Macro Econ Test 2

11. Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,000, consumption equals 7,500, and government purchases equal 2,000. What is national saving? a. -500 b. 500 c. 2,000 d. None of the above is correct.

D

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

a. saver or as a supplier of funds.

21. According to the classical dichotomy, when the money supply doubles, which of the following also doubles?

a. the price level and nominal wages

suppose that florists and landscape workers are not unionized. If florists unionize, then the wages of

florists will rise, and the wages of landscape workers will fall

for a closed economy, GDP is $12 trillion, consumption is #7 trillion, taxes net of transfers are $3 trillion and the gov run a deficit of $1 trillion. What are private saving and national saving?

$2 trillion and $1 trillion, respectively

in a small closed economy investment is $50 billion and private saving is $45 billion what are the public saving and national saving?

$5 billion and $50 billion

in 2014, the Italian non-institutionalized population was 38.8 million, the labor force was 25.4 million, and the number of people employed was 22 million. According to these numbers, the Italian labor force participation rate and unemployment are were about

65.5% and 13.4%

3. Which of the following best illustrates the concept of a store of value?

You keep 6 ounces of gold in your safe-deposit box at the bank for emergencies.

13. Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 500. What value of government purchases would make national savings equal to 2,000 and at that value would the government have a deficit or surplus?

a. 1,500, deficit

14. If P denotes the price of goods and services measured in terms of money, then

a. 1/P represents the value of money measured in terms of goods and services.

23. Suppose that the adult population in the country of Atlantis is 115 million. If 80 million people are employed and 5 million are unemployed, then

a. 30 million are not in the labor force.

23. If the nominal interest rate is 5 percent and there is a deflation rate of 3 percent, what is the real interest rate?

a. 8 percent

7. In a system of 100-percent-reserve banking,

a. banks do not make loans.

21. For the Bureau of Labor Statistics to place someone in the "unemployed" category, that person must

a. be available for work.

12. Which of the following can the Fed do to change the money supply?

a. change reserves or change the reserve ratio

5. If an economy used gold as money, its money would be

a. commodity money, but not fiat money.

25. Suppose that consumers decide to walk to work more frequently and drive cars less. Companies that make walking shoes hire workers, while automobile companies lay off workers. This is an example of

a. frictional unemployment created by sectoral shifts.

14. The source of the supply of loanable funds

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

26. Unemployment insurance

a. may improve the ability of the economy to match workers with appropriate jobs. b. reduces the job search efforts of the unemployed. c. increases the amount of frictional unemployment in the economy.

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

a. medium of exchange

26. When inflation rises, firms make

a. more frequent price changes. This raises their menu costs.

20. According to the classical dichotomy, which of the following is affected by monetary factors?

a. nominal wages b. the price level c. nominal GDP

8. A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to

b. $80.

27. You put money into an account and earn a real interest rate of 4 percent. Inflation is 2 percent, and your marginal tax rate is 25 percent. What is your after-tax real rate of interest?

b. 2.5 percent.

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

b. 25.

10. A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.

b. It has $250 in reserves and $4,750 in loans.

4. A bond is a

b. certificate of indebtedness.

22. Monetary neutrality means that a change in the money supply

b. does not change real GDP. Most economists think this is a good description of the economy in the long run but not the short run.

13. When the price level rises, the number of dollars needed to buy a representative basket of goods

b. increases, and so the value of money falls.

25. When inflation rises, people tend to go to the bank

b. more often, giving rise to shoeleather costs.

6. In a closed economy, what remains after paying for consumption and government purchases is

b. national saving.

18. The amount of unemployment that an economy normally experiences is called the

b. natural rate of unemployment.

16. The slope of the demand for loanable funds curve represents the

b. negative relation between the real interest rate and investment.

19. Cyclical unemployment refers to

b. short-run fluctuations around the natural rate of unemployment.

Norberto is opening a bicycle shop, and his monthly expenditures to get the shop up and running exceed his monthly income. Norberto is best described as a

borrower or as a demander of funds

12. 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?

c. 2,000, -1,000, and 1,000, respectively.

1. Which of the following is an example of barter?

c. A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.

20. Esmerelda worked part-time for her mother's business without pay. Tabitha was absent from work because she had strep throat. Who is counted as "employed" by the Bureau of Labor Statistics?

c. both Esmerelda and Tabitha

22. Jamarcus works part-time as a pizza delivery person in a college town. The Bureau of Labor Statistics counts Jamarcus as

c. employed and in the labor force.

7. The purchase of a new house is the one form of

c. household spending that is investment rather than consumption.

9. On a bank's T-account, which are part of the bank's assets?

c. reserves but not deposits made by its customers

9. If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,

c. there is a shortage so interest rates will rise.

6. Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy

central bank

24. In 2015 the Japanese adult non-institutionalized population was 110.7 million, the labor force was 66 million, and the number of people employed was 63.7 million. According to these numbers, the Japanese labor-force participation rate and unemployment rate were about

d. 59.6% and 3.5%

5. Which of the following is not correct?

d. Purchases of capital goods are excluded from GDP.

10. Suppose private saving in a closed economy is $12b and investment is $10b.

d. The government budget deficit must equal $2b.

24. Shawn puts money into an account. One year later he sees that he has 6 percent more dollars and that his money will buy 5 percent more goods.

d. The nominal interest rate was 6 percent and the inflation rate was 1 percent.

8. The identity that shows that total income and total expenditure are equal is

d. Y = C + I + G + NX.

3. Two of the economy's most important financial intermediaries are

d. banks and mutual funds.

19. The price of a Honda Accord

d. is a nominal variable and the price of a Honda Accord divided by the price of a Honda Civic is a real variable.

29. Michael decides to hire some additional workers for his roofing company. The equilibrium wage is $17 per hour. Efficiency wage theory suggests that it is reasonable for Michael to offer

d. more than $17 per hour in order to attract a better pool of applicants.

30. Suppose that medical technicians and nurses' aides are not unionized. If the nurses' aides unionize, then the wages of

d. nurses' aides will rise, and the wages of medical technicians will fall.

27. Minimum wages create unemployment in markets where they create a

d. surplus of labor. Unemployment of this type is called structural.

the invention of the telegraph led to the loss of jobs for those who had delivered mail by horse but created jobs for telegraph operators and delivery persons. This is an example of

frictional unemployment created by sectoral shifts

Fiat money

has no intrinsic value

The primary economic function of the financial system is to

match one person's saving with another person's investment.

the slip of the supply of loanable funds curve represents the

positive relation between the real interest rate and saving

you observe a closed economy that has a gov deficit and positive investment. Which of the following is correct?

private saving is positive; public saving is negative

in a closed economy, what does (T-G) represent?

public saving

a firm may pay efficiency wages in an attempt to

reduce incentives to shirk, reduce turnover, attract a well qualified pool of applicants

cyclical unemployment refers to

short-run fluctuations around the natural rate of unemployment