Economics final review

checkable deposits are also called:

checking accounts

in the united states, the money supply 1, is compromised of:

coins, paper currency, and checkable deposits

consumption of fixed capital (depreciation) can be determined by:

subtracting NDP from GDP

in the aggregate expenditures model, dissaving means

that the households are spending in excess of their current incomes

at the point where the consumption schedule intersects the 45-degree line:

the APC is 1.00

the difference between m1 and m2 is that:

the latter includes small time deposits...money market mutual fund balances

in defining money as m1 economists exclude time deposits because:

they are not directly or immediately a medium of exchange

suppose the total market value of all final goods and services produced in a partlicular country in 2001 is $500 billion and the total market value of final goods and services sold is $450 billion. we can conclude that:

GDP in 2001 is $500 billion

money functions as:

a store of value, a unit of account, a medium of exchange.. ect

which of the fallowing is not part of the m2 money supply?

large (100,000 or more) time deposits

"value added" refers to:

the difference between the value of a firm's output and the value of the inputs it has purchased from others

the three main tools of monetary policy are:

the discount rate, the reserve ratio, and open-market operations

which of the fallowing is correct?

MPC + MPS = APC + APS

in the aggregate expenditures model, the:

MPC is greater than zero, but less than one

in the united states monetary policy is the responsiblity of the:

board of governors of the federal reserve system

which of the fallowing relations is not correct?

c) MPS = MPC +1

the interest rate at which the Federal Reserve banks lend to commercial banks is called the:

discount rate

for all levels of income to the left of the intersection of the 45-degree line and the consumption schedule, the APC is:

greater than 100 percent

GDP differs from NDP in that

gross investment is used in calculating GDP and net investment is used in calculating NDP

gross domestic product (GDP) measures and reports output:

in dollar amounts

checkable deposits are:

included in m1

credit card balances are:

not a component of m1, m2, and m3

in calculating GDP, governmental transfer payments, such as social security of unemployment compenstation are:

not counted

demand-pull inflation

occurs when total spending exceeds the economy's ability to provide output at the existing price level

the unemployment rate is the:

percentage of the labor force which is out of work

the demand curve shows the relationship between:

price and quantity demanded

inflation means that:

prices in the aggregate are rising, although some particular prices may be falling

tom atoe grows tomatoes for home consumption. this activity is:

productive but is excluded from GDP becuase no market transaction occurs

the primary purpose of the legal reserve requirement is to:

provide a means by which the monetary authorities can influence the lending ability of commercial banks

if the price of product L increases, the demand curve for close-substitue product J will:

shift to the right

if ben's MPC is .80, this means that he will:

spend eight-tenths of any increase in his disposable income

value added can be determined by:

subtraccting the purchase of intermediate products from the value of the sales of final products

checkable deposits are classified as money because:

they can be readily used in purchasing goods and paying debts

cost-of-living adjustment clauses (COLAs):

tie wage increases to changes in the price level

a $200 price tag on a cashmere sweater in a department store window is an example of money functioning as a:

unit of account

the value of money varies

inversely with the price level

GDP can be calculated by summing

investment, government purchases, consumption, and net exports

the paper money used in the United States is:

Federal Reserve Notes

GDP is equal to:

C + Ig + G + Xn

with an MPS of .4, the MPC will be..

1.0 minus .4

if the price index rises from 100 to 120, the value of the dollar will fall by:

1/6th

refer to the above table. the value of the dollar in year 2 is:

$.80

refer to the above diagram. the break-even level of GDP (=income) is:

$150

a reserve requirement of 20% means a bank must have a $1000 of reserves if its checkable deposits are:

$5000, 1000 is 20% of 5000

if the consumer price index rises from 300 to 333 in a particular year, the rate of inflation in that year is:

11 percent

the consumer price index was 166.6 in 1999 and 172.2 in 2000. therefore, the rate of inflation in 2000 was about:

3.4 percent

suppose a family's consumption exceeds of its disposable income. this means that its:

APC is greater than 1

if you write a check on a bank to purchase a used honda civic, you are using money primarily as:

a medium of exchange

net export are negative when:

a nation's imports exceed its exports

cost-push inflation may be caused by:

a negative supply shock

which of the fallowing is a tool of monetary policy?

a) open market operations

the 45-degree line on a chart relating consumption and income shows:

all the points at which consumption and income are equal

the MPC can be defined as that fraction of a:

change in income that is spent

the fed can change the money supply by:

changing bank reserves through...commercial banks in borrowing from the central banks

Holly's break-even level of income is $10,000 and her MPC is .75. If her actual disposable income is $16,000, her level of:

consumption spending will be $14, 500

the APC is calculated as:

consumption/ income

inflation initiated by increases in wages of other resource prices is labled:

cost-push inflation

if the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent, then the:

cyclical unemployment rate is 4 percent

suppose there are 5 million unemployment workers seeking jobs. after a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. as a result of this, the official unemployment rate would:

decline

real income can be determined by:

deflating nominal income for inflation

if the consumer price index falls from 120 to 116 in a particular year, the economy has experienced:

deflation of 3.33 percent

"too much money chasing too few goods" best describes:

demand-pull inflation

excess reserves refer to the:

difference between actual reserves and required reserves

the labor force includes

employed workers and persons who are officially enemployed

the amount that a commercial bank can lend is determined by its:

excess reserves

net export:

exports less imports

most modern banking systems are based on:

fractional reserves

search unemployment and wait unemployment are types of

frictional unemployment

part-time workers are counted as:

fully employed and therefore the offical unemployment rate may understate the level of unemployment

a nation'g gross domestic product (GDP):

is the dollar value of the total output produced within the borders of the nation

the rate of inflation can be found by subtracting

last years price index from this years price index and dividing the difference by last years price index

currency in circulation is part of:

m1, m2, and m3

the presence of discouraged workers:

may cause the official unemployment rate to understate the amount of unemployment

the transactions demand for money is most closely related to money functioning as a:

medium of exchange

the GDP is the:

monetary value of all final goods and services produced within a nation in a particular year

fiat money is:

money because the government asserts that it is

suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. the person's real income will:

rise by about 1 percent

at the point where the consumption schedule intersects the 45-degree line:

saving is zero

if the consumption schedule is linear, then the:

saving schedule will also be linear

when the reserve requirement is increased:

the excess reserves of member banks are reduced

real GDP is:

the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation

in presenting the idea of a demand curve economists presume that the most important variable in determining the quantity demanded is:

the price of the product itself

open-market operations refer to:

the purchase or sale of government securities by the Fed