Macro Final

If U.S. per capita GDP is $50,000 and grows at 2% per year, what will U.S. per capita GDP be in 70 years?

$200,000

(Table: Balance of Payment Accounts) According to the data in this table, what is the capital account balance for this country?

$220 million

An increase in money growth will cause the economy's AD curve to:

shift outward

Fiscal policy is MOST effective in offsetting the effects of:

shocks to aggregate demand.

(Table: Equilibrium Adjustment) Refer to the table. If the price in the free market is $2, then a:

shortage of 50 units would exist, and price would rise

(Figure: PPF Mexico & United States) Use the figure in which both Mexico and the United States each have 24 units of labor. The opportunity costs of producing one computer are:

six shirts for Mexico and one shirt for the United States.

A country that has enforceable property rights, a noncorrupt political system, abundant factors of production, and a change in leadership and form of government every few years should suspect that economic growth will be _____ because _____.

slow; of uncertainty due to an unstable political system

A negative real shock is often amplified, creating short-run aggregate supply and aggregate demand shocks due to:

sticky wages and prices.

A technological innovation in the production of golf balls increases ______, causing the price to ______ and the ______.

supply; fall; quantity demanded to increase

An unexpected outward shift of the economy's AD curve will cause real GDP growth to increase in:

the short run only.

An increase in the rate of expected inflation causes:

the short-run aggregate supply curve to shift up.

(Figure: Gains from Trade) Refer to the figure. What are the total gains from trade at the free market equilibrium?

$1,000

(Figure: Costs of Price Ceilings 2) Refer to the figure. What is the dollar amount of lost producer surplus after the price ceiling of $4 has been implemented?

$10

A country has two income tax brackets: people pay 10% on their first $50,000 and 20% on everything they earn over $50,000. If someone earns $75,000, how much tax does that person pay?

$10,000

(Table: Statistics for a Small Economy) Refer to the table. The table shows some statistics for a small economy. Using only the information provided, the monetary base amounts to:

$12 million.

(Figure: Foreign Trade Market) Refer to the figure. What is the dollar value of the deadweight loss created by the loss of foreign trade?

$4,000

(Figure: Supply and Demand 4) Refer to the figure. If the good is purchased by those with the highest willingness to pay, what is the value of consumer surplus in the figure at the price ceiling of $8?

$54

(Figure: Foreign Trade Market) Refer to the figure. What is the dollar value of wasted resources as a result of prohibiting trade in this market?

$6,000

(Table: Prices and Quantities in a 4-Good Economy) Suppose an economy produces only the four goods listed in this table. All of the country's tomatoes are used in the production of pizzas. What is the GDP in this country?

$7,200

(Table: iPhones) This table shows data for a country producing only iPhones. Its nominal GDP in 2010 is:

$9,900

(Table: Three-Good Economy II) Suppose an economy produces only the three final goods shown in the table. The table gives information on the quantities produced and the prices of goods sold in 2008 and 2009. What is the growth rate of real GDP in 2009 if 2008 prices are used in the calculation of real GDP?

-3.71%

(Table: Multiple Deposit Expansion) Refer to the table. For the multiple deposit expansion process described in this table, if all banks hold only the required reserves, what is the money multiplier in this country?

12.5

(Figure: Countries A and B) Refer to the figure regarding countries A and B. If each country allocated half of its labor force to the production of each good before trade and were to then each specialize in their comparative advantage and allocate 75 percent of its labor force to the production of that good, world production of Good X would change by _____ and the production of Good Y by _____.

15; -5

(Table: Production Possibilities for Italy and Belgium) According to the table on production possibilities for Italy and Belgium, the opportunity cost of 1 pound of pasta for Italy is:

2/5 pound of linen.

For an aggregate demand curve with M = 10% and V = 0%, if inflation is 6%, then real growth is:

4%

(Figure: Labor Market) Refer to the figure. What is the unemployment rate in this market as a result of the implementation of a $10 minimum wage?

50%

(Figure: Price and Quantity 1) In the diagram, at a price of $40, the quantity demanded is ______, the quantity supplied is ______, and there is a ______.

60; 40; shortage of 20 units

A country has a population of 160 million. Thirty million of its people are under the age of 16 and 10% of the population is either in the military or institutionalized. Seventy million people have jobs, and five million are looking for work. What is the labor force participation rate in this country?

66%

(Table: Unemployment Statistics for Country X) Using the data in the table, Country X is likely to be in a recession in:

Both 1995 and 2005

How do budget deficits lead to trade deficits?

Budget deficits lead to higher interest rates, which lead to net capital inflow, which leads to currency appreciation, thus reducing net exports.

For a given money multiplier, a decrease in the banking system's reserves will cause the money supply to:

Decrease

(Figure: Market Changes) Refer to the figures. If these figures represent the market for blue jeans, which figure shows the effect of an increase in the price of denim, a raw material used to make jeans?

Figure A

Who is the current chairperson of the Federal Reserve?

Jerome Powell

Because of pressure from Western countries, garment producers in Bangladesh quit employing 30,000 to 50,000 child workers. What happened to these children?

Many children went to work in jobs with worse conditions and lower pay, many in prostitution.

(Figure: Oil Market Diagrams) Consider the world oil market diagrams presented in the figure. Which of the panels correctly depicts the cause of rises in the price of oil in the early 2000s?

Panel D

(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D 1 and the initial supply curve is S 1. If technological innovations lower the costs of production, what will happen?

S 1 will shift to S 3 and equilibrium price will decrease but equilibrium quantity will increase.

During the Great Depression, the long-run aggregate supply curve:

Shifted inward

(Figure: Monetary Policy and Demand Shocks) Refer to the figure. In the figure, assume the initial real growth rate of the economy is 3% when a positive aggregate demand shock shifts the AD curve from AD 1 to AD 4. As a result of the Fed's policy response, the AD curve shifts to AD 3 in the short run. Which of the following is TRUE about the Fed's policy response?

The Fed responded too much to the shock.

(Figure: Comparative Advantage) The figure illustrates both the U.S. and Japanese production possibilities frontiers for TVs and wheat. Based on this information, which of the following is TRUE?

The United States has the comparative advantage in the production of wheat.

At the time the Federal Reserve must make a decision, the actual state of the economy may be unknown.

True

Refer to the figure. In the diagram, a minimum wage of $7 causes a deadweight loss of:

X + Z

A decrease in expected future supply of a good will lead to:

a change in the demand for the good even before the supply actually decreases.

An increase in uncertainty will lead to:

a decrease in both V and M.

(Figure: Trade) Refer to the figure. If the world price for the good in this figure were higher than the domestic price, a move to free international trade means that the domestic economy would become:

a net exporter of the good

(Figure: Supply and Demand 5) Refer to the figure. In the figure, representing a market for apartments, a rent-controlled price of $800 will cause:

a short-run shortage of 3,000 apartments.

Growth in nominal GDP over time can be caused by:

an increase in both prices and production over time

An appreciation of the Mexican peso would most likely be a result of:

an increase of foreign investment in Mexico.

(Figure: Negative Supply Shock) Refer to the figure. This economy initially begins at point A and a negative supply shock takes it to point Y. Taking the economy back to the LRAS curve would require:

an inflation rate much greater than 16%.

A set of tires installed on a vehicle in an automobile factory is counted as:

an intermediate good and its market price is not part of GDP

(Table: Consumer Price Index) Refer to the CPI values in the table for the years 2005 to 2010. In which year(s) did the country experience disinflation?

both 2007 and 2009

A low saving rate in the United States is one possible reason for the U.S.:

current account deficit, capital account surplus, and trade deficit

Economists use the term ________________ to describe the part of the budget deficit that is a result of a downturn in economic activity.

cyclical deficit

As a result of the multiplier effect, a tax cut causes a:

larger shift of the aggregate demand curve to the right.

According to the supply and demand framework in the text, an increase in import trade tends to ______ domestic production of a good.

decrease

Paying a higher interest rate on reserves held at the Fed will tend to:

decrease the money supply.

Crowding out is the _____ in private spending that occurs when government _____ spending.

decrease; increases

If a country has a trade surplus of $100 million, then it has a capital _____ so that the balance of payments is _____.

deficit; balanced.

High and volatile inflation:

destroys the ability of market prices to send signals about the value of resources and opportunities.

Examples of automatic stabilizers include:

food stamps, unemployment benefits, and income taxes.

For a given nominal interest rate, an increase in deflation will cause the real rate of interest to:

increase

If a national government improves its unemployment benefits, its unemployment rate will most likely:

increase

An increase in U.S. government spending tends to:

increase U.S. interest rates and increase the U.S. capital account surplus.

According to the quantity theory of money, an increase in the money supply will cause the price level to:

increase by about the same percentage as the money supply.

Cell phone data plans are most useful when used with a smartphone, and smartphones are most useful when used with a data plan. As the price of data plans falls, the demand for smartphones will:

increase, because smartphones and data plans are complements.

An economy in which the central bank overstimulates aggregate demand will suffer from:

inflation

Holding reserves is costly for banks because:

it leads to fewer profits

Crowding out:

limits the increase in aggregate demand due to fiscal policy.

Assume that the initial real exchange rate for a country and its trading partner is 1:1. If there is inflation in the country, then PPP predicts:

no significant long run change in the real exchange rate.

Currency held by governments is part of the:

official reserves account.

As a result of an increase in the growth rate of the money supply:

real GDP growth increases only in the short run, and the inflation rate increases in both the short run and the long run

Advocates of Fed discretion think that the Fed's adjustments, on average, push the economy in the:

right direction and lower GDP volatility.

If Ricardian equivalence holds:

taxpayers respond to lower tax rates today with increased savings today.

A problem with a monetary rule that requires the Fed to keep money growth constant is:

the Fed must ignore changes in money velocity.

If instead of buying short-term Treasury securities the Fed decides to purchase the country's supply of paper clips, the money supply:

will expand.

History has shown that when collective property rights are converted to private property rights:

work effort, investment, and productivity all increase.