Macroecon
If real GDP per capita in the United States is $8,000, what will real GDP per capita in the United States be after 5 years if real GDP per capita grows at an annual rate of 3.2%?
$9,365
Which of the following leads to an increase in real GDP?
a decrease in interest rates
Because of the slope of the aggregate demand curve, we can say that
a decrease in the price level leads to a higher level of real GDP demanded.
Which of the following policies would not help promote economic growth?
a law requiring that the funds in an individual retirement account be taxed
The situation in which short-term interest rates are pushed to zero, leaving the central bank unable to lower them further is known as
a liquidity trap.
You are an economic advisor to the president. You are asked to recommend a policy to promote long-term economic growth in the economy. Which of the following policies would you choose?
an investment tax credit
The term "brain drain" refers to
highly educated individuals who leave developing countries for high-income countries.
Refer to Table 8-4. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals
$1,600.
A very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2017 and 2020 are shown in the table above.Refer to Table 8-18. What is nominal GDP in 2020 when 2017 is the base year?
$11,790
Refer to Table 8-27. Based on the table above, what is national income for this economy?
$2,950 billion
Scenario 10-1Consider the following data for a closed economy:Y = $12 trillionC = $8 trillionI = $2 trillionG = $2 trillionTR = $2 trillionT = $3 trillionRefer to Scenario 10-1. Based on the information above, what is the level of private saving in the economy?
$3 trillion
Refer to Table 8-13. Real GDP for Vicuna for 2019 using 2020 as the base year equals
$5,650
Consider the following data for Tyrovia, a country that produces only two products: guns and butter.Refer to Table 8-11. Real GDP for Tyrovia for 2020 using 2013 as the base year equals
$690.
Table 8-1 Suppose that a simple economy produces only four goods and services: sweatshirts, dental examinations, coffee drinks, and coffee beans. Assume all of the coffee beans are used in the production of the coffee drinks. Using the information in the above table, nominal GDP for this simple economy equals
$8,750
The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.Refer to Table 9-14. The real average hourly earnings for 1965 in 1982-1984 dollars equal
$8.28.
Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2020, then the value of your grandfather's salary in 2020 dollars is approximately
$84,775.
Refer to Table 9-1. The unemployment rate for this simple economy equals
(100/1,100) × 100.
Refer to Table 8-15. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The GDP deflator for 2019 equals
106.2
Refer to Table 8-14. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The GDP deflator for 2020 equals
108.5
Refer to Table 9-2. Assume the market basket for the consumer price index has two products—bread and milk—with the following values in 2013 and 2020 for price and quantity: The Consumer Price Index for 2020 equals
116
Refer to Table 9-3. Assume the market basket for the consumer price index has three products—Cokes, hamburgers, and CDs—with the following values in 2013 and 2020 for price and quantity: The Consumer Price Index for 2020 equals
121
Refer to Table 9-9. Suppose that the data in the table above reflect the price levels in the economy. Given that data, we can say that the cost of living rose by ________ between 2019 and 2020?
13%
According to the "Rule of 70," how many years will it take for real GDP per capita to double when the growth rate of real GDP per capita is 5%?
14 years
Refer to Table 9-4. Assume the market basket for the consumer price index has two products—meat and potatoes—with the following values in 2013 and 2020 for price and quantity: The Consumer Price Index for 2020 equals
141
As a result of the Great Recession, millennials entered the worst job market the U.S. has experienced in decades. How high did the unemployment rate get for workers aged 20 to 24 in late 2009, when the economy was finally emerging from the Great Recession?
16 percent
Refer to Table 9-6. Consider the following values of the consumer price index for 1996, 1997, and 1998: The inflation rate for 1997 was equal to
2.5 percent.
If real GDP grows by 3% in 2020, 3.2% in 2021, and 2.5% in 2022, what is the average annual growth rate of real GDP?
2.9%
Refer to Table 9-11. Suppose an economy has only three goods and the typical family purchases the amounts given in the table above. If 2016 is the base year, then what is the CPI for 2020?
208
If the nominal rate of interest is 6.5% and the inflation rate is 3.0%, what is the real rate of interest?
3.5%
Refer to Table 9-19. Looking at the table above, what is the approximate rate of growth of real average hourly earnings from 2018 to 2019?
4.8%
If real GDP per capita measured in 2009 dollars was $6,000 in 1950 and $48,000 in 2020, we would say that in 2020, the average American could buy ________ times as many goods and services as the average American in 1950.
8
Refer to Table 8-1. Suppose that a simple economy produces only four goods and services: sweatshirts, dental examinations, coffee drinks, and coffee beans. Assume all of the coffee beans are used in the production of the coffee drinks. Using the information in the above table, nominal GDP for this simple economy equals
8,750
Which of the following explains why employment only rises at a slow pace at the end of a recession?
Firms are hesitant to rehire laid off workers as they continue to operate below capacity.
Which of the following statements is true?
GDP accounting rules do not adjust for production that pollutes the economy.
Scott is a woodworker and charges $125 an hour for his time manufacturing custom-made wood products. For his wife's birthday, he designs and creates an intricate birdseye maple jewelry box that takes him 15 hours to complete. By how much and in what direction does GDP change as a result of his efforts?
GDP is not affected by Scott's production of the jewelry box.
Which of the following transactions would take place in the "underground economy"?
John makes chain-link belts and necklaces and sells them at a local flea market for cash to avoid paying taxes.
Refer to Figure 10-2. Which of the following is consistent with the graph depicted above?
New government regulations decrease the profitability of new investment.
Which of the following headlines would be more closely related to what macroeconomists study than what microeconomists study?
Real GDP grows by 2.3% in the second quarter.
The budget deficit is defined as
T - (G + TR), and this is negative.
In a closed economy, public saving is equal to which of the following? (Y = GDP, C = Consumption, G = Government purchases, T = Taxes, and TR = Transfers)
T - G - TR
Refer to Figure 10-1. Which of the following is consistent with the graph depicted above?
Technological change increases the profitability of new investment.
Refer to Table 8-16. Given the information above, what can we say has happened in the economy from 2019 to 2020?
The price level has risen.
Which of the following could cause nominal GDP to increase next year, but real GDP to decrease?
The price level rises and the quantity of final goods and services produced falls.
Between 2019 and 2020, the CPI of a small nation rose from 182 to 185. If household incomes rose by 3% during that period of time, which of the following is true?
The purchasing power of household income rose between 2019 and 2020.
Refer to Figure 9-1. Based on the graph of the labor market above, if a minimum wage of $8 per hour is imposed, which of the following will result?
The quantity of labor demanded by firms will fall.
Refer to Figure 10-6. The loanable funds market is in equilibrium, as shown in the figure above. An increase in the supply of loanable funds could result in which of the following combinations of the real interest rate and quantity of loanable funds at a new equilibrium?
The real interest rate is 3 percent, and the quantity of loanable funds is $150 million.
How are intermediate goods treated in the calculation of GDP?
Their value is not counted separately, but included as part of the value of the final good for which they are an input.
In a closed economy, which of the following equations reflects investment? (Y = GDP, C = Consumption, G = Government purchases, T = Taxes, and TR = Transfers)
Y - C - G
Under which of the following circumstances would private saving be positive in a closed economy?
Y = $10 trillionC = $5 trillionTR = $2 trillionG = $2 trillionpublic saving = $1 trillion
Which of the following explains the changes in the U.S. adult male labor force participation rate since 1948?
Younger men are remaining in school longer as compared to the past.
Which of the following transactions represents the purchase of a final good?
Your father buys a new John Deere riding lawn mower.
Cyclical unemployment is the result of
a slowdown in the economy
If GDP is currently $13 trillion and is growing at a rate of 2.3% per year, how long will it take GDP to reach $26 trillion?
about 30 years
Refer to Figure 10-4. Which of the following is consistent with the graph depicted?
an increase in the proportion of income after net taxes used for consumption
An increase in cyclical unemployment will result in
an increase in the unemployment rate.
Which of the following would increase the unemployment rate?
an increase in unemployment insurance payments
The GDP deflator is a measure of the
average level of prices of final goods and services in the economy.
The consumer price index is the
average of the prices of the goods and services purchased by a typical urban family of four.
The total amount of physical capital available in a country is know as the country's
capital stock
Which of the following price indices comes closest to measuring the cost of living of the typical household?
consumer price index
The purchase of a new automobile is included in
consumption expenditures on durable goods.
To calculate GDP by the expenditure method, one must add
consumption spending, investment spending, government purchases, and net exports.
The process of new technologies advancing living standards while destroying many existing firms is known as
creative destruction.
Most of the unemployment that occurred during the Great Depression was
cyclical unemployment.
The real wage equals the nominal wage ________ the CPI, all times 100.
divided by
Macroeconomics seeks to understand
economic growth, business cycles, and inflation.
Suppose that in 2020, real GDP grew in Estonia by 3% and the population increased by 5%. Therefore, in 2020, Estonia experienced
economic growth, but not an increase in living standards.
The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily away from their job because they were ill.
employed
National income is defined as
gross domestic product less the consumption of fixed capital.
The output of U.S. citizens who work in Canada would be included in the
gross domestic product of Canada.
Which of the following is not an example of a transfer payment?
health insurance payments to an army private
Gross domestic product understates the total production of final goods and services because of the omission of
household production.
An advantage of the household survey over the establishment survey of the labor market is that the household survey
includes the number of self-employed persons.
Inflation tends to ________ during the expansion phase of the business cycle and ________ during the recession phase of the business cycle.
increase; decrease
An increase in unemployment insurance payments would, in effect, ________ the amount of time spent searching for a job, which would increase ________ unemployment.
increase; frictional
Technological advances generally result in
increased life expectancy.
During a business cycle expansion, total production ________ and total employment ________.
increases; increases
In a closed economy, public saving plus private saving is equal to
investment
An efficiency wage
is higher than the market wage and tends to increase productivity.
Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?
labor force participation rate
The demand for loanable funds is downward sloping because the ________ the interest rate, the ________ the number of profitable investment projects a firm can undertake, and the ________ the quantity demanded of loanable funds.
lower; greater; greater
Since 1900, real GDP in the United States has grown
more rapidly than the population.
The Bureau of Labor Statistics would categorize a retiree who is not working as
out of the labor force.
If real GDP increases we know for sure that
output has risen.
The nominal interest rate equals the real interest rate ________ the inflation rate.
plus
Gross national product (GNP) of the United States is the market value of all final goods and services
produced by citizens of the United States anywhere in the world.
In terms of economic growth, the key measure of the standard of living is
real GDP per capita.
The period between a business cycle peak and a business cycle trough is called
recession
If your nominal wage rises faster than the price level, we can say your real wage has ________ and the purchasing power of your income has ________.
risen; risen
The advice to "retrain" would be most appropriate for which of the following types of unemployment?
structural unemployment
By offering training to workers whose firms laid them off because of competition from foreign firms, the federal government is attempting to reduce
structural unemployment.
According to Douglass North, the Industrial Revolution occurred in England because
the British Parliament took control of the government and could credibly commit to upholding property rights.
Human capital refers to which of the following?
the accumulated knowledge and skills workers acquire from education and training or from their life experiences
What does the PPI measure?
the average of the prices received by producers of goods and services at all stages of the production process
Liquidity refers to
the ease with which a financial security can be traded for cash.
What two factors are the keys to determining labor productivity?
the level of technology and the quantity of capital per hour worked
The average price of goods and services in the economy is also known as
the price level.
Frictional unemployment is the result of
the process of matching workers with jobs.
If the minimum wage is set above the market wage
unemployment will rise.
Nominal GDP is GDP in a given year
valued in the prices of that year.
In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA
values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.
The M1 measure of the money supply equals
currency in circulation plus checking account deposits in banks.
Corruption
curtails economic growth.
A change in tax rates
has a larger multiplier effect the smaller the tax rate.
Refer to Figure 11-2. Based on the per-worker production function above, if the economy raises capital per hour worked from $35,000 to $40,000, by how much will real GDP per hour worked increase?
$150
Refer to Figure 12-4. Potential GDP equals $100 billion. The economy is currently producing GDP1 which is equal to $90 billion. If the MPC is 0.8, then how much must autonomous spending change for the economy to move to potential GDP?
$2 billion
Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve reduces the required reserve ratio to 8 percent, then the bank can make a maximum loan of
$2 million.
Refer to Table 14-3. Consider the above simplified balance sheet for a bank. If the required reserve ratio is 10 percent, the bank can make a maximum loan of
$2,000
Consider the information above for a simple economy.Refer to Scenario 14-1. M2 in this simple economy equals
$21,000.
If the government purchases multiplier equals 2, and real GDP is $14 trillion with potential real GDP $14.5 trillion, then government purchases would need to increase by ________ to restore the economy to potential real GDP.
$250 billion
With a required reserve ratio of 20 percent, an increase in reserves of $10,000 could lead to a maximum increase in checking account deposits in the entire banking system of
$50,000.
Scenario 14-2Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%.Refer to Scenario 14-2. As a result of Kristy's deposit, Bank A's excess reserves increase by
$8,000.
Refer to Table 12-3. Given the consumption schedule in the table above, the marginal propensity to save is
0.1.
If national income increases by $20 million and consumption increases by $5 million, the marginal propensity to consume is
0.25
If the marginal propensity to consume is 0.75, the marginal propensity to save is
0.25
Refer to Table 12-4. Given the data in the table above, the marginal propensity to consume is
0.6
A general formula for the multiplier is
1/(1-MPC)
A general formula for the multiplier is
1/MPS
Using the quantity equation, if the velocity of money grows at 5 percent, the money supply grows at 10 percent, and real GDP grows at 4 percent, then the inflation rate will be
11 percent.
Suppose the equilibrium real federal funds rate is 5 percent, the target rate of inflation is 3 percent, the current inflation rate is 5 percent, and real GDP is 4 percent above potential real GDP. If the weights for the inflation gap and the output gap are both 1/2, then according to the Taylor rule the federal funds target rate equals
13 percent.
Refer to Table 10-2. Using the table above, what is the approximate growth rate of real GDP from 2018 to 2019?
4%
If real GDP per capita in the United States is $8,000 in 2020, and if real GDP per capita is $12,000 in 2030, what is the total percent change in the growth rate of GDP per capita between 2020 and 2030?
50%
Refer to Figure 16-1. Suppose the economy is in short-run equilibrium below potential GDP and Congress and the president lower taxes to move the economy back to long-run equilibrium. Using the basic AD-AS model in the figure above, this would be depicted as a movement from
A to B
Refer to Figure 11-5. Based on the "catch-up line" drawn above, poorer countries are more likely to be at a point like ________, where growth in GDP is relatively ________, while richer countries are more likely to be at a point like ________, where growth in GDP is relatively ________.
A; high; B; low
Refer to Figure 13-1. Ceteris paribus, a decrease in households' expectations of their future income would be represented by a movement from
AD2 to AD1.
The formula for aggregate expenditure is
AE = C + I + G + NX.
Refer to Figure 12-1. At point L in the figure above, which of the following is true?
Actual inventories are greater than planned inventories.
Macroeconomic equilibrium occurs when
Aggregate expenditure = GDP
Consumption spending is $22 million, planned investment spending is $7 million, actual investment spending is $7 million, government purchases are $9 million, and net export spending is $3 million. Based on this information, which of the following is true?
Aggregate expenditure is equal to GDP.
Consumption spending is $5 million, planned investment spending is $8 million, actual investment spending is $8 million, government purchases are $10 million, and net export spending is $2 million. Based on this information, which of the following is true?
Aggregate expenditure is equal to GDP.
Which of the following is an example of foreign direct investment?
American Airlines builds a hub in China.
What impact does an increase in the price level in the United States have on net exports and why?
An increase in the price level decreases net exports by increasing the relative cost of American goods.
________ consumption is consumption that does not depend upon the level of GDP.
Autonomous
Refer to Figure 13-3. Which of the points in the above graph are possible short-run equilibria but not long-run equilibria? Assume that Y1 represents potential GDP.
B and D
Refer to Figure 16-1. An increase in taxes would be depicted as a movement from ________, using the basic AD-AS model in the figure above.
B to A
Refer to Table 11-4. In the table above, which countries are consistent with the predictions of the economic growth model?
Botswana and Thailand
Refer to Figure 15-7. Suppose the economy is in short-run equilibrium above potential GDP, the unemployment rate is very low, and wages and prices are rising. Using the basic AD-AS model in the figure above, the correct Fed policy for this situation would be depicted as a movement from
C to B.
The Soviet Union's economy grew rapidly in terms of GDP per hour worked in the 1950s, but eventually this growth slowed. Why did this occur?
Capital per hour worked grew rapidly from 1950 to 1980, but technological change occurred very slowly.
Refer to Figure 12-2. If the U.S. economy is currently at point K, which of the following could cause it to move to point N?
Congress passes investment tax incentives.
Expansionary monetary policy refers to the ________ to increase real GDP.
Federal Reserve's increasing the money supply and decreasing interest rates
Refer to Table 11-1. Based on the table above, which country has a higher standard of living and why?
Ireland has a higher standard of living because their GDP per capita is higher.
In the early 1900s, Henry Ford revolutionized the automotive manufacturing industry by instituting the assembly line. What impact did the assembly line method for producing automobiles have on the per-worker production function for Ford?
It shifted up.
Refer to Figure 13-4. Given the economy is at point A in year 1, what will happen to the unemployment rate in year 2?
It will rise.
If the Federal Reserve decided to include virtual money like bitcoins in its measure of the money supply, what would be the effect on M1 or M2?
M1 would rise.
Which of the following provides health-care coverage to people age 65 and over?
Medicare
Refer to Figure 13-2. Ceteris paribus, an increase in the labor force would be represented by a movement from
SRAS1 to SRAS2.
Government transfer payments include which of the following?
Social Security and Medicare programs
Which of the following is not a reason why low-income countries might experience low economic growth?
The country has a good education system.
When aggregate expenditure is less than GDP, which of the following is true?
There was an unplanned increase in inventories.
Open market operations refer to the purchase or sale of ________ to control the money supply.
U.S. Treasury securities by the Federal Reserve
An increase in the value of which of the following would not increase household wealth?
a credit card balance.
Which of the following describes a situation in which the person is hurt by inflation?
a person paid a fixed income during an inflationary period
When the Fed sells a security to a financial firm and the Fed agrees to buy back the security the next day, the transaction is known as
a reverse repurchase agreement.
The Business Cycle Dating Committee defines a recession as
a significant decline in activity visible in industrial production, employment, real income, and wholesale/retail trade lasting more than a few months.
A farm worker gets paid today in money, but plans to spend the money next week. This illustrates which function of money?
store of value
The argument advanced by Milton Friedman for adopting a monetary growth rule is that
active monetary policy potentially destabilizes the economy.
A bank will consider a car loan to a customer ________ and a customer's checking account to be ________.
an asset; a liability
Refer to Figure 16-4. In the graph above, suppose the economy is initially at point A. The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by Congress and the president?
an increase in the marginal income tax rate
Refer to Figure 11-1. Technological change is illustrated in the per-worker production function in the figure above by a movement from
b to c
Monetarism is a school of thought put forth by Milton Friedman. He argued that the economy would ordinarily
be at potential GDP.
Refer to Figure 15-3. In the figure above, when the money supply shifts from MS1 to MS2, at the interest rate of 3 percent households and firms will
buy Treasury bills.
The aggregate demand curve will shift to the right ________ the initial increase in government purchases.
by more than
An economic growth model explains
changes in real GDP per capita in the long run.
The level of aggregate supply in the long run is not affected by
changes in the price level
Silver is an example of a
commodity money
National income =
consumption + saving + taxes
Which is the largest component of aggregate expenditure?
consumption expenditures
Planned aggregate expenditure is equal to
consumption spending plus planned investment spending plus government purchases plus net exports.
The largest component of spending in GDP is
consumption spending.
Which of the following explains the ability of the U.S. economy to avoid diminishing marginal returns and experience accelerating growth in the early to mid-20th century?
continuing technological change
If the marginal propensity to save is 0.25, then a $10,000 decrease in disposable income will
decrease consumption by $7,500.
A decrease in Social Security payments will
decrease consumption spending.
An increase in interest rates
decreases investment spending on machinery, equipment, and factories, consumption spending on durable goods, and net exports.
A fractional reserve banking system is one in which banks hold less than 100 percent of ________ as reserves.
deposits
Fiscal policy refers to changes in
federal taxes and purchases that are intended to achieve macroeconomic policy objectives.
Paper currency is a
fiat money
Creative destruction means that
firms develop new products that replace old products in the economy, thereby encouraging economic growth.
Inventories refer to
goods that have been produced but not yet sold.
Congress and the president carry out fiscal policy through changes in
government purchases and taxes.
If the economy is falling below potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in
government purchases.
Automatic stabilizers refer to
government spending and taxes that automatically increase or decrease along with the business cycle.
In 1980, one Zimbabwean dollar was worth 1.47 U.S. dollars. By the end of 2008, the exchange rate was one U.S. dollar to 2 billion Zimbabwean dollars. When an economy experiences rapid increases in the price level such as what occurred in Zimbabwe, the economy is said to experience
hyperinflation.
All of the following policies are ways for a country to promote long-run economic growth except
imposing stricter regulations to limit foreign direct investment.
If the MPC is 0.95, then a $10 million increase in disposable income will
increase consumption by $9.5 million.
Refer to Figure 16-2. In the graph above, if the economy is at point A, an appropriate fiscal policy by Congress and the president would be to
increase government transfer payments.
Increases in the price level
increase the quantity of money needed for buying and selling.
A recession tends to cause the federal budget deficit to ________ because tax revenues ________ and government spending on transfer payments ________.
increase; fall; rises PreviousNext
A tax rebate, like the one issued in 2008, is likely to ________ consumption spending ________ than would a permanent tax cut.
increase; less
An increase in the interest rate
increases the opportunity cost of holding money.
A decrease in individual income taxes ________ disposable income, which ________ consumption spending.
increases; increases
A decrease in the reserve requirement ________ bank reserves and ________ the money supply.
increases; increases
Which of the following is not directly counted in GDP?
intermediate goods
Which of the following increases labor productivity?
inventions of new machinery, equipment, or software
The chair of the Federal Reserve's Board of Governors
is nominated by the president and confirmed by the Senate.
A financial asset is considered a security if
it can be sold in a secondary market.
Not enforcing property rights in an economy will
lower the level of investment
The crowding out of private spending by government spending will be greater the
more sensitive consumption, investment, and net exports are to changes in interest rates.
By the 2000s, an important market change occurred when investment banks became significant participants in the secondary market for
mortgages.
An increase in the real interest rate will
most likely lower consumers' purchases of durable goods.
Economists refer to the series of induced increases in consumption spending that result from an initial increase in autonomous expenditures as the ________ effect.
multiplier
The money demand curve has a
negative slope because an increase in the interest rate decreases the quantity of money demanded.
If a person withdraws $500 from his/her checking account and holds it as currency, then M1 will ________ and M2 will ________.
not change; not change
Dollar bills in the modern economy serve as money because
people have confidence that others will accept them as money.
Foreign direct investment in the United States declined 42 percent in the first quarter of 2009. This means that
people or firms in other countries reduced their building of facilities or purchases of facilities in the United States by 42 percent in the first quarter of 2009.
Which of the following is more likely to be effective in increasing the growth rate of real GDP?
permanent cuts in business taxes
Refer to Figure 13-1. Ceteris paribus, an increase in the price level would be represented by a movement from
point B to point A.
When the Federal Reserve System was established in 1913, its main policy goal was
preventing bank panics.
The Federal Reserve System's four monetary policy goals are
price stability, high employment, economic growth, and stability of financial markets and institutions.
Potential GDP refers to the level of
real GDP in the long run.
Because of the productivity slowdown in the United States from the mid-1970s through the mid-1990s
real GDP per capita grew more slowly.
On the 45 degree-line diagram, the 45 degree line shows points where
real aggregate expenditure equals real GDP.
The federal funds rate is
the interest rate banks charge each other for overnight loans.
If the Fed raises the interest rate, this will ________ inflation and ________ real GDP in the short run.
reduce; lower
If the central bank can act as a lender of last resort during a banking panic, banks can
satisfy customer withdrawal needs and eventually restore the public's faith in the banking system.
If, due to a recession, foreign workers begin to leave the United States to search for temporary work in their home countries until the recession has ended, this will
shift the short-run aggregate supply curve of the home country to the right.
The basic aggregate demand and aggregate supply curve model helps explain
short-term fluctuations in real GDP and the price level.
Stagflation usually results from
supply shock
Under the Soviet system of communism
technological progress was slow because managers had little incentive to develop new technologies.
The key factors in raising standards of living in low-income countries have been increases in
technology and knowledge.
If an increase in autonomous consumption spending of $10 million results in a $50 million increase in equilibrium real GDP, then
the MPC is 0.8.
Long-run macroeconomic equilibrium occurs when
the aggregate demand and short-run aggregate supply curves intersect at a point on the long-run aggregate supply curve.
A negative supply shock in the short run causes
the aggregate supply curve to shift to the left.
The marginal propensity to save is defined as
the change in saving divided by the change in disposable income.
The economic growth model predicts that
the level of real GDP per capita in poor countries will grow faster than in rich countries.
Monetary policy refers to the actions the Federal Reserve takes to manage
the money supply and interest rates to pursue its economic objectives.
Which of the following models relies on emphasizing the importance of sticky wages and prices?
the new Keynesian model
Refer to Figure 11-2. Assuming no technological change, if the United States increases capital per hour worked by $40,000 every year between 2016 and 2020, we would expect to see
the per-worker production function will get flatter over time.
Refer to Figure 15-1. In the figure above, the money demand curve would move from Money demand1 to Money demand2 if
the price level increased.
The aggregate demand curve illustrates the relationship between ________ and the ________, holding constant all other factors that affect aggregate expenditure.
the price level; quantity of planned aggregate expenditure
Globalization refers to
the process of countries becoming more open to foreign trade and investment.
When an economy faces diminishing returns
the slope of the per-worker production function becomes flatter as capital per hour worked increases.
The quantity theory of money was derived from the quantity equation by asserting that
the velocity of money was fixed.
John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending
they may make themselves worse off by causing aggregate expenditure to fall, thereby pushing the economy into a recession.
The aggregate expenditure model focuses on the relationship between ________ and ________ in the short run, assuming ________ is constant.
total spending; real GDP; the price level
Refer to Figure 16-11. In the graph above, the shift from AD1 to AD2 represents the total change in aggregate demand. If government purchases increased by $50 billion, then the distance from point A to point B ________ $50 billion.
would be greater than
