Macro Midterm

vertical AS curve shifts rightward

long-run economic growth occurs when the...

the general level of prices

inflation is defined as an increase in...

relevant cost-cutting technological progress occurs

Firms w/in an industry are more likely to increase investment when...

exports, gov spending, firms' expected return on investment, incomes in countries buying US exports

An increase in what would result in an increase in AD?

relatively stable

the long-run Phillips curve illustrates that the natural rate of unemployment is ______.

services, such as haircuts

the majority of spending in the consumer sector is spent on...

AD constant, SRAS decreases, price level increases, RGDP decreases

Assume an oil-importing economy is operating in long-run equilibrium. Unexpectedly, widespread civil unrest severely curtails oil exports in oil-producing countries, resulting in severe worldwide shortages, in the short-run the most likely impact would be...

taxes

According to the Laffer Curve, economic growth is best promoted through the increased incentives to work, save, and invest provided by lower ______.

governors are appoint by the pres and confirmed by the senate, each regional Fed bank is owned by private banks in its district, the board of governors determines monetary policy for regional Fed banks, regional Fed banks serve as "bankers' banks"

Additional Fed info

increase consumption, reduce saving

As a result of the wealth effect, a sudden increase in the value of stock will cause households that hold a significant amount of stock assets to...

0.6

Assume Jason has an income of $10,000 and spends $9000 of it. He receives a bonus of $500 at work and spends $200 of it. His marginal propensity to save is _____.

saving increases by less than $100

according to the consumption function, if income increases by $100...

price level increase, output increase, employment increase

how will an increase in gov spending affect price level, output, and employment in short run?

control the money supply

the primary role of the Fed is to...

inflation and unemployment

the short-run Phillips curve illustrates the relationship between ______.

its purchasing power

the value of fiat money as a medium of exchange is backed by...

$35 bil

Assume that in an economy w/ an MPC of 0.8, investment increases by $7 bil. By how much will RGDP increase if economy fully expands?

costs of production decrease

Economies of scale contribute to economic growth b/c as firm size increases...

output increase, price level decrease

If SRAS increases, what is the likely effect on output and price level

increase of 1%

If a worker received an increase in nominal annual salary of 3% and the price level rose in that yr by 2%, then the worker received a real annual salary...

don't have answer

If firms increase investment by $5 mil and MPC is 0.8, what is the max. possible change in RGDP?

30%

If the 2009 real GDP of a country was $2.6 bil, and the 2008 RGDP was $2 bil, what was the rate of economic growth for the country in 2009?

20%

If the CPI for this year is 240 and the CPI for last yr was 200, what was the rate of inflation for this year?

10%

If the CPI in the yr 2010 is 200 and the CPI in the yr 2011 is 220, then the rate of inflation for 2011 was ______.

government

In a command economy, the decisions on the economic questions are made by whom? A. Historical customs B. Government C. Private companies D. Consumers

non-checkable savings accounts, money market deposit accounts, small denominated time deposits, money market mutual funds

In addition to M1, M2 includes:

sell products and buy resources

In the circular flow model, businesses... A. Buy products and resources B. Sell products and resources C. By products, sell resources D. Sell products, buy resources

I, III

Long-run economic growth is illustrated by a rightward shift of the I. vertical AS curve II. upward-sloping AS curve III. production possibilities curve

worker productivity

supply increases as a result of an increase in _____.

wants are unlimited

A basic assumption of economics is that... A. Wants are unlimited B. Incentives are irrelevant C. Consumers are irrational D. Means are unlimited

input prices, input productivity, business taxes, business subsidies

A change in what factors will cause SRAS to shift?

frictional unemployment

A college graduate searching for her first job is experiencing ______.

the cost of production increased

A decrease in SRAS would result if...

demand

A schedule/curve showing the various amounts of a product consumers are willing and able to purchase at each price in a series of possible prices during a specified period of time is called _______. A. Supply B. Demand C. Quantity supplied D. Quantity demanded

wage decrease, production cost decrease, RGDP increase, SRAS increase, price level decrease

A substantial increase in immigration of new workers into the domestic workforce will most likely result in what changes to wages, per-unit production costs, RGDP, price level, and SRAS

I, II, III

AD curve slopes downward b/c I. as price level falls, real value of personal assets increases, leading personal consumption spending to increase II. as price level falls, interest rates decrease, causing investment and interest-sensitive spending to increase III. as price level falls, exports increase and imports decrease, resulting in a positive change in net trade

increasing the demand for pretzels and therefore the price of pretzels

Assume that consumers consider popcorn and pretzels to be substitutes. A significant decrease in the supply of popcorn will affect the pretzel market by... A. Increasing demand for pretzels and therefore supply of pretzels B. Increasing demand for pretzels and therefore price of pretzels C. Decreasing demand for pretzels and therefore the price of pretzels D. Increasing supply of pretzels and therefore the price of pretzels

decrease b/c hamburgers and onions are complements

Assume that people like onions on their hamburgers. If the supply of hamburgers decreases, the demand for onions will most likely... A. Remain unchanged b/c hamburgers and onions are different goods B. Increase b/c hamburgers and onions are substitutes C. Increase b/c hamburgers and onions are complements D. Decrease b/c hamburgers and onions are complements

Price will increase; quantity will increase

Assume that the price of video game players falls. What will happen to the equilibrium price and quantity of video games, assuming this market is competitive? A. Price increase, quantity decrease B. Price decrease, quantity increase C. Price decrease, quantity decrease D. Price increase, quantity increase

I, II, III, IV

Business cycles occur as a result of supply/demand shocks caused by I. irregular innovation II. changes in productivity III. political events IV. changes in money supply

durable goods

Consumer products that have expected lives of 3 or more yrs are _______. A. Services B. Durable goods C. Nondurable goods D. Resource goods

I, III

Consumer spending as a component of AD increases when I. consumer wealth increases II. consumer borrowing decreases III. consumer expectations are optimistic IV. personal taxes increase

I, II, III

Criticisms of the Laffer curve include concerns that tax cuts I. have little impact on incentives and are slow to emerge II. give some workers an incentive to work less b/c they can afford to "buy more leisure" III. lead to lower gov revenues and a higher national debt

create a shortage of flashlights

Following a prolonged power outage, the price of flashlights normally increases significantly. If cities had passed laws prohibiting price increases for flashlights, during power outages, such laws would most likely... A. Make flashlights more available B. Create shortages of flashlights C. Shift demand curve to right D. Shift supply curve to left

principle

From the perspective of economists, what would offer the highest degree of confidence for explaining economic behavior? A. Assumption B. Speculation C. Correlation D. Principle

II, III, V

Gross private domestic investment for the current yr includes I. all stocks/bonds purchased in current yr II. all final purchases of machinery, equipment, tools used to produce final goods/services III. all changes in business inventories IV. all purchases of personal/business real estate V. all construction

least-cost production

How goods and services are produced in a market economy is essentially determined by _______. A. Least cost production B. Consumer sovereignty C. Creative destruction D. Medium of exchange

price level decrease, real output decrease, unemployment increase

How will an increase in interest rates affect price level, real output, and unemployment in short run?

I and III only

LaKenya's opportunity cost for attending college includes I. other goods that could have been bought with the money II. clothing LaKenya bought during the 4 yrs of college III. income LaKenya could have earned from work at a full-time job

perfectly liquid

M1 is different from M2 b/c M1 is ______.

individuals should consider the true costs of each alternative when making decisions

Opportunity costs are important because... A. Opportunity costs are the main expenditure on most companies' balance sheet B. The cost of society of some activities are greater than the costs of private balance sheets C. Opportunity costs represent the costs of previous decisions that cannot be reversed D. Individuals should consider the true costs of each alternative when making decisions

inflation

Real GDP, rather than nominal GDP, is used to compare changes in national output over time, b/c RGDP removes the effects of _____.

F

T/F If the reserve requirement is 20%, then banks are allowed to loan out only 20% of the deposits they accept

T

T/F M1 is the Fed's narrowest measure of money

F

T/F Money consists exclusively of paper currency and coins printed or minted by the gov

F

T/F When the Fed buys up treasury bonds or other gov securities, this reduces the money supply by removing these securities from the open market

F

T/F When the Fed raises the reserve requirement, this increases the supply of money in the economy

this year's market basket price by the base year's market basket price

The GDP price deflator (index) is calculated by dividing...

creative destruction

The advent of personal computers and word processing software that eliminated the market for electric typewriters would be an example of ______. A. Creative destruction B. Invisible hand C. Division of labor D. Soecialization

I, II, IV

The calculation of gross private domestic investment includes I. firms' spending for equipment and machinery II. all construction III. depreciation IV. changes in inventories

model

The combination of economic theories or principles into a simplified representation of reality is referred to as an economic ______. A. Fact B. Law C. Model D. Hypothesis

scarcity

The need for individuals to make trade-offs results primarily from ________. A. Marginal cost B. Scarcity C. Abundance D. Free enterprise

E

The shortcomings of GDP include all of the following except A. does not include home production B. cannot measure improvements in quality of products C. does not take into account negative externalities such as pollution D. does not take into account increased leisure time E. does not count gov spending for public goods

How to Produce? What to produce? For whom to produce?

What are some questions that are part of the production decision? A. Why to produce? B. How to produce? C. What to produce? D. For whom to produce?

increasing opportunity cost

What explains why a production possibilities curve is often represented as concave from the origin? A. Law of demand B. Law of supply C. Constant returns to scale D. Decreasing opportunity costs E. increasing opportunity costs

economic resources are not completely adaptable to alternative uses

What is the economic rationale for the law of increasing opportunity costs? A. Full production and full employment of resources have not been achieved B. Economic resources are not completely adaptable to alternative uses C. Economic growth is being limited to by the pace of technology advancement D. An economy's present choice of output is determined by fixed technology and fixed resources

households are demanders in the product markets and suppliers in the factor markets

What is true according to the circular flow model? A. Firms are suppliers in product and factor market B. Firms are demander in product market and suppliers in factor market C. Households are demander in both product and factor market D. Households are demanders in product market and suppliers in factor market

decrease in consumer confidence

What might result in a decrease in the price level and decrease in RGDP?

reduce consumption, increase saving

When consumers expect a recession, they generally...

corporation

Which form of business can most effectively raise money capital? A. Corporation B. Partnership C. Proprietorship D. Households

I, II, III

Which is a function of money? I. medium of exchange II. store of value III. unit of account

the prices at which the household sells its resources

Which is the primary factor determining the share of the total output of the economy received by a household? A. The tastes of households B. Medium of exchange used by household C. Prices at which household sells its resources D. Ethical considerations in operation of market economy

I, II

Which of the following factors could result in cost-push inflation? I. increase in energy costs II. increase in workers' wages III. decrease in interest rates

E

Which of the following would be included in the calculation of US GDP? A. girl mowing family's yard B. student buying used car C. neighbor paying babysitter w/ cookies D. senior citizen receiving social security check E. family buying dinner at restaurant

B

Which of the following would cause demand-pull inflation? A. Increase in cost of raw materials for firms B. increase in money supply C. significant decrease in the supply of oil D. serious crop failure E. reduction in imports allowed into country

recipients have not produced any output in return for payment

Why are transfer payments not included in the calculation of GDP? A. Recipients have not produced any output in return for the payment B. Payments

resources are not perfectly interchangeable in the production of the 2 goods

Why does the opportunity cost increase as the production of capital goods increases? A. Capital goods are more expensive to produce than consumer goods B. Resources are not perfectly interchangeable in production of two goods C. The lower supply of consumer goods causes their price to increase D. Buyers are willing to pay more for capital goods

spending in the economy must equal the incomes earned in the economy

Why must GDP be calculated using the expenditure approach equal GDP calculated using the income approach?

consumer wealth, consumer expectations, household borrowing, taxes

a change in what factors will cause household consumption and AD to change?

saving

a decrease in consumption directly causes an increase in ____.

real output increase, price level decrease

a favorable supply shock, such as a significant increase in crop output, will cause what effects of real output and price level?

decreases

during a period of inflation, the purchasing power of money _______.

central bank buying and selling gov bonds on the open market

open market operations consist of...

RGDP and price level

the equilibrium point of AS and AD would determine ______.

fiat money

the kind of currency used in the US is _____.

issuing currency of US, setting required reserve ratio, accepting deposits of banks and thrifts in excess of required reserves, lending to financial institutions

some of the fed's functions include...

the Fed

the M1 money supply is controlled by...

I, II, III

the components of M1 include I. checkable deposits II. travelers' checks III. currency IV. gov bonds V. non-checkable savings accounts