Econ Final

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

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 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, the average growth rate of U.S. real GDP per person is 2 percent. Over the past 100​ years, growth was most rapid during the​ ______ and slowest during the​ ______.

1960s; Great Depression

Suppose an increase in the monetary base of ​$1​00,000 increases the quantity of money by ​$200,000. Calculate the money multiplier. The money multiplier is___.

2

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

2%

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

In the year to December 2017​, the inflation rate measured by the CPI was ___ percent. ​ In the year to December 2017​, the inflation rate measured by the PCE was ____ percent. ​ In the year to December 2017​, the inflation rate measured by the PCE less food and fuel was ____ percent.

2.1% 1.7% 1.5%

If the monetary base increases by​ $1 million and the quantity of money increases by​ $2.5 million, then the money multiplier is​ _____.

2.5

Suppose that the velocity of circulation of money is constant and real GDP is growing at a constant 2 percent a year. To achieve an inflation target of 1 percent a​ year, the central bank grows the quantity of money at ____ percent a year.

3

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 table above and graph to the right provide information about the U.S. labor market in January, 2018. In​, January, 2018​, the unemployment rate in the United States was ____ percent. In​, January, 2018​, the labor force participation rate in the United States was ____ percent

4.1% 62.7%

Use the above data to calculate for March 2018March 2018​: ​>>> Answer each to one decimal place. Unemployment rate_____ percent Labor force participation rate ______ percent Employment to population ratio ____ percent

4.1% 62.9% 60.4%

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​: ​>>> Answer each to one decimal place. Unemployment rate ____ percent Labor force participation rate ____ percent Employment to population ratio ____ percent

4.1% 62.7% 60.1%

Suppose an increase in the monetary base of ​$3​00,000 increases the quantity of money by ​$1,500,000. Calculate the money multiplier.

5

An economy has a fixed price​ level, no​ imports, and no income taxes. MPC is 0.8, and real GDP is ​$150 billion. Businesses increase investment by ​$10 billion. The multiplier is ____. The increase in real GDP is $___ billion.

5 $50 billion

An economy is at potential GDP and the price level is 100 in the figure. If aggregate demand unexpectedly​ increases, the inflation rate is​ ______.

5 percent a year

If the annual interest paid on a​ $500 loan is​ $25, the nominal interest rate is​ _____ percent per year. If the nominal interest rate is 5 percent per year and the inflation rate is 2 percent a​ year, the real interest rate is​ _____ per year.

5; 3

The table gives information about the U.S. labor market in 2002. What is the​ employment-to-population ratio?

62.7%

The table gives information reported by the Bureau of Labor Statistics for April​, 2010. What is the labor force participation​ rate?

65.4%

Calculate the growth rate of​ China's standard of living during 2013. The growth rate of​ China's standard of living during 2013 increased by ___ percent.

7.3%

Calculate​ China's real GDP growth rate and its population growth rate during 2013. ​China's real GDP growth rate during 2013 is ____ percent and its population growth rate during 2013 is ____percent.

7.8% 0.5%

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​ ______.

78.6

The real wage rate is​ $_____ when the money wage rate is​ $2,000 and the price level is​ $25.

80

2. The price of oil falls unexpectedly and aggregate supply increases by​ $50 billion. What type of output gap​ appears? If the central bank responds to close the output​ gap, does Shell Island experience inflation or​ deflation? ​_____ gap appears and the central bank closes the output​ gap, aggregate demand​ _____ and a​ _____ is created.

An​ inflationary; decreases;​ cost-push deflation

Choose the statement that is incorrect.

At full employment, the unemployment rate is zero.

​______ is triggered by a decrease in autonomous expenditure and​ ______ is triggered by an increase in autonomous expenditure.

A​ recession; an expansion

What is the largest component of​ M1?

Checkable deposits

Consider the following statements and decide​ which​ is\are false I. Global saving glut is an increased saving​ in​ lower-income countries such as China and other developing countries II. As a result of global saving glut U.S.A became a net lender to many lower countries III. Global saving glut lead to a fall in​ global​ long-term interest rate IV. As a result of global saving glut China and other developing countries became net borrowers Which of the above sentences are false

II and IV

Choose the statement that is incorrect.

If a depository institution​ fails, its deposits are guaranteed up to a maximum of​ $25,000 per depositor per bank.

Choose the statement that is incorrect.

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

Choose the statement that is incorrect.

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

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

Choose the statement that is incorrect.

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

The government of Canada cuts income taxes. Canada's aggregate demand _____.

Increases

The multiplier increases when the marginal propensity to consume _____.

Increases

Starting from a monetary equilibrium​ condition, an increase in money supply

Increases the bond price and decreases the interest rate

Based on this news​ clip, Barack Obama most likely follows the​ ______ school of thought and John McCain most likely follows the​ ______ school of thought.

Keynesian or new​ Keynesian; classical or new classical

In​ ______ cycle​ theory, fluctuations in investment driven by fluctuations in business confidence are the main source of fluctuations in aggregate demand. In​ ______ cycle​ theory, fluctuations in both investment and consumption​ expenditure, driven by fluctuations in the growth rate of the quantity of​ money, are the main source of fluctuations in aggregate demand.

Keynesian; monetarist

1. Who does the BLS classify as being​ unemployed, a​ part-time worker, an employed​ person, a discouraged​ worker, and not in the labor​ force? Explain your classification. ​______ are​ unemployed, ______ is a​ part-time worker,​ _____ is a discouraged​ worker, and​ _____ is not in the labor force.

Pat and​ Mary; Sarah;​ Kevin; Johnie

Who does the BLS classify as being​ unemployed, a​ part-time worker, an employed​ person, a discouraged​ worker, and not in the labor​ force? Explain your classification. ​______ are​ unemployed, ______ is a​ part-time worker,​ _____ is a discouraged​ worker, and​ _____ is not in the labor force.

Pat and​ Mary; Sarah;​ Kevin; Johnie

​______ cycle theory would say that the rise in unemployment is not cyclical but is a change in the natural unemployment rate.

Real business

Choose the correct statements. 1. The unemployment that arises from normal labor turnover is frictional unemployment. 2. A worker who is laid off because of the recent recession is cyclically unemployed. 3. The unemployment that arises when changes in technology or international competition change the skills 4. Frictional unemployment usually lasts longer than structural unemployment.

Statements 1 and 2 are correct

Choose the correct statements. 1..Gum does not serve as money because it is not a good store of value. 2.Most people know the price of gum, so it could serve as money because it is a unit of account. 3.Because most people buy gum, it can be used as money because it is a useful tool in barter. 4.Gum does not serve as money because it is not generally accepted in exchange for goods and services.

Statements 1 and 4 are correct

Choose the correct statements. 1.A worker who is laid off because of the recent recession is cyclically unemployed. nothing 2. When a steel plant becomes more automated and workers lose their jobs comma the workers are structurally unemployed. 3. Structural unemployment increases during a recession and decreases during an expansion. 4. The unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the locations of jobs is cyclical unemployment.

Statements 2 and 2 are correct.

Choose the correct statements. 1. The president of the San Francisco Fed is always a member of the FOMC. 2. The Chicago Fed implements the policy decisions of the FOMC. 3. The chairman and the other six members of the Board of Governors are members of the FOMC. 4. The FOMC is the main policy-making organ of the Federal Reserve System.

Statements 3 and 4 are correct.

Choose the correct statements. 1. Frictional unemployment increases during a recession and decreases during an expansion. 2. Structural unemployment increases during a recession and decreases during an expansion. 3. A worker who is laid off because of the recent recession is cyclically unemployed. 4. When a steel plant becomes more automated and workers lose their jobs comma the workers are structurally unemployed.

Statements 3 and 4 are correct.

The Bureau of Labor Statistics reports six alternative measures of the unemployment rate. Choose the correct statements. a. .U-2 adds all marginally attached workers to the official unemployment rate. b. U-2 measures the job losers. c.U-6 adds the economic part-time workers to the official unemployment rate. d. U-6 measures those who are unemployed for 15 weeks or more.

Statements b and c are correct.

A typical family on Sandy Island consumes only juice and cloth. Last​ year, which was the base​ year, the family spent ​$10 on juice and ​$9 on cloth. In the base​ year, juice was ​$2 a bottle and cloth was ​$3 a length. This​ year, juice is ​$7 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 5 bottles of juice and 3 lengths of cloth The CPI in the current year is 278.9 The inflation rate in the current year is 178.9 percent

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.

A current account deficit means we must borrow more from abroad than we lend abroad or use our official reserves to cover the shortfall.

True

The real exchange rate is the relative price of​ _____ to​ _____.

U.S.-produced goods and​ services; foreign-produced goods and services

The effect of this decrease is ____ in the demand for​ labor, _____ in the supply of​ labor, _____ in​ employment, and _____ in the real wage rate.

a decrease a decrease a decrease a decrease

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

a decrease in the quantity of real GDP demanded

A​ cost-push inflation begins with​ ______ as the result of an increase in the money wage rate or an increase in the money prices of raw materials.

a decrease in​ short-run aggregate supply

Which of the following events might cause a​ cost-push inflation?

an increase in the money wage rate or an increase in the money prices of raw materials

A monetarist is a macroeconomist who believes that the economy is​ self-regulating and that it will normally operate​ _____, provided that monetary policy is not erratic and that the pace of​ _____ is kept steady.

at full​ employment; money growth

The discount rate is the interest rateThe discount rate is the interest rate ​______.

at which the Fed stands ready to lend reserves to depository institutions

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 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

A multiplier is the amount by which a change in any component of​ _____ is magnified or multiplied to determine the change in​ _____ and​ _____ that it generates.

autonomous​ expenditure; equilibrium​ expenditure; real GDP

The price level is the​ _____.

average level of prices

The Consumer Price Index is a measure of the​ _____ of the prices paid by​ _____ consumers for a fixed market basket of consumption goods and services.

average; urban

The velocity of circulation is the​ _____ number of times in a​ _____ that each dollar of money gets used to buy final goods and services.

average; year

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

The Fed is the lender of last resort​, which means that if​ _____ is short of​ reserves, it can borrow from the​ _____.

a​ bank; Fed

A type of​ _____ is a ​mortgage-backed security​, which entitles​ _____ to the income from a package of mortgages.

a​ bond; its holder

A problem with using a commodity as money is​ ______.

a​ commodity's value changes over time

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

A rise in the price of oil creates​ _______.

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

Cyclical unemployment is the fluctuating unemployment over the business cycle that increases during​ _____ and decreases during​ _____.

a​ recession; an expansion

Reserves consist of the currency in the​ _____ plus the balance on its​ _____ account at​ _____.

bank's vaults;​ reserve; a Federal Reserve Bank

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

The monetary base is the sum of​ _____, _____, and​ _____ at the Fed.

coins; Federal Reserve​ notes; banks' reserves

A stock market is a financial market in which shares of stocks of​ _____ are traded.

corporations

The news clip is describing​ _________ inflation.

cost-push

An inflation that is kicked off by an increase in​ _____ is called ​cost-push inflation.

costs

Stagflation occurs when​ _______.

costs increase

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

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

The main components of money in the United States today are​ ______.

currency and deposits at banks and other depository institutions

We call the leakage of bank reserves into currency the currency​ drain, and we call the ratio of​ _____ to​ _____ the currency drain ratio.

currency; deposits

The​ ______ account records receipts from exports of goods and services sold​ abroad, payments for imports of goods and services from​ abroad, and​ ______.

current; net interest income paid abroad and net transfers

Growth rates are calculated in a similar manner for all variables. Real GDP growth rate​ = [(Real GDP in​ ______ year−Real GDP in​ ______ ​year) ÷Real GDP in​ ______ year ​] ×100.

current; previous; previous

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

cyclical

Full employment is when there is no​ _____ unemployment​ or, equivalently, when all the unemployment is​ _____ or​ _____.

cyclical; frictional; structural

In both​ sectors, output fell while labor productivity increased. The quantity of labor​ (aggregate labor​ hours) in the nonfarm sector _____.

decreased

​Real-Time Data Analysis​ Exercise* In March 2017​, the U.S. unemployment rate was 4.5 percent. In March 2018​, the unemployment rate was 4.1 percent. Assuming that the labor force remained constant between March 2017 and March 2018​, then unemployment​ _______.

decreased

Describe the path of the price level in Japan. The price level​ ______.

decreased in both years

U.S. household income has grown considerably since 1984. U.S. saving has​ ______ because wealth has​ ______.

decreased; increased due to capital gains

The quantity of labor​ (aggregate labor​ hours) in the manufacturing sector​ ______. And the percentage change in the quantity of labor was larger in the​ ______ sector.

decreased; manufacturing

The tables describe an​ economy's labor market and its production function in 2014. In​ 2015, the population increases and labor hours supplied increase by 40 at each real wage rate. The​ economy's standard of living​ ______ in 2015 because​ ______.

decreased; real GDP per person is smaller in 2015 than in 2014

The​ economy's standard of living​ ______ in 2015 because​ ______.

decreased; real GDP per person is smaller in 2015 than in 2014

The Fed cuts the quantity of money and all other things remain the same. In the short​ run, aggregate demand​ _______.

decreases

The following events have occurred at times in the history of the United States: 1. A deep recession hits the world economy 2. The world oil price rises sharply 3. U.S. businesses expect future profits to fall Event 1​ ______. Event 2​ ______. Event 3​ ______.

decreases aggregate​ demand; decreases​ short-run aggregate supply; decreases aggregate demand

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

Starting from a position of​ long-run equilibrium, a deep recession​ ______, and a decrease in expected future profits​ ______.

decreases real GDP and lowers the price​ level; decreases real GDP and lowers the price level

Starting from a position of​ long-run equilibrium, a sharp increase in the world oil price​ ______.

decreases real GDP and raises the price level

An unexpected increase in aggregate demand​ ______ rate, which is shown by​ ______ the​ short-run Phillips curve.

decreases unemployment and increases the​ inflation; a movement up along

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

decreases; decreases

A fall in the expected future exchange rate​ ______ the demand for U.S. dollars. A decrease in the U.S. demand for imports​ _______ the demand for U.S. dollars.

decreases; does not change

An increase in discouraged workers​ ______ the official unemployment rate and​ ______ U-4.

decreases; does not change

A decrease 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.

decreases; increases

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

decreases; increases

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

decreases; increases

A government budget surplus​ _______ the real interest​ rate, decreases​ ______.

decreases; private saving and increases investment

Chinese Premier Wen Jiabao has warned Japan that its companies operating in China should raise the pay for their workers. A rise in wages in China​ _______ aggregate supply.

decreases​ China's short-run

The​ "average overall increase across the​ board" wage increase​ _______.

decreases​ short-run aggregate supply

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 demand for U.S. dollars. An increase in the U.S. demand for imports​ _______ the demand for U.S. dollars.

decreases​; does not change

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

decreases​; increases

In the long​ run, the real exchange rate is determined by​ ______ and the nominal exchange rate is determined by​ ______.

demand and supply in the markets for goods and​ services; the quantities of money in two countries

A flexible exchange rate is an exchange rate that is determined by​ ______ in the foreign exchange market with no direct intervention by the​ _____.

demand and​ supply; central bank

An economy experiences​ _______ inflation when​ "wages tend to feed​ inflation."

demand-pull

​"Wages typically track​ inflation, soaring higher when prices take​ off." In this​ situation, the economy is experiencing​ _______ inflation.

demand-pull

China is experiencing a​ ______ inflation caused by​ ______.

demand-pull; loose monetary​ policy, which increases aggregate demand

In new classical cycle theory​, the rational expectation of the price​ level, which is determined by potential GDP and expected aggregate​ _____, determines the​ _____ and the position of the SAS curve.

demand; money wage rate

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 required reserve ratio is the minimum percentage of​ _____ that​ _____ are required to hold as reserves.

deposits; depository institutions

If the Fed raised the interest rate while the Brazilian interest rate remained at 8.75​ percent, the Brazilian real would​ ______.

depreciate by a smaller amount than if the Fed left the interest rate unchanged

If a euro deposit in a bank in​ Paris, France, earns interest of 4.1 percent a year and a yen deposit in​ Tokyo, Japan, earns 4.4 percent a​ year, other things remaining the same and adjusted for​ risk, what is the exchange rate expectation of the Japanese​ yen? The Japanese yen exchange rate is expected to _____ against the euro by ____percent.

depreciate; .3 percent

Real GDP per person is real GDP​ _____.

divided by the population

The Rule of 70 is the number of years it takes for the level of any variable to double. It is approximately 70​ _____ by the annual percentage​ _____.

divided; growth rate of the variable

If the price level and the money wage rate rise by the same​ percentage, the quantity of real GDP supplied​ ______ and there is a movement up along the​ ______ aggregate supply curve.

does not​ change; long-run

3. The government of Shell Island announces an increase in spending of​ $50 billion a year and the central bank will increase the quantity of money to pay for the spending. Does the economy go into a​ boom? Will there be​ inflation? The economy​ _____ into a​ boom, real GDP​ _____ billion, and​ _____ arises.

does not​ go; remains at​ $600; inflation

The U.S.​ long-run Phillips curve​ ______ when the expected inflation rate rises. The U.S.​ long-run Phillips curve​ ______ when the natural unemployment rate increases.

does not​ shift; shifts rightward

Interest rate parity ___ hold between Brazil and the United States. The Brazilian real is expected to ____ by ____ percent.

does, depreciate, 8.75

Between 1960 and​ 2010, growth rates in real GDP per person in Hong​ Kong, Korea,​ Singapore, and China​ ______ the growth rate of real GDP in the United States. ​China's real GDP per person in 2010 is approximately equal to real GDP per person in Hong Kong in​ ______.

exceeded; 1976

When potential GDP​ _____ real​ GDP, the output gap is called a recessionary gap.

exceeds

An above​ full-employment equilibrium is an equilibrium when real GDP​ _____.

exceeds potential GDP

Economic growth is the​ _____.

expansion of production possibilities

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

fall; increases (opposite for Americans)

A financial institution is a firm that operates on both sides of the markets for​ _____: It​ _____ in one market and​ _____ in another.

financial​ capital; borrows; lends

Bonds issued by​ _____ are traded in the bond market.

firms and governments

U.S. official reserves are the​ government's holding of​ _____.

foreign currency

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 capital and financial account is the record of​ _____ minus U.S. investment abroad.

foreign investment in the United States

The official settlements account records the change in U.S. official​ reserves, which are the​ government's holdings of​ ______. If U.S. official reserves decrease​, the official settlements account balance is​ ______.

foreign​ currency; positive

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

frictional and structural

According to new growth​ theory, ______.

growth can persist indefinitely

According to the​ Ricardo-Barro effect, a government budget deficit​ ______ the real interest rate.

has no effect on

A discouraged worker​ ______.

has stopped looking for a job because of repeated failure to find one

If the only change that occurred was that people gave up job​ searching, then the labor force would ​ _______ and unemployment would​ _______.

have​ decreased; have decreased

If​ "pricing pressures are weaker​ today," compared to the​ 1970s, then the expected inflation rate in the 1970s was​ _______ today.

higher than it is

Suppose that the business cycle in the United States is best described by RBC theory. An advance in technology increases productivity. The​ when-to-work decision depends on the real interest rate. The​ _____ the real interest​ rate, other things remaining the​ same, the​ _____ is the supply of labor today.

higher; larger

The quantity of labor demanded is the number of labor hours ______ during a given period. The quantity of labor supplied is the number of labor hours _____ during a given period. The ___ wage rate adjusts to bring the labor market to equilibrium.

hired by all the firms in the economy that all the households in the economy plan to work real

The quantity of labor demanded is the number of labor hours _____ during a given period. The quantity of labor supplied is the number of labor hours ____during a given period. The ____wage rate adjusts to bring the labor market to equilibrium.

hired by all the firms in the economy that all the households in the economy plan to work real

A mortgage is a legal contract that gives ownership of a​ _____ to the​ _____ in the event that the​ _____ fails to meet the agreed loan payments​ (repayments and​ interest).

home; lender; borrower

Explain the effect of the Bank of​ Japan's announcement on the demand for and supply of U.S. dollars. The Bank of​ Japan's announcement would​ _____ the demand for U.S. dollars and​ _____ the supply of U.S. dollars on June 2.

increase; decrease

Explain the effect of the​ Fed's announcement on the demand for and supply of U.S. dollars. The demand for U.S. dollars would​ _____ and the supply of U.S. dollars would​ _____ on June 2.

increase; decrease

Tax rebates​ ______ aggregate demand and the​ housing, credit, and financial crises​ ______ aggregate demand.

increase; decrease

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

Between 2007 and 2012 the monetary base​ _______.

increased

In March 2007​, the U.S. unemployment rate was 4.4 percent. In August 2008​, the unemployment rate was 6.1 percent. Assuming that the labor force remained constant between March 2007 and August 2008​, then the number unemployed​ _______.

increased

In March 2017​, the U.S. unemployment rate was 4.5 percent. In March 2018​, the unemployment rate was 4.1 percent. Assuming that unemployment was constant between March 2017 and March 2018​, then the labor force​ _______.

increased

In October 2009​, the U.S. unemployment rate was 10.0 percent. In October 2011​, the unemployment rate was 8.9 percent. Assuming that unemployment remained constant between October 2009 and October 2011​, then the labor force​ ______.

increased

According to this news​ clip, consumption expenditure _____ as household wealth decreased. This change in consumption expenditure could be attributed to​ ______ in disposable income or​ ______ in expected future income.

increased an​ increase; an increase

What happened to the quantity of saving and​ investment? The quantity of saving​ _____ and the quantity of investment​ _____.

increased; decreased

A government budget deficit ______ the demand for loanable funds.

increases

A government budget deficit ____ the demand for loanable funds.

increases

A government budget surplus _____ the supply of loanable funds

increases

A government budget surplus ____ the supply of loanable funds.

increases

The multiplier increases when the marginal propensity to consume _____.

increases

Private saving _____ and investment _____.

increases decreases

Suppose that the exchange rate falls from 80yen per U.S. dollar to 70yen per U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan to buy in the foreign exchange​ market? The quantity of U.S. dollars that people plan to buy in the foreign exchange market​ _______.

increases and a movement down along the demand curve for U.S. dollars occurs

When Mexico increases the quantity of​ money, Mexico's aggregate demand​ ______.

increases and its AD curve shifts rightward

In the news​ clip, productivity gains exceed pay increases because the demand for labor​ ______ than the​ ______ in the supply of labor.

increases by​ less; increase

Lowering the required reserve ratio​ ______, which​ ______ the quantity of loans that​ China's banks can make and the quantity of money created.

increases excess​ reserves; increases

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

increases the demand for loanable​ funds; rises

A decrease in expected future income​ ______.

increases the supply of loanable funds today because households with smaller expected future income will save more today

Starting from a​ full-employment equilibrium, an increase in aggregate demand​ ______ real​ GDP, and creates​ ______ gap.

increases; an inflationary

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

increases; decreases

An open market purchase​ ______ the monetary base. An open market sale​ ______ the monetary base.

increases; decreases

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

increases; decreases

Starting from a​ full-employment equilibrium, a decrease in​ short-run aggregate supply​ ______ the price level and​ ______ real GDP.

increases; decreases

The increase in investment​ ______ aggregate demand. The decrease in government spending​ _______ aggregate demand.

increases; decreases

The fall in the average weekly wage rate​ ______ short-run aggregate supply and​ ______ long-run aggregate supply.

increases; does not change

The increased labor productivity​ ______ the demand for labor and​ ______ the supply of labor.

increases; does not change

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

increases; increases

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

increases; increases

An increase in world demand for U.S. exports​ ______ the demand for U.S. dollars. A rise in the U.S. interest rate differential​ ______ the demand for U.S. dollars.

increases; increases

In real business cycle​ theory, an increase in productivity​ ______ the demand for labor by more than it​ ______ the supply of labor.

increases; increases

In the short​ run, an increase in business investment​ ______ real GDP and​ ______ the price level.

increases; increases

In the short​ run, an increase in consumer spending​ ______ real GDP and​ ______ the price level.

increases; increases

In the short​ run, an increase in exports​ ______ real GDP and​ ______ the price level

increases; increases

The fall in the minimum wage​ ______ short-run aggregate supply and​ ______ long-run aggregate supply.

increases; increases

The increase in the personal consumption expenditures​ ______ aggregate demand. The increase in exports​ ______ aggregate demand.

increases; increases

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

increases; increases;

The increased labor productivity​ ______ potential​ GDP, and​ ______ real GDP per person.

increases; increases;

M1 consists of currency held by​ _____ and​ _____, _____, and​ _____ owned by individuals and businesses.

individuals; businesses;​ traveler's checks; checkable deposits

People are more likely to accept a real wage cut that arises from an increase in the price level than a cut in their nominal wage rate because​ ______.

inflation decreases the real wage rate gradually and a cut in the nominal wage decreases the real wage rate suddenly

The ​short-run Phillips curve is a curve that shows the relationship between the​ _____ rate and​ _____ when​ _____ and the​ _____ remain constant.

inflation; the unemployment​ rate; the natural unemployment​ rate; expected inflation rate

The ​long-run Phillips curve is the relationship between​ _____ and​ _____ when the economy is at full employment. The​ long-run Phillips curve is a​ _____ line at the​ _____ unemployment rate.

inflation; unemployment;​ vertical; natural

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

Balance of payments accounts are the accounts in which a nation records its​ _____.

international​ trading, borrowing, and lending

During times of​ uncertainty, it might be necessary for a bank to hold large cash reserves and to have a large percentage of its assets purchased by its own capital because​ ______.

its depositors may decide to make large withdrawals

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

The unemployment rate in​ May, 2008 is​ ______.

lower than the unemployment rates that occurred in recessions since 1980

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

lower; higher U.S. consumers are more confident about the future

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. Possible reasons for the difference could be​ _______.

lower; higher a lower return to saving

An increase in the population ______ the real wage rate.

lowers

Inflation​ ______ the real wage​ rate, everything else remaining the same.

lowers

When the unemployment rate is greater than the natural unemployment​ rate, the output gap is _____. When the unemployment rate is less than the natural unemployment​ rate, the output gap is _____.

negative positive

In​ ______ cycle​ theory, the rational expectation of the price​ level, which is determined by potential GDP and expected aggregate​ demand, determines the money wage rate and the position of the SAS curve. In​ ______ cycle​ theory, past rational expectations of the current price level influence the money wage rate and the position of the SAS curve.

new​ classical; new Keynesian

The key idea of classical growth theory that leads to the dismal outcome is that​ ______.

no matter how much technological change​ occurs, real GDP per person is always pushed back toward the subsistence level

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

nominal interest​ rate; hold

The official settlements account is the record of the change in U.S.​ _____.

official reserves

Which of the people described in the table is unemployed because of labor market​ mismatching?

only Tory and David

To increase the money​ supply, the Fed may conduct

open market purchases or decrease the discount rate.

China was the​ world's largest economy until 1890 because​ ______.

people in all countries had approximately the same subsistence level of income

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

people leave the labor force

The inflation rate is the percentage change in the​ _____ from one year to the next. Deflation is a situation in which the​ _____ is​ _____ and the inflation rate is​ _____.

price​ level; price​ level; falling; negative

The sum of​ _____ is called national saving.

private saving and government saving

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

quantity of loanable funds demanded decreases​; real interest rate

The​ crowding-out effect is the tendency for a government budget deficit to​ ______ the real interest rate and decrease​ ______.

raise; investment

In the long​ run, an increase in the quantity of money​ _______.

raises the price level and lowers the value of money

A government budget deficit​ ______ the real interest rate because​ ______.

raises; the demand for loanable funds increases

The defining feature of the Keynesian view of macroeconomics is that the economy is​ ______.

rarely at full employment

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

The output gap is the gap between​ _______.

real GDP and potential 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

In the short​ run, ______ and​ ______ adjusts to achieve equilibrium.

real GDP determines the demand for money curve and the Fed determines the quantity of real money​ supplied; the nominal interest rate

When​ _____ there is a​ full-employment equilibrium.

real GDP equals potential GDP

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

Neoclassical growth theory is the proposition that​ _____ grows because technological change induces saving and investment that make​ _____ grow.

real GDP per​ person; capital per hour of labor

Classical growth theory is the view that the growth of​ _____ is temporary and that when it rises above the subsistence​ level, a population explosion​ _____.

real GDP per​ person; eventually brings it back to the subsistence level

New growth theory holds that​ _____ grows because of the choices people make in the pursuit of profit and that growth will​ _____.

real GDP per​ person; persist indefinitely

The main criticisms of RBC theory include all of the following except​ ______.

real business cycle theory relies too heavily the role of money in the economy to make its predictions

As we move up along the LAS​ curve, the​ _______.

real wage rate is constant

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

The​ ______ interest rate is the opportunity cost of loanable funds because​ ______.

real; the real interest paid on borrowed funds is the opportunity cost of borrowing and the real interest rate forgone is the opportunity cost of not saving or not lending those funds

The analysis of macroeconomic performance in the news clip reflects the​ ______ business cycle theory because it discusses​ ______.

real; factors that change potential GDP

The aggregate production function is a relationship that tells us how​ _____ changes as the quantity of​ _____ changes when all other influences on production remain the same.

real​ GDP; labor

Aggregate demand is the relationship between the quantity of​ _____ demanded and the​ _____ when all other influences on expenditure plans remain the same.

real​ GDP; price level

​Short-run aggregate supply is the relationship between the quantity of​ _____ supplied and the​ _____ when the money wage​ rate, the prices of other​ resources, and potential GDP remain constant.

real​ GDP; price level

​Short-run macroeconomic equilibrium occurs when the quantity of​ _____ demanded equals the quantity of​ _____ supplied at the point of intersection of the​ _____ curve and the​ _____ curve.

real​ GDP; real​ GDP; AD​; SAS

The quantity of desired reserves depends on the level of deposits and is determined by the desired reserve ratio ​- the ratio of​ _____ to​ _____ that the​ _____ plan to hold.

reserves; deposits; banks

A​ bank's "balancing​ act" balances​ _______. The​ over-pursuit of profit or underestimation of risk can lead to bank failure because​ _______.

return against​ risk; some borrowers default and never​ repay, which can lead to bank insolvency

How will the labor force participation rate change if Kevin starts creating football apps in his garage and they turn out to be very​ popular? The labor force participation will​ _____ Kevin starts creating football apps in his garage and they turn out to be very popular.

rise

How will the unemployment rate change if Sarah quits and starts to search for a​ full-time job? The unemployment rate will​ _____ if Sarah quits and starts to search for a​ full-time job.

rise

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

rise; decrease future; present

In December 2007​, the exchange rate was 0.97 Canadian dollars per U.S. dollar. By December 2008​, the exchange rate had risen to 1.06 Canadian dollars per U.S. dollar. As the exchange rate rises​, prices of​ U.S.-produced goods and services to foreigners​ ______ and the volume of U.S. exports​ ______.

rise; decreases

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

rises​; the quantity of money demanded decreases

According to the​ Ricardo-Barro effect, when a government budget deficit occurs​ today, ______.

saving​ increases, the supply of loanable funds​ increases, and the real interest rate does not change

A means of payment is a method of ​ _____ a debt.

settling

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

If the natural unemployment rate​ increases, the​ long-run Phillips curve​ _______ and the​ short-run Phillips curve​ ______. The expected inflation rate ____.

shifts​ rightward; shifts rightward Does not change

If the natural unemployment rate​ increases, the​ long-run Phillips curve​ _______ and the​ short-run Phillips curve​ ______. The expected inflation rate ____.

shifts​ rightward; shifts rightward does not change

The U.S.​ short-run Phillips curve​ ______ when the expected inflation rate rises. The U.S.​ short-run Phillips curve​ ______ when the natural unemployment rate increases.

shifts​ upward; shifts rightward

When the money wage rate rises ​_______. When the price level in India increases​ _______.

short-run aggregate supply​ decreases; the quantity of real GDP supplied increases

The inflation and unemployment trends during the Great Depression can be explained by a movement along the​ ______ Phillips curve that​ ______.

short-run; lowers the inflation rate and increases the unemployment rate

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

supply of

When it becomes obvious to everyone that the deflation is not going to​ occur, _______.

the money wage rate rises and the​ short-run aggregate supply curve returns to its original position

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

The supply of loanable funds is the relationship between​ _____ supplied and the​ _____ when all other influences on lending plans remain the same.

the quantity of loanable​ funds; real interest rate

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

the quantity of money persistently increases

Requirements to hold more capital make banks safer because​ _______.

the requirement to hold more capital makes the possibility of failure less likely

The current account is the record of receipts from​ _____ other​ countries, minus​ _____ other​ countries, plus the net amount of​ _____ received from and paid to other countries.

the sale of goods and services to other​ countries; payments for goods and services bought​ from; interest and transfers

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

A rise 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; does not change

A new Classical view is that business cycle fluctuations are the​ _____ responses of a​ well-functioning market economy that is bombarded by shocks that arise from the uneven pace of​ _____.

​efficient; technological change

This increase in expected profit​ _______ the demand for loanable funds and brings​ _______ the demand for loanable funds curve.

​increases; a rightward shift of

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

​increases; increases

The US dollar exchange rate decreased from 81 Japanese Yen in June 2011 to 78 Japanese yen in June 2012. In June 2011, the value of 100 Japanese yen was ___ U.S. dollars. In June 2012, the value of 100 Japanese yen was ___ U.S. dollars.

$1.23; $1.28 (divide 100 by yen value)

If saving is​ $850 billion, investment is​ $500 billion, government expenditure on goods and services is​ $700 billion, net exports is​ $50 billion, and net taxes is​ $800 billion, then calculate government sector balance.

$100 billion

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

$11,000

An economy has a fixed price​ level, no​ imports, and no income taxes. MPC is 0.8, and real GDP is ​$200 billion. Businesses increase investment by ​$10 billion. The new level of real GDP is ​$____ billion. Real GDP increases by more than ​$1010 billion because the increase in investment​ _______.

$250 billion induces an increase in consumption expenditure

In December 2017​, the nominal wage rate was ​$____ per hour. In December 2017December 2017​, the CPI was ____ In December 2017​, the real wage rate was ​$____ per hour.

$30.74 248 $12.4

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

If saving is​ $850 billion, investment is​ $500 billion, government expenditure on goods and services is​ $600 billion, and net exports is​ $100 billion, then calculate private sector balance.

$350 billion

If the US interest rate is 1.5​ percent, Canada's interest rate is 1​ percent, the US inflation rate is 1.2​ percent, and​ Canada's inflation rate is 0.70​ percent, then calculate the US interest rate differential.

.5 percent

The U.K. pound is trading at 1.50 U.S. dollars per U.K. pound. There is purchasing power parity at this exchange rate. The interest rate in the United States is 1 percent a year and the interest rate in the United Kingdom is 0.5 percent a year. What is the U.S. interest rate​ differential? What is the U.K. pound expected to be worth in terms of U.S. dollars one year from​ now? The U.S. interest rate differential is ____ percent. A year from​ now, the U.K. pound is expected to _____ by ____ percent. Which country more likely has the lower inflation​ rate?

.5 percent appreciate; .5 percent United Kingdom

If equilibrium expenditure changes by​ $50 billion that results from an increase in autonomous taxes by​ $80 billion, find the autonomous tax multiplier.

.625

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​ _____.

.67

In an​ economy, when disposable income increases from​ $400 to​ $500, consumption expenditure increases from ​$450 billion to ​$525. The marginal propensity to consume is ____. The marginal propensity to save is ___.

.75 .25

Choose the correct statement.

"Slowing growth" can reduce inflationary pressure if aggregate demand growth slows.

You can purchase a laptop in Tokyo for 88,000 Japanese yen. If the exchange rate is 80.00 Japanese yen per U.S. dollar and if purchasing power parity​ prevails, at what price can you buy an identical computer in​ Dallas, Texas?

$1,100

The U.S. dollar exchange rate increased from ​$0.89 Canadian in June 2009 to ​$0.96 Canadian in June 2010​, and it decreased from 83.8 euro cents in January 2009 to 76.9 euro cents in January 2010. In June 2009​, the value of the Canadian dollar was ​$______U.S. In June 2010​, the value of the Canadian dollar was ​$_____U.S.

$1.11; $1.04

If real GDP is​ $1,000,000, exports are​ $200,000, imports are​ $300,000, and aggregate labor hours are​ 100,000, labor productivity is​ _____.

$10 per hour

CNN agreed to pay its workers ​$36 an hour in 1999 and ​$45 an hour in 2001. The CPI in 1999 was 166 and in 2001 it was 180. Calculate the real wage rate in each year​ (to the nearest​ cent). Did these workers really get a pay raise between 1999 and​ 2001? The real wage rate in 1999 was ​___. The real wage rate in 2001 was ​___. Because the real wage rate in 2001 is _____ the real wage rate in​ 1999, the workers _____ really get a raise between 1999 and 2001.

$21.96 $25.00 Greater than; did

The value of M1 is ​$_____ billion. The value of M2 is ​$____billion.

$235 $1,015

In December 2017​, M1 was ​$____ billion. In December 2017​, M2 was ​$____ billion.

$3600 $13833.1

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 ​$24,000. What was​ Sophie's net​ investment?

$4,000

In​ Australia, the quantity of M1 is​ $150 billion, the currency drain ratio is 33 percent of deposits and the reserve ratio is 8 percent. The monetary base in Australia is ​$____ million

$46.24

Using a Federal grant of​ $150,000, a research lab buys equipment for​ $75,000 that has depreciated by​ $11,000 after two years. Calculate gross investment and net investment.

$75,000; $64,000.

CPI​ = ______.

(Cost of CPI basket at​ current-period prices divided by ÷Cost of CPI basket at​ base-period ​prices) times ×100

Net exports equals​ ______.

(T − G​) ​+ ​(S − I​)

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​ _____.

.17

The price level in the Eurozone is 111.2​, the price level in the United States is 109.1​, and the nominal exchange rate is 0.85 euros per U.S. dollar. What is the real exchange rate expressed as Eurozone real GDP per unit of U.S. real​ GDP? The real exchange rate expressed as Eurozone real GDP per unit of U.S. real GDP was _____.

.83

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

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

1

What are the values of the M1 money multiplier and the M2 money multiplier in December 2017? The M1 money multiplier is ____. The M2 money multiplier is ____.

1.2 4.4

The CPI in 2012 was 229.6. The CPI in 2013 was 233.0. The inflation rate in 2013 was ___ percent.

1.5%

In February 2018, the real interest rate was ____ percent. decimal places. Between October 2017 and February 2018​, the real interest rate _____.

1.68% increased

In Canada​, the currency drain ratio is 11 percent of deposits and the reserve ratio is 0.03 percent of deposits. The Canadian money multiplier is _____.

10.06

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

1960s; Great Depression

Suppose that in 2014​ China's real GDP is growing at 1010 percent a year and its population is growing at 3.03.0 percent a year. If these growth rates​ continue, then​ China's real GDP per person in​ ______ will be twice what it is in 2014.

2024

Suppose that in 2014​ China's real GDP is growing at 7 percent a year and its population is growing at 0.5 percent a year. If these growth rates​ continue, then​ China's real GDP per person in​ ______ will be twice what it is in 2014.

2025

The CPI in 2006 was 201.6. The CPI in 2007 was 207.3. The inflation rate in 2007 was ____ percent.

3.2%

What was the inflation rate in 2005 and​ 2009? How do you​ know? The inflation rates in 2005 and 2009 were​ _____ percent and​ _____ percent respectively because the inflation rate equals​ _____ .

3; 0; nominal interest rate minus real interest rate

An economy has a fixed price​ level, no​ imports, and no income taxes. An increase in autonomous expenditure of ​$11 trillion increases equilibrium expenditure by ​$44 trillion. The multiplier is ____. The marginal propensity to consume is _____. If an income tax is introduced in this​ economy, the multiplier​ _______.

4 .75 decreases

Apparel comprises​ ______ percent of the CPI basket.

4%

Hyperinflation is an inflation rate of​ _____ or higher that grinds the economy to a halt and causes a society to collapse.

50 percent a month

The U.S. price level is 120​, the Japanese price level is 95.4​, and the real exchange rate is 105.4 Japanese real GDP per unit of U.S. real GDP. What is the nominal exchange​ rate?

83.79

The table gives information reported by the Bureau of Labor Statistics for 2009. What is the unemployment​ rate, the labor force participation​ rate, and the​ employment-to-population ratio? The unemployment rate is ____ percent. The labor force participation rate is ____ percent. The​ employment-to-population ratio is ____ percent.

9.3% 65.4% 59.3%

If the growth rate of​ China's standard of living during 2013 is​ maintained, how many years will it take to​ double? If the growth rate of​ China's standard of living during 2013 is​ maintained, it will double in ____ years.

9.6

Consider the following events. Event​ 1: Growth in the world economy slows. Event​ 2: The world price of oil rises. Event​ 3: U.S. labor productivity declines. Choose the statement that is correct.

A classical macroeconomist and a monetarist recommend that taxes be kept low to avoid disincentive effects for all of the events and a Keynesian recommends active fiscal policy and monetary policy to offset all events.

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.

Choose the correct statement.

A credit card is not a means of payment.

Choose the statement that is incorrect.

A government budget surplus competes with investment for funds.

Choose the statement that is incorrect about the Eurozone economy.

A rise in the expected inflation rate shifts the​ short-run Phillips curve rightward.

Choose the statement that is incorrect.

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

Choose the correct statement about interest rate parity.

Adjusted for risk, interest rate parity always prevails.

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.

Starting at point A​, the initial effect of a​ cost-push inflation is a move to point​ ______. As a​ cost-push inflation spiral​ proceeds, it follows the path​ ______.

B; E,​ G, I

A​ cost-push rise in the price level will initially move the economy to point​ ______ and to point​ ______.

C when the money prices of raw materials​ rise; D when aggregate demand increases

Starting at point A​, the initial effect of a​ demand-pull inflation is a move to point​ ______. As a​ demand-pull inflation spiral​ proceeds, it follows the path​ ______.

C; E,​ H, I

Choose the statement that is incorrect.

Changes in relative prices lead consumers to change the items they buy, and the CPI reflects this substitution.

Using the news​ clip's definition of​ productivity, choose the statement that is incorrect.

Changing the number of hours employed changes the growth of productivity.

Which of the following is money​?

Charlie's checking account deposit at the Bank of America.

​China's real GDP per person was​ 13,165 yuan in 2013 and​ 14,088 yuan in 2014.​ India's real GDP per person was​ 49,516 rupees in 2013 and​ 51,521 rupees in 2014. By maintaining their current growth​ rates, _______.

China will double its standard of living first

Choose the correct statement.

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

Choose the statement that is incorrect.

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

The debtor nation status of the United States would be a concern if the borrowed funds were used to finance​ ______.

Consumption

Which of the following fiscal policies combats​ inflation?

Decreasing government spending

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.

Starting at point A​, the initial effects of an expected inflation is a movement to point​ ______. As an expected inflation​ proceeds, it follows the path​ ______.

E; I

How will the labor force change if the following events​ occur? 1. Sarah starts a second job 2. Pat finds a good job and is hired. 3. Mary takes a job at​ McDonald's while she waits to start her new job.

Events​ 1, 2, and 3 will not change the labor force.

Stagflation is anathema to the Phillips curve.

False

The central bank of the United States is the​ ______.

Federal Reserve System

The monetary base is the sum of​ _______. The monetary base is equal to​ _______.

Federal Reserve​ notes, coins, and depository institution deposits at the​ Fed; the liabilities of the Fed plus coins issued by the Treasury

U.S. official reserves are the​ government's holding of​ _____.

Foreign currency

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

The article defines productivity as​ ______. Real GDP per person is​ ______.

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

Choose the statement that is incorrect.

Growth in average hours per worker increase labor productivity.

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 that is incorrect.

If the demand for Treasury bonds​ increases, the interest rate on the Treasury bond rises.

Choose the statement that is incorrect.

In the long​ run, China manages its exchange rate to keep its export prices low and to make it easier to compete in world markets

Choose the statement that is incorrect.

In the long​ run, China manages its exchange rate to keep its export prices low and to make it easier to compete in world markets.

Canada sets new environmental standards that require power utilities to upgrade their production facilities. Canada's aggregate demand _____.

Increases

The United States experiences strong economic growth. Canada's aggregate demand _____.

Increases

An increase in world demand for U.S. exports​ ______ the demand for U.S. dollars. A rise in the U.S. interest rate differential​ ______ the demand for U.S. dollars.

Increases; Increases

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

Keynesian

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

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.

The two main official measures of money in the United States today are​ ______. The two main official measures of money in the United States​ ______ really money.

M1 and​ M2; are

M2 consists of​ _____ plus​ _____ and​ _____ deposits,​ _____, and other deposits.

M1; savings​ deposits; small​ time; money market funds

The equation of exchange is​ ______ and it is true​ ______.

MV​ = PY​; by definition

Choose the statement that is incorrect.

Malthusian growth theory holds that real GDP per person growth slows as the opportunity cost of women in the labor force increases.

Mexico trades with the United States. When the U.S. economy goes into an expansion​, ​______.

Mexico's exports to the United States increase​, ​Mexico's aggregate demand increases​, and​ Mexico's AD curve shifts rightward

​Long-run aggregate supply is the relationship between the quantity of real GDP supplied and the price level when the ​ _____ changes in step with the price level to maintain full employment.

Money wage rate

Choose the statement that is incorrect.

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

Which of the following statements illustrates structural unemployment​?

Outsourcing resulted in many job losses in the mid 2000s.

Choose the statement that is incorrect.

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

The core inflation rate is the annual percentage change in the​ _____ price index​ _____ the prices of food and energy.

PCE; excluding

An exchange rate is the​ _____ at which one currency exchanges for another in the foreign exchange market

Price

The numbers in the table are _____. The reference base year for the CPI is _____. The CPI for December 2017 tells us that since the reference base​ year, the price level has increased by ____ percent. In the year to December 2017​, the inflation rate measured by the CPI was ___ percent.

Price levels 1982-1984 148% 2.1%

Choose the statement that is incorrect.

Quantitative easing decreased bank reserves.

Defenders of RBC theory claim all of the following except ​_______.

RBC theory is consistent with a negligible intertemporal substitution effect

Which of the following is an example of financial capital​?

Rachel has taken a loan to buy a new home.

Choose the statement that is incorrect.

Real GDP per person grows whenever real GDP grows.

Which of the following statements illustrates frictional unemployment​?

Robin is quitting his current job to find another that has better prospects.

In developing countries with less developed capital​ markets, which of the following monetary policy rule works the best

Ruired reserve ratios

A change in the actual inflation rate brings a movement along the​ ______. A change in the expected inflation rate brings​ ______.

SRPC​; a shift of the SRPC

What is the largest component of​ M2?

Savings deposits

Choose the statement that is incorrect.

Slower economic growth is always better than rapid economic growth because of reduced environmental damage.

Choose the correct statements. 1. If $ 1 buys 100 yen, then the exchange rate is 100 yen per dollar 2. The foreign exchange market is made up of thousands of people including international tourists and foreign 3. The foreign exchange market is a place. 4. Foreign currency is always in the form of notes or coins

Statements 1 and 2 are correct

The Bureau of Labor Statistics reports six alternative measures of the unemployment rate. Choose the correct statements. a. U-5 measures the job losers. b. U-1 measures those who are unemployed for 15 weeks or more. c. U-2 measures the job losers. d. U-2 adds all marginally attached workers to the official unemployment rate.

Statements b and c are correct.

​______ bring business cycle turning points.

Swings in autonomous expenditure

Which of the following economies is facing a stagflation​?

The European economy is experiencing a decrease in real GDP for three quarters and a rise in the price level.

Which of the following statements illustrate monetary policy​?

The Fed has raised the federal funds rate by 0.3 percent.

Choose the statement that is incorrect.

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

Which of the following statements illustrate fiscal policy​?

The US government has proposed a hike in the corporate tax rate.

The bank plans to hold ​$7 for every​ $100 in deposits. The bank holds desired reserves of ​$4,000 and actual reserves of ​$18,000. What is the​ bank's desired reserve ratio and its excess reserves​?

The bank's desired reserve ratio is 7% The banks excess reserves are $14,000

Choose the statement that is incorrect.

The bias in the CPI eliminates the need for people to shop in discount stores.

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 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 that is incorrect.

The greater the default​ risk, the greater is the supply of loanable funds.

Choose the statement concerning​ firms' investment decisions that is incorrect.

The higher the real interest​ rate, the greater is the demand for loanable​ funds, other things remaining the same.

Labor productivity is rising at a rapid rate in China and wages are rising at a similar rate. Choose the statement that is incorrect.

The increase in labor productivity has no effect on​ short-run aggregate supply.

Choose the correct statement.

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

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 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.

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.

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 unemployment rate is zero when the economy is at a business cycle peak.

Choose the statement that is incorrect.

The unemployment rate was lower during the recession in 1982 than it was during the recession of​ 1990-1991.

Choose the statement that is incorrect.

The​ "Mexican peso is gaining on the​ greenback" because the demand for pesos is increasing at a slower pace than the supply of pesos is increasing.

Choose the statement that is incorrect.

The​ employment-to-population ratio fluctuates less than the labor force participation rate.

Choose the statement that is incorrect.

Treasury Secretary Timothy Geithner most likely follows the monetarist school of thought if he thinks that a falling money wage rate will respond quickly to changes in government tax policy.

Choose the statement that is incorrect.

Trends around which the exchange rate fluctuates are impossible to predict.

The Economist magazine uses the price of a Big Mac to determine whether a currency is undervalued or overvalued. In July​ 2012, the price of a Big Mac was​ $4.33 in New​ York, 15.65 yuan in​ Beijing, and 6.50 Swiss francs in Geneva. The exchange rates were 6.37 yuan per U.S. dollar and 0.98 Swiss francs per U.S. dollar. The yuan was​ ______ relative to purchasing power parity and the Swiss franc was​ ______ relative to purchasing power parity. The price of a Big Mac in different countries​ _______ provide a valid test of purchasing power parity because​ _______.

Undervalued; overvalued does​ not; purchasing power parity is determined by the price level not by individual prices

Choose the correct statement.

When the price of an asset​ rises, the interest rate​ falls, everything else remaining the same.

According to the quantity theory of​ money, in the long run an increase in the quantity of money of 5​ percent, brings​ _____ in the price level.

a 5 percent increase

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

Suppose the economy had been operating at a​ full- employment equilibrium. After the fall in consumer​ confidence, the economy moves to​ ______ equilibrium and​ ______ gap emerges.

a below​ full-employment; a recessionary

The quantity theory of money tells us that​ _______.

a change in the money growth rate brings an equal change in the inflation rate

A​ bank's attempts to pursue profit can sometimes lead to bank failure because​ _______.

a combination of all of the above

A fixed exchange rate is an exchange rate that is determined by​ ______ and is achieved by central bank intervention in the foreign exchange market to block​ _____.

a decision of the government or the central​ bank; the unregulated forces of demand and supply

The effect of this decrease is ____ in investment​ demand, _____ in the demand for loanable​ funds, and _____ in the real interest rate

a decrease a decrease a decrease

With the strengthening of the yen against the U.S. dollar in​ 2012, Japan's central bank did not take any action. A Japanese politician called on the central bank to take actions to weaken the​ yen, saying it will help exporters in the short run and have no​ long-run effects. Japan's current exchange rate policy is​ ______. The politician wants a​ ______ in the short run. This policy would have no effect on the exchange rate in the long run because in the long run​ ______.

a flexible exchange rate crawling​ peg; the price level and the nominal exchange rate are determined together

A rise in the money wage rate with no change in potential GDP creates​ ______.

a leftward shift of the SAS curve and no change in the LAS 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)

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

A very high unemployment rate can be accounted for by the Phillips curve model by all of the following except​_______.

a movement up along the​ long-run Phillips curve if the natural unemployment rate increases

The United States is​ ______.

a net borrower and a debtor nation

Deflation is​ _______.

a persistently falling price level

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

a rational expectation

Excess reserves are a​ bank's _____ reserves minus its​ _____ reserves.

actual; desired

A person is in the labor force if any one of the following statements is true except that he or she is​ ______.

aged 16 and over and not in​ jail, hospital, or some other form of institutional care

An inflation that starts because​ _____ is called ​demand-pull inflation.

aggregate demand increases

Deflation occurs when​ _______.

aggregate demand increases at a persistently slower rate than aggregate supply

A macroeconomic equilibrium in which real GDP exceeds potential GDP is​ _____ equilibrium. And one in which real GDP is less than potential GDP is​ _____ equilibrium.

an above full​-employment​; a below full​-employment

In a​ demand-pull inflation​ spiral, the economy moves from​ _____ to​ _____.

an above​ full-employment equilibrium; a​ full-employment equilibrium

Mexican goods might become more expensive to U.S. consumers because​ ______.

an appreciation of the Mexican peso against the U.S. dollar means that the U.S. dollar depreciates against the Mexican peso

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

Which of the following events would not cause an expected​ inflation?

an expected increase in taxes

A​ demand-pull inflation begins with​ _______.

an increase in aggregate demand

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

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

On March 30, 2012 the U.S. dollar was trading at 82 yen per dollar on the foreign exchange market. On August 30, 2012​, the U.S. dollar was trading at 79 yen per dollar. The events in the foreign exchange​ market, everything else remaining the same that could have resulted in this change in the value of the U.S. dollar include​ _______.

an increase in the Japanese interest rate and a fall in the expected future exchange rate of the U.S. dollar

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

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

an upward shift​ of; an increase

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

The growth rate is the​ _____ of a variable​ - the change in the level expressed as a percentage of the initial level.

annual percentage change

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

If aggregate demand grows faster than potential​ GDP, ______ gap emerges and if it grows more slowly than potential​ GDP, ______ gap emerges.

an​ inflationary; a recessionary

Explain the effect of the two announcements on the U.S. dollardash-yen exchange​ rate: Would the U.S. dollar appreciate or​ depreciate? The two announcements on the U.S.​ dollar-yen exchange rate would​ _____ the U.S. dollar.

appreciate

The U.S. dollar exchange rate increased from ​$0.89 Canadian in June 2009 to ​$0.96 Canadian in June 2010​, and it decreased from 83.8 euro cents in January 2009 to 76.9 euro cents in January 2010. Between June 2009 and June 2010​, the U.S. dollar​ ______ against the Canadian dollar. Between January 2009 and January 2010​, the U.S. dollar​ ______ against the euro.

appreciated; depreciated

The natural unemployment rate​ ______.

arises from the existence of frictional and structural unemployment

Categorize the following items as either an asset of the Fed or a liability of the Fed. U.S. government securities Federal Reserve notes Loans to depository institutions Depository institution deposits

asset liability asset liability

A Classical macroeconomist believes that the economy is​ self-regulating and always​ _____.

at full employment

The natural unemployment rate is the unemployment rate when the economy is​ _____.

at full employment

When aggregate planned expenditure is greatergreater 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 debtor nation is a country that during its entire history has​ _____ the rest of the world than it has​ _____ the rest of the world.

borrowed more​ from; lent to

A depository institution creates liquidity by​ ______.

borrowing short and lending​ long;

An increase in potential GDP increases​ ______.

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

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

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

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

During​ 2008, the inflation rate increased and the unemployment rate increased. These events​ ______.

cannot be explained by a movement along the SRPC because along this curve the inflation rate and unemployment rate move in opposite directions

The​ ______ account records​ ______ U.S. investment abroad.

capital and​ financial; foreign investment in the United States minus

The Federal Reserve System ​(the Fed) is the​ _____ of the United States.

central bank

The four price indexes that are alternatives to the CPI are​ ______.

chained​ CPI, personal consumption expenditure​ deflator, GDP​ deflator, and core PCE

The​ Fed's policy tools include all of the following except​ ______.

changing government expenditure

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

consumption expenditure and imports

Aggregate planned expenditure is the sum of planned​ _____.

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

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

consumption​ expenditure; 70

Households preferred to buy corporate equities rather than bonds because​ ______.

corporate equities deliver capital​ gains, which increases wealth

Pakistan is experiencing​ ______ inflation

cost-push

The news clip refers to​ ______ inflation when it discusses rising production costs. ​"Rising labor​ productivity" can neutralize the effect on the inflation rate of​ "higher input​ costs" because​ ______.

cost-push; it increases​ short-run aggregate supply and​ long-run aggregate supply with no slowdown in aggregate demand growth

If the government sector deficit​ increases, with no change in the private sector​ surplus, net exports​ ______.

decrease

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

decrease increase; increases

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

In March 2007​, the U.S. unemployment rate was 4.4 percent. In August 2008​, the unemployment rate was 6.1 percent. Assuming that unemployment remained constant between March 2007 and August 2008​, then the labor force​ ______.

decreased

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

Potential GDP is​ ______.

determined by the​ full-employment quantity of labor

Did the change in the government budget deficit crowd out some​ investment? The change in the government budget deficit​ _____ crowd out some investment because the​ _____.

did; real interest rate rose

Planned saving​ + Planned consumption expenditure​ = ______.`

disposable income

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

For three​ years, there was no technological change in Longland but capital per hour of labor increased from​ $10 to​ $20 to​ $30 and real GDP per hour of labor increased from​ $3.80 to​ $5.70 to​ $7.13. ​Then, in the fourth​ year, capital per hour of labor remained constant but real GDP per hour of labor increased to​ $10. Longland​ ______ experience diminishing returns because​ ______.

does; as capital per hour of labor​ increases, real GDP per hour of labor increases but by smaller amounts

If the growth rates of 2010 are maintained in future​ years, real GDP per person in Sudico will​ ______.

double by 2019

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

A rational expectation is a forecast that results from the use of all the relevant data and​ _____.

economic science

The components of the CPI basket that are experiencing price increases faster than the​ 12-month average include​ ______. And those components that are experiencing price increases below the​ 12-month average include​ ______.

energy, transportation and​ food; clothing

Interest rate parity means​ ______.

equal rates of return

Interest rate parity​, which means​ _____ across​ currencies, means that for risk free​ transactions, there is​ _____ gain from choosing one currency over another.

equal rates of​ return; no

Arbitrage in the foreign exchange market and international loans market achieves all of the following except​ _______.

equal real exchange rates across the major currencies

​Long-run macroeconomic equilibrium occurs when real GDP​ _____ potential GDP​ - equivalently, when the economy is on its​ _____ curve.

equals; LAS

The quantity theory of money is the proposition that when real GDP​ _____ potential​ GDP, an increase in the quantity of money brings​ _____ percentage increase in the​ _____.

equals; an​ equal; price level

The government expenditure multiplier equals the change in​ _____ that results from a change in government expenditure divided by the change in government expenditure.

equilibrium expenditure and real GDP

A below​ full-employment equilibrium is an equilibrium in which potential GDP​ _____ real GDP.

exceeds

Households make saving decisions by considering all of the following factors except​ _______.

expected profit

Could the change in the exchange rate on June 2 have resulted from the two announcements or must some other influence have changed​ too? If​ so, what might that influence have​ been? On June​ 2, the U.S. dollar depreciated rather than appreciated because a fall in U.S.​ _____ decreased the demand for U.S. dollars or an increase in U.S.​ _____ increased the supply of U.S. dollars.

exports; imports

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

exports; imports

Choose the statement that is incorrect. Starting from a​ long-run equilibrium,​ _______.

f the percentage change in the money wage rate equals the percentage change in the unemployment​ rate, the economy remains at full employment.

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

fall

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 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

A country has a higher inflation rate than all other​ countries, and it has slower economic growth. The central bank does not intervene in the foreign exchange market. To preserve purchasing power​ parity, the exchange rate​ ______. If investment from foreigners decreases due to the low economic​ growth, the current account balance is becoming more​ ______. It is expected that in the future the exchange rate will​ ______. The interest rate differential is​ ______.

falls; positive fall; positive

If the interest rate is less than 4 percent a​ year, the price of a bond​ ______, and the interest rate​ ______.

falls; rises

The price of a bond​ ______ and the interest rate​ ______.

falls; rises

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

The loanable funds market is the aggregate of all the individual​ _____ markets.

financial

In the 1950s and​ 1960s, the United States operated a​ ______. Now the United States operates a​ ______ . The Fed​ "counters disorderly conditions in exchange​ markets" by doing all of the following except​ ______. A currency can experience​ short-run fluctuations because​ ______.

fixed exchange​ rate; flexible exchange rate selling foreign​ reserves, which raises the U.S. exchange rate when the supply of dollars dramatically decreases the currency can fluctuate based on beliefs about the future exchange rate

According to RBC​ theory, the source of the business cycle is​ _______, which result mainly from​ _______.

fluctuations in​ productivity; fluctuations in the pace of technological change

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

The core CPI is the CPI excluding​ ______ prices.

food and fuel

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

An open market operation is the purchase or sale of​ _____ -​ _____ - by the​ _____ in the open market.

government​ securities; U.S. Treasury bills and​ bonds; New York Fed

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

greater; positive

The unemployment rate in May 2008 is​ ______ the estimated natural unemployment rate. This implies that real GDP is​ ______ potential GDP at this time.

greater​ than; less than

What are the three sources of global investment​ funds? (Separate with a​ comma, no plurals or​ abbreviations.)

household saving, government budget surplus, borrowing from rest of world

A depository institution is a financial firm that takes deposits from​ _____.

households and firms

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 Fed is the lender of last​ resort, which means​ _______.

if depository institutions are short of​ reserves, they can borrow from the Fed

A person is not in the labor force if they are​ ______.

in the​ working-age population but neither employed nor unemployed

A bank manager tells you that she​ doesn't create money. She just lends the money that people deposit. The bank manager is​ ______ because​ ______.

incorrect; every new loan creates a new deposit

The changes in exports and imports reported here​ ______. Of the two quarters​ reported, exports and imports make the greater contribution to aggregate demand growth in the _____ quarter.

increase aggregate demand and have no effect on the quantity of real GDP demanded Second

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 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

A government budget deficit​ _______ the real interest​ rate, increases​ ______.

increases; private saving and decreases investment

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

Deflation can be ended by​ _______.

increasing the growth rate of the quantity of money

The federal funds rate is the​ _____ rate on​ _____ loans.

interest; interbank

A creditor nation is a country that during its entire history has​ _____ the rest of the world than other countries have​ _____ it.

invested more​ in; invested in

In monetarist cycle theory​, fluctuations in both​ _____, driven by fluctuations in the growth rate of the quantity of​ money, are the main source of fluctuation in aggregate demand.

investment and consumption expenditure

In Keynesian cycle theory​, fluctuations in​ _____ driven by fluctuations in business confidence​ - summarized by the phrase​ "animal spirits"​ - are the main source of fluctuations in​ _____.

investment; aggregate demand

Stagflation​ ______.

is a combination of recession and inflation

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

FOMC members are predicting that the U.S. economy​ ______.

is on a​ short-run Phillips curve to the right of the LRPC and will move leftward up along the SRPC

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

Arbitrage​ _______.

is the practice of seeking to profit by buying in one market and selling for a higher price in another related market

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

A central bank performs all of the following functions except​ ______.

it provides safety deposit boxes for citizens with assets over $ 200 million

Core CPI is a useful measure because​ ______. Core CPI is a misleading measure because​ ______.

it smooths out​ short-term fluctuations that arise from the volatility in food and fuel​ prices; it does not include food and fuel prices price rises

The key proposition of new growth theory that makes growth persist is that​ ______ is not subject to diminishing returns.

knowledge capital

RBC theorists believe the​ when-to-work effect is

large

To increase its assets to​ $2.3 trillion in​ 2008, the Fed used​ ______.

last resort loans

Net worth is the total market value of what a financial institution has​ _____ minus the market value of what it has​ _____.

lent; borrowed

Deflation will be created if the growth rate of the quantity of money is ​ _______.

less than 2 percent a year

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

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

loan​ markets, bond​ markets, and stock markets

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

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 Federal Open Market Committee is the​ Fed's _____ committee.

main policy making

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

makes the multiplier smaller

Banks create money by​ ______.

making loans

Depository institutions pool risk because they use funds obtained from​ ______ depositors to make loans to​ ______ borrowers.

many; many

The unemployment rate might underestimate the underutilization of labor resources because it does not include​ ______.

marginally attached workers and​ part-time workers who want​ full-time jobs

Money is any commodity or token that is generally acceptable as a​ ______.

means of payment

The unemployment rate is supposed to​ ______. It is an imperfect measure because​ ______.

measure underutilized​ labor; it does not include marginally attached workers and​ part-time workers who want​ full-time jobs

Money serves as a​ ______.

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

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

money; monetary base

Purchasing power parity is equal value of​ _____ - a situation in which​ _____ buys the same amount of goods and services in different currencies.

money; money

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

more induced expenditure

A net borrower is a country that is borrowing​ _____ from the rest of the world​ _____ it is lending to the rest of the world.

more; than

A net lender is a country that is lending​ _____ to the rest of the world​ _____ it is borrowing to the rest of the world.

more; than

When the economy goes into​ recession, the output gap is​ _______.

negative

If inflation is​ expected, _______.

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

The bias in these CPI numbers might arise from​ ______.

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

The​ ______ growth theory best corresponds to the explanation given by Mr. Greenspan because Mr.​ Greenspan's explanation shows​ ______.

new; the economy as a perpetual motion machine

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

If the only change that occurred was that all the newly hired people had been unemployed in​ October, then the labor force would​ ______ and unemployment would​ _______.

not have​ changed; have decreased

Currency consists of​ _____.

notes​ (dollar bills) and coins

Saving is the amount of income that is​ _____ in net taxes or spent on​ _____ goods and services.

not​ paid; consumption

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

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

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

occurs when all expenditure is induced expenditure

Foreign currency is the money​ _____ regardless of whether that money is in the form of​ notes, coins, or bank deposits.

of other countries

The U.S. dollar exchange rate fluctuates in part because a change in the U.S. interest rate differential changes the demand for U.S. dollars and the supply of U.S. dollars in​ ______ and a change in the expected future exchange rate changes the demand for U.S. dollars and the supply of U.S. dollars in​ ______.

opposite​ directions; opposite directions

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

The chained CPI​ ______.

overcomes the sources of bias in the CPI by incorporating substitutions and using current and previous period quantities

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

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

Wealth is the value of all the things that people​ _____.

own

A stock is a certificate of​ _____ and claim to the​ _____ that a firm makes.

ownership; profits

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

The new Keynesian cycle theory emphasizes the fact that​ today's money wage rates were negotiated at many past​ dates, which means that​ _____ rational expectations of the​ _____ price level influence the money wage rate and the position of the SAS curve.

past; current

Some unemployment is unavoidable because​ ______.

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

Depository institutions balance risk and return by​ _______.

placing some funds into safe low​ interest-earning assets and other funds into​ high-interest risky assets

Keynesian macroeconomists recommend​ ______.

policies that actively offset changes in aggregate demand that bring recession

Monetarist macroeconomists recommend​ ______.

policies that keep taxes low to avoid disincentive effects that decrease potential GDP

Classical macroeconomists recommend​ ______.

policies that minimize the disincentive effects of taxes on​ employment, investment, and technological change

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

population growth

A recessionary gap eventually emerges even if aggregate demand remains constant because over time​ ______.

potential GDP increases

The mainstream business cycle theory is that​ ______ grows at a steady rate while​ ______ grows at a fluctuating rate.

potential​ GDP; aggregate demand

The output gap is real GDP minus​ _____ expressed as a percentage of​ _____.

potential​ GDP; potential GDP

The combination of a rising​ _____ and decreasing​ _____ is called stagflation.

price​ level; real GDP

The newest theory of the business​ cycle, known as real business cycle theory ​(or RBC​ theory), regards random fluctuations in​ _____ as the main source of economic fluctuations.

productivity

Workers in developing Asian economies who work more hours than Americans are not the​ world's most productive workers because​ ______.

productivity depends on how much real GDP each hour of labor can produce

According to RBC​ theory, the main source of economic fluctuations is a decrease in​ ______

productivity growth

The functions of depository institutions include all of the following except​ ______.

providing debt counseling

The Federal Reserve​ (usually called the​ Fed) is the central bank of the United​ States, a​ _____ authority whose main role is the regulation of​ _____.

public; banks and money

A central bank is a banks bank and a​ _____ authority that regulates a​ nation's depository institutions and conducts​ _____ policy, which means that it adjusts the​ _____ and influences​ _____.

public; monetary; quantity of money in​ circulation; interest​ rates;

A central bank is a​ bank's bank and a​ _____ authority that regulates a​ nation's depository institutions and conducts​ _____ policy, which means that it adjusts the​ _____ and influences​ _____.

public; monetary; quantity of money in​ circulation; interest​ rates;

The ​crowding-out effect is the tendency for a government budget deficit to raise the​ _____ and​ _____ investment.

real interest​ rate; decrease

The sources of labor productivity growth include all of the following except​ ______.

real wage rate growth

Over the last several​ decades, the gap between real GDP per person in the United States and CanadaCanada ​______. The gap between real GDP per person in the United States and JapanJapan ​______.

remained nearly constant or widened a small​ amount; narrowed

What happened to the price of a bond between 2005 and​ 2009? How do you​ know? The price of a bond ​ _____ between 2005 and 2009 because the​ _____.

remained​ unchanged; nominal interest rate remained unchanged

Stagflation is a combination of a​ ______ in the price level and​ ______ in real GDP.

rise; a decrease

1. An unexpected increase in exports increases aggregate demand by​ $50 billion. What happens to the price level and real​ GDP? Has Shell Island experienced inflation or deflation and what type of output gap does it now​ have? The price level​ _____ and real GDP​ _____ billion. Shell island has experienced​ _____ .

rises to​ 130; increases to​ $625; a​ one-time change in the price level and has an inflationary gap

The demand for loanable funds increases and the supply of loanable funds increases. As a​ result, the equilibrium real interest rate​ ______ and the equilibrium quantity of loanable funds​ ______.

rises, falls, or remains the​ same; increases

In the long​ run, the money wage rate​ ______, short-run aggregate supply​ ______, and the economy returns to a​ full-employment equilibrium.

rises; decreases

If the interest rate is greater than 4 percent a​ year, the price of a bond​ ______, and the interest rate​ ______.

rises; falls

The demand for loanable funds increases and the supply of loanable funds decreases. As a​ result, the equilibrium real interest rate​ ______ and the equilibrium quantity of loanable funds​ ______.

rises; increases,​ decreases, or remains the same

The defining feature of the classical view of macroeconomics is that the economy is​ ______.

self-regulating and always at full employment

The defining feature of the monetarist view of macroeconomics is that the economy​ is______.

self-regulating and that it will normally operate at full​ employment, provided that monetary policy is not erratic and that the pace of money growth is kept steady

In the short​ run, when the Fed decreasesdecreases the quantity of​ money, people enter the loanable funds market and ____ bonds.

sell

Growth rates over the past few decades indicate that gaps in real GDP per person around the world are​ ______.

shrinking between some countries and growing or staying the same between other countries

Potential sources for faster economic growth in India suggested in this news clip include all of the following except​ ______.

slowing population growth

A bond is a promise to pay​ _____ sums of money on​ _____ dates.

specified; specified

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

stagflation

In mainstream business cycle​ theory, the money wage rate is

sticky

The unemployment that arises when changes in technology or international competition change the skills needed toThe unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the location of jobs isperform jobs or change the location of jobs is ​______ unemployment.

structural

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

structural; increases

The 5 million workers who cannot find jobs because of mismatching in the labor market are counted as part of the​ economy's ______ unemployment because​ ______.

structural; there is a mismatch between their skills and the skills required for the available jobs

The​ long-run historical evidence and international evidence show us that the relationship between money growth and the inflation rate​ ______.

supports the quantity​ theory, but the correlation is not perfect

According to neoclassical growth​ theory, the fundamental cause of economic growth is​ ______.

technological​ change, which induces saving and investment that make capital per hour of labor grow

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

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

If a U.K. bank deposit earns 4 percent a year and a U.S. bank deposit earns 5 percent a​ year, then people expect that​ ______.

the U.S. dollar will depreciate by 1 percent a year

The region with the highest inflation rate in 2010 is​ ______. The region with the highest inflation rate in 2011 is​ ______.

the United​ States; the United States

The loanable funds market is​ ______.

the aggregate of all the individual financial markets

Although luxury clothing prices have increased dramatically since the late​ 1990s, the clothing category of the CPI has actually declined by about 10 percent because​ ______.

the apparel component of the CPI is weighted more heavily toward​ moderately-priced clothing, and the price of​ moderately-priced clothing has decreased

The price level is​ ______.

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

A lower required reserve ratio increases bank profits because​ ______.

the banks hold fewer reserves

In​ 1890, the United States surpassed China to become the​ world's largest economy because​ ______.

the benefits of the Industrial Revolution were greater in the United States than in China

Net taxes are taxes paid to the government minus​ _____.

the cash transfers received from government

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

In the short​ run, the nominal exchange rate is determined by​ ______. And in the short run​ ______.

the demand for U.S. dollars and the supply of U.S. dollars in the foreign exchange​ market; a change in the nominal exchange rate brings an equivalent change in the real exchange rate

Aggregate demand will increase if​ ______.

the effect of the tax rebates and the change in the foreign exchange rate outweigh the effect of the​ housing, credit, and financial crises

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

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

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

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

Economic growth results when there are increases in​ ______.

the full-employment quantity of labor

The velocity of circulation is the average number of times a dollar of money is used annually to buy​ ______. The formula used to measure the velocity of​ circulation, V​, is​ ______, where P is the price​ level, Y is real​ GDP, and M is the quantity of money.

the goods and services that make up​ GDP; V​ = ​(P ×Y​) ÷M

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

An economy has a zero marginal tax rate. When real GDP​ increases, the change in consumption expenditure equals​ _______. When real GDP​ increases, the change in imports equals​ _______.

the marginal propensity to consume times ×the increase in real GDP 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 times ×the increase in real GDP

The quantity of money that the banking system can create is limited by​ _______.

the monetary​ base, desired​ reserves, and desired currency holdings

All of the following events except an increase in​ ______ might cause a​ demand-pull inflation.

the money wage rate

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

the money wage rate or money prices of raw materials

The unemployment rate tends to actually underestimate the unemployment​ problem, especially during a​ recession, because​ ______.

the number of marginally attached workers​ increases, but these workers are not included in the official unemployment rate

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

the price level

The aggregate demand curve shows the relationship between the quantity of real GDP demanded and​ ______, when everything else remains the same.

the price level

A movement along the aggregate demand curve occurs if​ _______.

the price level changes and all other factors remain unchanged

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

The demand for loanable funds is the relationship between​ _____ demanded and the​ _____ when all other influences on borrowing plans remain the same.

the quantity of loanable​ funds; real interest rate

Inflation results when​ ______.

the quantity of money increases rapidly

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

the quantity of real GDP supplied

The main influences on the quantity of money that people and businesses plan to hold include all of the following except​ ______.

the quantity of reserves

The demand for loanable funds is determined by​ ______. The demand for loanable funds changes when​ ______ changes.

the real interest rate and expected​ profit; expected profit

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

the real wage rate remains constant

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

the supply of​ labor; labor productivity

Gross investment is​ ______. Net investment is​ ______.

the total amount spent on new​ capital; the change in the value of capital

Along the​ long-run Phillips​ curve, _______.

the unemployment rate is constant at the natural unemployment rate

Depository institutions have made innovations that have changed the composition of money in all of the following ways except​ ______.

the use of currency has fallen significantly

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

Choose the statement that is incorrect. If the labor market is working​ properly, there is still unemployment because​ ______.

there are always discouraged searchers

European banks need more capital because​ _______. The​ "capital" that is referred to in the news clip is​ _________.

they risk failing if loans they hold are not repaid or if other assets lose​ value; owners' investment in the bank

The price index with the greatest bias is​ ______ because​ ______.

the​ CPI; it​ isn't based on current period actual expenditure weights

The monetary base is equal to​ ______.

the​ Fed's liabilities together with coins issued by the Treasury

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

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

The foreign exchange market is the market in which​ _____ of one country is exchanged for​ _____ of another.

the​ currency; the currency

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

Disoposable income is aggregate income minus taxes plus ​ _____.

transfer payments

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

up; unexpected

Depository institutions minimize the cost of monitoring borrowers by​ ______.

using specialized resources that have a much lower cost than what households would incur if they had to undertake the activity individually

An unemployed person​ ______.

wants​ work, has made specific efforts to find a job within the previous four​ weeks, or is waiting to be called back to a job from which he or she has been laid​ off, or is waiting to start a new job within 30 days

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

was in an expansion

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

ΔC ÷ΔYD​; ΔS ÷ΔYD