Honors Economics - Macroeconomics

Which economic measure is the total value of all goods and services produced within a country's borders adjusted for inflation?

real GDP

Assume the following numbers for a country: Personal Consumption - $100 Investment - $50 Government Spending - $50 Exports - $100 Imports - $150 What is the total GDP for this country?

$150

How many regional banks are in the Federal Reserve System?

12

The Federal Open Market Committee consists of the combination of which groups?

The Board of Governors and the 12 District Bank Presidents

Which action causes US GDP to increase?

The US exports machinery to Japan

Monetary policy is defined as the

decisions of the Federal Reserve System that determine the money supply

The Cosumer Price Index is used to help measure the amount of ____ in the U.S. to better help achieve the goal of ______.

inflation; price stability

When the Federal Reserve Bank is offering banks payment in exchange for leaving money at the Fed instead of lending it, they are manipulating which tool of monetary policy?

interest on reserves

In order to achieve the goals of maximum employment and stable prices the Fed targets which variable in the U.S. economy?

interest rates

How are the people that serve on the Board of Governors chosen?

nominated by the President and approved by the Senate

When there is inflation in an economy which is ALWAYS true?

the consumer price index has increased

A budget surplus means that

the government has taken in more money than it spent

The highest levels of unemployment and lowest levels of GDP would be found at which point on this business cycle?

3

In October, Bill is laid off from his job as a Halloween costume maker solely because of a slow Halloween season. Which statement is true?

Bill is cyclically unemployed

Which is the Fed MOST likely to do in the event of a recession?

Buy treasury bonds on the open market

Gross Domestic Product is a method for calculating how much a country produces by adding which four spending categories?

Consumption, Investment, Government, Net Exports

Which government agency is NOT tasked with measuring data related to the three big macroeconomic goals?

Department of Education

The group within the Federal Reserve that sets and directs monetary policy is the

Federal Open Market Committee

If the economy has just entered phase 4 on this business cycle, which statement is MOST LIKELY true?

GDP is increasing, unemployment is decreasing

The most common number used to measure economic growth is

Gross Domestic Product

Which is true about seasonal unemployment?

It is general predictable in both timing and size

Which person below would be considered frictionally unemployed?

Jake, who has recently entered the labor force

A government decision to increase taxes is MOST related to which combination of events Consumption, Aggregate Demand and GDP?

Option A; consumption decrease, aggregate demand decrease, GDP increase

Which component of the Federal Reserve System holds the most influence in regards to the direction of monetary policy?

The Federal Open Market Committee

When the money supply is increased, which is MOST likely to happen?

The price level will increase

Because fiscal policies have to come from Government, they sometimes suffer from an "inside" lag. What does this mean?

The specifics of the policies are slow to be created

How can a person tell that the U.S. government is concerend with measuring the economy?

There are entire government agencies dedicated to task like calculating unemployment, price indexes, and GDP

An economist is presented with information about the prices of a selection of goods over several years. This information would be MOST useful for which purpose?

To compile a price index to measure inflation

In calculating the consumer price index, prices of a basket of goods and services are compared to what over time?

a base year

Assume Econland had a balanced budget when the year began. Unexpectedly, at the end of the year tax revenues were $2 million higher than expected and spending was exactly as budgeted. Which situation is Econland in currently?

budget surplus

How is the government able to run a budget deficit where they spend more than they make?

by issuing bonds that promise future repayment to bondholders

Which is NOT a function of the Federal Reserve System?

collecting taxes

A market basket is generally used to

compare prices of goods between years to calculate the consumer price index

If the economy was in a recession and Congress and the Federal Reserve Bank BOTH wanted to correct it quickly, which policy combination would be best?

cut taxes, buy treasury bonds

Continually adding to the federal ____ every year will increase the overall _____ owed by the government. Which two words complete this sentence in order

deficit; debt

Increasing government spending and decreasing taxes are known as _______ ________ policies. Which two words complete this sentence in order?

expansionary; fiscal

Federal deficits, surpluses, taxes, and government spending are MOST DIRECTLY related to which other concept in economics?

fiscal policy

When the Fed is conducting open market operations, they are buying or selling

government bonds

The two primary goals (sometimes referred to as the dual mandate) of the Federal Reserve Bank are

maximum employment and stable prices

The actions of the FED that control and regulate the amount of money in the economy are referred to as

monetary policy

Which is NOT a key component of the definition of Grost Domestic Product?

money held in stocks and bonds

Which is NOT a goal promoted by the government through fiscal policy?

money supply

National debt is different than government deficits in that

national debt is the sum of all past deficits plus interest

You hear another student say: "Fiscal policy is easy to understand, all you have to know is what is happening with current tax rates!" This student is

partially correct; he needs to include government spending decisions as well

Inflation decreases what in an economy?

purchasing power of a dollar

The town of Smithville recently closed the blacksmith factory and now all of the blacksmiths are out of work. This type of unemployment is known as

structural

To calculate the unemployment rate an economist would need the total number of unemployed people and which other number?

the number of people in the labor force

If an economy is currently experiencing a contraction or recession, which stage of the business cycle will they experience next?

trough

Which BEST describes an economy that is in a trough of the business cycle?

unemployment is high, GDP is low, and inflation is low

Which number is used to measure the percentage of the labor force that is currently able to work and looking for a job, but not working?

unemployment rate

Despite the ups and downs of the business cycle, over time, the general trend of the cycle in the United States has been

upward sloping showing economic growth