Macro test ! & 2

If the CPI was 120 last year and it increased to 150, what was the inflation rate?

25%

When Marginal Propensity to Consume is 75%, Marginal Propensity to Save is

25%

If the bank is paying 7% nominal interest on deposits and inflation is 4%. What is the real interest rate a depositor would earn?

3%

BLS data shows that the working age population is 150,000, 50,000 people are considered as 'not in labor force', 95,000 are employed and 5,000 people are counted as unemployed. What is the unemployment rate?

5%

Which of the following would be included in the US Gross National Product but not in the US Gross Domestic Product?

A tractor produced by a U.S. company in Mexico

How does the federal government finance budget deficit?

By selling treasury securities

When the BLS announces that the Consumer Price Index in April 2020 is 265, it tells us that the average cost of goods & services bought by typical consumers have increased from the base year by

165%

With a reserve requirement of 5%, the money multiplier is

20

Suppose the table above shows the CPI from 2010 to 2014. During which year did this economy experience deflation?

2011

The study of economics is best described as a study of

coping with scarcity, and choices made as a result of scarcity in a society.

When workers are out of work because the economy is in a recession, their unemployment is considered to be

cyclical unemployment

Within the Federal Reserve who is in charge of the monetary policy decisions?

Federal Open Market Committee

Suppose the exchange rate for Mexican Peso to US dollar changes from $1= 15 Pesos to $1= 12 Pesos. This will be good news for

Mexican consumers buying American goods and services.

Which of the following is not a factor of production?

Money

Suppose you transfer $500 from your checking deposit account to your savings deposit account, what is the overall effect on M1 and M2?

Neither M1 nor M2 change

The above figure shows the production possibility frontier for a country. Suppose the country is producing at point A. What is the opportunity cost of moving to point D?

Nothing, it is a free lunch

The idea of offering door prizes to an event to capture a larger audience is based on, which of the following core principles in economics?

People respond to incentives.

DVD players and DVDs are complementary goods, an increase in the price of DVD players, will cause

a decrease in demand for DVDs.

John paid $600 to buy an Apple iPad. He used that $600 of money as Correct!

a medium of exchange.

The federal government budget is

a plan for government expenditures and revenues for the coming year

Neoclassical economists believe that

active government policy is not required because economy can self adjust.

Which of the following might cause the demand for ice cream, a normal good, to increase?

an increase in the price of sherbet

Ceteris paribus, as the price of gas falls, the quantity demanded of gas increases.

an introduction of information technology that increases labor productivity.

John is shopping for a tablet. When he compares price of a Samsung tablet as $449 and an Apple IPad as $600, he is using money as

an unit of account.

The members of the Board of Governors of the Federal Reserve are

appointed by the US President with the approval of the Senate

Since May 2020, savings deposits are included in

both M1 and M2

If there an increase in the production without any change in the price level, there will be an in increase in

both Real and Nominal GDP

When the Keynesian simple spending multiplier is equal to 2, an initial decrease in investment spending of $10 billion, will

decrease Aggregate Demand by $20 billion.

An appropriate fiscal policy response to reduce inflation would be to

decrease government expenditures and increase taxes.

If half of all unemployed individuals suddenly gave up looking for work, the unemployment rate would ________ and the labor force participation rate would ________

decrease; decrease

Interest rates on European bonds are lower than US bond rates. Investors earn interest rates.

demand for US dollars will increase and supply of US dollars will decrease

If consumer spending increases when the economy is at full employment, there will be

demand pull inflation

Interest rate that Federal Reserve charges banks to borrow is called

discount rate.

The interest rate that banks charge other banks for borrowing reserves is the:

federal funds rate.

Sharon was being treated unfairly by her boss, so she stormed off the job and two months later found another similar position. For two months Sharon experienced

frictional unemployment

The unique feature of a progressive income tax is that the higher one's income, the __________ proportion of income is paid in taxes.

higher

Core inflation is calculated based on the Consumer Price Index that ___________________ bought by typical urban consumers.

includes all items, except food and energy,

Ceteris paribus, an increase in government purchases will

increase aggregate demand

Given aggregate supply, when there is an increase in aggregate demand, it leads to

increase in RGDP and price level.

The potential problem of crowding-out can happen as a result of

increase in interest rates.

Expansionary monetary policy implies

increase in money supply and decrease in interest rates.

When an economy experiences stagflation, there is

increase in unemployment along with rising prices.

A fall in prices of resources will

increase short run aggregate supply.

One way to eliminate shortage is to

increase the price of the product.

If the Federal Reserve wants to use expansionary monetary policy, it will do all the following except

open market sales

Contractionary monetary policy will

raise interest rates and decrease aggregate demand.

If an economy is operating at a point inside the production possibilities frontier, then

some of the nation's resources are unemployed

The immediate effect on GDP of Ibrahim's purchase of a government bond is

nonexistent, since no real goods and services have been produced

People must make choices because

there is scarcity.

When economists refer to capital, they mean

tools and equipment

Public debt is the

total debt of the federal government held by the public

In order for something to be used as money, it must be

universally acceptable as medium of exchange

A business cycle refers to the

ups and downs in Real GDP.

What is the shape of the supply curve?

upward sloping

Sometimes the law of supply is not valid. These times when the quantity supplied is fixed, supply curve is

vertical.

The Keynesian view of economics assumes that:

wages and prices are sticky.

Government budget deficit occurs when

when government expenditures are greater than tax revenue.

If Bank Q has excess reserves of $20 billion and the money multiplier is 5, what is the maximum money the banking system could create as a result?

$100 billion.

Based on the information in the table below, the value of M2 is

$3,000

If you are earning $75,000 this year and the CPI is 250 your real income in base year prices is

$30,000

If you deposit $100 in your bank when the reserve requirement is 15%, what is the maximum loan your bank can offer a borrower from your deposit?

$85

The Bureau of Labor Statistics collects the data about cost of the market basket bought by typical urban households. Suppose they find that the market basket's cost in the base year was $40,000 whereas consumers had to pay $20,000 in the last month for the same basket of goods and services. The Consumer Price Index for the last month BLS would announce is

50

Suppose the frictional unemployment is 3%, the structural unemployment is 4% , the cyclical unemployment is 2% and the seasonal unemployment is 0.5%. This economy will be considered to be at full employment if the current unemployment is

7.5%

Suppose the US population is 300 million. If 200 million people are of working age, 145 million are employed, and 5 million are unemployed, what is the labor force participation rate?

75 percent

Which of the following describes the law of demand?

Ceteris paribus, as the price of gas falls, the quantity demanded of gas increases.

Which of the following persons is NOT considered a part of the labor force?

Desire, a wealthy hedge fund manager who just took early retirement

Net Domestic Product is

GDP - depreciation

Use the following data to calculate GDP: consumption = $5,000; gross investment = $800; government purchases = $700; exports = $30; imports = $60; transfer payments = $340.

GDP = $6,200

Which of the following is not a question that scarcity forces all societies to answer?

How can scarcity be eliminated?

Which of the following is a positive statement?

Inflation rate has increased by 2%

If the price of cotton used in making cotton T-shirts decreases, which of the following will occur?

There will be an increase in the supply of cotton T-shirts.

Supply of US dollars in foreign exchange market comes from

US consumers buying foreign goods and services.

Which of the following people would be considered unemployed?

Victoria, who does not have a job and has been actively searching for work, but turned down a job paying less than she desired

Which of the following will result in the Aggregate Demand curve shifting to its left?

Weak consumer confidence

In the graph below, the economy is currently producing Q1 level of RGDP where QN denotes NRGDP.

expansionary gap.

If inflation is expected to be higher,

lenders will increase nominal interest rates

An increase in supply of chocolate chip cookies, ceteris paribus, would result in a

lower equilibrium price and a higher equilibrium quantity

Which of the following is not a function of the Federal Reserve System?

making loans to the public

The aggregate demand curve slopes downward to the right, reflecting a relationship between the price level and

real GDP

In the simple Circular Flow model, households

sell resources and buy goods and services.

Which of the following is not a monetary policy tool of the Federal Reserve?

setting the tax rates

An adverse supply shock will

shift the short-run aggregate supply curve to the left.

If the current market price is $10, there is

shortage of 600 units

The basic idea of opportunity cost is that

the decision to use resources in one activity means that they cannot be used elsewhere.