Macro Econ Final Exam
Nominal GDP in 2006 was $13,458.2 billion. The GDP deflator uses 2000 as the base year. In 2006, the GDP deflator was 116.9. What was the real GDP for 2006?
$11,512.6 billion
GDP is $10 trillion in 2001. The GDP deflator is 100 in 2000 and is 110 in 2001. What is real GDP?
$9.09 trillion
The economy is probably heading into a recession when the National Activity Index equals:
-0.94.
If the Federal Reserve tries to target inflation near 2%, the inflation rate is 2.1%, and output is 4% below potential GDP, the target federal funds rate according to the Taylor rule is:
2.15%.
One of the major limits to trade is:
transaction costs.
The Taylor rule is an example of:
unemployment targeting.
Monetary policy involves all of the following EXCEPT:
increases in personal taxes.
Other things equal, if a recession gets worse, the number of discouraged workers __________, and the number of those in the labor force _____________.
increases; decreases
When the Fed buys bonds, its demand ____ the price of bonds, ____ nominal interest rates.
increases; decreasing
If there is a general rise in fear of the financial system:
the actual multiplier will fall.
In the United States, our principal measure of inflation is:
the consumer price index.
From 2008 to 2013, nearly ________ of the Eurozone nations faced some sort of financial crisis.
50%
Which of the following statements is NOT correct?
Discouraged workers are considered underemployed.
_____ is a reduction in the rate of inflation.
Disinflation
_____ unemployment includes workers who voluntarily quit their jobs to search for better positions.
Frictional
The main policymaking arm of the Fed is the:
Money Committee.
_____ is a measure of the change in average prices paid by urban consumers for a typical market basket of goods and services.
The consumer price index
There are two ways for money to be initially deposited into the banking system. They include:
a cash deposit by a bank customer and an electronic reserve deposit by the government.
In economics, capital refers to:
actual manufactured products used in the production process.
A higher interest rate __________ consumption, investment, and _____________, which ___________ aggregate demand
decreases; exports; decreases
Which of the following groups is most likely to favor a tight monetary policy?
importers
A criticism of GDP per capita is that it:
might not fully reflect the standard of living of the typical citizen.
The main tool of monetary policy is:
open market operations.
According to the equation of exchange, the long-run effect of a doubling of the money supply would be that:
prices double and real GDP is unchanged.
If the unemployment rate is 4.5% and the inflation rate is 6%, the Fed will most likely:
sell bonds.
What component of GDP includes college tuition?
services
Which of the following events has significantly influenced the development of macroeconomic ideas?
the Great Depression
Which organization determines the beginning and end dates of a recession?
the National Bureau of Economic Research
If foreigners become less confident in the ability of the U.S. dollar to hold its value:
the actual multiplier will rise.
"The economic wealth of this country was built primarily by some individuals profiting from a transaction, whereas others were harmed by that transaction." This statement indicates the author:
fails to understand that all voluntary trades benefit both parties involved.
Arlina got a 5% raise while the rate of inflation was 6%. Arlina's standard of living:
fell by about 1%.
The U.S. gross domestic product is equal to the total market value of all:
final goods and services produced by resources in the United States.
In counteracting a negative supply shock, the Fed could achieve ______ by using ______ monetary policy.
full employment but not price stability; expansionary
The Fed will keep the inflation rate constant, regardless of evolving economic conditions, if it is using:
inflation targeting.
Which of the following items is NOT included in gross private domestic investment?
purchases of common stock
Since the invention of automatic teller machines, many bank tellers have lost their job. This is an example of ______ unemployment.
structural
If the nominal GDP is $13 trillion for a given year and the GDP deflator for that year is 115, then the real GDP is:
$11.3 trillion.
Suppose a bank has $1 million in deposits, a reserve requirement of 10%, and bank reserves of $300,000. The bank has excess reserves of:
$200,000.
People are considered employed if they are:
All of those listed are considered employed.
The report that compiles economic conditions collected by the Federal Reserve regional banks is called the:
Beige Book.
Which is NOT a criticism of the official unemployment rate?
It is not reported frequently enough to provide a good picture of the state of the economy.
Whose analysis serves as the foundation of modern macroeconomics?
John Maynard Keynes
Robert lost his job and now takes care of the children while his wife works. Robert has decided he likes his daddy duties. Robert would take a job similar to the one he lost if it was offered, but he is not actively seeking work. How is Robert categorized in the unemployment figures?
Robert is not part of the labor force.
Which of the following persons is considered to be unemployed?
Tiffany, who is going on interviews, hoping to get her first job
The GDP deflator for the base year is:
always equal to 100.
A criticism of the National Bureau of Economic Research's business cycle dating committee is that it:
dates peaks and troughs only after the fact.
The unemployment rate is defined as the ________ divided by the ________.
number unemployed; number in the labor force
We are least likely to be heading into a recession when the National Activity Index equals:
0.81.
The Chairman of the Board of Governors is appointed for a _____ renewable term.
4-year
Which is NOT a criticism of the National Bureau of Economic Research's recession dating?
A) Dates are announced long after the economy turned. B) Deliberations are not made public. C) Its use of revised data introduces errors in dating. D) There is no single consistent methodology used in dating. C is the answer
Which of the following is NOT a criticism of the dating of business cycles by the National Bureau of Economic Research (NBER)?
A) Economists use different methodologies to measure business cycles. B) NBER dates peaks and troughs only after the fact. C) The NBER deliberations are not public. D) The NBER is sometimes manipulated by the federal government. the answer is D
_____ is a measure of the changes in the average prices received by domestic producers for their output.
The producer price index
Which of the following is considered a supply shock?
a decrease in investment
Which of the following is included in gross private domestic investment?
an increase in business inventories
The key benefit of countries engaging in trade based on comparative advantage is that:
both countries will be able to consume more than with no trade.
Which one of the following actions is NOT a tool of monetary policy?
changing government spending and taxes
In the long run, changes in the money supply will NOT change output according to:
classical economists and monetarists.
In 2012, the group with the LOWEST unemployment rate in the United States was:
college graduates and higher.
Which shaped curve reflects the reality that most goods are better suited for specific sorts of production?
concave PPF
If the rate of inflation decreases from 5% to 3%, the economy is undergoing:
disinflation.
If Abigail withdraws $300 cash from her checking account, then her bank's assets:
fall by $300, and its liabilities fall by $300.
If the reserve requirement is 20%, then a $1 decrease in deposits means that the money supply:
has the potential to decrease by $5.
If the government of Spain decides to spend less on the military and more on health care, the forgone spending on military items represents the:
opportunity cost of the extra health care.
Negative demand shocks to the economy can come from:
reductions in consumer demand.
In economics, the payment to capital is called:
interest
Economists believe that changes in investment spending are important for forecasting the business cycle because:
investment is a key determinant of economic growth.
The National Activity Index:
is a weighted average of 85 indicators of national economic activity.
Capital:
is any manufactured product that is used to produce other products.
To say that the Fed is transparent means that the Fed:
is open regarding its monetary policy.
One important reason economists track business investment is that:
it is a leading indicator of the business cycle.
Which of the following is NOT an investment in human capital?
launching an employee physical fitness campaign
To gain from trade, a country should:
specialize in the commodity in which it has a comparative advantage.
Assume the reserve requirement is 10% and no excess reserves are held. If an initial cash deposit of $10,000 is made, the money supply has the potential to increase by:
$100,000.
Sumit deposits $1,500 cash into his checking account. The reserve requirement is 25%. What is the change in his bank's required reserves?
$375
Which of the following items would be included in the GDP accounts?
A) personal time spent learning how to use accounting software B) personally rotating the tires on your neighbor's car C) caring for your aged grandmother at home D) $50 consultation on the phone with a psychic adviser The answer is D
Which of the following is TRUE within the circular flow of economic activity?
A) Households are buyers of products and sellers of production factors. B) Business firms are buyers and sellers of production factors. C) Households are sellers of products and buyers of production factors. D) Business firms are buyers of products and sellers of production factors. the answer is A
Which of the following is NOT a problem in using GDP to measure standard of living?
A) failure to include environmental impacts B) failure to include the value of non market work C) failure to include exports and imports D) failure to include the value of investments in human capital the answer is C
Which of the following activities is an example of a non market transaction?
A) hiring a maid to clean your home B) employing a lawn service worker to trim your bushes C) hiring a nanny to take care of your kids D) growing your own food in a vegetable garden the answer is D
All of the following types of wages can cause unemployment EXCEPT:
A) minimum wages. B) union wages. C) efficiency wages. D) equilibrium wages. the answer is D
Which of the following is included in the consumer price index?
A) price of bauxite B) price of a hotel room in Beirut, Lebanon C) price of crude oil D) price of gasoline the answer is D
Which of the following countries was NOT bailed out by the European Central Bank in the period from 2008 to 2013?
France
Which of the following is a provision of the Federal Reserve Act or subsequent legislation that contributes to the independence of the Fed?
Members of the Federal Reserve Board cannot be reappointed.
Over the past 30 years, the highest inflation rates occurred under Fed chair _______________ during the ________________.
Paul Volcker; early 1980s
Which of the following is correct?
The Federal Reserve has 12 regional banks. The Board of Governors has seven members, each serving a 14-year term.
Assuming full employment in the classical model, if velocity increases and the government wants stable prices, the government should:
decrease the money supply.
The 12 Federal Reserve banks and their branches do all of the following:
distribute coins and currency. regulate and supervise member banks. serve as the banker for the United States Treasury.
Wages set high to discourage employee turnover are called ________ wages.
efficiency
The inflation rate is 4%. Social Security payments automatically rise 4%. This adjustment is authorized by an:
escalator clause.
All of the following are considered human capital
obtaining a college education. receiving training for another area in a current job. completing a professional development course.
Monetarists believe that in the short run a change in the money supply can affect _______________________, while in the long run, a change in the money supply will affect _____________.
output and the price level; output only
Points that are unattainable for an economy are shown as points:
outside the PPF.
The graphical tool we could use to represent the combinations of two goods that are possible with a given society at full employment is a(n):
production possibilities frontier.
The national economic objectives that the Fed attempts to achieve include all the following actions
promoting economic growth accompanied by full employment. maintaining moderate long-term interest rates. keeping the price level stable.
The Taylor rule:
targets GDP and employment.
A business cycle is:
the periodic fluctuation of economic activity.
The short-run aggregate supply curve is ____ and the long-run aggregate supply curve is ____.
upward sloping; vertical
The actual money multiplier is:
usually smaller than the potential money multiplier.
The National Bureau of Economic Research determines that a recession is over:
when the economy is in a trough.