MACRO 210 FINAL

What are the five fundamental questions?

-who will get the good and services -What goods and services will be produced -How will the system promote progress -Who will get the output -How will the system accommodate change

1. If nominal GDP is 200 and the GDP price index is 250, then the real GDP is a. 125 b. 80 c. 0.8 d. 1,250

200/250 =0.80 c. 0.8

If nominal GDP in some year is $280 and real GDP is $160, then the GDP price index for that year is.

280/160= 1.75 x100 = 175

Suppose that AD and AS intersect at an output level that is lower than the full-employment output level. After the economy adjusts back to the equilibrium in the long run (without intervention)...

APL is lower and RGDP is higher

Appreciation of the United States currency relative to the Euro would cause

Exports to fall and Imports to rise

True/False: Loans made to customers are a liability on the bank's balance sheet

False

True/False: The four general categories of economic resources include: Energy production, Internet access, stable government and entrepreneurial ability.

False

full employment is impossible given that both structural and frictional unemployment will always exist

False

The Taylor rule for monetary policy refers to the rule which:

Is a rule dictating the target interest rate combat inflation and unemployment.

When both supply and demand change at the same time..

It is only possible to either know what happens to the market price or quantity but not both without knowing which shift was relatively larger.

The four general categories of economic resources include:

Land, Labor, Capital, and Entrepreneurial Ability

The economic costs of unemployment include a. Improved profits for businesses because of a loss of dead-beat employees. b. Loss of potential output and employee skills. c. An increase in government revenue through higher pay roll taxes. d. There are no costs to unemployment.

Loss of potential output and employee skills

Which pair of statements correctly identifies a microeconomic and a macroeconomic concept?

Macroeconomics: The unemployment rate in the United States was 3.7 percent in 2018 Microeconomics: A U.S. software firm laid off 15 workers last month and transferred the work to India.

Which of the following correctly identifies a normative and positive statement?

Normative: The unemployment rate is too high Positive: Higher unemployment rates are correlated with higher crime rates.

Changes in the nominal GDP can be caused by changes in _______, while changes in the real GDP indicate changes in ________.

Output or Prices; Output

Which of the following are two reasons that command systems have failed in the past?

The Coordination problem and the Incentive problem

Which is a true statement regarding money?

The use of money makes trade easier, as it eliminates the issue of "coincidence of wants" and is a medium of exchange.

1. Refer to the accompanying data (all figures in billions of dollars). GDP is Government Purchases $21 Consumption $32 Gross Investment $15 Consumption of Fixed Capital (depreciation) $45 Rent $26 Exports $16 Imports $32 a. $52 b. $116 c. $84 d. $187

a. $52 Explanation: Gov. Purchases $21+ Consumption $32+ Gross Invest $15 =68 Exports $16- Imports $32= -16 68-16= 52

A rightward shift in demand may have been caused by a. An increase in investment spending. b. A decrease in worker productivity due to Covid. c. An increase in worker productivity due to higher pay. d. An increase in taxes.

a. An increase in investment spending.

Which of the following is considered expansionary fiscal policy? a. Increase government spending, decreasing taxes or a combination of both. b. Decrease government spending, decreasing taxes or a combination of both. c. Increase government spending, increasing taxes or a combination of both. d. Decrease government spending, increasing taxes or a combination of both.

a. Increase government spending, decreasing taxes or a combination of both

A commercial bank sells a Treasury bond to the Federal Reserve for $100,000. The potential money supply: a. Increases b. Decreases c. Is unaffected d. It is unknown.

a. Increases

1. Economics is best defined as the study of how people, businesses, governments, and societies a. make choices to cope with scarcity. b. Obtain wealth. c. Make use of infinite resources. d. Minimize utility.

a. Make choices to cope with scarcity

Over the last part of the twentieth century, car manufacturing has left Michigan to other locations with lower costs of employment. ___________ is the type of unemployment caused by this type of movement. a. Structural Unemployment b. Frictional Unemployment c. Cyclical Unemployment d. Seasonal Unemployment

a. Structural Unemployment

1. The government puts a binding price floor of $1.60 in place. The result would be a _____ of ____ units. a. Surplus, 160 b. Surplus, 90 c. Shortage, 160 d. Surplus, 290

a. Surplus, 160

1. Built-in stabilizers are a mechanism that increases government's budget deficit (or reduce its surplus) during a recession and increases government's budget surplus (or reduces its deficit) during an expansion without action by policymakers. a. True b. False

a. True

1. True/False: The value of a price index in the base year is always 100, and consequently nominal GDP and real GDP are always equal in the base year. a. True b. False

a. True

Changes in real GDP reflect changes in total productivity of the country. a. True b. False

a. True?????

Which of the following will not cause the supply of product k to change? a. an increase in immigration into the country b. Input prices of product K have increased c. Number of sellers of product K increased d. New tech has made it cheaper to produce product K.

a. an increase in immigration into the country

Excess reserves a. can be lent out, thereby increasing the money supply. b. must be borrowed, thereby increasing the money supply. c. can be lent out, thereby decreasing the money supply. d. must be borrowed, thereby decreasing the money supply.

a. can be lent out, thereby increasing the money supply.

1. In sequential order, the four phases of the business cycle are a. peak, expansion, trough, and recession. b. expansion, trough, recession, and peak c. trough, expansion, peak, and recession recession, peak, trough and expansion

a. peak, expansion, trough, and recession.

The real GDP per capita of Bangladesh in 2020 was approximately $5,000 USD. If the growth rate of real GDP per capita in Bangladesh is 5%, then it will take Bangladesh roughly _____ to catch up to the (current) United States GDP per Capita of $160,000. a. 28 Years b. 14 Years c. 70 Years d. 140 Years

b. 14 Years 70/5= 14

Which of the following would increase the money supply? a. You deposit a check given to you by your grandmother into your checking account. b. A commercial bank increases the amount of cash held in its reserves. c. You find a hundred-dollar bill in the street and deposit it into your checking account. d. A commercial bank reduces the amount of loans they give out for the next month.

b. A commercial bank increases the amount of cash held in its reserves.???

1. An increase in nominal GDP can be caused by all the following EXCEPT; a. An increase in the average price level. b. An increase in production. c. An increase in the average price level and an increase in production. d. A decrease in the average price level and a decrease in production.

b. An increase in production.

What does it mean when economists say that home buyers are "underwater" on their mortgages? a. Buyers are financially incapable of repaying their mortgages and bankruptcy is inevitable. b. Buyers owe more on their mortgage than the properties are worth. c. Buyers are purchasing homes on flood plains and are highly susceptible to financial losses. d. Buyers are paying interest rates substantially higher than current market interest rates, creating interest payments that create financial hardship.

b. Buyers owe more on their mortgage than the properties are worth.

Which of the following is a characteristic of a command system? a. No scarcity. b. Central planning by government. c. Government-set wages and prices. d. Minimal Government intervention.

b. Central planning by government.

1. Full employment occurs when unemployment only includes frictional and cyclical unemployment, and structural unemployment is zero. a. True b. False

b. False

1. True/False: A command system is characterized by the private ownership of resources and the use of prices to coordinate economic activity. a. True b. False

b. False

Discouraged workers are part of the labor force, and are commonly targeted by policymakers to reduce the unemployment rate through expansionary policy, increased government spending through government work programs. a. True b. False

b. False

Demand-pull inflation is shown by a ____________. a. Left shift of the AD Curve. b. Right shift of the AD Curve. c. Left shift of the SRAS Curve. d. Right shift of the SRAS Curve.

b. Right shift of the AD Curve.

Which of the following is a true statement regarding the barter system? a. A failure in the barter system is the "coincidence of wants". b. The barter system eventually replaced the prevailing monetary system in the late 1950's, also known as the gold standard. c. It is widely known that the barter system is defined as a financial system where the government owns the means of production.

b. The barter system eventually replaced the prevailing monetary system in the late 1950's, also known as the gold standard.

A major strength in monetary policy is a. the relatively short appointments of members of the Fed's Board of Governors. b. its speed and flexibility. c. its long-term consequences. d. the rule that it uses to manage the economy.

b. its speed and flexibility.

A rightward shift in supply may indicate: a. an increase in the wages paid to workers b. the development of more efficient machinery for producing this commodity c. the product became less fashionable d. an increase in consumer incomes

b. the development of more efficient machinery for producing this commodity

The basic objective of monetary policy is a. to increase employment and stabilize exchange rates. b. to assist the economy in achieving a full-employment, noninflationary level of total output. c. to eliminate inflation and lower interest rates. d. to maintain steady exchange rates and lower inflation.

b. to assist the economy in achieving a full-employment, noninflationary level of total output.

The money supply is backed

by the government's ability to control the supply of money and therefore to keep its value relatively stable.

Which of the following would shift aggregate demand to the left? a. An increase in worker productivity b. A decrease in government subsidies to producers c. An appreciation of the US Dollar d. A depreciation of the US Dollar

c. An appreciation of the US Dollar (or government increases taxes)S

The Law Demand states, as prices rise the quantity demanded _________, while the Law of Supply states, as prices rises the quantity supplied ___________. a. Rises, Falls b. Rises, Rises c. Falls, Rises d. Falls, Falls

c. Falls, Rises

Which of the following is a characteristic of a market system? a. No scarcity. b. Central planning by government. c. Government-set wages and prices. d. Minimal Government intervention.

c. Government-set wages and prices.

1. Cost-push inflation is show by a __________. a. Left shift of the AD Curve. b. Right shift of the AD Curve. c. Left shift of the SRAS Curve. d. Right shift of the SRAS Curve.

c. Left shift of the SRAS Curve.

Which of the following is a characteristic of a laissez-faire system? a. No scarcity b. Central planning by government c. Minimal government intervention d. Government-set wages and prices

c. Minimal government intervention

Which of the following correctly lists the determinants of Aggregate Demand? a. Consumption, Net Exports, Inflationary Push, and Investment b. Government Spending, Red Herring, Consumption, and Net Exports c. Net Exports, Government Spending, Consumption, and Investment d. Investment, Consumption, Blue Herring, and Government Spending

c. Net Exports, Government Spending, Consumption, and Investment

Refer to graph: The government puts a binding price ceiling of $0.50 in place. The result would be a _________ of ______ units. a. Shortage, 70 b. Surplus, 90 c. Shortage, 160 d. Surplus, 290

c. Shortage, 160

Critics of economic growth a. contend that growth and industrialization reduce pollution. b. point out that growth results in greater economic security for workers. c. argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth. d. agree that GDP is the only and best measure in determining the overall health of a country's economy and should be increased at all costs.

c. argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth.

Which of the following is NOT part of the M2 money supply? a. currency in circulation b. small, denominated time deposits of less than $100,000 c. credit card balances d. checkable deposits

c. credit card balances

Monetary policy is easier to conduct than fiscal policy because a. the economy responds better to monetary policy than to fiscal policy. b. the Fed has more control of the economy. c. monetary policy has a much shorter administrative lag than fiscal policy. d. monetary policy is easier to understand.

c. monetary policy has a much shorter administrative lag than fiscal policy.

Economic systems differ according to which two main characteristics? a. how goods are produced and who gets them b. the political system in place and the degree of scarcity facing the economy c. who owns the factors of production and the methods used to coordinate economic activity d. the technology used in production and the quantity and quality of natural resources

c. who owns the factors of production and the methods used to coordinate economic activity

Government's fiscal policy options for ending a severe recession include a. Increasing the money supply using open market operations. b. Decreasing the money supply by changing the required reserve ratio. c. A combination of increasing taxes and decreasing government spending. d. A combination of decreasing taxes and increasing government spending.

d. A combination of decreasing taxes and increasing government spending.

Which of the following would shift short run aggregate supply to the right? a. An increase in investment spending b. A decrease in investment spending c. An increase in government taxes on businesses d. A decrease in government taxes on businesses

d. A decrease in government taxes on businesses

Any point outside the production possibilities curve indicates: a. the presence of technological change. b. that resources are imperfectly substitutable among alternative uses. c. A point that is not desirable as it would lead to inflation. d. A point that is currently unobtainable given our current resources.

d. A point that is currently unobtainable given our current resources.

The two conflicting goals facing commercial banks are a. Profits and loss. b. Assets and liabilities. c. Deposits and withdrawals. d. Profit and Liquidity.

d. Profit and Liquidity.

Differences in production efficiencies among nations in producing a particular good result from a. different endowments of fertile soil. b. different amounts of skilled labor. c. different levels of technological knowledge. d. all of these.

d. all of these.

1. The area to the right of the LRAS curve is associated with____, and the area to the left is associated with______. a. higher unemployment; and lower unemployment. b. lower unemployment; and lower unemployment. c. higher unemployment; and higher unemployment. d. lower unemployment; and higher unemployment.

d. lower unemployment; and higher unemployment.

Liquidity (in Economics) refers to a. The idea that viscosity of a sample is an important in understanding fluid dynamics. b. The idea premier ideology that fractional banking allows for banks to indirectly increase the money supply by giving out loans. c. The idea that aggregate demand is downward sloping for most markets, but upward sloping for developing markets. d. the ease with which an asset, or security, can be converted into ready cash without affecting its market price.

d. the ease with which an asset, or security, can be converted into ready cash without affecting its market price.

The near-money components of M2 are

less liquid as the M1 components of M2

What will occur in the short run if there is demand pull inflation and the government adopt a hands-off approach to it?

low unemployment and an increase in real output

The major assets on a commercial bank's balance sheet include

reserves, securities, loans, and vault cash.

Any point inside the production possibilities curve indicates:

that more output could be produced with the available resources.

A student will decide to attend class when

the marginal benefit of attending exceeds the marginal cost of attending