MACRO REV
The interest rate on a financial asset ______.
C. falls as the price of the asset rises
The largest asset of commercial banks are _______.
C. loans
Induced taxes ______ during a recession. Needs-tested spending ______ during a recession.
. decrease; increase
The Rule of 70 is the number of years it takes for the level of any variable to double. It is approximately 70 _____ by the annual percentage _
. divided; growth rate of the variable
The interest rate on a financial asset ______
falls as the price of the asset rises
One of the reasons why this rapid increase occurred during this decade was that ______
family budgets became more stretched
Financial capital is _______.
the funds used to buy physical capital
A south sea island produces only coconuts. In 2010, the price of a coconut is $2.00 and the quantity produced is 300. In 2016, the price of a coconut is $2.50 and the quantity produced is 350. 2010 is the base year. Real GDP in 2016 is ______.
$700
Examples of capital include all of the following except _______.
. Google stock
The Fed regards price stability as being achieved when the core inflation rate is _______.
A. 2 percent a year
Economics studies choices that arise from one fact. What is that fact?
A. Everyone faces scarcity.
Which of the following is an example of an incentive?
All conference volunteers would be offered free lunch on all three days.
Sustained growth of real GDP per person can transform a poor country into a wealthy one because economic growth ______
B. is applied to a larger and larger real GDP each year Y
Wealth is the value of all the things that people _____.
B. own
When new and better ways of producing all goods and services are discovered or when the quantity of capital increases
B. the production possibilities frontier shifts outward Your answer is correct.
The news headline "IBM's Quasar: Is it the future of computing question mark " deals with the ______ question(s) of economics.
B. what and how
If real GDP is $1,000,000, exports are $200,000, imports are $300,000, and aggregate labor hours are 100,000, labor productivity is _____.
B. $10 per hour
Supply-side effects consist of the effects of _____ policy on _____ and _____.
B. fiscal; potential GDP; the economic growth rate
The reference base period is a period for which the _____ is defined to equal _____. Currently, the reference base period is 1982-1984.
CPI; 100
If Country A allocates more resources to producing capital goods than does Country B
Country A will incur a larger opportunity cost of growth, but it will grow more quickly than Country B
Which of the following is an example of investment? A. a person investing $ 250 a month in the stock market B. a person's annual medical checkup C. a person depositing $ 100 a week to her savings account D. the purchase of new buses by Greyhound
D. the purchase of new buses by Greyhound
_______ published The General Theory of Employment, Interest, and Money in _______
D. too little private spending is the cause of depression and recession
An increase in disposable income, other things remaining the same, ______ the equilibrium real interest rate and ______ the equilibrium quantity of loanable funds.
D. lowers; increases
In an expansion, the expected profit rate ______ and, other things remaining the same, the demand for loanable funds ______. A. rises; does not change but the quantity of funds demanded increases B. falls; does not change but the quantity of funds demanded decreases C. falls; decreases D. rises; increases
D. rises; increases
Suppose a Canadian dollar bank deposit in Toronto earns 4 percent a year and a U.S. dollar bank deposit in Chicago earns 1 percent a year. What expectations do people hold if interest rate parity is to hold?
For interest rate parity to hold, people expect that the U.S. dollar will appreciate by 3 percent a year.
Once a month, the Bureau of ______ Statistics calculates the Consumer Price Index, which is a measure of the ______ consumers for a fixed basket of consumer goods and services.
Index; discounted prices paid by all B. Urban; retail prices paid by urban C. Price; prices paid by all D. Labor; average of the prices paid by urban
______ macroeconomics is the view that the market economy is inherently unstable and needs active government intervention to achieve full employment and sustained economic growth.
Keynesian
You buy a coffee at Starbucks. -A money flow from households through goods markets to firms The government buys some Dell computers. -A real flow from firms through goods markets to government A student works at Kinko. -A real flow from households through factor markets to firms Donald Trump rents a building to Marriot hotels. -A real flow from households through factor markets to firms You pay your income tax. -A money flow from households to government
SEE ANS
Choose the statement about the Fed that is correct.
The FOMC meets approximately every six weeks to review the state of the economy.
Does inflation targeting achieve lower inflation rates? Choose the correct statement.
The United Kingdom and New Zealand have missed their inflation targets but the other inflation targeters have achieved theirs.
the central banks of ______ practice inflation targeting.
The United Kingdom, Canada, Australia, New Zealand, Sweden, and the Euro countries
Choose the correct statement. A. There is no tradeoff associated with economic growth. B. Economic growth abolishes scarcity. Your answer is not correct.C. The cost of economic growth is fewer consumption goods in the future. D. The cost of economic growth is fewer consumption goods today. This is the correct answer.E. With economic growth, production becomes a free lunch.
The cost of economic growth is fewer consumption goods today.
Choose the correct statement. A. With economic growth, production becomes a free lunch. B. The cost of economic growth is fewer consumption goods in the future. C. Economic growth abolishes scarcity. D. There is no tradeoff associated with economic growth. E. The cost of economic growth is fewer consumption goods today.
The cost of economic growth is fewer consumption goods today.
The currency drain ratio is 0.5 and the desired reserve ratio is 0.4. What is the money multiplier?
The currency drain ratio is 0.5 and the desired reserve ratio is 0.4. What is the money multiplier? The money multiplier is 1.7.
The money multiplier is 2.0 and the currency drain ratio is 0.2. What is the desired reserve ratio?
The desired reserve ratio is 0.4.
The table gives the demand and supply schedules for lattes. What are the equilibrium price and equilibrium quantity in the market for lattes? The equilibrium price is $ 5 a latte. The equilibrium quantity is 500 lattes per day. Price Quantity demanded Quantity supplied (dollars per latte) (lattes per day) 1 700 100 2 650 200 3 600 300 4 550 400 5 500 500 6 450 600
The equilibrium price is $ 5 a latte. The equilibrium quantity is 500 lattes per day.
Consider potential GDP and then choose the statement that is correct.
The potential GDP line is vertical because potential GDP is independent of the price level.
The quantity of U.S. dollars that traders plan to buy in the foreign exchange market in a given period of time is independent of ______.
The price of gold
In the market for beef comma the price of a pound of beef falls. Explain the effect of this event on the quantity of beef supplied and on the supply of beef.
The quantity of beef supplied decreases and the supply of beef is unchanged.
Consider the short run and the long run and then choose the statement that is correct. A. In the short run, other things remaining the same, a given percentage change in the quantity of money brings an equal percentage change in the price level. B. The real interest rate is dependent on the price level in the long run. Your answer is not correct.C. The real interest rate is independent of the inflation rate in the long run. This is the correct answer.D. In the short run, money market equilibrium determines the price level.
The real interest rate is independent of the inflation rate in the long run.
Sally has a credit card balance of $10 comma 000. The credit card company charges a nominal interest rate of 19 percent a year on unpaid balances. The inflation rate is 7 percent a year. Calculate the real interest rate that Sally pays the credit card company.
The real interest rate that Sally pays the credit card company is 12 percent a year.
Consider the demand for labor, and then choose the statement that is correct. A. Each additional hour of labor hired produces more additional output than the previous hour. B. The demand for labor curve is downward sloping because hours per person increase as the real wage rate falls. C. The real wage rate influences the quantity of labor demanded because what matters to firms is how much output they must sell to earn the dollars they pay the workers. Your answer is correct.D. The higher the real wage rate, the greater is the quantity of labor that firms find it profitable to hire because firms can hire higher-skilled labor at higher wage rates.
The real wage rate influences the quantity of labor demanded because what matters to firms is how much output they must sell to earn the dollars they pay the workers.
Choose the statement that is correct.
The true tax rate on interest income is higher than that on labor income because of the way in which inflation and taxes on interest income interact.
The table gives information about a nation's labor force. What is the unemployment rate? Labor Market Data Working-age population: 215.1 million Labor force: 143.7 million Unemployed: 6.8 million
The unemployment rate is 4.7 percent.
The table gives data about Northland's economy in 2016. What is the value of GDP in Northland in 2016? The value of GDP in Northland in 2016 is _______. A.
The value of GDP in Northland in 2016 is _______. A. $1 comma 213 billion 5-11
The table shows the amounts held as the various components of M1 and M2. Calculate the value of M1 and M2. Item $billions Savings deposits: 375 Checking deposits: 100 Small time deposits: 250 Money market funds and other deposits: 220 Currency and traveler's checks:80
The value of M1 is $ 180 billion. The value of M2 is $ 1025 billion.
In 2009, U.S. exports of goods and services are $1 comma 587 billion and imports of goods and services are $1 comma 976 billion. What is the value of net exports? The value of net exports in 2009 is negative 389 billion dollars.
The value of net exports in 2009 is negative 389 billion dollars.
An example of ceteris paribus is the statement ______.
To study the effect of a wage rise on the number of employees comma keep the population constant
The figure shows the flows of expenditure and income on Lotus Island. In 2016, R was $5 billion; W was $32 billion; U was $14 billion; J was $17 billion; and Z was $4 billion. Calculate total expenditure and total income.
Total expenditure is $ 67 billion. Total income is $ 67 billion 5-2
The graph shows the unemployment rate in the United States from 1960 to 2016. The average unemployment rate was lowest during the 1960s and it resulted from ______.
Vietnam war defence spending and consumer spending encouraged by expanded social programs
Which of the following illustrates goods markets? Which of the following illustrates factor markets?
Walmart sells potatoes at $2.14 a pound. Ann bought a new condo for $200,000.
Which of the following are examples of monetary policy that decrease aggregate demand?
a decrease in the quantity of money and an increase in interest rates
The average unemployment rate was highest during the 1980s and it resulted from ______.
a deep recession 6-2
The table sets out an economy's aggregate demand and aggregate supply schedules. Price level Real GDP demanded Real GDP supplied (GDP deflator) (billions of 2009 dollars) 90 900 600 100 850 700 110 800 800 120 750 900 130 700 1,000 If potential GDP is $600 billion, the economy is _______. In the long run, ______.
above full employment and has an inflationary gap aggregate supply decreases, the price level rises, and real GDP decreases to potential GDP
When investment increases, _______
aggregate demand increases and income increases. The increase in income induces an increase in consumption expenditure so aggregate demand increases by more than the initial increase in investment
So real GDP equals
aggregate hours multiplied by labor productivity
Equilibrium expenditure is the level of aggregate expenditure that occurs when ______.
aggregate planned expenditure equals real GDP
In the United States, the CPI basket consists of items that ______. ______ has the greatest weight in the CPI basket.
an average urban household buys; Housing
You observe that inventories are taking an unplanned dive. You predict that there will be ______.
an expansion
The costs of inflation do not include _______. A. the tax on money held by individuals and businesses B. an increase in saving and investment This is the correct answer.C. the cost of running around to compare prices at different outlets Your answer is not correct.D. the increased opportunity cost of holding money
an increase in saving and investment
Inflation-targeting central banks _____.
announce a target inflation rate, and publish an inflation report that explains how and why the central bank believes its current policy actions will achieve its ultimate goals
The production function separates ______ .
attainable combinations of labor hours and real GDP from unattainable combinations
Loanable funds are used to finance ______.
business investment, a government budget deficit, and international investment or lending
Suppose the Fed wants to keep the dollar pegged at 0.90 euros per dollar. If the demand for dollars decreases permanently and the exchange rate falls below 0.90 euros per dollar, the Fed would have to ______.
buy dollars and sell euros every day
A market is an arrangement that brings _____ together and enables them to get information and do business with each other.
buyers and sellers
The U.S. saving rate increased from minus0.1 percent in 2011 to 2.0 percent in 2012 to 2.4 percent in 2013, to 2.9 percent in 2014, and to 3.0 percent in 2015. A negative saving rate occurs if ______.
consumption expenditure exceeds disposable income
Cost-push inflation is an inflation that begins with an increase in _____.
cost
The fiscal stimulus that returns the economy to full employment from a below full-employment equilibrium _______.
could be an increase in government expenditure and an equal increase in taxes
A minimum wage set above the equilibrium wage rate for low-skilled workers
creates unemployment among low-skilled workers
In 2009 comma the Japanese economy was below full employment. A policy to restore full employment might ______. This policy would create inflation if ______.
cut taxes, increase government expenditures, or increase the quantity of money the demand stimulation was so strong that it moved real GDP above potential GDP
An electrician who is laid off because the economy is in a recession and who gets rehired some months later when the expansion begins experiences ______.
cyclical employment
The cut in employment at the U.S. Postal Service results in ______ unemployment because _______.
cyclical; the workforce is being decreased because of the economic slowdown
National debt is the amount of government _____ - _____ that has arisen from past _____.
debt outstanding; debt; budget deficits
Induced taxes and needs-tested spending _______ the multiplier effects of changes in autonomous expenditure.
decrease
Much of Africa experiences slow economic growth because it lacks ______.
economic freedom, private property rights that are enforced, and markets that function well
A rise in the money wage rate when the economy is at potential GDP ______.
decreases aggregate supply because a rise in the money wage rate increases costs, so firms employ fewer workers
An increase in the minimum wage ______
decreases employment and increases unemployment if it is set above the equilibrium wage rate
The requirement to raise more capital can make financial institutions safer because by using more of its own funds and less borrowed funds, a financial institution ______.
decreases its risk of insolvency
When the price level rises but the money wage rate remains unchanged, unemployment ______ and the quantity of real GDP supplied ______.
decreases; increases
Between 2001 and 2008, traders expected the U.S. dollar to ______ against the euro and it ______.
depreciate; did depreciate
An increase in the income tax rate is an example of ______.
discretionary fiscal policy
The production function _______.
displays diminishing returns
A rational expectation is a forecast that results from the use of all the relevant data and _____.
economic science
Much of Africa experiences slow economic growth because it lacks ______. A. a healthy labor force B. manufactured goods from developed countries C. economic freedom, private property rights that are enforced, and markets that function well Your answer is correct.D. the motivation to grow E. safe drinking water and adequate sewage systems
economic freedom, private property rights that are enforced, and markets that function well
The preconditions for economic growth are ______.
economic freedom, private property rights, and markets
If the real wage rate is at the full-employment equilibrium level, real GDP is
equal to potential GDP, which is efficient but is not the most that can be produced
Purchases of new national defense equipment flow from ______ through the ______ markets.
governments to firms; goods
The opportunity cost of producing a tub of ice cream is ______ at point A than at point B. The opportunity cost of producing a pound of butter is ______ at point B than at point A.
greater; greater ref 3-5
Expenditure on consumption goods and services flows from ______ through the ______ markets.
households to firms; goods
You've seen that the global distribution of income is unequal. Why do you think it is unequal? The global distribution of income is unequal because there is an unequal distribution of ______
human capital and physical capital
As more people in India have access to higher education ______ and in the long run ______.
human capital increases; both potential GDP and aggregate supply increase
A Clinton Foundation success story is that it loaned $23,000 to Rwandan coffee growers to support improvements to coffee washing stations and provided technical support. What was the source of the success? The source of the success of the coffee growers is _______.
increase in human capital and improvements to washing stations, which changed physical capital
U.S. consumer confidence edges up The Reuters/University of Michigan Surveys of Consumers reported a rise in September of consumer confidence that exceeded economists' expectations and a rise in expected inflation to 3.7 percent from 3.5 percent a year. Such a rise should be a concern to the Federal Reserve, which has been pumping money into the economy in an attempt to contain the recession and spur a recovery. Source: The New York Times, September 16, 2011 If the Fed is concerned about inflation and unexpectedly slows money growth, explain how unemployment will change in the short run and in the long run. If the Fed is concerned about inflation and unexpectedly slows money growth, unemployment ______ the natural unemployment rate in the short run. In the long run, unemployment ______ the natural unemployment rate.
increases above; returns to
GM, UAW reach crucial cost-cutting pact GM and the UAW agree on restructuring workers' jobs. This restructuring, with no change in the wage rate, will save GM billions in labor costs. Source: Wall Street Journal, May 22, 2009 Will this reduction of labor costs, with no change in the wage rate, change GM's supply of vehicles? The cut in labor costs with no change in the wage rate will
increase productivity, which will increase GM's supply of vehicles
For consumers, Upper T dash shirts and tank tops are substitutes. If the price of a Upper T dash shirt increases, the demand for tank tops will _______
increase, and the demand curve for tank tops will shift rightward
Which of the following are included in the income approach to measuring GDP? A. rent; profit; government expenditure on goods and services B. interest; rent; investment C. interest; rent; profit This is the correct answer.D. profit; investment; net exports of goods and services
interest, rent: profit
If aggregate planned expenditure is less than real GDP, then _______.
inventories increase, and as real GDP decreases a movement down along the AE curve occurs
The graphs below show the federal government deficit and debt from 2000 to first quarter of 2019 (the most recent quarter). When budget is ________, the debt increases. A _______ brings ___________ .
in deficit; large deficit; fast-growing debt
The value of the CPI in the base period ______
is 100 no matter what reference base period is chosen
An economy is at full employment. If it experiences an unexpected reduction in the inflation rate, the inflation reduction ______. If the Fed announces an inflation reduction policy and is successful in lowering the expected inflation rate, the inflation reduction ______.
is accompanied by recession and unemployment moving above the natural unemployment rate; results in a lower inflation rate with no accompanying loss of output or increase in unemployment
Sustained growth of real GDP per person can transform a poor country into a wealthy one because economic growth ______.
is like compound interest
A bank's liquid assets consist of ______. A. the money in its ATMs and the bonds that it owns, which are issued by the U.S. government and by other large, safe organizations Your answer is not correct.B. the currency in its vaults and the money in checking and savings deposits C. currency in its vaults plus the balance on its reserve account at a Federal Reserve Bank D. its short-term Treasury bills and overnight loans to other banks
its short-term Treasury bills and overnight loans to other banks
Consider the functional distribution of income. The largest percentage of income paid to the factors of production is paid to
labor
Potential GDP is the value of real GDP when all the economy's factors of production - _____, _____, _____, and _____ - are fully _____.
labor; capital; land; entrepreneurial ability; employed
A real business cycle is a cycle that results from fluctuations in the pace of growth of _____ and _____.
labor productivity; potential GDP
An economy grows when it does all of the following except
lowers prices
A decrease in the marginal propensity to import _______, everything else remaining the same.
makes the multiplier larger
The objectives of U.S. monetary policy are to achieve ______.
maximum employment and stable prices
The trend money growth rate ______.
minus the trend real GDP growth rate determines the trend inflation rate
Compared to the developing economies, the advanced economies have _______ human capital and _______ physical capital.
more; more
Initially, the economy is at full-employment when aggregate demand increases. The increase in aggregate demand creates a _______ the short-run aggregate supply curve and a_______ the short-run Phillips curve.
movement up along; movement up along
A country that is lending more to the rest of the world than it is borrowing from the rest of the world is a ______. A country that during its entire history has invested more in the rest of the world than other countries have invested in it is a ______.
net lender; creditor nation;
The supply of money is the relationship between the quantity of money supplied and the _
nominal interest rate
An economic model is a description of some features of the economic world that includes _____ features assumed necessary to explain the _____facts.
only those; observed
If the CPI rises from 120 to 126, then ______
on average, the price paid by urban consumers for a fixed basket of consumer goods and services rises by 5 percent
If the CPI rises from 120 to 126, then ______.
on average, the price paid by urban consumers for a fixed basket of consumer goods and services rises by 5 percent
According to new growth theory, ______. . economic growth most often occurs in economies with large populations, such as what we see in China today B. our unlimited wants will lead us to ever greater productivity and perpetual economic growth Your answer is correct.C. prosperity will last but growth will not last because eventually technology stops advancing D. technological advances are determined by chance
our unlimited wants will lead us to ever greater productivity and perpetual economic growth
Diminishing returns do not limit growth in new growth theory because ______.
physical activities can be replicated
Classical growth theory ______
predicts that the clash between an exploding population and limited resources will eventually bring economic growth to an end
In the long run, money market equilibrium determines the
price level
The CPI tells us the ______ in the reference base period. The CPI in the reference base period is by definition equal to ______.
price level in a given period expressed as a percentage of the price level; 100
Loanable funds come from ______.
private saving, a government budget surplus, and international borrowing
A substitute in production is a good that is _____ another good, and a complement in production is a good that is _____ another good.
produced in place of; produced together with
If governments in Africa _______ they will encourage economic growth and raise the standard of living.
protect private property
A supply schedule is a list of the ______ at each different price when all other influences on selling plans remain the same. A supply curve is a graph of
quantities supplied; a supply schedule
Adrienne graduates from college and her income increases by $20 comma 000. Nothing else changes. Adrienne decreases the quantity of ramen noodles and potato chips that she buys and increases the quantity of ski trips that she buys. For Adrienne,
ramen noodles and potato chips are inferior goods
The economic growth rate is the annual percentage change of ______.
real GDP
Labor productivity equals _____
real GDP divided by aggregate hours
A rise in the price level _______.
shifts the AE curve downward and brings a movement up along the AD curve
Brazil's inflation rate was 9.28 percent in the past twelve months. food and beverage prices rose more than one percent per month. Source: Bloomberg, May 6, 2016 Explain the effect of a rise in the price level on Brazil's equilibrium expenditure. A rise in the price level _______ and equilibrium expenditure _______.
shifts the AE curve downward; decreases
An increase in expected future income ______.
shifts the consumption function upward
In the African nation of Senegal, to enroll in school a child needs a birth certificate that costs $25. This price is several week's income for many families. Explain how this requirement is likely to affect the growth of human capital in Senegal. Because of this requirement we would expect to see _______.
slow growth of human capital in Senegal and particularly slow growth in the human capital of girls and women
The U.S. interest rate differential rises when ______.
the U.S. interest rate rises and the foreign interest rate falls 19-7
The three types of financial markets are ______.
stock markets, bond markets, and loans markets
Job rationing creates a
surplus of labor
The core inflation rate is ______.
the annual percentage change in the Personal Consumption Expenditure Price Index excluding the prices of food and energy
To calculate the multiplier, we divide ______ by ______.
the change in equilibrium expenditure; the change in autonomous expenditure
When there is a shortage of dollars in the foreign exchange market, ______.
the forces of supply and demand pull the foreign exchange market into equilibrium 19-6
The inflation rate is 1.5 percent a year, the unemployment rate is 4 percent, and the economy is at full employment. Unexpectedly, the Fed increases the money growth rate to raise the inflation rate to 3 percent a year. In the short run, ______.
the inflation rate rises and the unemployment rate falls
Human capital is _______
the knowledge and skill that people obtain from education, on-the-job training, and work experience
If we observed a rise in the price of beef and a decrease in the quantity of beef that producers sell, the most likely explanation would be that
the law of supply applies to beef, but some other influence on selling plans has also changed and the supply of beef has decreased
The graph shows a short-run Phillips curve. Draw an arrow on the curve that shows the effect of an unexpected increase in aggregate demand. When aggregate demand unexpectedly increases, ______.
the natural unemployment rate does not change 15-4
When the real wage rate is above the full-employment equilibrium leve
the natural unemployment rate increases
An open market operation is ______
the purchase or sale of government securities by the Federal Reserve System in the open market
If the price of a smartphone rises, with all other influences on buying plans remaining the same, _______.
the quantity of smartphones demanded decreases
If the price of a smartphone falls, with all other influences on buying plans remaining the same
the quantity of smartphones demanded increases
The table shows some of the items in Northland's National Income and Product Accounts in 2016. Calculate Northland's net domestic product at factor cost in 2016. Northland's net domestic product at factor cost in 2016 is $ 1215 billion. Item Amount (billions of dollars) Consumption expenditure: 885 Wages: 815 Government expenditure:350 Interest, rent, and profit: 400 Indirect taxes less subsidies: 165 Depreciation: 200 Investment: 300 Net exports: 35
$1215 billion.
If tax revenues are $3,500 billion and the government's budget balance is a $720 billion deficit, calculate the government's outlays.
$4,220
Real GDP growth rate = ______.
[(Real GDP in current yearminusReal GDP in previous year) divided by Real GDP in previous year] times 100
Between 2014 and 2015, traders expected the U.S. dollar to ______ against the euro and it ______.
appreciate; did appreciate
The multiplier is the amount by which a change in ______ expenditure is magnified or multiplied to determine ______.
autonomous; the change in equilibrium expenditure and real GDP
A marginally attached worker is a person who does not have a job, is _____ and _____ to work, has _____ specific efforts to find a job within the previous _____ weeks, but has looked for work sometime in the recent past.
available; willing; not made; four
Still on the job, but at half the pay In past recessions, firms have cut their labor costs by laying off workers. During this recession, many firms and state governments have trimmed labor costs by cutting pay or shortening the workweek, rather than laying off workers. Source: The New York Times, October 13, 2009 What effect might the strategy of cutting pay or the workweek rather than laying off workers have on the depth of the recession and the unemployment rate? In comparison to laying off workers, cutting pay and shortening the workweek ______ the unemployment rate and makes the recession ______.
decreases; less deep
When the quantity of loanable funds supplied ______ the quantity of loanable funds demanded, the real interest rate falls to eliminate the ______ of funds.
exceeds; surplus
The supply of loanable funds increases when disposable income______ or wealth ______
increases; decreases
Households are individuals or groups of people _____ together. Firms are institutions that organize _____ of goods and services.
living; the production
Inflation targeting is a _____ policy strategy in which the _____ makes a public commitment to achieving an explicit _____ target and to explaining how its policy actions will achieve that target.
monetary; central bank; inflation
Capital consists of _______.
tools, instruments, machines, buildings, and other items that have been produced in the past and that businesses now use to produce goods and services
What to do with $50,000 now A good strategy: Put about two-thirds of the money into bonds of developed nations and the rest into riskier emerging- market bonds. Source: CNNMoney.com What is the opportunity cost of holding money? If lots of people put their money into bonds, how will the demand for money and the interest rate change? The opportunity cost of holding money is ______. When lots of people followed this advice and put their money into bonds, the demand for money _____ and the interest rate on bonds _____.
-the interest rate forgone on an alternative asset -decreases; falls
Two countries, Arctica and Antarctica, produce only two goods: frozen fish and party ice. The table gives their production possibilities. _______ has a comparative advantage in producing frozen fish and _______ has a comparative advantage in producing party ice.
. Arctica; Antarctica ref: CH3Q3
Choose the correct statements. 1. Upper A rise in the exchange rate is called an appreciation of the dollar 2. In a growing economy comma the exchange rate is always rising 3. The foreign exchange market is a place 4. Foreign currency is the money of other countries
. Statements 1 and 4 are correct.
The quantity of money demanded is the amount of money that households and firms choose to _____.
. hold
The spread of ATMs and the increased use of debit cards ______ money. Everything else remaining the same, the nominal interest rate ______.
. increase the demand for; rises
The slope of the production function becomes _______ steep as the quantity of _____ increases because of diminishing returns
. less; labor
The federal funds rate is the interest rate at which banks can borrow and lend _____ in the _____ market.
. reserves; federal funds
A change in the expected future exchange rate changes the supply of U.S. dollars ______, and a change in U.S. demand for imports changes the supply of U.S. dollars ______.
. today; today 19-9
Emily owns an ice cream parlor. In an hour she can produce 40 milkshakes or 40 ice cream sundaes. Ben also owns an ice cream parlor. In an hour he can produce 20 milkshakes or 10 ice cream sundaes. Emily's opportunity cost of producing 1 milkshake is _____. Ben's opportunity cost of producing 1 milkshake is _____
1 ice cream sundae; 0.5 ice cream sundae "Ben" has a comparative advantage in the production of milkshakes.
An economy follows Okun's Law. The natural unemployment rate is 6 percent and potential GDP is $11 trillion. When the actual unemployment rate is 7 percent, real GDP is _____
10.8 Trillion
he natural unemployment rate is 6 percent and the expected inflation rate is 10 percent a year. Draw the long-run Phillips curve. Label it LRPC0. Draw the short-run Phillips curve. Label it SRPC0. Draw a point at the natural unemployment rate and the expected inflation rate. Label it 1. Now the natural unemployment rate rises to 9 percent with no change in the expected inflation rate. Draw and label LRPC1. Draw and label SRPC1. Draw a point at the natural unemployment rate and the expected inflation rate. Label it 2.
15-13
The graph shows the labor force participation rate of women in the U.S. labor market between 1970 and 2016. The labor force participation rate of women increased most during the _______.
1970s 6-5
You deposit $200 in a savings account on January 1, and the bank pays you interest of $10 at the end of the year. During the year, the average price level rises by 2 percent. The real interest rate on your savings account is
3 percent a year
According to Peter Howitt of Brown University, if inflation is lowered from 3 percent a year to zero, then in 30 years the accumulated value of all additional output produced would be worth ______ percent of current GDP.
85
Classify each of the following items as a final good or service or an intermediate good or service, and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services. A. Steel sheets bought by General Motors B. Upper A new house bought by Beyoncé C. Upper A DVD bought by a household D. The purchase of a new aircraft for the vice dash president
A is an intermediate good, B is a final good that is investment, C is a final good that is consumption expenditure, and D is a final good that is government expenditure.
What does classical growth theory say will eventually end economic growth?
A population explosion that leads to a fall in labor productivity and the return of real GDP per person to the subsistence level
In 2015 and in 2016, consumers in Dexter purchased only books and pens. The prices and quantities for 2015 and 2016 are listed in the table. The reference base period for Dexter's CPI is 2015, and 2015 is also the year of the Consumer Expenditure Survey. The inflation rate in 2016 is ______ percent.
A. 59.1
Which of the following is included in the measure of U.S. GDP
A. a 2013 Grand Am produced and sold as a new car in the United States in 2013
Over time, ______. A. both the demand for loanable funds and the supply of loanable funds trend upward, but the real interest rate has no trend Your answer is correct.B. the demand for loanable funds trends upward, the supply of loanable funds trends downward, and the real interest rate trends upward C. both the demand for loanable funds and the supply of loanable funds trend upward, and the real interest rate also trends upward D. the demand for loanable funds trends downward, the supply of loanable funds trends upward, and the real interest rate trends upward
A. both the demand for loanable funds and the supply of loanable funds trend upward, but the real interest rate has no trend
According to classical growth theory, when real GDP per person ______, the population grows. A. exceeds the subsistence level Your answer is correct.B. exceeds capital per hour of labor C. is less than capital per hour of labor D. is less than the subsistence level
A. exceeds the subsistence level
According to classical macroeconomics, ______.
A. no remedy by government can improve on the performance of the market
Saving is the amount of income that is _____ in net taxes or spent on _____ goods and services.
A. not paid; consumption
New growth theory predicts that economic growth will never end because _______. A. our unlimited wants will lead us to make choices that will bring ever-greater productivity and perpetual economic growth. Your answer is correct.B. the world population growth rate is slowing down C. the world population growth rate is rising at an increasing rate D. competition increases profit E. productivity decreases as robots and computers take over more of the work previously done by humans
A. our unlimited wants will lead us to make choices that will bring ever-greater productivity and perpetual economic growth.
The economic growth rate is the annual percentage change of _____. A. real GDP Your answer is correct. B. real income C. interest rates D. the real wage rate
A. real GDP
The productivity curve is the relationship that shows how _____ changes as the quantity of _____ changes
A. real GDP per hour of labor; capital per hour of labor
The CPI market basket consists of items that ______ buy and ______. A. urban households; the Consumer Expenditure Survey is used to update it frequently Your answer is correct.B. all households; a greater weight is put on the items purchased by urban households C. all households; the reference base period changes whenever the market basket changes D. urban households; it is updated every month
A. urban households; the Consumer Expenditure Survey is used to update it frequently
The news headline "Space travel only for rich and fit" deals with the ______ question(s) of economics.
A. what and for whom
A marginally attached worker is a person who does not have a job, is _____ and _____ to work, has _____ specific efforts to find a job within the previous _____ weeks, but has looked for work sometime in the recent past.
A. available; willing; not made; four
The demand for dollars increases if the U.S. interest rate differential ______ or the expected future exchange rate ______.
A. increases; rises
Two countries, Alpha and Beta, have identical production possibilities frontiers. If Alpha produces at point A and Beta produces at point B, then _______. B is higher than A on a Downward slope
Alpha consumes more than Beta today, but it will grow slower than Beta
Two countries, Alpha and Beta, have identical production possibilities frontiers. If Alpha produces at point A and Beta produces at point B, then _______.
Alpha consumes more than Beta today, but it will grow slower than Beta ref 3-8
Real GDP growth rate = ______. A. [(Real GDP in current yearminusReal GDP in previous year) divided by Real GDP in current year] times 100 B. [(Real GDP in current yearminusReal GDP in previous year) divided by Real GDP in previous year] times 100 Your answer is correct.C. [(Real GDP in previous yearminusReal GDP in current year) divided by Real GDP in current year] times 100 D. [(Real GDP in previous yearminusReal GDP in current year) divided by Real GDP in previous year] times 100
B. [(Real GDP in current yearminusReal GDP in previous year) divided by Real GDP in previous year] times 100
Choose the statement about money that is correct. A. Barter requires a double coincidence of wants. This is the correct answer.B. Money is a completely stable store of value. C. Inflation brings a rising value of money. D. Upper A work of art is an example of money because it can act as a store of value.
Barter requires a double coincidence of wants.
______ macroeconomics is the view that the market economy works well, that aggregate fluctuations are a natural consequence of an expanding economy, and that government intervention cannot improve the efficiency of the market economy.
C. Classical
Classical macroeconomics _______
C. fell into disrepute during the Great Depression
According to new growth theory, the driving force of economic growth is ______. A. better math skills B. an increase in the working dash age population Your answer is not correct.C. growth results from the choices that people make in the pursuit of profit This is the correct answer.D. the population growth rate E. the expansion of a country's highway system
C. growth results from the choices that people make in the pursuit of profit This is the correct answer.
Aggregate demand if the exchange rate ______ or foreign income ______.
C. increases; decreases
Gross national product is ______. A. the sum of wages, interest, rent, and profit Your answer is not correct.B. the income received by households minus personal income taxes paid C. the market value of all the final goods and services produced anywhere in the world in a given time period by the factors of production supplied by the residents of that country This is the correct answer.D. the market value of all the final goods and services produced within a country in a given time period
C. the market value of all the final goods and services produced anywhere in the world in a given time period by the factors of production supplied by the residents of that country This is the correct answer.
Aggregate demand if monetary policy ______ the quantity of money and ______ interest rates.
D. decreases; increases
Aggregate demand decreases if expected future income, inflation, or profits ______. And aggregate demand if fiscal policy ______ government expenditure.
D. decrease; decreases
According to Malthusians, _______. A. if today's global population reaches 11 billion by 2200, the world will see the greatest prosperity in its history B. our unlimited wants lead to greater productivity C. our unlimited wants lead to a decrease in the population D. if today's global population reaches 11 billion by 2200, we will return to a primitive standard of living
D. if today's global population reaches 11 billion by 2200, we will return to a primitive standard of living
Aggregate demand if fiscal policy ______ taxes or ______ transfer payments.
D. increases; decreases
The demand for money is the relationship between the quantity of money demanded and the _______ when all other influences on the amount of money that people wish to hold remain the same.
D. nominal interest rate
Olivia and Helen produce afghans and quilts. The figure shows Olivia's PPFO and Helen's PPFH. Olivia and Helen can achieve gains from trade if _______. A. Olivia sells afghans to Helen in exchange for some of the quilts that Helen produces B. Olivia sells both afghans and quilts to Helen in exchange for money C. Helen sells both afghans and quilts to Olivia in exchange for money D. Helen sells afghans to Olivia in exchange for some of the quilts that Olivia produces
Helen sells afghans to Olivia in exchange for some of the quilts that Olivia produces 3-6
Which of the following statements about the market for chicken describes a change in the quantity demanded and which describes a change in demand? I People are buying less chicken because the price of beef has fallen. II People are buying less chicken because the price of chicken has increased. III People are buying more chicken because the price of chicken has fallen. IV The cost of chicken feed has increased.
I is a change in demand and II and III are changes in the quantity demanded.
Which of the following statements is about a normal good, which is about an inferior good, which is about both, and which is about neither? I With incomes falling in the recession, people are buying more chicken. II People are buying more beef now that incomes have increased. III People are buying more chicken because the price of chicken has fallen. IV With higher incomes people are switching from chicken to beef.
I is inferior, II is normal, III is neither, and IV is both
Which of the following illustrates a tradeoff?
I will study for my exam instead of going for the movie tonigh
Which of the following statements by Aqua Springs demonstrates that the firm's selling plans obey the law of supply
If the price of bottled water falls and all the other influences on our selling plans remain the same, we will cut back on production and lay off some workers
In June 2014, traveler's checks in circulation were $3 billion; checkable deposits owned by individuals and businesses were $ 1 comma 635 billion; Upper M 1 was $ 2 comma 857 billion; money market funds and other deposits were $ 631 billion; Upper M 2 was $ 11 comma 424; and savings deposits were $ 7 comma 406 billion. Calculate currency held by individuals and businesses in June 2014. Calculate small time deposits in June 2014.
In June 2014 currency held by individuals and businesses was $ 1,219 billion. Small time deposits in June 2014 were $ 530 billion.
Every week, Kate plays the piano for four hours, and her grade on each English test is 90 percent. Last week, after playing for four hours, Kate considered playing for another hour. She decided to play for another hour and cut her study time by one hour. But last week, her English grade fell to 85 percent. Did Kate make her decision on the margin?
Kate made her decision at the margin because she considered the benefit and cost of one additional hour of playing the piano.
The magnitude of the tax multiplier is equal to _______.
MPC times the government expenditure multiplier
During 2016, Simon's Recording Studio spent $45,000 on new machines. Simon's depreciation was $3,000. What was Simon's net investment?
Net investment was $ 42000.
An economy produces only robots, pens, and pizza. The table gives the quantities produced and prices in 2016 and 2017. The base year is 2016. What is nominal GDP in 2016 and in 2017?
Nominal GDP in 2016 is $ 16. Nominal GDP in 2017 is $ 116. 5-5
The table shows an economy's total production and the prices of the final goods it produced in 2016 and 2017. Calculate nominal GDP in 2016 and nominal GDP in 2017. In 2016 Item Quantity Price Fish 130 $2 Berries 50 $5 In 2017 Item Quantity Price Fish 75 $4 Berries 75 $10
Nominal GDP in 2016 is $ 510. Nominal GDP in 2017 is $ 1050.
Bureau of Economic Analysis data show that for the period 1929 through 2008 the average annual increase in the GDP price index is 3.0 percent. The Bureau of Labor Statistics data show that for the period 1929 through 2008, the average annual increase in the CPI is 3.2 percent. Although the difference of 0.2 percentage points is small, maintained over the 79 year period, the CPI rose by 17 percent more than the GDP price index. How would you explain the difference in these two inflation measures? Choose the correct statement.
The GDP price index uses the prices of all the goods and services in GDP.
Choose the correct statement. A. The United States is a net borrower. China and Saudi Arabia are net lenders. This is the correct answer.B. The United States and China are net borrowers. Saudi Arabia is a net lender. C. Saudi Arabia is a net borrower. The United States and China are net lenders. D. China and Saudi Arabia are net borrowers. The United States is a net lender.
The United States is a net borrower. China and Saudi Arabia are net lenders.
Which statement is an example of economics as a policy tool?
The federal government is cutting taxes
The table gives some items from the national income and product accounts. Calculate the government sector balance, the private sector balance, and net exports. >>> Record a negative balance with a minus sign. Do not record a positive
The government sector balance is negative 150 billion dollars. The private sector balance is negative 150 billion dollars. Net exports is negative 300 billion dollars. GOVT SECT BALANCE:Net taxes minus Govt EXP PRIV SECT BAL: Saving- Investments NET EXP: GOVT + PRIV BAL
Consider the long-run Phillips curve, and then choose the correct statement.
The inflation rate can take on any value at full employment.
The figure shows the short-run and long-run Phillips curves. The current inflation rate is 5 percent a year. The Fed announces that it will slow the money growth rate so that inflation will fall to 2.5 percent a year. If no one believes the Fed and expected inflation remains at 5 percent a year, explain the effect of the Fed's action on inflation and unemployment next year. Choose the correct statement.
The inflation rate will fall and the unemployment rate will increase in a movement down the short-run Phillips curve. 15-3
Choose the correct statement. A. The level of aggregate expenditure that occurs where the AE curve intersects the 45degrees line is equilibrium expenditure. Your answer is correct.B. Equilibrium expenditure occurs at all points along the 45degrees line. C. Equilibrium expenditure occurs at the point at which the AE curve intersects the x-axis. D. Equilibrium expenditure occurs at all points along the AE curve.
The level of aggregate expenditure that occurs where the AE curve intersects the 45 degrees line is equilibrium expenditure.
In an economy without taxes and imports, an increase in investment of $50 billion increases equilibrium expenditure by $125 billion. What are the values of the multiplier and the slope of the AE curve?
The multiplier is 2.5 and the slope of the AE curve is . 6.
The real wage rate is $11.00 an hour and the CPI is 115. What is the nominal wage rate?
The nominal wage rate is $ 12.65 an hour.
Which of the following statements by Tom demonstrates that his buying plans obey the law of demand?
The only thing that's changed is the price of textbooks: they've become more expensive and now I'm not buying as many.
Which of the following is an example of government expenditure on goods and services A. Welfare payments B. All expenditure by lobbyists C. The purchase of airline tickets by Congress to send members to visit overseas troops Your answer is correct.D. The salaries paid to Washington correspondents from major networks and newspapers
The purchase of airline tickets by Congress to send members to visit overseas troops
The velocity of circulation is 4 and GDP is $ 12 billion. What is the quantity of money?
The quantity of money is $3 billion.
Consider aggregate supply and then choose the statement that is correct.
The quantity of real GDP supplied equals potential GDP at the price level at which the real wage rate is at its full-employment equilibrium level.
The table shows the market for apartments. If a rent ceiling is set at $900 a month, what is the housing shortage? If a rent ceiling is set at $1,500 a month, what is the housing shortage? When a rent ceiling is set at $900 a month, the housing shortage is 300 apartments a month. When a rent ceiling is set at $1,500 a month, the housing shortage is 0 apartments a month. Rent/ Quantity demanded/ Quantity supplied/ (dollars per month) (apartments per month) 300 1,300 400 600 1,100 500 900 900 600 1,200 700 700 1,500 500 800
When a rent ceiling is set at $900 a month, the housing shortage is (300) apartments a month. When a rent ceiling is set at $1,500 a month, the housing shortage is (0) apartments a month. 4-11
Choose the correct statement. A. The balanced budget multiplier is equal to zero. B. When both government expenditure and taxes decrease by $1, aggregate demand decreases. This is the correct answer.C. The balanced budget multiplier is positive because an increase in government expenditure increases disposable income. Your answer is not correct.D. The balanced budget multiplier is the magnification effect on aggregate demand of a simultaneous increase in aggregate demand and an equal decrease in taxes.
When both government expenditure and taxes decrease by $1, aggregate demand decreases.
ADB reduces China growth estimate Since 1980 China's real GDP per person has grown at 10 percent a year. The Asian Development Bank (ADB) cut its estimate for China's growth to 9.3 percent this year. Source: Bloomberg, September 13, 2011 If China's growth rate remains at 9.3 percent a year, how many additional years will it take for China to double its real GDP per person?
When real GDP per person grows at 10 percent a year, real GDP per person in China doubles in 7 years. >>> Answer to 1 decimal place. When real GDP per person grows at 9.3 percent a year, real GDP per person in China doubles in 7.5 years. >>> Answer to 1 decimal place. When the growth rate of real GDP per person decreases from 10.0 percent to 9.3 percent a year, real GDP per person will double 0.5 years later. >>> Answer to 1 decimal place.
The amount of job-search unemployment increases when
a prolonged structural slump occurs
The graph illustrates the market for tea. The initial equilibrium is at point A. After one or more changes, the new equilibrium moves to point B. You predict that the market for tea was influenced by ______
a rise in household income and an increase in the number of plantations 4-2
An example of a capital good is
a satellite communication system
If the government sets a price on dog food that is below the equilibrium price
a shortage of dog food occurs
The U.S. unemployment rate ______.
averaged 5.8 percent between 1948 and 2016
CBO expects higher long-term deficits The Congressional Budget Office (CBO) says the national debt is on an upward path and will hit 122 percent of GDP in 2040. Healthcare programs and Social Security benefits are the large drivers of spending over the coming decades. Source: The Wall Street Journal, July 12, 2016 If the government decided to slow the growth of debt by cutting transfer payments and raising taxes by the same amount, how would this fiscal policy influence the budget deficit and real GDP? Cutting transfer payments and raising taxes by the same amount _______. The supply-side effect of an increase in taxes _______ employment and _______ real GDP.
decreases the budget deficit, decreases aggregate demand, and decreases real GDP decreases; decreases
The Fed decreases the quantity of money. In the short run, the quantity of money demanded ______ and the nominal interest rate ______.
decreases; rises
The United Nations HDI is based on GDP per person, life expectancy at birth, and indicators of the quality and quantity of education. The United States _______ have the highest HDI in part because _______. Adding _______ to the current HDI index would not create a better standard of living index.
does not; Americans do not have access to universal healthcare real GDP
A discretionary monetary policy is a monetary policy that is based on an expert assessment of the current _____.
economic situation
Event 1 The Middle East cuts supplies of oil to the United States. 2 The New York Yankees win the World Series. 3 U.S. labor unions negotiate wage hikes that affect all workers. 4 A huge scientific breakthrough doubles the output that an additional hour of U.S. labor can produce. 5 Migration to the United States increases the working-age population. An increase in potential GDP results from ______. A decrease in potential GDP results from ______.
events 4 and 5; events 1 and 3
The U.S. saving rate increased from minus0.1 percent in 2011 to 2.0 percent in 2012 to 2.4 percent in 2013, to 2.9 percent in 2014, and to 3.0 percent in 2015. A negative saving rate might be something to worry about because ______. U.S. saving might be increased by ______.
eventually households must repay their borrowing; decreasing taxes on interest income
The velocity of circulation is the average number of times in a year that each dollar of money gets used to buy ______. The formula used to measure the velocity of circulation, V, is ______, where P is the price level, Y is real GDP, and M is the quantity of money.
final goods and services; V = (P times Y) divided by M
A financial institution is a firm that operates on both sides of the markets for _____: It _____ in one market and _____ in another.
financial capital; borrows; lends
Payments for labor services flow from ______ through the ______ markets.
firms to households; factor
The Fed's $2.2 trillion fire hose The Fed threw a lot of money at the financial crisis in 2008 to unfreeze credit markets and encourage economic activity. As part of its effort to keep the interest rate low, the Fed purchased government bonds worth $300 billion between March and September 2009. By October, the Fed held $770 billion in government securities, nearly double its pre-crisis total. Before the crisis, the Fed held mainly government securities, which it used to control the quantity of money in the economy. Now government securities make up just 35% of the Fed's balance sheet. Source: CNN Money, October 9, 2009 If the Fed purchased the government securities on the open market, explain why the purchase of $300 billion of government securities would influence the interest rate. If the Fed purchases the government securities on the open market, the quantity of money ______ because _______. The nominal interest rate _______.
increases; bank reserves increase falls
People are more likely to accept a real wage cut that arises from an increase in the CPI than a cut in their nominal wage rate because ______.
inflation decreases the real wage rate gradually and a cut in the nominal wage decreases the real wage rate suddenly
An economy at full employment experiences an unexpected reduction in the inflation rate, which ______.
initially increases the unemployment rate above the natural unemployment rate
The figure shows an economy's production possibilities frontier and identifies some production points. We can produce all combinations ______. A. inside the PPF but not on the PPF or outside the PPF B. inside the PPF and on the PPF Your answer is correct.C. on the PPF but not inside or outside the PPF D. on the PPF and outside the PPF E. inside the PPF, on the PPF, and outside the PPF
inside the PPF and on the PPF
Currency _________. A. inside the banks is not money because it isn't available as a means of payment This is the correct answer.B. inside ATMs is money because it is a store of value for the bank Your answer is not correct.C. is money and bank deposits are not money D. and debit cards are fiat money
inside the banks is not money because it isn't available as a means of payment
Nominal GDP targeting is a monetary policy rule that adjusts the _____ rate to achieve a target growth rate for nominal GDP.
interest
When the unemployment rate is ______ than the natural unemployment rate, cyclical unemployment is
less; negative
An economy grows when it does all of the following except _______.
lowers prices
A structural boom ______
lowers the natural unemployment rate because new jobs are found quickly
The economic growth rate is the annual percentage change of ______. A. the quantity of money B. real GDP Your answer is correct.C. real GDP per person D. labor productivity
real GDP
The quantity theory of money is the proposition that when ______, an increase in the quantity of money brings ______ percentage increase in the price level. A. real GDP exceeds potential GDP; a greater B. real GDP equals potential GDP; an equal This is the correct answer.C. real GDP equals potential GDP; a smaller D. real GDP exceeds potential GDP; an equal Your answer is not correct.E. an inflationary gap exists; a greater
real GDP equals potential GDP; an equal
The productivity curve is the relationship that shows how _____ changes as the quantity of _____ changes.
real GDP per hour of labor; capital per hour of labor
The ______ is the opportunity cost of the funds used to finance the purchase of capital. The ______ is the opportunity cost of consumption expenditure.
real interest rate; real interest rate
The crowding-out effect is the tendency for a government budget deficit to raise the _____ and _____ investment.
real interest rate; decrease
Aggregate supply is the relationship between the quantity of _____ supplied and the _____ when all other influences on production plans remain the same.
real GDP; price level
When the price level and the money wage rate rise by the same percentage, unemployment _______.
remains the same
An increase in the demand for hot dogs brings a ______ in the price of a hot dog and ______ in the quantity of hot dogs supplied
rise; an increase
The Fed's "dual mandate" is to achieve _______. The means to achieving the goals of the dual mandate are _______.
stable prices and maximum employment maintaining the long-run growth of the monetary and credit aggregates commensurate with the economy's long-run potential to increase production
Property rights encourage economic growth by
strengthening the incentive to work, save, invest, and accumulate human capital
When unemployment benefits increase, the ______.
supply of labor decreases, and potential GDP decreases as a movement occurs down along the production function
Economic growth is defined as the ____
sustained expansion of production possibilities
For young people, a jobless summer In July 2009, the youth unemployment rate hit 18.5 percentlong dashthe highest level since the BLS started recording youth labor statistics. The proportion of young people working was 51.4 percent, another historic low for the month of July. Source: The Wall Street Journal, August 27, 2009 The table sets out the youth labor force participation rate and youth unemployment rate. During which recession did the labor force participation rate drop the most? During ______ recession, the youth labor force participation rate dropped ______.
the 2008-2009; the most 6-9
The Federal Reserve Act makes ______ responsible for the conduct of monetary policy.
the Board of Governors of the Federal Reserve System and the Federal Open Market Committee
The graph shows the supply of loanable funds and the demand for loanable funds in an economy. Suppose the government has a budget deficit of $0.2 trillion and the Ricardo-Barro effect holds. Draw the new demand for loanable funds curve. Label it. Draw the new supply of loanable funds curve. Label it. Draw a point that shows the equilibrium quantity of loanable funds and interest rate. The Ricardo-Barro effect is the proposition that______
the budget deficit has no effect on the real interest rate or investment 10-4
The marginal propensity to import is equal to _______.
the change in imports divided by the change in real GDP, other things remaining the same
The quantity of U.S. dollars that traders plan to sell in the foreign exchange market in a given period of time is independent of ______.
the demand for U.S. dollars in the foreign exchange market
The unemployment rate jumped to 5.5% in May 2008 from 5% in April 2008. This jump was the biggest one-month jump in unemployment since February 1986, and the 5.5% rate is the highest level seen since October 2004. Source: CNN, June 6, 2008 Why might the unemployment rate tend to actually underestimate the unemployment problem, especially during a recession? The unemployment rate tends to actually underestimate the unemployment problem, especially during a recession because ______.
the number of marginally attached workers increases, but these workers are not included in the official unemployment rate
Which of the following is an example of investment? A. a student increasing his human capital by attending college Your answer is not correct.B. a person money adding money to his retirement fund C. the purchase of new bookshelves by Barnes and Noble This is the correct answer.D. a person's annual medical checkup
the purchase of new bookshelves by Barnes and Noble This is the correct answer.
In a market with job rationing
the quantity of labor supplied persistently exceeds the quantity demanded
The natural rate hypothesis is the proposition that when the inflation rate changes, ______. Eventually ______.
the unemployment rate changes temporarily; the unemployment rate returns to the natural unemployment rate
We use a time-series graph to show ______.
the upward trend in the average level of prices since the Depression
Fiscal policy is ______. The ______ proposes a budget to ______. The ______ passes the budget acts in ______.
the use of the federal budget to achieve macroeconomic objectives President; Congress each February Congress; September
If most prices increase in Japan and other countries but remain constant in the United States, ______.
then for purchasing power parity to hold, the demand for U.S. dollars increases and the supply of U.S. dollars decreases
Your school has decided to increase the intake of new students next year. In reaching its decision, would the school use the "economic way of thinking" and make its decision at the margin? Your school would use the "economic way of thinking" and make its decision at the margin by checking that ____________________..
the school's net benefit from an additional student was positive
If the expected inflation rate increases and the natural rate of unemployment remains constant, then _______.
the short-run Phillips curve shifts upward and the long-run Phillips curve does not shift
If the Fed changes the quantity of money, the immediate effects are on ______ and the long-run effects are on ______.
the short-term nominal interest rate; the price level and the inflation rate
A change in the expected future exchange rate changes the demand for U.S. dollars ______, and a change in the world demand for U.S. exports changes the demand for U.S. dollars ______.
today; today
According to Keynes, _______.
too little private spending is the cause of depression and recession
The news headline "Scientists blast NASA budget cuts comma" deals with the ______ question(s) of economics.
what
Two countries, Alpha and Beta, have identical production possibilities frontiers. If Alpha produces at point A and Beta produces at point B, then _______.
Alpha's and Beta's economic growth rates will be the same ref:CH3Q4
The table shows the CPI in Sparta. Calculate the inflation rates in 2014 and 2015. Did the CPI rise or fall in 2015? Did the inflation rate increase or decrease in 2015? In 2015, Sparta's CPI _______ and its inflation rate _______. 2013 CPI 160 2014, 177 2015,200
Sparta's inflation rate in 2014 was 10.6 percent. Sparta's inflation rate in 2015 was 13.0 percent. increased; increased
The reference base period for the CPI is 1982-1984. In January 2013, the CPI was 230.3. This number tells us that the ______ of the prices paid by urban consumers for a fixed basket of consumer goods and services was ______.
average; 130.3 percent higher in January 2013 than the average of 1982-1984
Despite some optimism about the seeds of recovery, the Congressional Budget Office (CBO) sees joblessness rising. The CBO sees unemployment peaking at 10.4% next year from an average of 9.3% this year, before it falls to 9.1% in 2011. Source: Fortune, August 25, 2009 Before the recession began, the U.S. unemployment rate was about 6 percent. As a recession begins, firms quickly make layoffs. Is this rise in unemployment mostly a rise in frictional, structural, or cyclical unemployment? The resulting rise in unemployment is mostly a rise in ______ unemployment because _______.
cyclical; it is related to the state of the economy
An increase in taxes when the economy is above full employment ______ aggregate demand and real GDP, and the price level ______.
decreases; falls
A circular flow model shows the interrelationship between the ____ markets and the ____ markets.
goods; factor
When a firm decides to use skilled professionals to produce its output, it is answering the ______ question. When a firm decides to produce computers rather than bikes, it is answering the ______ question. Who gets the goods and services that are produced answers the ______ question.
how; what; for whom
Close to 100 percent of Canada's unemployed receive generous benefits compared to 38 percent in the United States. If the United States adopted the level of unemployment benefits that Canada has, we would expect the U.S. natural unemployment rate to ______ and U.S. potential GDP to ______.
increase; decrease
An increase in disposable income will ______ the supply of loanable funds and the adoption of new technology will ______ the demand for loanable funds. The equilibrium real interest rate ______.
increase; increase; might rise, fall, or stay the same
Real GDP grows when labor productivity _______ or when aggregate hours _
increases; increase
An economy is in a below full-employment equilibrium. Fiscal stimulus that returns the economy to full employment ______ aggregate demand and real GDP, and the price level ______
increases; rises
In the United States in 2014, the factor of production that earned the largest share of income was ______ and it earned ______ percent of total income.
labor; 63
Consider the incomes paid to the factors of production. Wages are paid to ____ and interest is paid to ____
labor; capital
nflation can act as a safety valve Workers will more readily accept a real wage cut that arises from an increase in the CPI than a cut in their nominal wage rate. Source: FT.com, May 28. 2009 Explain why inflation influences a worker's real wage rate. Why might this observation be true? An increase in inflation ______ a worker's real wage rate because as inflation rises, _______.
lowers; the CPI rises, and the nominal wage rate divided by CPI decreases
A stock is a certificate of _____ and claim to the _____ that a firm makes.
ownership; profits
At a business cycle trough, cyclical unemployment is ______ and at a business cycle peak, cyclical unemployment is ______
positive; negative
A government budget deficit ______ the real interest rate and ______ investment.
raises; crowds out
When the nominal interest rate rises, the opportunity cost of holding money ______ and the quantity of money demanded ______.
rises; decreases
The Great Depression was a period of high _____, low _____, and extreme economic hardship that lasted from _____ to _____.
unemployment; incomes; 1929; 1939
An unexpected increase in aggregate demand _______.
. does not shift the long-run Phillips curve
The cut in employment at Bank of America results in ______ unemployment because _______.
structural; the labor restructuring is in response to changing technology