ECON Final Exam

The labor-force participation rate measures the percentage of the

total adult population that is in the labor force.

The natural rate of unemployment

varies less than the measured unemployment rate.

What do economists call financial institutions through which savers can indirectly provide funds to borrowers?

Financial intermediaries

Financial intermediaries are

financial institutions through which savers can indirectly provide funds to borrowers

Financial intermediaries are

financial institutions through which savers can indirectly provide funds to borrowers.

Sandy has graduated from college and is devoting her time to searching for a job. She has seen plenty of openings but has not yet been offered one that best suits her tastes and skills. Sandy is

frictionally unemployed. Frictional unemployment can exist even in the long run.

When the Fed buys bonds the supply of money

increases and so aggregate demand shifts right.

The source of the supply of loanable funds

is saving and the source of demand for loanable funds is investment.

Esther is considering expanding her dress shop. If interest rates rise she is

less likely to expand. This illustrates why the demand for loanable funds slopes downward

You saved $500 in currency in your piggy bank to purchase a new laptop. The $500 you kept in your piggy bank illustrates money's function as a _______. The laptop's price is posted as $500. The $500 price illustrates money's function as a _____. You use the $500 to purchase the laptop. This transaction illustrates money's function as a ______.

medium of exchange, store of value, unit of account

When the government's budget deficit increases the government is borrowing

more and public savings falls

The effect of an increase in the price level on the aggregate-demand curve is represented by a

movement to the left along a given aggregate-demand curve.

At the broadest level, the financial system moves the economy's scarce resources from

savers to borrowers.

Institutions that help to match one person's saving with another person's investment are collectively called the

Financial System

Which of the following would shift the long-run aggregate supply curve right?

An increase in the capital stock, but not an increase in the price level

Which of the following lists is included in what economists call "money"?

Cash

Which of the following statements about the term of a bond is correct?

Interest rates on long-term bonds are usually higher than interest rates on short-term bonds.

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can, given the reserve requirement

It has $800 in reserves and $9,200 in loans.

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

Medium if exchange

Which of the following is NOT an example of monetary policy?

The Federal Reserve facilitates bank transactions by clearing checks.

Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government purchases equal 4,000, and taxes equal 3,000. What are private saving, public saving, and national saving?

2,000, −1,000, and 1,000, respectively.

If the reserve ratio is 4 percent, then the money multiplier is

25

The leverage ratio is calculated as

assets divided by bank capital.

The natural rate of unemployment is the

amount of unemployment that the economy normally experiences.

The economy's two most important financial markets are

bond market and stock market

The natural rate of unemployment includes

both frictional and structural unemployment

Suppose that a large number of people who used to work or seek work no longer do either. Other things the same, this makes

both the number of people unemployed and in the labor force fall.

The money supply increases when the Fed

buys bonds. The increase will be larger, the smaller is the reserve ratio.

Which of the following is not a function of money? a. Unit of account b. Store of value c. Medium of exchange d. Protection against inflation

d. protection against inflation

Crowding out occurs when investment declines because a budget

deficit makes interest rates rise.

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, there is a

surplus and the interest rate is above the equilibrium level.

Which of the following would necessarily create a surplus at the original equilibrium interest rate in the loanable funds market?

. An increase in the supply of or a decrease in the demand for loanable funds

The Federal Reserve

. is the central bank of the United States

Which of the following counts as part of the supply of loanable funds?

Bank deposits and purchases of bonds

When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures

Capital Investment

Which of the following does the Federal Reserve not do?

Conduct fiscal policy

In which case can we be sure aggregate demand shifts left overall?

People want to save more for retirement and the Fed decreases the money supply

In a closed economy, what does ( Y − T − C) represent?

Private saving

In a closed economy, what does the difference between the tax revenue and government purchases, ( T − G), represent?

Public saving

In a closed economy, what does the difference between the tax revenue and government purchases, (T − G), represent?

Public saving

Consider the expressions T − G and Y − T − C. Which of the following statements is correct?

The first of these is public saving; the second one is private saving

T or F? When output rises, unemployment falls.

True

The price of a stock will rise if the

demand for the stock rises

Josh is a full-time college student who is not working or looking for a job. The Bureau of Labor Statistics counts Josh as

not in the labor force.

A bond that never matures is known as

perpetuity

An increase in the government's budget surplus means public saving is

positive and increasing.

A larger budget deficit

raises the interest rate and reduces investment

Long-term bonds are

riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.

Other things the same, a higher interest rate induces people to

save more, so the supply of loanable funds slopes upward

Given that Monika's income exceeds her expenditures, Monika is best described as a

saver or as a supplier of funds

Frictional unemployment is inevitable because

sectoral shifts are always happening.

Frictional unemployment is thought to explain relatively

short spells of unemployment, while structural unemployment is thought to explain relatively long spells of unemployment.

Cyclical unemployment refers to

short-run fluctuations around the natural rate of unemployment.

. In a closed economy, private saving is

the amount of income that households have left after paying for their taxes and consumption.

Aggregate demand includes

the quantity of goods and services the government, households, firms, and customers abroad want to buy.

. The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

the slope of the aggregate demand curve.