The willingness of households and governments to save

The table gives information reported by the Bureau of Labor Statistics for October​, 2008. What is the​ employment-to-population ratio?

The​ employment-to-population ratio is 61.7 percent.

A share of stock is __________.

a certificate of ownership and claim to the firm's profits

A higher exchange rate will result in:

a decrease in net exports and a decrease in aggregate demand

The 1974-1975 recession was a result of a:

a leftward shift of the short-run aggregate supply curve

A mortgage is​ _______.

a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments​ (repayments and​ interest)

Possible reasons for the difference could be​ _______.

a lower return to saving

Deflation is​ _______.

a persistently falling price level

You observe that unplanned inventories are increasing. You predict that there will be​ _______.

a recession

The graph shows that Japan has an output gap that is __________ gap of $100 trillion

a recessionary

The economy has​ ______.

a recessionary gap of $50 billion

The output gap in the graph is​ ______ because​ ______.

a recessionary​ gap; potential GDP exceeds real GDP

Cost-push inflation might start with:

a rise in money wage rates

The mainstream business cycle theories all assert that the main factor leading to business cycles is fluctuations in the growth of

aggregate demand

The business cycle occurs because​ ______.

aggregate demand and​ short-run aggregate supply​ fluctuate, but the money wage rate does not adjust quickly enough to keep real GDP at potential GDP

At points above the 45 degree line in the AE model:

aggregate planned expenditure is greater than GDP.

If the U.S. exchange rate changes from​ $1.00 Canadian to​ $1.05 Canadian, then the U.S. dollar has​ _______ and the Canadian dollar has​ _______.

appreciated; depreciated

Fluctuations in total spending in the economy may affect:

both employment and production in the short run.

An increase in the real interest rate will:

cause a movement along the demand curve for loanable funds

As a result of financial​ innovation, ______ have become​ ______.

checking deposits at thrift​ institutions; an increasing percentage of M1

The deposits of the following three types of depository institutions make up the​ nation's money:​ ______.

commercial​ banks, thrift​ institutions, and money market mutual funds

The most important determinant of consumption is __________.

current disposable income

Currently, the United States is a

debtor nation

Suppose the Fed sells​ $50 million of government securities to the Bank of America. The​ Fed's total assets​ ______ and its total liabilities​ ______.

decrease by​ $50 million; decrease by​ $50 million

Read the news​ clip, then answer the following questions. FDIC insurance helps to minimize bank failures and bring more stability to the banking system because​ _______.

depositors know that money they have deposited with a bank will be repaid

The decline in capital's value over a period of time is known as __________.

depreciation

The ratio of reserves to deposits that a bank plans to hold is its​ ______. If a bank has​ $10 million in actual reserves and​ $8 million in desired​ reserves, then it has​ ______.

desired reserve​ ratio; excess reserves

The consumption function is the relationship between consumption expenditure and​ _____, other things remaining the same.

disposable income

The relationship between saving and​ _____, other things remaining the​ same, is called the saving function.

disposable income

The best measure of the income households actually have available to spend is:

disposable personal income

The Bank of​ America's total assets​ ______ and its total liabilities​ ______

do not​ change; do not change

A rise in the money wage rate​ ______.

does not change the LAS curve because along the LAS curve a rise in the money wage rate is accompanied by an equal percentage change in the price level

Purchasing power parity _____ hold between Brazil and the United States PPP predicts that the Brazilian real will​ ______ against the U.S. dollar

does not; depreciate

The table provides some data on real GDP and the population of Eastiana in 2009 and 2010. If the growth rates of 2010 are maintained in future​ years, real GDP per person in Eastiana will​ ______.

double by 2024

The table provides some data on real GDP and the population of Asiana in 2010 and 2011. If the growth rates of 2011 are maintained in future​ years, real GDP per person in Asiana will​ ______.

double by 2034

Assuming there are no leakages out of the banking system, a money multiplier equal to 5 means that:

each additional dollar of reserves creates $5 of deposits.

The​ Ricardo-Barro effect _____ crowding out.

eliminates

An increase in labor productivity increases potential GDP because​ ______.

employment increases and a given amount of employment produces more real GDP

When the unemployment rate​ ______ the natural unemployment​ rate, real GDP​ ______ potential GDP.

equals;equals

The __________ links the quantity of money, velocity of circulation, price level, and real GDP.

equation of exchange

To calculate the​ multiplier, we divide​ ______ by​ ______.

equilibrium​ expenditure; the change in autonomous expenditure

The supply of loanable funds is influenced by all of the following except ​______.

expected profit

When aggregate demand increases, unemployment will usually __________ and inflation will __________.

fall, rise

The consumer price index is an index computed using prices of a __________.

fixed basket of goods and services purchased by the typical consumer

The aggregate production function is the relationship that tells us​ ______, when all other influences on production remain the same.

how real GDP changes as the quantity of labor changes

The multiplier is greater than 1 because the change in autonomous expenditure leads to​ _______.

more induced expenditure

The defining characteristic of long-run economic growth is:

rising productivity

If the interest rate is 5​ percent, people will​ ______ bonds. Bond prices will​ ______. The interest rate will ___.

sell; fall; rise

The long-run aggregate supply curve:

shifts to the right as technological change occurs

An unexpected change in the price of oil would cause a shift of the _______ curve.

short-run aggregate supply

The aggregate demand and aggregate supply model explains:

short-run fluctuations in real GDP and the price level

During the past decade, a nation's average annual rate of population growth was 4 percent, and its average annual real GDP growth rate was 1 percent. Thus, the average annual rate of growth in per capita real GDP was __________.

-3.0 percent

The equation of the aggregate expenditure curve is given by​ _______.

AE​ = A​ + ​[b​(1-t​)-m​]Y

If in the long​ run, the U.S. dollar appreciates against the Japanese​ yen, then​ ______.

Japan has created money at a faster pace than has the United​ States, and the price level in Japan has risen more rapidly than the U.S. price level

Choose the statement about the Consumer Price Index that is incorrect.

The CPI is defined to equal 1.00 for a period called the reference base period.

Did the U.S. dollar appreciate or depreciate against the Canadian​ dollar?

The U.S. dollar depreciated against the Canadian dollar.

So, as the price level​ rises, there is​ ______.

a decrease in the quantity of real GDP demanded

According to real business cycle theory, a major source of fluctuations in economic activity is __________.

changes to technology

Aggregate demand increases if fiscal policy​ ______ taxes or​ ______ transfer payments.

decreases; increases

Between October 2017 and February 2018​, the real interest rate ___

increased

Deflation occurs when​ _______.

aggregate demand increases at a persistently slower rate than aggregate supply

Equilibrium expenditure is the level of aggregate expenditure that occurs when​ ______.

aggregate planned expenditure equals real GDP

During the 100 years from 1914 to​ 2014, real GDP per person in the United States grew at​ ______.

an average of 2 percent a year

In the United​ States, the CPI basket consists of items that​ ______ . ​______ has the greatest weight in the CPI basket.

an average urban household​ buys; Housing

In the United​ States, the CPI basket consists of items that​ ______ . ______ has the greatest weight in the CPI basket.

an average urban household​ buys; Housing

You observe that unplanned inventories are decreasing. You predict that there will be​ _______.

an expansion

Examples of fiscal policy that increase aggregate demand include​ ______.

an increase in government​ expenditure, a decrease in​ taxes, and an increase in transfer payments

When labor productivity​ increases, there is​ _____ the production function and​ _____ in potential GDP.

an upward shift​ of; an increase

At arrow​ 2, the economy is in​ ______ full-employment equilibrium and the intersection of the AD and SAS curves is to the​ ______ of the LAS curve.

an​ above; right

This change in consumption expenditure could be attributed to​ ______ in disposable income or​ ______ in expected future income.

an​ increase; an increase

Suppose that Sara withdraws​ $1,000 from her savings account at the Lucky​ S&L, keeps​ $50 in​ cash, and deposits the balance in her checking account at the Bank of Illinois. The immediate change is​ ______ in M1 of​ $1,000 and​ ______ in M2.

an​ increase; no change

The vertical distance between the horizontal line and point 3 is​ _____ gap. At point​ 3, the intersection of the AD and SAS curves is to the​ _____ of the LAS curve

an​ inflationary; right

An economy is in a​ long-run equilibrium. An increase in aggregate demand creates​ ______ gap. A rise in the money wage rate decreases​ ______ and returns the economy to a​ full-employment equilibrium.

an​ inflationary; the quantity of real GDP demanded

The theory of purchasing power parity states that __________.

arbitrage equalizes the value of monies

China fixes its exchange rate​ ______.

as a way of achieving a low inflation rate

The multiplier is the amount by which the change in​ ______ expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP. For every dollar increase in​ ______ expenditure, the multiplier determines the increase in real GDP.

autonomous; autonomous

The reference base period for the CPI is​ 1982-1984. In February ​2014, the CPI was 234.8. This number tells us that the​ ______ of the prices paid by urban consumers for a fixed basket of consumer goods and services was​ ______ .

average; 134.8 percent higher in February 2014 than the average of​ 1982-1984

A central bank is​ ______. The central bank in the United States is the​ ______.

a​ bank's bank and a public authority that regulates a​ nation's depository institutions and conducts monetary​ policy; Federal Reserve System

At arrow 1 in the​ graph, the economy is in​ ______ full- employment equilibrium and the intersection of the AD and SAS curves is to the​ ______ of the LAS curve.

a​ below; left

If the government increases its expenditure on goods and services and as a​ result, the money wage rate​ increases, the economy has experienced​ _______.

a​ demand-pull rise in the price level

In the​ graph, the vertical distance between the horizontal line and point 2 is​ _____ gap. At point​ 2, the intersection of the AD and SAS curves is to the​ _____ of the LAS curve.

a​ recessionary; left;

In an​ economy, there is ​$75 million in currency held outside​ banks, ​$75 million in​ traveler's checks, ​$250 million in currency held inside the​ banks, ​$200 million in checking​ deposits, ​$800 million in savings​ deposits, ​$2,000 million in time​ deposits, and ​$800 million in money market mutual funds and other deposits. The value of M1 is​ ______ and the value of M2 is​ ______.

$350 ​million; ​$3,950 million

The personal consumption expenditure deflator is calculated as​ _______.

(Nominal C/Real C)x100

The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.25, and the marginal propensity to import is 0.2. The autonomous tax multiplier is​ _______.

-1.33

The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.20, and the marginal propensity to import is 0.14. The autonomous tax multiplier is​ _______.

-1.6

If the inflation rate is 6 percent and the nominal rate of interest is 4 percent, then the real interest rate is __________.

-2 percent

The table gives you information about the economy of Bluejay Island. What is the marginal propensity to​ save? The marginal propensity to save is ____.

.4

In an​ economy, when disposable income increases from​ $400 to​ $500, consumption expenditure increases from ​$420 billion to ​$500. What is the marginal propensity to​ consume, the change in​ saving, and the marginal propensity to​ save? The marginal propensity to consume is ____ When disposable income increases from​ $400 billion to​ $500 billion, saving increases by ​$___ billion. The marginal propensity to save is ____.

.8 20 .2

The marginal propensity to consume is ____. Autonomous consumption expenditure is ​$____ billion. Savings: ______ The marginal propensity to save is ____.

0.75 5 -5, 20, 45 0.25

The table gives you information about the economy of Bluebird Island. What is the marginal propensity to​ consume? The marginal propensity to consume is ___.

0.8

If the dollar price of a euro is $1.25, then the euro price of the dollar is __________.

0.80 euros

Using PPP​ prices, China's ranks as the​ world's number __ economy in 2010.

1

The variable... measures 1) U6-U5 2) U3-U1 3) U5-U3 4) U4-U3

1) "economic part-time workers" 2) "unemployed for less than 15 weeks" 3) "all marginally attached workers" 4) "discouraged workers"

The table provides information about three U.S. price indexes for December each year from 2011 to 2017. 1) In the year to December 2017​, the inflation rate measured by the CPI was ___ percent. 2) In the year to December 2017​, the inflation rate measured by the PCE was ___ percent. 3) In the year to December 2017​, the inflation rate measured by the PCE less food and fuel was ___ percent. 4) The price index with the greatest bias is​ ______ because​ ______.

1) 2.1 2) 1.7 3) 1.5 4) the​ CPI; it​ isn't based on current period actual expenditure weights

The table provides information about the money wage rate and the CPI in the United States for the past five years. 1) In December 2017​, the nominal wage rate was ​$____ per hour. 2) In December 2017​, the CPI was ____. 3) In December 2017​, the real wage rate was ​$____ per hour.

1) 30.74 2) 248.0 3) 12.40

The table provides some data on real GDP and the population of Asiana in 2009 and 2010. 1) What was the growth rate of real GDP in Asiana in 2010​? 2) What was the growth rate of real GDP per person in Asiana in 2010​?

1) The growth rate of real GDP in Asiana in 2010 is 3 percent. 2) The growth rate of real GDP per person in Asiana in 2010 was 2 percent.

The table provides some data on real GDP and the population of Pacifica in 2008 and 2009. 1) What is the growth rate of real GDP in Pacifica in 2009​? 2) What is the growth rate of real GDP per person in Pacifica in 2009​?

1) The growth rate of real GDP in Pacifica in 2009 is 13 percent. 2) The growth rate of real GDP per person in Pacifica in 2009 is 7 percent.

The table provides information about the U.S. CPI for December each year from 2011 to 2017. 1) The numbers in the table are ___ 2) The reference base year for the CPI is ____ 3) The CPI for December 2017 tells us that since the reference base​ year, the price level has increased by ___ percent. 4) In the year to December 2017​, the inflation rate measured by the CPI was ___ percent.

1) price levels 2) 1982-1984 3) 148 4) 2.1

When the Fed buys securities from a​ bank, a sequence of events begins. The events are listed below. Number each event in the order in which it occurs.

1. Banks have excess reserves 2. Banks lend excess reserves 3. The quantity of money increases 4. New money is used to make payments 5. Some of the new money remains on deposit 6. Some of the new money is a currency drain 7. Desired reserves increase because deposits have increased 8. Excess reserves decrease

When the Fed buys securities from a​ bank, a sequence of events begins. The events are listed below. Number each event in the order in which it occurs.

1. Banks have excess reserves. 2. Banks lend excess reserves. 3. The quantity of money increases. 4. New money is used to make payments. 5. Some of the new money remains on deposit. 6. Some of the new money is currency drain. 7. Desired reserves increase because deposits have increased. 8. Excess reserves decrease.

What events in the foreign exchange market could have brought this fall in the value of the U.S.​ dollar?

1. World demand for U.S. exports decreases. Y 2. World demand for U.S. exports increases. N 3. U.S. import demand decreases. N 4. U.S. import demand increases. Y 5. The U.S. interest rate differential falls. Y 6. The U.S. interest rate differential rises. N 7. The expected future exchange rate falls. Y 8. The expected future exchange rate rises. N

An economy has a consumption function of C​ = 15​ + 0.7Y​, investment of​ 8, government expenditure of​ 12, exports of​ 20, and an import function of M​ = 0.2Y. What is equilibrium real​ GDP?

110

How many Federal Reserve districts are there?

12

In 2013 and in​ 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for​ Dexter's CPI is 2013 and 2013 is also the year of the Consumer Expenditure Survey. The CPI in 2014 is​ ______.

133.8

If a country's real GDP is growing at a rate of 5 percent per year, how long will it take for the real GDP to double?

14 years

If the cost of a market basket of goods in 1992, the base year, is $200, and the cost of the same market basket is $300 in 2008, what is the CPI in 2008?

150

The unemployment rate peaked​ ______ after the 2001 recession. During the​ 2002-2008 recession, the unemployment rate reached its lowest point at the beginning of​ ______.

18​ months; 2007

Over the past 100​ years, growth was most rapid during the​ ______ and slowest during the​ ______.

1960s; Great Depression

The table provides official estimates of U.S. wealth and U.S. saving in three years. The change in U.S. wealth exceeds U.S. saving in​ ______. U.S. saving exceeds the change in U.S. wealth in​ ______.

1997 and 1998; none of the years in the table

An economy has a consumption function of C​ = 15​ + 0.7Y​, investment of​ 8, government expenditure of​ 12, exports of​ 20, and an import function of M​ = 0.2Y. What is the multiplier for this​ economy?

2

Over the past 100​ years, the average growth rate of U.S. real GDP per person is __ percent.

2

An economy has a consumption function of C​ = 15​ + 0.7Y​, investment of​ 8, government expenditure of​ 12, exports of​ 20, and an import function of M​ = 0.2Y. If government expenditure increases by​ 10, what is the increase in equilibrium​ expenditure?

20

Suppose that in 2014​ China's real GDP is growing at 11 percent a year and its population is growing at 1.0 percent a year. If these growth rates​ continue, then​ China's real GDP per person in​ ______ will be twice what it is in 2014.

2021

The Population Survey in Blogsville for the past month is given in the​ table: In Blogsville last​ month, ______ million people were in the labor force and​ ______ million people were in the​ working-age population.

27;58

An economy has a consumption function of C​ = 10​ + 0.8Y​, investment of​ 6, government expenditure of​ 10, exports of​ 10, and an import function of M​ = 0.1Y. What is the multiplier for this​ economy?

3.33

If real GDP per person doubles in 20​ years, then the annual growth rate of real GDP per person is​ ______ percent a year.

3.5

The quantity of real GDP at the​ short-run macroeconomic equilibrium is ​$___ billion.

450

According to the rule of 70, if a nation's per capita real GDP doubled during the past 10 years, then its average annual rate of economic growth over that period was approximately __________.

7 percent

Which of these factors will cause the aggregate demand curve to shift?

A change in the expectations of households and firms

Choose the statement that is incorrect.

A country with a large population cannot have a high standard of living.

Choose the statement about a crawling peg that is incorrect.

A crawling peg makes the exchange rate fluctuate wildly.

Which of these factors will shift the short-run aggregate supply to the left?

A decrease in the size of the labor force

Choose the statement that is incorrect.

A government budget surplus competes with investment for funds.

What is the relationship between real interest rates and investment, other things being equal?

A negative relationship

Which of these persons is officially unemployed?

A non-working individual who has looked for a job in the past week

Which of these will cause the quantity of goods and services that can be produced by one worker, or in one hour of work, to increase?

A technological change

Choose the statement that is incorrect.

A wage contract linked to the CPI gives the workers less real income than the firm intended.

An economy has a consumption function of C​ = 10​ + 0.8Y​, investment of​ 6, government expenditure of​ 10, exports of​ 10, and an import function of M​ = 0.1Y. What is the equation of the aggregate expenditure​ curve?

AE​ = 36​ + 0.7Y

The equation of the aggregate expenditure curve is given by​ _______.

AE​ = A​ + ​[b​(1minust​)minusm​]Y

What happens when there is an unplanned decrease in inventories?

Actual investment is less than planned investment.

Choose the statement that is incorrect.

Against the Chinese​ yuan, the dollar appreciated between 2005 and 2014.

Choose the statement that is incorrect.

Along the SAS​ curve, the real wage rate and the price level change by the same percentage

Choose the statement that is incorrect.

Along the SAS​ curve, the real wage rate and the price level change by the same percentage.

Which of these will shift the money demand curve to the right?

An increase in real GDP

Choose the statement about the​ long-run Phillips curve that is incorrect.

An unexpected increase in aggregate demand shifts the​ long-run Phillips curve rightward.

Choose the statement that is incorrect.

An unexpected inflation or deflation has no effect on the economy.

Which of these are financial instruments that represent promises to repay a fixed amount of funds?

Bonds

Did the events​ you've described change the demand for U.S.​ dollars, the supply of U.S.​ dollars, or both demand and supply in the foreign exchange​ market?

Change in world demand for U.S.exports D Change in U.S.import demand S Change in U.S. interest rate differential B Change in expected future exchange rate B

Choose the statement that is incorrect.

Classical growth theory tells us that technological change induces a level of saving and investment that makes capital per hour of labor grow indefinitely.

Choose the statement that is incorrect.

Comparisons of real GDP between countries are most accurate when we use market prices.

Which of the following fiscal policies combats​ inflation?

Decreasing government spending

The marginal propensity to consume is equal to​ ______, and the marginal propensity to save is equal to​ ______

DeltaC / DeltaYD​; Delta S / DeltaYD

Choose the statement that is incorrect.

Deposits are not money because you cannot settle a debt with a deposit.

Choose the correct statement.

Deposits are​ money, checks are not​ money, and credit cards are not money.

Which of these factors inhibit economic growth?

Discouraging international trade

Choose the statement that is incorrect.

Each additional hour of labor increases real GDP by successively larger amounts.

The liabilities of the Fed are​ ______, and these liabilities along with​ ______ make up the monetary base.

Federal Reserve notes held by households and businesses and reserves of depository​ institutions; coins issued by the Treasury

Suppose a Canadian dollar bank deposit in Toronto earns 2 percent a year and a U.S. dollar bank deposit in Chicago earns 1 percent a year. What expectations do people hold if interest rate parity is to​ hold?

For interest rate parity to​ hold, people expect that the U.S. dollar will appreciate appreciate depreciate by 1 percent a year.

Suppose a Canadian dollar bank deposit in Toronto earns 3 percent a year and a U.S. dollar bank deposit in Chicago earns 4 percent a year. What expectations do people hold if interest rate parity is to​ hold?

For interest rate parity to​ hold, people expect that the U.S. dollar will depreciate by 1 percent a year.

The unemployment that arises from normal labor turnover -- from people entering and leaving the labor force -- and from the ongoing creation and destruction of jobs is ​______ unemployment.

Frictional

The news article reports that China is the second largest economy in the world based on​ ______.

GDP converted to U.S. dollars at the current exchange rate

Read the news​ clip, then answer the following questions. The article defines productivity as​ ______. Real GDP per person is​ ______.

GDP divided by the number of people​ employed; real GDP divided by the population

The quantity of money is $ 4 billion and the velocity of circulation is 5. What is GDP​?

GDP is $20 billion

Which of the following shifts the aggregate demand curve rightward year after year?

Growth in the quantity of money

Which of these predictions can be made using the growth rates associated with the equation of exchange?

If the money supply grows at a faster rate than real GDP, there will be inflation.

Suppose that potential GDP and the velocity of circulation are constant. What is the change in the price level in the long run if the quantity of money increases by 3 percent a​ year?

If the quantity of money increases by 3 percent a​ year, in the long run the change in the price level is 3 percent a year.

Which of these statements about interest rates and inflation is true?

If there is zero inflation, the nominal interest rate is equal to the real interest rate.

If real GDP increases by​ $2 million and potential GDP increases by​ $3 million and the marginal propensity to import is​ 0.2, by how much do imports​ change?

Imports increase by​ $400,000

Which of these government policies can help economic growth?

Improving the quality of education

The table shows the quantities of the components of M1 and M2 in January 2018.

In January 2018, M1 was $3648 billion. In January 2018, M2 was $13838.3 billion

The table above provides information about the U.S. labor market in January comma 2017​, December, 2017​, and January, 2018. The graph shows the unemployment rate since January, 2013.

In January, 2018 the number employed increased and the unemployment rate did not change. Over the year since January, 2017 the number employed increased and the unemployment rate decreased

Choose the statement about the business cycle that is incorrect.

In a business​ cycle, real GDP shows steady growth and steady inflation.

Choose the statement that is incorrect.

In a​ deflation, the inflation rate is positive but decreasing in consequent years.

Choose the statement that is incorrect.

In the United States in​ 2009, 22 million fewer people had jobs than in 1989.

Choose the statement that is incorrect.

In the long​ run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate.

According to the graph, an increase in government spending, all else equal, will shift the AD curve from the initial AD curve to the curve labeled:

Increased AD

The table above and graph to the right provide information about the U.S. labor market in January, 2018.

In​ January, 2018​, the labor force participation rate in the United States was 62.7 percent.

The table above and graph to the right provide information about the U.S. labor market in January, 2018.

In​, January comma 2018​, the unemployment rate in the United States was 4.1 percent.

According to _______ cycle theory, fluctuations in aggregate demand are primarily caused by fluctuations in confidence.

Keynesian

The​ ______ macroeconomic school of thought justifies the policy discussed in this news clip.

Keynesian

Read the news​ clip, then answer the following question. Based on this news​ clip, Paul Krugman most likely follows the​ ______ school of thought and Ben Bernanke most likely follows the​ ______ school of thought.

Keynesian or new​ Keynesian; Keynesian or new Keynesian

__________ advocates active government intervention via fiscal policy when the economy is in recession.

Keynesian theory

Choose the statement that is incorrect.

Labor hours are all equally productive.

Which of the following statements about the monetarist view of the macroeconomy is ​incorrect?

Left​ alone, the economy rarely operates at full employment.

Choose the statement that is incorrect.

Liquid assets have a higher interest rate than securities.

Which of these factors could have caused the increase in supply shown in this graph?

Lower U.S. interest rates

Which of these shifts the aggregate demand curve to the right?

Lower interest rates

What is the relationship between investment and real interest rates, all other things being equal?

Lower interest rates stimulate investment.

The equation of exchange is:

M x V = P x Q

The sum of all currency in the hands of the public, checkable deposits and traveler's checks is the official definition of __________.

M1

The value of the multiplier is larger when the value of the __________.

MPC is larger

Which of the following equations is incorrect​?

MPC ​ + MPS​ = DeltaYD

Which of the following equations is incorrect​?

MPC ​ + MPS​ = Upper DeltaYD

The process by which competition for profits leads to technological progress and perpetual economic growth best fits which growth theory?

New growth theory

Is it likely that all the points in the graph to the right lie on the same consumption​ function?

No, because the real interest​ rate, wealth, and expected future income changed

The table to the right shows the values of disposable income and consumption expenditure for each of the past four quarters. Could these levels of disposable income and consumption expenditure be on the same consumption​ function? ​___ because consumption expenditure changed by​ _____ than disposable income in​ _______ .

No; more; 2017; Q4

Choose the statement that is incorrect.

Over the business​ cycle, aggregate supply fluctuates around potential GDP.

The bank plans to hold ​$3 for every​ $100 in deposits. The bank holds desired reserves of ​$13,000 and actual reserves of ​$22,000. What is the​ bank's desired reserve ratio and its excess reserves​?

The​ bank's desired reserve ratio is 3 percent. The banks excess reserves are ​$9,000.

The bank plans to hold ​$5 for every​ $100 in deposits. The bank holds actual reserves of ​$17,000 and desired reserves of ​$10,000. What is the​ bank's desired reserve ratio and its excess reserves​?

The​ bank's desired reserve ratio is 5 percent. The banks excess reserves are ​$7000.

The table gives information about the U.S. labor market in 2007. What is the​ employment-to-population ratio?

The​ employment-to-population ratio is 63.0 percent.

Suppose you are available for work but have not looked for a job for at least the last four weeks because you believe that no jobs are available. You would then be counted as __________.

a discouraged worker

If a country has a deficit in its net exports, it means that this country imports __________.

a greater value of goods and services than it exports

Monetarism is a school of economic thought that favors:

a monetary growth rule.

The effect of the United States returning millions of workers to their countries of origin is​ _____ the U.S. PF and​ _____ in potential GDP.

a movement down​ along; a decrease

The best forecast​ available, which is based on all the relevant information is called​ _______.

a rational expectation

When aggregate planned expenditure is greater than real​ GDP, inventories are ​_______, so production​ ______ and inventories return to their target level as the economy moves to equilibrium expenditure.

below target; increases

In January 2018​, the U.S. the unemployment rate was​ ______ the natural unemployment rate and in the fourth quarter of 2017 the output gap was​ ______.

below; zero

A business cycle can be described by the following​ sequence: ​______ equilibrium,​ ______ equilibrium,​ ______ equilibrium.

below​ full-employment; full-employment; above​ full-employment

According to the graph, in this economy there will be a tendency for:

both wages and prices to rise over time

An increase in potential GDP increases​ ______.

both​ long-run aggregate supply and​ short-run aggregate supply

If workers and firms have rational expectations and wages and prices adjust quickly, an expansionary monetary policy will result in higher inflation;

but no change in the unemployment rate

Inflation expectations​ "become self-fulfilling" because consumers decide to​ _____, which​ ______.

buy more goods and services at​ today's lower​ prices; increases aggregate demand

Arbitrage is the practice of seeking to profit by​ _____ in one market and​ _____ in another related market.

buying; selling for a higher price

To increase the money supply, the Fed __________.

buys securities from the public

If the interest rate is 5​ percent, people will​ ______.

buy​ bonds, bid up their​ price, and the interest rate will fall

The shift of the function in this graph could have been caused by a __________.

change in the MPC

An increase in investment shifts the AE curve upward by an amount equal to the​ ______, and shifts the AD curve rightward by an amount equal to the​ ______.

change in​ investment; change in investment times the multiplier

Labor supply growth is influenced by all of the following except​_______.

changes in labor productivity

A​ ______ macroeconomist believes that the economy is​ self-regulating and always at full employment. A​ ______ macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment.

classical; Keynesian

Stagflation is a:

combination of inflation and recession

The components of aggregate expenditure that are influenced by real GDP are​ ______.

consumption expenditure and imports

Aggregate expenditure, or the total amount of spending in the economy, equals:

consumption spending plus planned investment spending plus government purchases plus net exports.

Aggregate planned expenditure is the sum of planned​ _____.

consumption​ expenditure, investment, government​ expenditure, and exports minus imports

Depository institutions provide four​ benefits, which are​ ______.

creating​ liquidity, lowering the cost of​ borrowing, lowering the cost of monitoring​ borrowers, and pooling risk

A decline in investment spending as a result of an increase in government spending and borrowing is known as:

crowding out

If increases in government budget deficits cause investment spending to fall it is known as __________.

crowding out

In the balance of payment accounts, the sum of exports minus imports, net interest income, and net transfers is called the __________.

current account balance

If the sum of net exports, net interest income received from abroad, and net transfer payments from abroad yields a negative number, we say that a country's __________.

current account is in deficit

Growth rates are calculated in a similar manner for all variables. Real GDP growth rate​ = [(Real GDP in​ ______ yearminusReal GDP in​ ______ ​year) divided by Real GDP in​ ______ year ​] times 100.

current; previous; previous

The slow job growth and rise in unemployment after​ mid-2007 is most likely​ ______.

cyclical

At full employment, __________.

cyclical unemployment is zero

If real GDP and aggregate expenditure are less than equilibrium​ expenditure, firms' inventories _______. Firms​ ______ production, and real GDP​ ______.

decrease increase; increases

In the short run, an unexpected decrease in oil prices will:

decrease the price level but increase real GDP

In January 2017​, the U.S. unemployment rate was 4.8 percent. In January 2018​, the unemployment rate was 4.1 percent. Assuming that the labor force remained constant between January 2017 and January 2018​, then unemployment​ _______.

decreased

The expectations about the exchange rate​ ______ the demand for U.S. dollars and​ ______ the supply of U.S. dollars.

decreased; increased

The requirement to hold more capital can make financial institutions safer because by using more of its own funds and less borrowed​ funds, a financial institution​ ______.

decreases its risk of insolvency

An increase in expected future income _____.

decreases the supply of loadable funds today because households with larger expected future income will save less today

An increase in expected future income​ ______.

decreases the supply of loanable funds today because households with larger expected future income will save less today

Aggregate demand decreases if expected future​ income, inflation, or profits​ ______. And aggregate demand if fiscal policy​ ______ government expenditure.

decreases; decreases

The multiplier increases when the marginal propensity to import​ ______ or the income tax rate​ ______.

decreases; decreases

An increase in current income taxes​ ______ the supply of loanable funds today because it​ ______.

decreases; decreases disposable income, which decreases saving

A fall in the expected future exchange rate​ ______ the supply of U.S. dollars. An increase in the world demand for U.S. exports​ ______ the supply of U.S. dollars.

decreases; increases

Aggregate demand if monetary policy​ ______ the quantity of money and​ ______ interest rates.

decreases; increases

Aggregate demand increases if the exchange rate​ ______ or foreign income ​______.

decreases; increases

An increase in current income taxes​ ______ the supply of loanable funds today because it​ ______.

decreases​; decreases disposable​ income, which decreases saving

Potential GDP is​ ______.

determined by the​ full-employment quantity of labor

The Bank of​ America's total assets​ ______ and its total liabilities​ ______.

do not​ change; do not change

The graph _____ illustrate the law of supply of foreign exchange.

does

The Rule of 70 states that the number of years it takes for the level of any variable to​ ______ is approximately​ ______.

double; 70 divided by the annual percentage growth rate of the variable

Net exports is​ _____ of goods and services minus​ _____ of goods and services.

exports; imports

If these policies are​ successful, we would expect to see​ Oregon's natural unemployment rate​ ______.

fall

When aggregate planned expenditure is greater than GDP, inventories will __________ and GDP and total employment will __________.

fall, increase

In January 2010​, the exchange rate was 91 yen per U.S. dollar. By September 2010​, the exchange rate had fallen to 84 yen per U.S. dollar. As the exchange rate falls​, the prices of​ foreign-produced goods and services to Americans​ ______ and the volume of U.S. imports​ ______.

fall; decrease

The consequences of deflation include all of the following except​ _______.

falling real wage rates for workers with​ long-term wage contracts

The real interest rate​ ______, household saving​ ______,

falls; decreases and investment increases

When the interest rate falls​, other things remaining the​ same, the opportunity cost of holding money​ ______ and​ ______.

falls; the quantity of money demanded increases

An economy at a​ full-employment equilibrium experiences an increase in aggregate demand. The unemployment rate​ ______ its natural​ rate, and to return to the​ long-run equilibrium, the money wage rate begins to​ ______.

falls​ below; rise

Between 2007 and​ 2012, the U.S. exchange rate​ ______ against the Japanese yen because the U.S. interest differential​ _______ ​ ______ against the yen.

fell; decreased and because currency traders expected the dollar to depreciate

In this graph, as the dollar depreciates __________.

fewer dollars are supplied

A __________ is one where the government or central bank determines their exchange rate by intervening in the foreign exchange market.

fixed exchange rate

A __________ is where a government or central bank intervenes in currency exchange markets and buy or sell currency in order to keep an exchange rate fixed or on a determined path.

fixed exchange rate or a crawling peg

A country that allows demand and supply to determine the value of its currency is said to have a __________.

flexible exchange rate

A crawling peg exchange rate policy is one that​ _______.

follows a path determined by a decision of the government or the central bank and is achieved by central bank intervention in the foreign exchange market

A monetary growth rule that might be supported by a monetarist would be a plan:

for the Federal Reserve to increase the quantity of money at a fixed rate and not respond to economic fluctuations.

The market in which the currency of one country is exchanged for the currency of another country is the​ ______. The price at which one currency exchanges for another currency is the​ ______.

foreign exchange​ market; exchange rate

The main type of unemployment that Governor Kulongoski is using policies to avoid is​ ______.

frictional and structural

The short-term unemployment that arises from workers, in the process of changing jobs, is called __________.

frictional unemployment

The unemployment that occurs with the normal workings of the economy, such as workers taking time to search for suitable jobs and firms taking time to search for qualified employees, is called:

frictional unemployment

The "normal or natural" underlying level of unemployment in the economy is the __________.

full employment rate of unemployment

The financial capital markets exist in order to __________.

funnel household savings to firms

Choose the statement that is incorrect. Older unemployed workers might become marginally attached workers or discouraged workers during a recession because​ _______.

given their long employment​ history, they are eligible for longer periods of unemployment benefits

The balanced budget multiplier equals the change in equilibrium expenditure and real GDP that results from equal changes in​ _____ divided by the change in government expenditure.

government expenditure and​ lump-sum taxes

When the unemployment rate is less than the natural unemployment​ rate, real GDP is​ ______ than potential GDP and the output gap is​ ______.

greater; positive

According to new growth​ theory, ______.

growth can persist indefinitely

In the long run, the rate of inflation is determined by the __________.

growth of the money supply

In neoclassical growth​ theory, ______.

growth will stop if technology stops advancing

According to real business cycle theory, shifts in aggregate demand:

have no impact on real GDP.

A firm that pays an efficiency wage is paying a wage that is __________ the current market wage.

higher than

If the minimum wage is set above the market-determined equilibrium wage, the natural unemployment rate will be __________.

higher than it would be without a minimum wage

The law of supply of foreign exchange states that other things remaining the​ same, the​ ______ the exchange​ rate, the​ ______ in the foreign exchange market.

higher; greater is the quantity of U.S. dollars supplied

The fundamental source of labor productivity growth is​ ______.

human capital

Unanticipated deflation __________.

hurts borrowers

If real GDP and aggregate expenditure are greater than equilibrium​ expenditure, firms' inventories ______. Firms​ _______ production, and real GDP​ _______.

increase decrease; decreases

Suppose the Fed buys​ $50 million of government securities from the Bank of America. The​ Fed's total assets​ ______ and its total liabilities​ ______.

increase by​ $50 million; increase by​ $50 million

The multiplier matters because we can use it to determine by how much we should change autonomous expenditure to​ ______.

increase real GDP by a given amount

An increase in household wealth will:

increase the consumption component of aggregate expenditure.

A federal government budget deficit will __________.

increase the demand for loanable funds and increase the equilibrium interest rate

If consumers in the United States decrease their demand for imports, the result will be to __________.

increase the exchange rate of the U.S. dollar

According to this news​ clip, consumption expenditure ________ as household wealth decreased.

increased

During the 1990s, the flow of foreign investment in the United States __________.

increased dramatically

An increase in expected future income _____ aggregate demand.

increases

An increase in expected future profits ______ aggregate demand.

increases

An increase in the expected future inflation rate ______ aggregate demand.

increases

Read the news​ clip, then answer the following question. A fall in inventories​ _______ aggregate demand.

increases

The multiplier increases when the marginal propensity to consume ____.

increases

Starting from a position of​ long-run equilibrium, an increase in government expenditures​ ______ real GDP and​ ______ the price level.

increases real GDP and raises the price level

Starting from a position of​ long-run equilibrium, a world expansion​ ______, and an increase in expected future profits​ ______.

increases real GDP and raises the price​ level; increases real GDP and raises the price level

A government budget deficit​ occurs, which​ ______. The real interest rate​ ______.

increases the demand for loanable​ funds; rises

Aggregate demand if fiscal policy​ ______ taxes or​ ______ transfer payments.

increases; decreases

Aggregate demand if the exchange rate​ ______ or foreign income ​______.

increases; decreases

Aggregate demand increases if monetary policy​ ______ the quantity of money and​ ______ interest rates.

increases; decreases

An increase in the population​ ______ potential GDP and​ ______ potential GDP per hour of labor.

increases; decreases

Private saving _____ and investment _____

increases; decreases

Private saving _____ and investment _____.

increases; decreases

​Yesterday, the current exchange rate was ​$0.95 Canadian per U.S. dollar and traders expected the exchange rate to remain unchanged for the next month. ​Today, with new​ information, traders now expect the exchange rate next month to rise to​ $1 Canadian per U.S. dollar. The revised expected future exchange rate​ ______ the demand for U.S. dollars and​ ______ the supply of U.S. dollars.

increases; decreases

Aggregate demand increases if expected future​ income, inflation, or profits​ ______. And aggregate demand increases if fiscal policy​ ______ government expenditure.

increases; increases

An increase in expected future income __________ aggregate demand. An increase in the expected future inflation rate ___________ aggregate demand. An increase in expected future profits _______ aggregate demand.

increases; increases; increases

An increase in real GDP​ ______ the demand for money and financial innovation​ ______.

increases; might increase the demand for some types of deposits and decrease the demand for others

According to Keynesian theory, fiscal policymakers can combat the impact of recessions by:

increasing government spending.

The only way that the standard of living of the average person in a country can increase is by:

increasing production faster than population growth

Consumption expenditure minus​ imports, which varies with real​ GDP, is called​ _______.

induced expenditure

A sustained increase in the overall level of prices is known as:

inflation

If the inflation rate is low, steady, and anticipated, __________.

inflation may not be a major problem

The percentage rate of change in the price level is the definition of the:

inflation rate

An increase in __________ will cause savings to increase.

interest rates

When the Federal Reserve Bank increases the federal funds​ rate, other

interest rates​ rise, and​ consumption, firms' private investment and net exports decrease

When the Federal Reserve Bank increases the federal funds​ rate, other

interest rates​ rise, and​ consumption, firms' private investment and net exports decrease.

In the short​ run, the quantity of real money and real GDP are given and the​ ______ adjusts to achieve equilibrium. In the long​ run, supply and demand in the loanable funds market determines the​ ______.

interest​ rate; real interest rate

If aggregate planned expenditure exceeds real​ GDP, then​ _______.

inventories​ decrease, and as real GDP increases a movement up along the AE curve occurs

If aggregate planned expenditure is less than real​ GDP, then​ _______.

inventories​ increase, and as real GDP decreases a movement down along the AE curve occurs

Stagflation​ ______.

is a combination of recession and inflation

One consequence of China operating a crawling peg is that China​ ______.

is accumulating U.S. dollars

A flexible exchange rate is one that​ _______.

is determined by demand and supply in the foreign exchange market with no direct intervention by the central bank

A fixed exchange rate is one that​ _______.

is set by the government or the central bank and is achieved by central bank intervention in the foreign exchange market

The natural unemployment rate​ _______.

is the unemployment rate when there is no cyclical unemployment.

The long-run Phillips curve __________.

is vertical at the natural rate of unemployment

Read the news​ clip, then answer the following questions. Barter​ ______ a means of payment. When trading on​ e-Bay, barter​ _______.

is; is not as efficient as money because barter requires a double coincidence of wants

If inflation is anticipated, __________.

it costs less to society than if unanticipated

If the economy moves into a recession, monetarists argue that the Fed should:

keep the money supply growing at a constant rate.

According to new growth​ theory, ______ experience diminishing returns.

knowledge is capital that does not

The ratio of the labor force to the adult population is known as the:

labor force participation rate

For a given increase in aggregate​ demand, the steeper the slope of the​ short-run aggregate supply​ curve, the​ ______ is the increase in the price level and the​ ______ is the multiplier effect on real GDP in the short run.

larger; smaller

When we say that one of the functions of the Fed is to be a lender of last resort, we mean that the Fed __________.

lends to banks that are short of reserves and cannot find any other source of funds

Suppose the Fed increases the quantity of money. In the long​ run, supply and demand in the​ ______ market determines the real interest rate. The​ ______ adjusts to make the quantity of real money supplied equal to the quantity demanded.

loanable​ funds; price level

On the balance sheet of commercials banks __________.

loans are the largest asset

The three main types of markets for financial capital are​ _______.

loan​ markets, bond​ markets, and stock markets

Read the news​ clip, then answer the following question. According to the news​ clip, the main source of increased unemployment might be​ ______, and the main type of increased unemployment is​ ______.

losses in manufacturing and construction​ jobs; cyclical

When interest rates on Treasury bills and other financial assets are low, the opportunity cost of holding money is __________ , so the quantity of money demanded will be __________.

low, high

The exports effect is the result that the lower the exchange​ rate, other things remaining the​ same, the​ ______.

lower are the prices of​ U.S.-produced goods and services to foreigners and the greater is the volume of U.S. exports

The imports effect is the result that the higher the exchange​ rate, other things remaining the​ same, the​ ______.

lower are the prices of​ foreign-produced goods and services to Americans and the greater is the volume of U.S. imports

If the government is attempting to spur investment spending it should adopt policies that are designed to:

lower interest rates

The __________ the interest rate, the more investment projects firms can profitably undertake, and the __________ the quantity of loanable funds they will demand.

lower, greater

The unemployment rate in the United States is usually __________ than the unemployment rates in most European countries, partly because the United States has __________ generous benefits for the unemployed.

lower, less

The MPS in the United States is _____ than the MPS in​ China, and the MPC in the United States is ______ than the MPC in China.

lower; higher

An increase in the population ____ the real wage rate.

lowers

A decrease in the marginal propensity to import​ _______, everything else remaining the same.

makes the multiplier larger

An increase in income taxes​ _______, everything else remaining the same.

makes the multiplier smaller

In calculating the CPI, the __________.

market basket does not include large equipment purchased by firms

The consumer price index __________.

measures the average of prices paid by urban consumers for a fixed basket of consumer goods and services

Money serves as a​ ______.

medium of​ exchange, which means that it is generally accepted in exchange for goods and services

The CPI in 2013 is 160 and the CPI in 2014 is 177.6. The inflation rate in 2014 is 11.0 percent. The inflation rate in 2014 ​______.

might be​ higher, lower, or the same as in 2013

A rise in the price of oil:

might trigger a cost-push inflation

The school of thought that believes the activist policies of the Federal Reserve exacerbate economic fluctuations is __________.

monetarist cycle theory

The classical view assumes:

money wage rates adjust quickly.

The money multiplier is the ratio of the change in the quantity of​ ______ to the change in the quantity of​ ______.

money; monetary base

Other things remaining the​ same, when the U.S. price level​ rises, U.S.-made goods and services become ______ expensive relative to​ foreign-made goods and services. People spend ______ on​ U.S.-made items and ______ on​ foreign-made items. The quantity of U.S. real GDP demanded ________.

more; less; more; decreases

Between 1960 and​ 2010, the gap between real GDP per person in the United States and real GDP per person in Japan​ ______.

narrowed

At the point at which American consumers were consuming in the second and third quarters of​ 2011, saving is​ ______.

negative

If inflation is​ expected, _______.

neither a​ cost-push inflation nor a​ demand-pull inflation occur

​China, Japan, and Saudi Arabia are ______. The United States is a ______.

net lenders; net borrower

A country that is borrowing more from the rest of the world than it is lending to the rest of the world is a​ ______, and a country that during its entire history has borrowed more from the rest of the world than it has lent to it is a​ ______.

net​ borrower; debtor nation

A country that is lending more to the rest of the world than it is borrowing from the rest of the world is a​ ______. A country that during its entire history has invested more in the rest of the world than other countries have invested in it is a​ ______.

net​ lender; creditor nation

The table shows three years of CPI data. The bias in these CPI numbers might arise from​ ______.

new goods​ bias, quality change​ bias, commodity substitution​ bias, and outlet substitution bias

A​ ______ macroeconomist believes that business cycle fluctuations are the efficient responses of a​ well-functioning market economy that is bombarded by shocks that arise from the uneven pace of technological change. A​ ______ macroeconomist believes that the​ short-run aggregate supply curve is horizontal at a fixed price level.

new​ classical; new Keynesian

Monetary stimulus designed to increase aggregate demand would have __________ on real output according to real business cycle theory.

no impact

The demand for money is the relationship between the quantity of real money demanded and the _____ when all other influences on the amount of money that people wish to hold remain the same.

nominal interest rate

The stated rate of interest on a loan is the __________.

nominal interest rate

Credit cards are:

not part of the money supply.

Choose the option that is incorrect. Equilibrium expenditure​ _______.

occurs when all expenditure is induced expenditure

​Long-run macroeconomic equilibrium​ ______.

occurs when real GDP equals potential​ GDP, and the LAS​, SAS​, and AD curves intersect

The economy is in long-run equilibrium when the short-run aggregate supply and the aggregate demand curve intersect at a point:

on the long-run aggregate supply curve

When the dollar appreciates against the yen, __________.

one dollar will buy more yen

The sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) equals:

one.

If the CPI rises from 120 to​ 126, then​ ______.

on​ average, the price paid by urban consumers for a fixed basket of consumer goods and services rises by 5 percent

The Fed conducts monetary policy primarily through __________.

open market operations

To increase the money​ supply, the Fed may conduct

open market purchases or decrease the discount rate.

The private sector balance and the government sector balance tend to move in​ ______. Net exports respond​ ______.

opposite​ directions; to the sum of the government sector and private sector balances

Examples of physical capital are​ ______. Examples of financial capital are​ ______.

ovens used by Pizza Hut and lawn mowers used by​ Larry's Mowing; bonds issued by​ Wal-Mart and stocks issued by Boeing

Many economists believe the CPI __________ inflation because it fails to consider quality improvements in products.

overstates

Rapid inflation in Brazil in the early 1990s caused the cruzerio to lose its ability to function as money. Which of the following commodities do you think would most likely have taken the place of the cruzeiro in the Brazilian​ economy?

packs of cigarettes because they are a good medium of exchange

Some unemployment is unavoidable because​ ______.

people are making transitions through the stages of life and businesses are making transitions

Unemployment arises for all of the following reasons except​ ______.

people leave the labor force

Assume that the preconditions for labor productivity growth are in place. The pace of labor productivity growth is influenced by all of the following except​ ______.

population growth

The fundamental precondition for labor productivity growth is the incentive system created by all of the following except​ ______.

population growth

The output gap is the difference between __________.

potential GDP and actual GDP

In the​ long-run macroeconomic​ equilibrium, ______.

potential GDP and aggregate demand determine the price​ level, and the money wage rate adjusts so that the SAS curve intersects the LAS curve at the​ long-run equilibrium price level

Economic growth is the persistent increase in​ ______. Economic growth is accompanied by inflation when the​ ______.

potential​ GDP; AD curve shifts rightward at a faster rate than the LAS curve shifts rightward

When the real interest rate falls​, the​ ______ because the​ ______ is the opportunity cost of loanable funds.

quantity of loanable funds demanded increases​; real interest rate

The quantity of real GDP supplied depends on all of the following except the​ _______.

quantity of real GDP demanded

The theory concerning the link between the money supply and the price level that assumes the velocity of money is constant is called the __________.

quantity theory of money

Convergence between real GDP per person in the United States and Japan was relatively​ ______ during the​ 1960s; convergence has recently been​ ______.

rapid; decreasing

The ____ wage rate adjusts to bring the labor market to equilibrium.

real

The aggregate expenditure model focuses on the relationship between aggregate planned expenditure and __________.

real GDP

The gap between​ ______ is the output gap. When​ _____, the output gap is called an inflationary gap.

real GDP and potential​ GDP; real GDP exceeds potential GDP

Real GDP per person grows when​ ______.

real GDP grows at a faster rate than the population grows

Because the focus of long-run economic growth is on the standard of living of the average person, we measure the standard of living in terms of:

real GDP per capita

By measuring​ ______, we can see that the economy of Singapore has caught up to and surpassed the economy of the United​ States, but that the economies of Central and South America have not.

real GDP per person

The demand for labor is the relationship between the quantity of labor demanded and the​ ______. The supply of labor is the relationship between the quantity of labor supplied and the​ ______.

real wage​ rate; real wage rate

Between 1914 and​ 2014, the average growth rate of real GDP per person in the United States was 2 percent a year. During this​ period, ______ grew at a faster rate than​ ______.

real​ GDP; the population

The history of hyperinflations includes __________.

recent events. Hyperinflations have occurred in recent times as well as the past

A Phillips curve is a curve showing the __________.

relationship between the unemployment rate and the inflation rate

The name given to the fraction of deposits that a bank is legally required to hold in its vault, or as deposits at the Fed, is __________.

required reserves

In a demand-pull inflation, the AD curve shifts ____ and the SAS curve shifts ____.

rightward; leftward

When the real exchange rate decreases, a country's net exports will __________.

rise

On average in the United​ States, the inflation rate and the money growth rate minus the real GDP growth rate​ ______.

rise and fall together

When aggregate planned expenditures are less than the real GDP, inventories will:

rise.

As the price level​ rises, interest rates ____ and real wealth ______ People substitute goods in the ______ for goods in the ______.

rise; decrease future; present

According to classical growth​ theory, when real GDP per person​ ______, the population grows.

rises above the subsistence level

When the interest rate rises​, other things remaining the​ same, the opportunity cost of holding money​ ______ and​ ______.

rises; the quantity of money demanded decreases

Between 2012 and​ 2014, the U.S. exchange rate​ ______ against the Japanese yen because the U.S. interest rate differential was expected to​ _______.

rose; increase

A​ ______ is a depository institution that accepts savings deposits and makes mostly​ home-purchase loans. A​ ______ is a depository institution owned by a social or economic group such as a​ firm's employees that accepts savings deposits and makes mostly personal loans.

savings​ bank; credit union

Suppose a country has a crawling peg exchange rate policy against the U.S. dollar and the equilibrium exchange rate in units of foreign currency per U.S. dollar is above the target rate. To keep the exchange rate pegged at its target​ level, the​ country's central bank must​ ______ U.S. dollars and​ ______ its foreign currency reserves.

sell; decrease

Suppose the exchange rate is 90 yen per U.S. dollar and the United States wants to keep the exchange rate at a target rate of 90 yen per U.S. dollar. If the demand for U.S. dollars increases​, the Fed​ ______.

sells dollars to lower the exchange rate

A recession in the United States will __________.

shift the supply curve of dollars to the left

A rise in the price level​ _______.

shifts the AE curve downward and brings a movement up along the AD curve

An increase in labor productivity​ ______.

shifts the demand for labor curve rightward and the production function upward

An increase in the population​ ______.

shifts the supply of labor curve rightward and creates a movement along the production function

The U.S. M1 multiplier is ____ than the U.S. M2 multiplier.

smaller

If the Federal Reserve increases the money supply at 5% a year, in the long run there will be __________.

something less than 5% annual inflation

According to the graph, the situation of this economy after the supply shock can be called:

stagflation

An economy is at potential GDP when it experiences an increase in costs. The economy experiences​ _______.

stagflation

Keynes maintained that the economy could remain long-term at levels of output below the full-employment level of output due to:

sticky wages.

Unemployment arising from a persistent mismatch between the skills and characteristics of workers and job requirements is called __________.

structural unemployment

Suppose that the number of jobs in the fishing industry decreases but the number of jobs in the travel industry increases. Initially, ______.

structural unemployment increases

Older workers are more prone to experience​ ______ unemployment. During a​ recession, the unemployment rate of older workers​ ______.

structural; increases

A government budget surplus​ occurs, which increases the _____ loanable funds.

supply of

The quantity of labor supplied is the number of labor hour ______________________ during a given period.

that all the households in the economy plan to work

When the price​ level, the money wage​ rate, and other factor prices rise by the same​ percentage, there is a movement along​ ______. Potential GDP​ ______.

the LAS curve​; does not change

When the price level rises but the money wage rate and other factor prices remain the​ same, there is a movement along​ ______. The quantity of real GDP supplied​ ______.

the SAS​ curve; increases

Read the news​ clip, then answer the following question. Mr. Reddy is investing in the U.S. real estate market because​ ______.

the U.S. dollar depreciated and the price of U.S. investment properties to foreign investors like Mr. Reddy decreased

The U.S. interest rate differential rises when​ ______.

the U.S. interest rate rises and the foreign interest rate falls

The price level is​ ______.

the average level of​ prices, and the value of money

The Federal Reserve System is __________.

the central bank of the United States

To calculate the​ multiplier, we divide​ ______ by​ ______.

the change in equilibrium​ expenditure; the change in autonomous expenditure

The marginal propensity to import is equal to​ _______.

the change in imports divided by the change in real​ GDP, other things remaining the same

The part of the balance of payments that records a country's exports and imports of goods and services is __________.

the current account

The quantity of U.S. dollars demanded in the foreign exchange market depends on many​ factors, the main ones being​ ______.

the exchange​ rate, world demand for U.S.​ exports, interest rates in the United States and other​ countries, and the expected future exchange rate

Economic growth is​ _______.

the expansion of production possibilities

Along the​ short-run Phillips​ curve, ______.

the expected inflation rate and the natural unemployment rate are constant

All of the following statements are included in new growth theory except​ ______.

the forces of competition destroy incentives to make new discoveries

When there is a shortage of dollars in the foreign exchange​ market, ______.

the forces of supply and demand pull the foreign exchange market into equilibrium

When there is a surplus of dollars in the foreign exchange​ market, ______.

the forces of supply and demand pull the foreign exchange market into equilibrium

The demand for U.S. dollars changes when there is a change in any of the following except​ ______.

the foreign exchange rate

The supply of U.S. dollars changes when there is a change in any of the following except​ ______.

the foreign exchange rate

The U.S. interest rate differential rises if​ ______, and the larger the U.S. interest rate​ differential, the​ ______ is the demand for U.S. dollars in the foreign exchange market.

the foreign interest rate​ falls; greater

The marginal propensity to save is​ _______.

the fraction of a change in disposable income that is saved

The marginal propensity to consume is​ ______.

the fraction of a change in disposable income that is spent on consumption

In the long-run, the level of output is:

the full-employment level of output

The fundamental precondition for labor productivity growth is​ _______.

the incentive system created by​ firms, markets, property​ rights, and money

When the price of an asset​ rises, ______.

the interest rate falls

If we count marginally attached workers as unemployed​ ______.

the labor force participation rate rises

One of the​ Fed's main policy tools is​ ______.

the last resort​ loan, which means that if a bank is short of​ reserves, it can borrow from the Fed

When real GDP​ increases, the change in consumption expenditure equals​ _______.

the marginal propensity to consume times the increase in real GDP

When real GDP​ increases, the change in consumption expenditure equals​ _______.

the marginal propensity to consume x the increase in real GDP

When real GDP​ increases, the change in imports equals​ _______.

the marginal propensity to import times the increase in real GDP

When real GDP​ increases, the change in imports equals​ _______.

the marginal propensity to import x the increase in real GDP

If real GDP increases:

the money demand curve shifts to the right.

Potential GDP increases for all of the following reasons except​ ______.

the money wage rate increases

A​ cost-push rise in the price level can arise from an increase in​ _______.

the money wage rate or money prices of raw materials

As we move up along the​ short-run aggregate supply​ curve, ______.

the money wage​ rate, the prices of other​ resources, and potential GDP remain constant

When cyclical unemployment increases and other things remain the​ same, ______.

the natural unemployment rate does not change

In the long​ run, ____ adjusts to make the quantity of real money supplied equal the quantity demanded.

the price level

In the long​ run, _____ adjusts to make the quantity of real money supplied equal the quantity demanded.

the price level

The CPI tells us​ ______.

the price level in a given period expressed as a percentage of the price level in the base​ period, which is by definition equal to 100

The quantity of U.S. dollars supplied in the foreign exchange market depends on all of the following except​ ______.

the price of gold

An open market operation is​ ______.

the purchase or sale of securities by the Federal Reserve System in the loanable funds market

At the equilibrium exchange rate​ _______.

the quantity of dollars demanded equals the quantity of dollars supplied

High inflation accompanies economic growth when​ ______.

the quantity of money increases rapidly

A stagflation can turn into a​ cost-push inflation process when​ _______.

the quantity of money persistently increases

When firms are unable to meet the demand for their​ output, _____. Prices​ _____.

the quantity of real GDP demanded is greater than the quantity of real GDP​ supplied; rise

An increase in the price level when the money wage rate remains unchanged increases​ ______.

the quantity of real GDP supplied

Everything else remaining the​ same, an increase in aggregate demand increases​ ______.

the quantity of real GDP supplied

When unwanted inventories pile​ up, ​_____. Prices ​_____.

the quantity of real GDP supplied is greater than the quantity of real GDP​ demanded; fall

With a rise in the money wage​ rate, ______.

the quantity that firms are willing to supply at each price level decreases

As we move up along the​ long-run aggregate supply​ curve, ______.

the real wage rate remains constant

For a given increase in the monetary​ base, ______.

the resulting increase in M2 is greater than the resulting increase in M1

All of the following statements are correct except​ _______.

the return to full employment in an expansion phase of the business cycle is economic growth

According to the graph, an increase in the quantity of money is best described by:

the shift in the AD curve

The quantity of U.S. dollars demanded in the foreign exchange market depends on all of the following except​ ______.

the supply of U.S. dollars in the foreign exchange market

The two broad sources of potential GDP growth are growth of​ ______ and growth of​ ______.

the supply of​ labor; labor productivity

If most prices increase in Japan and other countries but remain constant in the United​ States, ______.

then for purchasing power parity to​ hold, the demand for U.S. dollars increases and the supply of U.S. dollars decreases

If most prices have decreased in the United States and not decreased in Japan and other​ countries, ______.

then for purchasing power parity to​ hold, the value of the U.S. dollar in the foreign exchange market will rise

International evidence shows us that​ ______.

there is a general tendency for money growth and inflation to be correlated but the quantity theory does not predict inflation precisely

Actual investment will equal planned investment only when __________.

there is no unplanned change in inventory

According to theory regarding labor productivity growth, workers will be more productive if __________.

they have more human capital

When the Fed buys securities from a​ bank, ______.

the​ bank's reserves increase but its deposits do not change

The​ "capital" referred to in the news clip is​ ______. The financial institutions that the​ G-20 might require to hold more capital are​ ______.

the​ institutions' own​ funds; banks and insurance companies

If the natural unemployment rate increases and the expected inflation rate remains​ constant, then​ ______.

the​ long-run Phillips curve shifts rightward and the​ short-run Phillips curve shifts rightward

If the expected inflation rate increases and the natural rate of unemployment remains​ constant, then​ _______.

the​ short-run Phillips curve shifts upward and the​ long-run Phillips curve does not shift

Physical capital is​ ______. Financial capital is​ ______.

the​ tools, instruments,​ machines, buildings, and other items that have been produced in the past and that are used today to produce goods and​ services; the funds that firms use to buy physical capital

If the consumer price index was 73 in 1979 and 225 in 2011, then prices in 2011 were on average:

three times as high as 1979

Disoposable income is aggregate income minus taxes plus ​ _____.

transfer payments

The natural rate of unemployment is the __________.

unemployment rate an economy will experience when real GDP equals potential GDP

The change in the unemployment rate over the past year suggests that the U.S. economy​ ______.

was in an expansion

The wealth effect refers to the fact that:

when the price level falls, the real value of household wealth rises, and so will consumption

The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.20, and the marginal propensity to import is 0.14. The government increases government expenditure and autonomous taxes each by​ $50 billion. What is the resulting change in equilibrium​ expenditure?

​$20 billion

The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.25, and the marginal propensity to import is 0.2. The government raises autonomous taxes and government expenditure by​ $100 million each. The resulting change in equilibrium expenditure is​ _______.

​$33.3 million

The table gives the aggregate expenditure schedule. Equilibrium expenditure is equal to​ _______.

​$5 trillion

The money multiplier can be calculated as​ ______, where C is​ currency, D is​ deposits, and R is​ banks' reserves.

​(1 + ​C/D​) divided by ​(​R/D​ + ​C/D​)

In a standard of living​ comparison, China ranks​ ______ in the world. This rank is​ ______.

​105th; rising because physical capital and human capital growth and technological change are proceeding rapidly and​ China's real GDP is growing

Cindy takes a summer job painting houses. During the​ summer, she earns an​ after-tax income of ​$3 comma 500 and she spends ​$1,000 on living expenses. What was​ Cindy's saving during the​ summer?

​Cindy's saving during the summer was ​$2,500.

Once a​ month, the Bureau of​ ______ Statistics calculates the Consumer Price​ Index, which is a measure of the​ ______ consumers for a fixed basket of consumer goods and services.

​Labor; average of the prices paid by urban

The multiplier is the amount by which a change in​ ______ expenditure is magnified or multiplied to determine​ ______.

​autonomous; the change in equilibrium expenditure and real GDP

The expectations about the exchange rate​ ______ the demand for U.S. dollars and​ ______ the supply of U.S. dollars.

​decreased; increased

The gap between real GDP per person in the United States and Hong Kong has​ ______ since 1960. During this​ period, the growth rate of real GDP per person in the United States has been​ ______ than in Hong Kong.

​decreased; slower

An increase in the population​ ______ the real wage rate and​ ______ the equilibrium quantity of labor.

​decreases; increases

If all​ (or most) prices have increased in the United States and not increased in​ Japan, then people will generally expect that the foreign exchange value of the dollar will​ ______. The demand for dollars​ ______.

​fall; decreases and the supply of dollars increases

The real interest rate​ ______, household saving​ ______,

​falls; decreases and investment increases

Between 2007 and​ 2012, the U.S. exchange rate​ ______ against the Japanese yen because the U.S. interest differential​ _______ ​ ______ against the yen.

​fell; decreased and because currency traders expected the dollar to depreciate

The law of demand for foreign exchange states that other things remaining the​ same, the​ ______ the exchange​ rate, the smaller is the​ ______ in the foreign exchange market.

​higher; quantity of U.S. dollars demanded

Read the news​ clip, then answer the following questions. If speculation like that made by Mr. Reddy becomes​ widespread, the demand for U.S. dollars will​ ______ and the supply of U.S. dollars will​ ______. The U.S dollar exchange rate will _____.

​increase; decrease rise

If an economy experiences a decrease in the money​ supply, short-run unemployment

​increases, and​ short-run output decreases

Potential GDP​ ______ and potential GDP per hour of labor​ ______.

​increases; decreases

An increase in U.S. demand for imports​ ______ the supply of U.S. dollars. A fall in the U.S. interest rate differential​ ______ the supply of U.S. dollars.

​increases; increases

An increase in the population​ ______ the equilibrium quantity of​ labor, ______ and potential GDP.

​increases; increases

If the price level rises and the money wage rate remains​ constant, the quantity of real GDP supplied​ ______ and there is a movement up along the​ ______ aggregate supply curve.

​increases; short-run

For a given increase in aggregate​ demand, the steeper the slope of the​ short-run aggregate supply​ curve, the​ ______ is the increase in the price level and the​ ______ is the multiplier effect on real GDP in the short run.

​larger; smaller

Read the news​ clip, then answer the following questions. The MPS in the United States is​ ______ today than it was before​ 1984, and the MPC in the United States is​ ______ today than it was before 1984.

​lower; higher

The money multiplier is the ratio of the change in the quantity of​ ______ to the change in the quantity of​ ______.

​money; monetary base

A Keynesian macroeconomist believes that left​ alone, the economy would​ _____ operate at full employment and that to achieve and maintain full​ employment, active help from fiscal policy and monetary policy is required. A modern version of the Keynesian​ view, known as the new Keynesian​ view, holds not only that the money wage rate is​ _____ but also that prices of goods and services are​ _____.

​rarely; ​sticky; sticky

When the nominal interest rate​ rises, the opportunity cost of holding money​ ______ and the quantity of real money demanded​ ______.

​rises; decreases

The business cycle is actually a continuous series of different​ ______.

​short-run macroeconomic equilibriums

A change in the expected future exchange rate changes the demand for U.S. dollars​ ______, and a change in the world demand for U.S. exports changes the demand for U.S. dollars​ ______.

​today; today

A change in the expected future exchange rate changes the supply of U.S. dollars​ ______, and a change in U.S. demand for imports changes the supply of U.S. dollars​ ______.

​today; today

The CPI basket consists of items that urban households buy. The CPI places more weight on​ _______ than on​ _______.

​transportation; medical care

A movement​ ______ along the​ short-run Phillips curve occurs when there is an​ ______ increase in aggregate demand.

​up; unexpected

An increase in investment shifts the AE curve​ _______ and the AD curve​ _______.

​upward; rightward

When real GDP​ decreases, ______.

a decrease in the demand for money occurs

The aggregate demand curve shows the relationship between:

The price level and the quantity of real GDP demanded

What influences consumption decisions and shifts the consumption​ function?

The real interest​ rate, wealth, and expected future income

Choose the statement that is incorrect.

The return to full employment in an expansion phase of the business cycle is economic growth.

Choose the statement that is incorrect.

The size of an economy is irrelevant.

The graph shows an economy that has no taxes or imports. AD0 is the aggregate demand curve when investment is​ $1.0 ​ trillion, and AD1 is the aggregate demand curve when investment is​ $1.5 trillion. What is the size of the multiplier in the short​ run?

The size of the multiplier in the short run is 4.

If the government begins running a budget surplus, what impact will the surplus have on the loanable funds market?

The supply of loanable funds will increase.

The table gives information about the U.S. labor market in 2007. What is the unemployment​ rate?

The unemployment rate is 4.6 percent.

The table gives information reported by the Bureau of Labor Statistics for September​, 2012. What is the unemployment​ rate?

The unemployment rate is 7.7 percent.

The table shows the amounts held as the various components of M1 and M2. What are the values of M1 and​ M2?

The value of M1 is ​$190 billion. The value of M2 is ​$985 billion.

Choose the statement about flexible exchange rates that is incorrect.

The world economy has operated a flexible exchange rate regime since the end of World War II.

Examples of monetary policy that decrease aggregate demand include​ ______.

a decrease in the quantity of money and an increase in interest rates

Which of these will ensure that an economy experiences labor productivity growth?

Technological change

Which of the following statements about the Keynesian view of the macroeconomy is ​incorrect?

Technological change is the most significant influence on both aggregate demand and aggregate supply.

Which of these factors contributes to economic growth?

Technological progress

A typical family on Sandy Island consumes only juice and cloth. Last​ year, which was the base​ year, the family spent ​$28 on juice and ​$18 on cloth. In the base​ year, juice was ​$4 a bottle and cloth was ​$2 a length. This​ year, juice is ​$8 a bottle and cloth is ​$6 a length. What is the CPI​ basket? What is the CPI and the inflation rate in the current​ year?

The CPI basket is 7 bottles of juice and 9 lengths of cloth. The CPI in the current year is 239.1. The inflation rate in the current year is 139.1 percent.

The people who live on Second Life Island consume only juice and cloth. Last​ year, which was the CPI base​ year, the price of juice was ​$3 a​ bottle, the price of cloth was ​$6 a​ length, and the average urban household spent ​$24 on juice and ​$42 on cloth. This​ year, the price of juice is ​$5 a bottle and the price of cloth is ​$3 a length. What is the CPI in the current​ year?

The CPI in the current year is 92.4.

Choose the statement that is incorrect.

The Congressional Advisory Commission on the Consumer Price Index in 1996 said that the CPI overstates inflation by 0.1 percentage points a year.

Which body of the Federal Reserve System sets the majority of U.S. monetary policy?

The Federal Open Market Committee

What are the values of the M1 money multiplier and the M2 money multiplier in January 2018​?

The M1 money multiplier is 1.2 The M2 money multiplier is 4.4

In the United Kingdom​, the currency drain ratio is 38 percent of deposits and the reserve ratio is 2 percent of deposits.

The U.K. money multiplier is 3.45

Did the U.S. dollar appreciate or depreciate against the Japanese​ yen?

The U.S. dollar depreciated against the Japanese yen.

Choose the statement that is incorrect.

The U.S. government cannot create jobs. Jobs are created by the private sector.

Suppose the United States goes from a​ free-trade policy to a​ no-trade policy with other countries. Which of the following is a result of this new​ policy?

The U.S. no longer consumes outside its production possibilities frontier

Choose the statement that is incorrect.

The United States and Great Britain were the only countries who suffered the Great Depression.

Which of these factors will cause the long-run aggregate supply curve to shift to the right?

The accumulation of more machinery and equipment

Rob takes a summer job with a landscaping firm. During the​ summer, he earns an​ after-tax income of ​$5,000 and he spends ​$1,000 on living expenses. Everything else remaining the​ same, what was the change in​ Rob's wealth during the​ summer?

The change in​ Rob's wealth is ​$4,000.

The left graph shows the consumption function and the right graph shows the saving function. Suppose there is a decrease in household wealth.

The consumption function shifts from A to B and the saving function shifts from C to D.

Choose the statement that is incorrect.

The core PCE is a broader measure than the CPI that attempts to overcome biases by placing extra emphasis on food and​ fuel, two goods which are large components of household expenditure.

Choose the statement about growth in labor productivity that is incorrect.

The demand for labor​ increases, the production function does not​ change, but a movement occurs along the production function.

If firms reduce investment spending and the economy enters a recession, which of these contributes to the adjustment that causes the economy to return to its long-run equilibrium?

The eventual agreement by workers to accept lower wages

The CPI in 2003 was 184.0. The CPI in 2004 was 188.9.

The inflation rate in 2004 was 2.7 percent.

Choose the correct statement.

The inflation rate is the annual percentage change in the price level.

Choose the statement that is incorrect.

The interest rate earned on a liquid asset is relatively high.

The table gives information reported by the Bureau of Labor Statistics for February​, 2007. What is the labor force participation​ rate?

The labor force participation rate is 65.9 percent.

The table gives information about the U.S. labor market in 2002. What is the labor force participation​ rate?

The labor force participation rate is 66.6 percent.

One of the​ Fed's main policy tools is​ ______.

The last resort​ loan, which means that if a bank is short of​ reserves, it can borrow from the Fed

Choose the correct statement.

The level of aggregate expenditure that occurs where the AE curve intersects the 45degrees line is equilibrium expenditure.

The table gives you information about the economy of Bluebird Island. What is the marginal propensity to​ consume?

The marginal propensity to consume is 0.75.

The table gives you information about the economy of Bluejay Island. What is the marginal propensity to​ save?

The marginal propensity to save is 0.20.

The table gives you information about the economy of Australia. What is the marginal propensity to​ save?

The marginal propensity to save is 0.25.

In​ Australia, the quantity of M1 is​ $150 billion, the currency drain ratio is 33 percent of deposits and the reserve ratio is 8 percent.

The monetary base in Australia is $46.24 million

The currency drain ratio is 0.2 of deposits and the​ banks' reserve ratio is 0.5. What is the money​ multiplier?

The money multiplier is 1.7.

Suppose an increase in the monetary base of ​$2​00,000 increases the quantity of money by ​$400 comma 000. Calculate the money multiplier.

The money multiplier is 2.

Suppose an increase in the monetary base of ​$2​00,000 increases the quantity of money by ​$400,000. Calculate the money multiplier.

The money multiplier is 2.

Read the news​ clip, then answer the following question. A​ bank's attempts to pursue profit can sometimes lead to bank failure because​ _______.

a combination of all of the above

In an economy without taxes and​ imports, an increase in investment of​ $50 billion increases equilibrium expenditure by ​$100 billion. What are the values of the multiplier and the slope of the AE​ curve?

The multiplier is 2.0 and the slope of the AE curve is 0.5.

Choose the statement that is incorrect.

The nominal interest rate is the real interest rate adjusted to remove the effects of inflation on the buying power of money.

Choose the statement that is incorrect.

Real GDP per person grows whenever real GDP grows.

The Board of Governors of the Federal Reserve has _________ members that are appointed for staggered _________ by the __________ and confirmed by the Senate.

Seven, 14-year terms, President

On January​ 1, 2014,​ Sophie's Sunlounge owned 4 tanning beds valued at​ $20,000. During​ 2014, Sophie's bought 3 new beds at a total cost of ​$12,000. At the end of the​ year, the market value of all of​ Sophie's beds was ​$26,000. Calculate​ Sophie's gross investment and depreciation during 2014.

Sophie's gross investment during 2014 was ​$12,000. ​Sophie's depreciation during 2014 was ​$6,000.

On January​ 1, 2014,​ Sophie's Sunlounge owned 4 tanning beds valued at​ $20,000. During​ 2014, Sophie's bought 3 new beds at a total cost of ​$12,000​, and at the end of the year the market value of all of​ Sophie's beds was ​$27,000. What was​ Sophie's net​ investment?

Sophie's net investment during 2014 was ​$7,000.

Choose the correct statements. 1. When a steel plant becomes more automated and workers lose their jobs comma the workers are structurally unemployed. 2. The fluctuating unemployment over the business cycle is cyclical unemployment. 3. The unemployment that arises from normal labor turnover is cyclical unemployment. 4. Structural unemployment increases during a recession and decreases during an expansion.

Statements 1 and 2 are correct.

Choose the statements concerning neoclassical growth theory that are true. 1. The rate of technological change influences the economic growth rate but economic growth does not influence the pace of technological change. 2. Technological change results from chance. nothing 3. Neoclassical growth theory implies that growth rates and income levels per person around the globe will diverge. nothing 4. Neoclassical growth theory states that growth in real GDP per person can persist indefinitely. nothing

Statements 1 and 2 are correct.

Choose the correct statements. 1. If $ 1 buys 100 yen comma then the exchange rate is 100 yen per dollar. nothing 2. In a growing economy comma the exchange rate is always rising. nothing 3. The foreign exchange market is a place. nothing 4. Upper A rise in the exchange rate is called an appreciation of the dollar. nothing

Statements 1 and 4 are correct.

A reason for the difference in the values between the countries may be​ ______.

U.S. consumers are more confident about the future

What is the impact of unanticipated inflation?

Unanticipated inflation creates arbitrary redistributions of income.

The Bureau of Labor Statistics reported the following data for January 2018. Labor force: 161,115 Employed: 154,430 Working-age population: 256,780 Use the above data to calculate for January 2018​:

Unemployment rate: 4.1 percent Labor force participation rate: 62.7 percent Employment to population ratio: 60.1 percent

Velocity of circulation is defined as __________.

V = (P x Y) / M

Which one of these groups is most hurt by unanticipated inflation?

Wealthy people who hold cash in their wall safes

The table gives the elements of planned expenditure. Real GDP Consumption expenditure Investment Government expenditure Exports Imports ​(trillions of 2009​ dollars) 0 0.2 0.4 0.2 0.9 0 4 2.3 0.4 0.2 0.9 0.2 When real GDP is ​$4 ​trillion, what are aggregate planned​ expenditure, autonomous​ expenditure, and induced​ expenditure?

When real GDP is ​$4 ​trillion, aggregate planned expenditure is ​$3.6 trillion. Autonomous expenditure is ​$1.7 trillion. Induced expenditure is ​$1.9 trillion.

If an economy is at a​ full-employment equilibrium and a decrease in consumption expenditure​ occurs, the new​ short-run equilibrium is​ _____ and​ _____ gap emerges.

a below​ full-employment equilibrium; a recessionary

An increase in labor productivity results in all of the following except ​______.

a decrease in potential GDP per hour of labor because of diminishing returns

​a. An unemployed auto assembly line worker during a sales slump. ​b. A snow plow driver during the summer. ​c. A record player repairman who has not learned the latest laser disk player repair technology. ​d. A computer programmer who quits his job to look for a job with better benefits. ​e. A high school dropout with few skills who has been looking for a job unsuccessfully for weeks. ​f. A person who leaves their job to attend graduate school full time. ​g. A recent business school graduate looking for her first job. ​h. A person whose job has been automated out of existence. ​i. A vendor who sells beer at major league baseball games during the winter months. ​j. A welder who finds that robots have replaced most of the welding jobs on assembly lines. ​k. A top salesman for a computer company who quit because he did not like his boss. ​l. A parent who quit to care for his or her child at home. This person has removed themself from the labor force

a. cyclical b. seasonal c. structural d. frictional e. structural f. not unemployed g. frictional h. structural i. seasonal j. structural k. frictional l. not unemployed

If inflation is anticipated to be 5 percent per year and actual inflation for that year turns out to be 7​ percent, identify whether each of the following groups would be helped or hurt by​ this, or if the effort is indeterminate. ​ a. People who are living on fixed incomes. ​b. Banks that have made​ long-term fixed rate loans. ​c. People who have purchased bonds. ​d. A person who has purchased real estate with a bank loan. ​e. A recent college graduate with many loans to pay back. ​f. People who have purchased stock. ​g. Governments that have sold bonds. ​h. Savers with open passbook accounts. ​i. People who have purchased precious metals. ​j. Wage earners who are members of a strong union.

a. hurt b. hurt c. hurt d. helped e. helped f. helped g. helped h. hurt i. helped j. indeterminate