Macroeconomic Final 3-4

If nominal GDP is 1800 and the money supply is 450, then what is velocity of circulation?

4

____________ is a completely inadequate mechanism ____________________ in a modern advanced economy.

Barter; for trying to coordinate trades

Which category of the money supply would you be contributing to if you invest in money market funds?

M2

It is sometimes argued that nation should not depend too heavily on other countries for supplies of certain key products. This argument is commonly known as the _______________.

National Interest Argument

________________ economists place an emphasis on __________ run economic performance.

Neoclassical; long

________________________ equalizes the prices of internationally traded goods across countries.

Purchasing power parity

If Sarah uses her smart card to purchase movies over the internet, then the money to pay the retailer will come from:

Sarah's M1 funds

________________________ is theoretically possible, even sensible: give an industry a short-term indirect subsidy through protection, and then reap the long-term economic benefits of having a vibrant healthy industry.

The infant industry argument

Aggregate demand curves slope downwards for each of the following reasons EXCEPT

The substitution effect: As the price level falls, people buy more of the cheaper goods and less of other goods.

What do goods like gasoline, tobacco, and alcohol typically share in common?

They are all subject to government excise taxes.

Which of the following is the best example of a quota?

a limit on the quantity of tires that can be imported from a foreign country

A rule that every imported product must be opened by hand and inspected with a magnifying glass, by one of just three government inspectors available at any given time might be referred to as __________________.

a non-tariff barrier

If an economy experiences a decrease in aggregate demand due to a decline in consumer confidence and output falls below potential GDP, which of the following is likely to occur?

a rise in unemployment

A tariff differs from a quota in that a tariff is:

a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

A vertical AS curve means that the level of aggregate supply (or potential GDP) will determine the real GDP of the economy, regardless of the level of:

aggregate demand

In macroeconomics, _____________________ denotes the relationship between the total quantity of goods and services and the price level for output.

aggregate demand (AD)

During a recession, if a government uses an expansionary fiscal policy to increase GDP, the:

aggregate demand curve will shift to the right.

One of the following groups is not participating in the foreign exchange markets. Which one?

an Iowa travel firm that arranges vacation tours for local seniors to Hawaii

Over the long run, a surge in aggregate demand from a neoclassical perspective will most likely result in:

an increase in price level.

_____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.

automatic stabilizers

A ______________________ means that government spending and taxes are equal.

balanced budget

The Central Bank has raised its reserve requirements from 10% to 12%. If Southern Bank finds that it is not holding enough in reserves to meet the higher requirements, then it will likely:

borrow for the short term from the central bank.

If the government for the state of Washington collects $65.8 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be:

budget deficit

If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a:

budget surplus

A central bank that wants to increase the quantity of money in the economy will:

buy bonds in open market operations.

As international trade increases, it contributes to a shift in jobs away from industries where that economy does not have a(n) __________ advantage and toward industries where it has a(n) ___________ advantage.

comparative; comparative

A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes.

contractionary

Which of the following must be present in order for the aggregate supply curve to form an upward slope?

demand

With respect to measuring the money supply, which of the following terms describes a checking account?

demand deposits

What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks?

discount rate

The infant industry argument for protectionism suggests that an industry must be protected in the early stages of its development so that:

domestic producers can attain the economies of scale to allow them to compete in world markets.

____________ means selling goods below their cost of production.

dumping

Whether the economy is in a recession is illustrated in the AD/AS model by how close the _____________________ is to the potential GDP line.

equilibrium

The _____________ is an example of a large-scale common currency.

euro

If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used?

expansionary

If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely be?

fighting inflation

Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?

fiscal policies

If government policy allows a country's currency to be determined in the exchange rate market, then that currency will be subject to:

floating exchange rate

When a Central Bank makes a decision that will cause an increase in both the money supply and aggregate demand, it is

following a loose monetary policy.

People or firms use one currency to purchase another currency at the _______________________.

foreign exchange market

The _____________________________ is the largest market in the world economy.

foreign exchange market

Tariffs are taxes imposed on _________________.

imported products

If a country�s GDP decreases, but its debt increases during that year, then the country�s debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes.

increase

If a neoclassical model shows increasing wages in the economy over the long run, what else will likely occur?

inflationary increase in price level

The ____________ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investmen

interest rate effect

"Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers." This statement:

is essentially correct.

If the Canadian dollar is strengthening, then:

it has appreciated in terms of other currencies.

Why is productivity growth considered to be the most important factor in the AD/ASAD/AS model?

it shifts the AS curve in the long-term

Suppose that a rise in business confidence has led to more investment in the economy and higher levels of output. In the short-run Keynesian analysis, the rise in aggregate demand will:

lower unemployment

If mollusk shells were accepted as a method of payment in modern-day markets, what economic role would they play in the financial system?

medium of exchange

In modern economies, credit cards are a _________________ because of their wide acceptance as a method of payment for both goods and services.

medium of exchange

Which of the following is omitted in a barter transaction?

money

________________ serves society in three functions: medium of exchange, unit of account, and store of value.

money

When the central bank decides it will sell bonds using open market operations:

money supply decreases

Which of the following is a traditional tool used by the Fed during recessions?

open market operations

In uncertain economic times, ____________________ serves as a way of preserving economic value that can be spent or consumed in the future.

owning gold

The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called:

potential GDP

What term is used to describe the maximum quantity that an economy can produce, in the context of its existing inputs, market and legal institutions?

potential GDP

If government tax policy requires Jane to pay $25,000 in taxes on annual income of $200,000 and Mary to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

progressive

If government tax policy requires Bill to pay $20,000 in taxes on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

proportional

A ________________________________ is calculated as a flat percentage of income earned, regardless of level of income.

proportional tax

Which of the following is described as an innovative and nontraditional method used by the Federal Reserve to expand the quantity of money and credit during the recent U.S. recession?

quantitative easing

In an AD/AS model:

real GDP is shown on the horizontal axis.

If government tax policy requires Peter to pay $15,000 in tax on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

regressive

Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank?

reserve requirements

When a government uses a ______________ exchange rate policy, it usually allows the exchange rate to be set by the market.

soft peg

For firms engaged in international trade, ____________________ can have an enormous effect on profits.

swings in exchange rates

If $1.00 U.S. bought $1.40 Canadian dollars in 2006 and in 2010 it bought $1.00 Canadian dollar, then;

the Canadian dollar appreciated against the U.S. dollar.

Which of the following is a valid criticism of the rational expectations theory?

the assumption seems too strong

If 112 Japanese yen purchased $1.00 U.S. in 2008 and 83 Japanese yen purchased $1.00 U.S. in 2009, then:

the dollar depreciated against the yen

Tariffs result in a decrease in consumer surplus because:

the price of the protected good increases and quantity consumed decreases.

If Japan does not have a comparative advantage in producing rice, the consequences of adopting a Japanese policy reducing or eliminating imports of rice into the country would include:

the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall.

Exchange rates are an effective way to analyze the price of one currency in terms of another currency with _________________________.

the tools of demand and supply

In macroeconomics, a _______________ describes the common way in which market values are measured in an economy.

unit of account

Say�s Law argues that a given ____________________ must create an equivalent ________________________ somewhere else in the economy.

value of supply; value of demand

In the neoclassic model, economic growth over time shifts potential GDP and the ______________ gradually to the right.

vertical AS curve

Which of the following is a building block of neoclassical economics?

wages and prices will adjust in a flexible manner

The Keynesian view of economics assumes that:

wages are sticky

A depreciating U.S. dollar is ________________ because it is worth ___________ in terms of other currencies.

weakening; less

International trade is fundamentally a ________________________.

win-win situation