MACRO PRACTICE FINAL

a policy mix that consists of an expansionary fiscal policy and a contractionary monetary policy would:

favor government purchases over investment spending

the natural rate of unemployment is generally thought of as the:

frictional unemployment and structural unemployment

when a radiologist quits her job at a hospital and starts looking for a better job in another hospital, she is:

frictionally unemployed

the PPI is a price index that tends to be a leading indicator of:

future inflation rates

in a period of ________ the fed would most likely ease monetary policy

high unemployment

a decresae in the level of aggregate output and the sale of government securities by the fed will have what effect on the equilibrium interest rate?

indeterminate effect on the interest rate

if the change in business inventories is positive, then final sales are _______

less than GDP

the interest rate is determined in the money market and influences the _______

level of planned investment

if interest rates increase to a very high level, people will most likely hold:

more bonds and less cash

as the interest rate falls, people hold _____ money instead of bonds because the opportunity cost of holding money has ______

more; fallen

a farmer buys a new tractor from john deere to use on her cotton farm. this tractor is included in GDP as:

part of gross private domestic investment

the economy goes through a recession between a _____ and _____

peak; trough

the __________ is considered to be a leading indicator of future inflation rates

producer price index

firms react to unplanned increases in inventories by:

reducing output

if the economy is operating below capacity, an increase in aggregate demand causes a _____ change in the price level and _____ change in output

small;big

tony has just graduated from college and has now applied for a full time position where he is currently working part-time. this caused the unemployment rate to _______ and the labor-force participation rate to _____

stay the same; stay the same

a price index is:

a measurement showing how the average price of bundle of goods changes over time

when calculating GDP, exports are _____ and imports are ______

added; subtracted

a market in which profit opportunities are eliminated almost instantaneously is:

an efficient market

aggregate demand _____ when the price level rises because the higher price level causes the demand for money to increase, causing interest rates to ____

falls; rise

during recessions, the number of discouraged workers _____ and this ______ the unemployment rate

decreases; increases

when supply is fixed or the product is unique, then price is:

demand determined

a rightward shift in the aggregate demand curve generates a ______ inflation and ______ output

demand-pull; higher

a increase in lump-sum taxes will shift the consumption function:

downward

the best overall indicator of inflationary pressures in the economy is the ________

GDP deflator

if the interest rate is higher than normal, people are most likely to hold:

bonds instead of money because the opportunity cost of money is high

when a government runs a surplus:

its debt decreases

transfer payments are the ________ in the governments budget

largest expenditure source

when differences between nominal GDP and real GDP result due to price changes and nothing else is compared, an index called the _______ is created

GDP deflator

if receipts of factor income from the rest of the world exceed payments of factor income to the rest of the world, then:

GNP is greater than GDP

if planned investment exceeds actual investment, there will be a:

decline in inventories

as the MPS increases, the multiplier will _____

decrease

assume that all commercial banks are loaned up. total deposits in the banking system are $200 million. the required reserve ratio is increased. the money supply will:

decrease

if interest rates are higher than what individuals consider normal, they will:

decrease their speculative money demand

dollar bank is currently loaned up. if the required reserve ratio is lowered,

dollar bank will have excess reserves that it can lend out

an increase in the money supply aimed at increasing aggregate output is referred to as:

expansionary monetary policy

many economists believe that sustained inflation is accomodated by a:

expansionary monetary policy

fixed weight indexes

generally become less accurate the farther in time they are from the base year

net investment is:

gross investment minus depreciation

a radiologist buys a new x-ray machine from general electric to use in her medical practice. this x-ray machine is included in GDP as:

gross private domestic investment

as the MPS decreases, the multiplier will:

increase

if the fed accompanies a fiscal expansion by decreasing the money supply so that the interest rate increases significantly, the crowding-out effect will:

increase

mike has just graduated from college and is now looking for a job, but has not yet found one. this causes the unemployment rate to _____ and the labor-force participation rate to ______

increase; increase

if the federal government is reducing net taxes to stimulate the economy at the same time the fed is buying bonds in the open market, the effectiveness of the expansionary fiscal policy will be:

increased, because the fed's actions will result in lower interest rates and a reduction in the crowding-out effect

if the government wants to reduce unemployment, government purchases should be _______ and/or taxes should be _______

increased; decresed

when income decreases, the money demand curve shifts to the ______ which ______ the interest rate with a fixed money supply

left; decreases

when the quantity of money supplied decreases, at any given price level the aggregate demand curve shifts _________

leftward

the price of bonds and the interest rate are _____ related

negatively

if the economy is operating on the relatively vertical segment of the aggregate supply curve, an increase in aggregate demand causes a small change in the _____ and a big change in _____

output; price level

if the federal government is reducing net taxes to stimulate the economy at the same time the fed is SELLING bonds in the open market, the effectiveness of the expansionary fiscal policy will be:

reduced, because the fed's actions will result in higher interest rates

capital, as economists use the term,:

refers to the things that have already been produced that are in turn used to produce other goods and services

if the united states were to pass legislation that would make it easier for people to emigrate to the united states, this would cause the short-run aggregate supply curve to shift to the _______

right

an individual who cannot find a job because his or her job skills have become obsolete is an example of:

structural unemployment

if the fed increases the money supply, there will be a _____ of money and the equilibrium interest rate will _____

surpulus; fall

the itnerest rate paid on bonds icnreases from 4% to 7%. this will cause:

the optimal balance of money to decrease because it raises the opportunity cost of holding money

the transaction demand for money increases when:

the price level rises

the quantity demanded of pepsi has decreased. the best explanation for this is that:

the price of pepsi has increased

the government purchases multiplier is:

the ratio of change in the equilibrium level of output to a change in the government purchases

a decrease in lump-sum taxes will shift the consumption function ______

upward

if the fed sets the money supply independent of the interest rate, then the money supply curve is:

vertical

among the factors of production are:

capital

the largest income component of GDP is:

compensation of employees

a policy mix of a _________ fiscal policy and a ______ monetary policy would cause output to decrease and interest rates to increase, decrease or remain unchanged

contractionary; contractionary