Macroeconomics Cerego All Units

If the value of the money multiplier is 5, by how much will the M1 money supply increase when an amount of $40,000 is deposited in a commercial bank?

$160,000

What is the equilibrium price?

$20

Why does a demand curve slope downward?

A demand curve slopes downward as it shows the inverse relationship between price and quantity.

Which of the following is likely to shift the supply curve of a firm to the right?

A new technology that helps a firm to produce at a lower cost.

Which of the following is a feature of a market economy?

A person's income is based on his or her ability to convert resources into something that society values.

Which of the following is a possible effect of a price ceiling?

A price ceiling transfers a part of producer surplus to consumers

How is fiscal policy defined?

A set of policies that affect government spending and tax rates

What happens when a price floor is imposed on a good?

A surplus occurs in the market.

Identify the correct formula for the money multiplier.

1/Reserve Requirement

To prevent solvent banks from failing and a financial crisis from spreading, the Fed stands ready to lend to banks and other financial institutions when they cannot obtain funds from anywhere else. This is known as the lender of last resort role of the Fed. What are Demand deposits?

Amounts held in checking accounts

Which of the following is likely to cause the demand curve for soft toys to shift to the right?

An increase in the birth rate in an economy

An ______ is something of value that is owned and can be used to produce something.

Asset

A bank views loans as ______.

Assets

What does monetary policy involve?

Policies that affect bank lending, interest rates, and financial capital markets.

What does the following describe? A law that a government enacts to regulate prices.

Price Control

Where is producer surplus located on a supply & demand model?

Producer surplus is the area between the market price and the segment of the supply curve below the equilibrium.

What changes in equilibrium will occur if Hanes's manufacturer buys a new machine that increases output 30% without increasing production costs?

The supply curve will shift to the right, causing the equilibrium price to ↓ and quantity to ↑

What is referred to as the quantity demanded of a good?

The total number of units of a good purchased at a price is called the quantity demanded at that price.

What is the measure of Globalization?

The volume of international trade

A ______ is a simplified representation of how two or more variables interact with each other.

Theory

What quantity of surplus or shortage (if any) is there at a price of $10 per unit?

There is a shortage of 300 units

People and firms with ______ look at past experience and gradually change their beliefs and behavior as circumstances change, but are not perfect synthesizers of information and accurate predictors of the future.

adaptive expectations

Market

an institution that brings together buyers and sellers of goods or services, who may be either individuals or businesses?

A bank's net worth is also referred to as ______.

bank capital

Depositors racing to the bank to withdraw their deposits for fear that otherwise they would be lost is called a ______.

bank run

A bank that is ______ will have a negative net worth.

bankrupt

The assumption behind a demand curve or a supply curve is that no relevant economic factors, other than the product's price, are changing. Economists call this assumption ______, a Latin phrase meaning "other things being equal."

ceteris paribus

The neoclassical view of unemployment tends to focus attention away from the problem of ______ unemployment—that is, unemployment caused by recession—while putting more attention on the issue of the rates of unemployment that prevail even when the economy is operating at potential GDP. To put it another way, the neoclassical view of unemployment tends to focus on how public policy can be adjusted to reduce the natural rate of unemployment.

cyclical

To prevent solvent banks from failing and a financial crisis from spreading, the Fed stands ready to lend to banks and other financial institutions when they cannot obtain funds from anywhere else. This is known as the ______ role of the Fed.

lender of last resort

A ______ is a debt or something you owe.

liability

Money serves as a ______, which means that money acts as an intermediary between the buyer and the seller. To serve this function, money must be very widely accepted as a method of payment in the markets for goods, labor, and financial capital.

medium of exchange

The ______ perspective on macroeconomics holds that, in the long run, the economy will fluctuate around its potential GDP and its natural rate of unemployment.

neoclassical

economics is more useful for long-run macroeconomic analysis.

neoclassical

Regulation requires that banks maintain a minimum ______, usually expressed as a percent of their assets, to protect their depositors and other creditors.

net worth

The ______ of a bank is the asset value minus how much is owed.

net worth

Banks are a critical intermediary in what is called the ______, which helps an economy exchange goods and services for money or other financial assets.

payment system

The purpose of a theory is to take a complex

real-world issue and simplify it down to its essentials. If done well, this enables the analyst to ______., understand the issue and any problems around it

Many banks make mortgage loans so that people can buy a home, but then do not keep the loans on their books as an asset. Instead, the bank sells the loan. This is called ______.

securitization

Money serves as a ______, which means that if money is usable today to make purchases, it must also be acceptable to make purchases today that will be paid in the future.

standard of deferred payment

Money serves as a ______, which means that although money loses some buying power each year in an economy with inflation, it still remains money.

store of value

If inflation is expected to decrease, _____.

the public may anticipate a recession

Banks help in bringing savers and borrowers together. Thus, banks help in lowering ______ costs.

transaction

In a ______ economy

which is the oldest economic system and can be found in parts of Asia, Africa, and South America, economic affairs are organized the way they have always been done., Traditional

An accounting tool that lists assets and liabilities

Balance sheet

What are the components of M1 money supply?

Cash, checkable deposits, and traveler's checks

The______ pictures the economy as consisting of two groups—households and firms—that interact in markets.

Circular flow diagram

______ currencies are dollar bills or other currencies with values backed up by gold or other items held at a bank.

Commodity-backed

Amounts held in checking accounts

Demand Deposits

______ is a system that makes sure depositors in a bank do not lose their money, even if the bank goes bankrupt.

Deposit insurance

Identify the correct definition of Economics.

Economics is the study of how humans make decisions in the face of scarcity.

Identify a likely impact of specialization in production.

Economies of scale in production

The ______ is the only price where the plans of consumers and the plans of producers agree—that is, where the amount of the product consumers want to buy is equal to the amount producers want to sell.

Equilibrium Price

Exports

Goods and services that are produced domestically and sold in abroad

The size of total production in an economy is measured by the ______.

Gross Domestic Product. (GDP)

Identify an economic question that microeconomics seeks to answer.

How do individuals decide how much of a good to consume?

The term used for goods and services that are produced abroad and then sold domestically?

Imports

Which of the following is likely to happen due to division of labor?

Increase in production

What is likely to happen if inflation is expected to decrease?

Interest rates are likely to fall

Commodity money

Items that are used as money, but which also have value from their use as something other than money.

Households sell and business firms buy in the ______ market.

Labor

A bank views deposits as ______.

Liabilities

Money Supply

M1 money supply includes those monies that are very liquid.

Money Supply includes?

M2 money supply includes M1 plus savings and time deposits, certificates of deposits, and money market funds.

Macroeconomics

Macroeconomics studies the actions and decisions of the economy as a whole.

Microeconomics

Microeconomics focuses on the actions of individual agents within the economy, like households, workers, and businesses.

Reserves

Money that a bank keeps on hand

Fiat money

Money that has no intrinsic value, but is declared by a government to be the legal tender of a country.

What happens when each worker in a factory specializes in a particular small job?

Most workers learn to produce more quickly and with better quality.

A product whose demand rises when income rises, and vice versa, is called a ______.

Normal Good

_____ has a command economy.

North Korea

Which of the following countries has the most economic freedom?

Singapore

Which of the following statements regarding social surplus is correct?

Social surplus is maximized at equilibrium price and quantity.

A good or service that can be used in place of another good or service is a ______.

Substitute

Who conducts Monetary Policy

The Central Bank

What will happen if the central bank of an economy lowers the reserve requirement?

The M1 money supply will increase

What changes in equilibrium will occur if Hanes' textile manufacturers go on strike, decreasing the number of shirts made?

The supply curve will shift to the left, causing the equilibrium price to ↑ and quantity to ↓

How does a decrease in income affect the demand for a good or service?

The demand curve shifts to the left.

What changes in equilibrium will occur if a revival of the "Go Tagless" Hanes ad campaign with Michael Jordan goes viral (suddenly Hanes shirts are flying off the shelves!)?

The demand curve will shift to the right, causing the equilibrium price to ↑ and quantity to ↑

Which of the following correctly defines division of labor?

The division of the production process into different tasks that are performed by different workers.

Identify a feature of a market economy.

The economy is driven by private enterprises.

Which of the following is likely to happen if both the demand curve and the supply curve shift to the right?

The equilibrium quantity will increase but the effect on equilibrium price will depend on the magnitude of the shifts.

Globalization is ?

The expanding cultural, political, and economic connections between people around the world

Identify a characteristic of a command economy.

The government decides how much workers will be paid.

Which of the following is a feature of a command economy?

The government decides what goods and services will be produced.

Price Control

The intent behind implementing price controls can stem from the desire to maintain affordability of staple foods, to prevent price gouging during shortages, and to slow inflation.

Who conducts fiscal policy in a nation?

The legislative body

Which of the following is an implication of neoclassical economics?

The long-run aggregate supply curve is a vertical line drawn at the level of potential GDP

Which of the following is likely to happen when a negative supply shock leads to a decrease in aggregate supply in an economy?

The public will expect the central bank to engage in contractionary monetary policy

What is the definition of social surplus?

The sum of consumer surplus and producer surplus is social surplus

What happens when the cost of producing a good decreases?

The supply curve shifts to the right.

Bartering

Trading one good or service for another.

Money serves as a ______, which means that it is the ruler by which other values are measured.

Unit Of Account

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

Wages and prices adjust quickly to changes in demand

Identify the economic question that is likely to be addressed in a macroeconomic textbook.

What determines the level of economic activity in a society?

In economics

_____ means that human wants for goods, services and resources exceed what is available., scarcity

A strategy where banks lend to a variety of customers is called ______.

diversification

The nominal interest rate is comprised of the real rate, plus an ______.

expected inflation factor

Banks act as ______ that is, institutions that operate between savers who deposit money in a bank and borrowers who receive loans from that bank.

financial intermediaries

Firms sell and households buy in the ______ market.

goods and services

Imports are?

goods and services that are produced abroad and then sold domestically