econ final

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You bought some shares of a stock and, over the next year, the price per share increased by 5% and the price level increased by 8%. Before taxes, you experienced

a nominal gain, and a real loss, and you paid taxes on the nominal gain

You bought some shares of stock and, over the next year, the price per share increases by 5%, as did the price level. Before taxes, you experienced

a nominal gain, but no real gain, and you paid taxes on the nominal gain

The term hyperinflation refers to

a period of very high inflation

When the price level falls

all of the above are correct

As the price level rises (people are)

people are less willing to lend, so interest rates rise

During the recent financial crisis velocity decreases. This means that the rate at which money changed hands

decreased. Other things the same, a decrease in velocity decreases the price level

As the price level rises, the value of money

decreases, so people want to hold more of it

When prices are falling, economists say that there is

deflation

A decrease in money supply creates an excess

demand for money that is eliminated by falling prices

As the price level falls, people will want to hold

less money, so the interest rate falls

Most economists use the aggregate demand and aggregate supply model primarily to analyze

short-run fluctuations in the economy

The idea that inflation by itself reduced people's purchasing power is called

the inflation fallacy

Which of the following is correct? (long-run vs short-run)

the long-run, not the short-run, aggregate supply curve is consistent with the idea that nominal variables do not affect real variables

A bank has $10,000 in deposits and $8,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

20%

Which of the following is not included in M1?

$500 in savings account

At a given price level, an increase in which of the following shifts aggregate demand to the right? 1. consumption 2. investment 3. government expenditures

all of the above

If the reserve requirement is 5%, a bank desires to hold no excess reserves, and it receives a new deposit of $400, it

all of the above

M1 includes: 1. currency 2. demand deposits 3. traveler's checks

all of the above

The long-run aggregate supply curve

all of the above

If P denotes the prices of goods and services measured in terms of money, then: 1. 1/P represents the value of money measured in goods and services 2. P is regarded as "overall price level" 3. Increase in value of money is associated with decrease in P

all of the above are correct

When prisoners use cigarettes or some other good as money, cigarettes become

commodity money and function as a unit of account

If inflation is higher than what was expected,

creditors receive a lower real interest rate than they had anticipated

Other things the same, if the price level falls, the dollar

depreciates

A decrease in the US interest rate leads to

depreciation of the dollar that leads to greater net exports

Monetary neutrality means that a change in the money supply

does not change real variables. Most economists think it is good description of economy in the long-run but not the short-run

An increase in the interest rate causes investment to

fall and exchange rate to appreciate

As recessions begin, production

falls and unemployment rises

When interest rate falls

firms want to borrow more new plants and equipment and households want to borrow more for homebuilding

High and unexpected inflation has a greater cost

for those who have fixed nominal wages than for those who have nominal wages that adjust with inflation

Aggregate demand shifts right when the government

increases the money supply

An open-market purchase

increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public

The Federal Reserve

is responsible for conducting the nation's monetary policy, and it plays a role in regulatory banks

A bank has a 10% reserve requirement, $4,000 in deposits, and has loaned out all it can given the reserve requirement

it has $400 in reserves and $3,600 in loans

A bank has a 10% loan reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement

it has $500 in reserves and $4,500 in loans

Commodity money is

money with intrinsic value

Economic variables whose values are measured in goods are called

real variables

According to classical dichotomy, which of the following is not influenced by monetary factors?

real wages and real GDP

A relatively mild period of falling incomes and rising unemployment is called a

recession

On a bank's T-account, which are part of the bank's assets?

reserves but not desposits made by its customers

Shoeleather cost refers to

resources used to maintain lower money holdings when inflation is high

When the price level falls, investment spending

rises

When inflation rises, the nominal interest rate

rises, and people desire to hold less money

To decrease the money supply, the Fed can

sell government bonds or increase the discount rate

Other things the same, if the US price level rises, then

the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises

If... M = 3,000 P = 2 Y = 12,000 then what is velocity?

8

Other things the same, as the price level falls, a country's exchange rate

and interest rate falls

Which of the following is an example of barter?

a barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet

Which of the following is correct? (recession in other countries)

a recession in other countries reduces US net exports so that US aggregate demand shifts left

Other things the same, as the price level rises, exchange rates

and interest rates rise

Money: 1. is more efficient than barter 2. makes trade easier 3. allows greater specialization

all of the above are correct

The New York Federal Reserve Bank: 1. president always gets to vote at FOMC meetings 2. conducts open market transactions 3. is 1/12 of regional Federal Reserve Banks

all of the above are correct

Which of the following institutions is a central bank? 1. bank of japan 2. bank of england 3. federal reserve system

all of the above are correct

According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply leads to

an increase in the price level but does not change real GDP

Interest rates adjusted for the effects of inflation

are real variables, inflation in a nominal variable

Which of the following fall during recession?

both retail sales and unemployment

On a Sunday morning, Tom sold 300 cups of coffee for a total of $750

the $750 is the nominal variable. The 300 cups of coffee is a real variable

Fiat money

has no intrinsic value

Wealth is redistributed from debtors to creditors when inflation was expected to be

high and it turns out to be low

James took out a fixed-interest-rate loan when the CPI was 200. He expected the CPI to increase to 206 but it actually increased to 204. The real interest rate paid is

hight than he had expected, and the real value of the loan is higher than he had expected

Credit card limits are included in

neither M1 or M2

Aggregate demand shifts right if at any given price level

net exports rise and shifts right if the money supply increases

According to assumptions of the quantity theory of money, if the money supply decreases by 5%, then

nominal GDP would rise by 5% and real GDP would be unchanged

As the price level rises (people will)

people will want to buy fewer goods, so the interest rate rises; people will want to hold more money, so the interest rate rises

As the price level falls (people will)

people will want to buy more bonds, so the interest rate falls

There is a (short-run tradeoff)

short-run tradeoff between inflation and unemployment

Dollar bills, rare paintings, and emerald necklaces are all

stores of value

Menu costs refers to

the cost of more frequent price changes induced by higher inflation

Liquidity refers to

the ease at which an asset is converted to the medium of exchange

As the price level rises,

the exchange rate rises, so net exports fall

At the Federal Reserve

the nation's monetary policy is made by the federal open market committee, which meets about every six weeks

Other things the same, if the US price level falls, then

the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls

In an economy that relies upon barter

there is no item in the economy that is widely accepted in exchange for goods and services

Other things the same, if the US price level falls, then (US residents want)

to buy more foreign bonds, the real exchange rate falls

Which of the following typically rises during a recession?

unemployment

Which of the following typically rises during recession?

unemployment


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