Smartwork Macroeconomics
An institution is a significant practice, relationship, or organization in a society. Institutions shape the environment in which decisions are made, and they affect production and income in a nation. The most significant institutions are private property rights, political stability and the rule of law, open and competitive markets, efficient taxes, and stable money and stable prices. Complete each of the following sentences with the correct institution. a. The single greatest incentive for voluntary production is the existence of----- B. -------increase investment in physical and human capital because they increase the predictability of future payoffs. c. Specialization is more likely to occur in nations with ----- competitive markets and result in more efficient production because of economies of scale. d. The Xiaogang agreement that led to an agricultural boom in China is an example of the power of----
A. Private B. Political C. Open and competitive D. Private
Below is a list of policy proposals advanced to help the economies of developing nations. Determine whether each proposal is consistent with the Solow model, New Growth Theory, neither, or both. a. unrestricted international aid to help build a power plant b. aid for a power plant, dependent on democratic reforms c. reductions in trade restrictions
A. Solow Model B. Both C. New Growth Theory
Let's suppose that a bank has $700 million in total deposits. This bank is subject to a 20% required reserve ratio and has $120 million in reserves. Which of the following statements is correct? Choose one: A. The bank has insufficient reserves. It needs an additional $20 million to meet the reserve requirement. B. The bank has $116 million in excess reserves. C. The bank has no excess reserves. D. The bank has insufficient reserves. It needs an additional $560 million to meet the reserve requirement. E. The bank has $24 million in excess reserves.
A. The bank has insufficient reserves. It needs an additional $20 million to meet the reserve requirement.
Since October 2008, the Federal Reserve has paid interest on excess reserves held by banks. Under these circumstances, if the Fed buys Treasury securities worth $300 million from a bank, how will the money supply be affected? Assume that the required reserve ratio is 10% and that all currency is deposited into the banking system. Choose one: A. The money supply will increase by less than $3 billion. B. The money supply will not change at all. C. The money supply will increase by more than $3 billion. D. The money supply will increase by $3 billion.
A. The money supply will increase by less than $3 billion.
To earn some extra money to pay for college, you have decided to open your own tattoo parlor one block from campus. You come up with a business plan and realize that you will need financing to get your business off the ground. For each of the following scenarios, is the financing option direct or indirect? a. You fill out an application with an online company that specializes in providing start-up loans funded by a group of banks. b. You appear on a reality show where you pitch your idea to potential investors. Someone likes you, so she writes you a check to get things going. c. You borrow money from classmates and promise to repay them with interest in two years.
A. indirect B. direct C. direct
A. Securitization is--- B. How does the existence of securitization impact mortgage rates?
A. the creation of a new security by combining separate loan agreements, bonds, stocks, mortgages, and other financial securities, into new financial assets. B. Securitization lowers interest rates for borrowers.
When a negative supply shock hits an economy, Choose one: A. unemployment increases temporarily but returns to the natural rate of unemployment in the long run. B. unemployment increases and this becomes the new long-run natural rate of unemployment. C. unemployment decreases and this becomes the new long-run natural rate of unemployment. D. unemployment decreases temporarily, but returns to the natural rate of unemployment in the long run.
A. unemployment increases temporarily but returns to the natural rate of unemployment in the long run.
Suppose that nominal GDP was $10000000.00 in 2005 in Montgomery County Maryland. In 2015, nominal GDP was $11500000.00 in Montgomery County Maryland. The price level rose 2.50% between 2005 and 2015, and population growth was 3.50%. Calculate the following figures for Montgomery County Maryland between 2005 and 2015. Give all answers to two decimals. a. Nominal GDP growth was----- b. Economic growth was------ c. Inflation was----- d. Real GDP growth was---- e. Per capita GDP growth was----- f. Real per capita GDP growth was----
A.15.00% B. 9.00% C.2.50% D.12.50% E.11.50% F.9.00%
We pay higher prices for TVs today than we paid 10 years ago. The higher prices today are likely due to Choose one or more: A. a monopoly in the TV industry. B. the higher quality of today's TVs. C. inflation.
B and C
Which of the following people are structurally unemployed? Select all answer options that apply. A. A teacher at the local high school loses his job when declining enrollment causes the school district to consolidate schools. B. Your mechanic closes his shop because recent advances in technology mean that cars need much less servicing, and he doesn't have enough work to keep the business open. C. A seasonal drought causes some farm workers to lose their jobs. There just isn't enough work for them to do. D. A newspaper photographer loses his job due to decreased circulation of the physical newspaper. His boss says more people are using the Internet to get their news. E. A worker on an assembly line loses her job when the company outsources jobs to China. F. Two employees of a tax accounting firm are laid off because new tax software has made it easier for people to do their own taxes.
B, D, E, F
Which of the following statements are true about inflation and the cost of living? Choose one or more: A. The United States has not experienced deflation in the past 50 years. B. Governments sometimes choose to have high inflation rates when they owe large debts to other countries. C. A salary of $100,000 will give a person approximately the same purchasing power anywhere in the United States. D. In the past 50 years in the United States, the highest periods of inflation occurred in the 1970s.
B. Governments sometimes choose to have high inflation rates when they owe large debts to other countries. D. In the past 50 years in the United States, the highest periods of inflation occurred in the 1970s.
Several European countries spend less time working and more time on leisure activities than the United States. How is this greater leisure time accounted for in gross domestic product measurements? A. Leisure time is added to GDP by using the average market wage for labor in that country. B. Leisure time doesn't factor into a country's GDP. C. A value for leisure time is added to a country's GDP by using a market wage that is a weighted average of the own-country's average hourly wage rate and the rest of the world's hourly wage rate.
B. Leisure time doesn't factor into a country's GDP.
U.S. consumers expect greater income in 2021. Choose one: A. Short-run aggregate supply shifts. B. Neither shifts. C. Both shift. D. Long-run aggregate supply shifts.
B. Neither shifts. Shifts to neither side
The Organization of Petroleum Exporting Countries (OPEC) meets and agrees to increase world oil output, leading to lower oil prices for six months. Choose one: A. Long-run aggregate supply shifts. B. Short-run aggregate supply shifts. C. Both shift. D. Neither shifts.
B. Short-run aggregate supply shifts. Shift to the right
Hot weather leads to lower crop yields in the Midwest. Choose one: A. Long-run aggregate supply shifts. B. Short-run aggregate supply shifts. C. Both shift. D. Neither shifts.
B. Short-run aggregate supply shifts. Shifts to the left
Suppose you have $12,000 in your checking account. You withdraw $500 cash from your account and hide it under your pillow for future use. If the required reserve ratio is 10%, then what will be the maximum impact on money supply today as a result of your action? Choose one: A. The money supply will decrease by $450. B. The money supply will decrease by $4,500. C. The money supply will decrease by $500. D. There will be no impact on the money supply.
B. The money supply will decrease by $4,500.
Which of the following occurs during an expansion? A. real GDP falls; employment falls; incomes rise B. real GDP rises; employment rises; incomes rise C. real GDP falls; employment falls; incomes fall D. real GDP rises; employment rises; incomes fall
B. real GDP rises; employment rises; incomes rise
Some economies grow faster for reasons particular to those economies. This statement refers to an economy's Choose one: A. exogenous growth and endogenous growth. B. technological innovation and endogenous growth. C. technological advances and exogenous growth. D. capital accumulation and exogenous growth.
B. technological innovation and endogenous growth.
Suppose you have a Xbox your roommate wants, and your roommate has a iPod that you want. You decide to trade the Xbox for the iPod. You have engaged in what economists call-----which can only occur when there is----------
Bartering A double coincidence of wants
Which of the following statements best describes the relationship between Solow's model of economic growth and New Growth Theory? Choose one: A. Neither of these growth theories has anything to do with the other. One focuses on physical capital, whereas the other deals only with institutions. B. Solow builds on New Growth Theory, as physical capital can only exist when institutions allow it. C. New Growth Theory builds on Solow, adding the importance of institutions to the importance of capital accumulation. D. Solow informs New Growth Theory, while at the same time New Growth Theory influences Solow.
C. New Growth Theory builds on Solow, adding the importance of institutions to the importance of capital accumulation.
What will the effects be on the U.S. economy in the long run when it comes to output, price level, and nominal wages? Choose one: A. Output will decrease; the price level will decrease; nominal wages will decrease. B. Output will increase; the price level will increase; nominal wages will increase. C. Output will remain unchanged; the price level will decrease; nominal wages will decrease. D. Output will remain unchanged; the price level will remain unchanged; nominal wages will remain unchanged. E. Output will remain unchanged; the price level will remain unchanged; nominal wages will decrease.
C. Output will remain unchanged; the price level will decrease; nominal wages will decrease.
What are the impacts, if any, of this shift on the price level and on the natural rate of unemployment? Choose one: A. The natural rate of unemployment and the price level both increase. B. The price level is unchanged, and the natural rate of unemployment increases. C. The price level increases, and the natural rate of unemployment is unchanged. D. The price level increases, and the natural rate of unemployment decreases. E. The price level decreases, and the natural rate of unemployment increases.
C. The price level increases, and the natural rate of unemployment is unchanged.
New shale gas deposits are found in North Dakota. Choose one: A. Long-run aggregate supply shifts. B. Short-run aggregate supply shifts. C. Both shift. D. Neither shifts.
C. both shift Shifts to the right
Which of the following would help reduce the amount of frictional unemployment? A. government policies to limit outsourcing of jobs B. providing tax breaks to firms that engage in technological innovations C. interviewing a wide variety of candidates to ensure a diverse workforce D. Websites that advertise job openings across the country E. government policies to help promote a stagnant economy
D
Investors fear greater economic turmoil. The-----loanable funds shifts to the----
Demand for left
Your friend Krista wants to open a cupcake shop. She needs to buy many resources before she can sell cupcakes and earn revenue. She is uncertain whether she should use direct or indirect financing. Sort each of the following ways Krista can raise the funds to buy these resources as either direct or indirect finance. Krista takes a loan from her small local bank. Krista arranges a loan from a large national bank. Krista borrows money from a friend. Krista issues bonds and sells them to people in her neighborhood.
Direct- Krista borrows money from a friend. Krista issues bonds and sells them to people in her neighborhood. Indirect - Krista takes a loan from her small local bank. Krista arranges a loan from a large national bank.
When borrowers want funding to pay for different projects, they go to the loanable funds market and acquire funds through either indirect finance or direct finance. Below, you are given five different scenarios. Is each an example of direct finance or indirect finance? Alan goes to his local bank to borrow money to expand his small business. Jennifer buys a Ford Motor Co. bond. Heather takes out a loan from Citibank to start a business consulting firm. Microsoft issues new securities. Jason borrows money from his parents to start a food truck business.
Direct- Microsoft issues new securities. Jason borrows money from his parents to start a food truck business. Jennifer buys a Ford Motor Co. bond. Indirect- Alan goes to his local bank to borrow money to expand his small business. Heather takes out a loan from Citibank to start a business consulting firm.
Which of the following is true of real gross domestic product? A. It is an exact measure of output. B. It measures price inflation. C. It only measures output. D. It can be used to measure a firm's output. E. When determined on a per capita basis, it can give us guidance on the living standards of a nation. F. It only measures income.
E
Suppose Lilian's wage rose from $10.00 to $11.00. The consumer price index (CPI) rose from 150 to 180. Therefore, Lilian's real wage has ________ and the purchasing power of her income has ________.
Fallen Fallen
Sort each statement as either true or false. Voluntary trade among rational individuals creates value for everyone involved. Trade helps to create additional growth through specialization. Everyone benefits with globalized trade. Comparative advantage is not an important aspect of specialization and trade.
False- Everyone benefits with globalized trade. Comparative advantage is not an important aspect of specialization and trade. True- Voluntary trade among rational individuals creates value for everyone involved. Trade helps to create additional growth through specialization.
Sort the following institutions by whether they help or hinder growth. corruption political instability unexpected inflation established property rights competitive markets efficient taxes
Helps- established property rights competitive markets efficient taxes Hinders- corruption political instability unexpected inflation
Before Anthony was Ana's gardener, he lived in Colorado and grew and sold marijuana. This was before it was legalized in 2014. Suppose he continued to grow and sell marijuana after it was legalized. Assuming nothing else changed, Colorado's GDP would be----once marijuana was legalized.
Higher
Comparing the 40 poorest nations with the high-income OECD nations, are the following living conditions higher or lower in poorer nations? GDP per capita female literacy rates male literacy rates access to electricity access to improved sanitation life expectancy access to clean water infant mortality
Higher- Infant mortality Lower- GDP per capita female literacy rates male literacy rates access to electricity access to improved sanitation life expectancy access to clean water
The aggregate production function states how output is produced based on what inputs? Technology human capital institutions natural resources physical capital
Included- Human capital Natural resources Physical capital Not Included- Technology institutions
Whether these are shifts or movements, in which direction should we anticipate the change? Consumers expect strong future economic growth: Consumers substitute away from U.S.-made clothes toward Nicaraguan-made clothes: European countries go into recession: Dropping price levels increases real wealth and savings:
Increase decrease decrease increase
Referring to the graph above, what happens after an increase in aggregate demand in the short run? The price level Output Unemployment
Increase increase decreases
In 2015, the Consumer Price Index (CPI) was 238, whereas it was about 100 in 1982. Suppose that one of your parents had a job that paid $28,000 annually in 1982 and a job that paid $60,000 annually in 2015. Relative to 1982, we could say that your parent's nominal income------in 2015 and that your parent's real income--- in 2015
Increased Decreased
Determine whether the following changes or events would shift the LRAS curve to the right, to the left, or not at all. The price level increases. The government provides more generous unemployment benefits. Political instability leads to the overthrow of the government. Microhard develops new computer hardware that doubles data transmission speeds. A large new oil field is discovered off the coast of California.
LRAS shifts right- Microhard develops new computer hardware that doubles data transmission speeds. A large new oil field is discovered off the coast of California. LRAS shifts left- The government provides more generous unemployment benefits. Political instability leads to the overthrow of the government. The U.S. government deports a large number of undocumented immigrants. No shift in LRAS- The price level increases.
Before Ana married her husband, Anthony, she hired him as her gardener. After they were married, Anthony still did the gardening, but Ana no longer paid him. Assuming nothing else changed, GDP would be--- when they are married compared to when Ana was single.
Lower
Think about a country where most economic production results in a ground-shaking explosion that cracks the foundations of buildings. What would be the trade-off if the bad result (a ground-shaking explosion) were reduced?
Lower incomes
Daniel and his intramural team just won the co-ed volleyball tournament, and they're celebrating at an all-you-can-eat pizza place. Daniel has had four slices of pizza and is trying to decide whether to have a fifth slice. He does not have to pay for it, but he is thinking about whether feeling overfull from the fifth slice are worth it. Which foundation(s) of economics is he applying?
Marginal thinking Trade-offs
Determine whether each of the following scenarios would be studied in microeconomics or macroeconomics. Economic Scenarios The exchange rate between Mexican pesos and U.S. dollars How a cut in federal income tax rates affects economic growth The current unemployment rate Your decision on whether to buy one additional slice of pizza The impact of unusually cold weather on the market for oranges A five-year plan for Microsoft that projects hundreds of billions in new profits for the company Tesla's decision to sell its cars in Mexico Your decision to go back to school to get an MBA
Microeconomics - Your decision on whether to buy one additional slice of pizza The impact of unusually cold weather on the market for oranges A five-year plan for Microsoft that projects hundreds of billions in new profits for the company Tesla's decision to sell its cars in Mexico Your decision to go back to school to get an MBA Macroeconomics- The exchange rate between Mexican pesos and U.S. dollars How a cut in federal income tax rates affects economic growth The current unemployment rate
The longer workers can collect unemployment insurance, and the more income the insurance provides, the-----time we would expect them to spend unemployed, thus----the unemployment rate.
More Rising
In the long run, all other things being equal, an extensive wildfire in California will-----U.S. output, ----the U.S. price level, and ------U.S. unemployement.
Not change not change not change
Economists have identified many concerns about inflation. Yet inflation isn't always bad. Which of the following are concerns you might see an economist cite?
Problems with inflation: -costs of changing prices on menus -costs people incur to avoid holding cash when there is inflation -money illusion -wealth redistribution Not a problem: -decreased tax burdens with inflation
The population of the globe is aging, with more people living past the standard retirement age. The----- loanable funds shifts to the----
Supply of Left
Suppose that U.S. citizens suddenly become poorer. As a result, the--- loanable funds----- and borrowers issue ----- stocks and bonds to finance capital improvements.
Supply of decreases Fewer
In each of the following scenarios, identify whether the supply curve or demand curve shifts in the loanable funds market, and in which direction. A major discovery of oil in North Dakota leads to the creation of a tremendous number of high-paying jobs. The------loanable funds shifts to the-----
Supply of Right
Trade-offs and opportunity costs are closely related topics. ----------exists when a decision-maker has to choose a course of action that prevents him or her from being able to take another course of action, but ----------- explains what you give up when you choose to buy a new pair of shoes instead of attending a concert.
Trade Off opportunity cost
Consider Amanda and Zelda. They both will save $6,000 per year until they retire at age 70. Amanda and Zelda, however, will start saving at different ages. Amanda will start saving when she is 30 years old. Zelda will start saving when she is 50 years old. Assuming the interest rate each year is 8%, how much money will the first year of savings amount to when they retire? Round your answers to two decimal places. Amanda----------- Zelda------- Since Amanda started saving much earlier than Zelda, Amanda has---- time preferences than Zelda
$130,347.13 $27965.74 Lower
Suppose that the United States of Durbin, a small nation, has consumption, investment, government purchases, imports, and exports as follows. Consumption $110 Investment $50 Government purchases $55 Imports $25 Exports $20 Calculate the United States of Durbin's GDP.
$210
Suppose you deposit $3,000.00 into your savings account that pays you 10.00% interest. After one year, you will have------In your account (2 decimal places) Suppose that in the following year, interest rates increase by 3% from 10.00%. If you leave your money in the account for another year, you will have------in your account
$3,300.00 $3,729.00
You recently got a job as an usher at the nearby movie theater. Last night, you had the opportunity to work but decided to take your very first vacation day. Suppose you could have earned $8 per hour for three hours of work. Instead, you went to a movie yourself, where you spent $14 on a ticket and popcorn. Your opportunity cost to see the movie was------
$38
Assume you are bequeathed $400 by a long-lost cousin. You decide that, for the next year, you will put all that money in the bank until you decide what to do with it. The bank is currently paying an interest rate of 4%. At the year's end you will have
$416
Suppose you own a bicycle but haven't found the time to ride it much lately. These days, it is only worth $25 to you. One of your close friends, who recently got a job at the college bookstore two miles down the road, wants to take it off your hands. He offers you $70 for the bicycle, and you gladly accept. Your friend is also happy because he thinks the bicycle is worth $95 . How much total value was created from this trade?
$70
Lauren works as a server at a local restaurant. Applying the circular flow model: (a) The restaurant where Lauren works represents----- (b) The meals that the restaurant sells represent------ (c) The labor that Lauren provides to the restaurant represents------
(a) Firms (b) Product Market (c) Resource market
Suppose that nominal GDP was $20 trillion in 2040 in Mordor. In 2050, nominal GDP was $18 trillion in Mordor. The price level rose 7% between 2040 and 2050, and population growth was 4%. Between 2040 and 2050 in Mordor, nominal GDP growth was -----% and economic growth was ----%. Give your answers to one decimal place.
-10% -21.0%
Suppose U.S. nominal GDP changed by -5.00% from 2019 to 2020, and the price level changed by 0.50%. Therefore, real GDP changed by approximately
-5.50
The table below reports labor market data for the United States in January 2018 (all numbers are in thousands). Work-eligible population 256,780 Employed persons 154,482 Labor force 161,123 Insert the correct values in the boxes (report the rates to two decimal places): number of unemployed persons: unemployment rate: labor force participation rate:
1. 6,641.00 2. 4.12% 3. 62.75%
Rank the economic growth rate from 1950 to 2010 for the three countries listed, in order from highest to lowest. U.S China India
1. China 2. India 3. U.S
Different categories of expenditures are weighted differently in the consumer price index. Rank these items in from the highest share to the lowest share.
1. Housing 2. Transportation 3. Food and beverages 4. Medical care 5. Recreation 6. Education
Rank the following six countries or regions from richest to poorest in 2010 U.S. dollars. You may need to move the scroll bar to the right to see all of the countries. Africa India China Latin America U.S West Europe
1. U.S 2. Western Europe 3. Latin America 4. China 5. India 6. Africa
Suppose that Aaron, the owner of Jack Brown's Burger Bar, wants to open a new restaurant. To open the restaurant, he will need to raise $250,000. Suppose Aaron decides to sell one-year bonds with a $10,000 face value. If the price of the bond is $9000, the interest rate on the bond is------ Suppose that because of the popularity of Jack Brown's, Aaron decides to open a third restaurant and issues another round of $10,000 one-year bonds. If the interest rate on the bond falls to 5%, the price of these new bonds is--------
11.11% $9,523.81
Suppose that nominal GDP was $13 trillion in 2040 in Mordor. In 2050, nominal GDP was $15 trillion in Mordor. The price level fell 7% between 2040 and 2050, and population growth was 4%. Between 2040 and 2050 in Mordor, nominal GDP growth was ------ and economic growth was ----%. Give your answers to one decimal place.
15.4% 18.4%
Suppose that between 2015 and 2016, nominal GDP grew by 5%. If the price level grew by 1.5% and population grew by 1%, real per capita GDP grew by---- If real per capita GDP continues to grow at this rate, it would double in ----- years. Give your answer to the second decimal.
2.50% 28.00
During recessions, the official unemployment rate may not adequately reflect the true state of workers in the labor market. Data on the official unemployment rate and percentage of unemployed, underemployed, and discouraged workers are provided below. Official unemployment rate 5.5% Total percentage of the labor force who are either unemployed, underemployed, or discouraged workers. 8.4% Using the data above, calculate the percentage of discouraged and underemployed workers. Percentage of discouraged workers and underemployed workers:
2.9%
Suppose that nominal GDP was $8 trillion in 2040 in Mordor. In 2050, nominal GDP was $10 trillion in Mordor. The price level rose 15.0% between 2040 and 2050, and population growth was 11.0%. Between 2040 and 2050 in Mordor, nominal GDP growth was-----% and economic growth was ----%. Give your answers to one decimal place.
25% -1.0%
The macroeconomic data collection department for the country of the United Republic of Neverland reported the consumer price index as 211.4 in December 2010, and 271.6 in December 2016. What was the inflation rate from the end of 2010 to the end of 2016 (rounded to two decimal places)?
28.00
You have been hired to determine if unemployment is running too high. First you must determine the natural rate of unemployment. You have been provided the data in the table below. Frictional unemployment 2% Structural unemployment 1% Cyclical unemployment 1% Using the data above, determine the natural rate of unemployment. The natural rate of unemployment is
3.00%
While rooting through the attic, you discover a box of old tax forms. You find that your grandmother made $75 working part-time during December 1964, when the CPI was 31.3. How much would you need to have earned in December 2014, when the CPI was 234.8, to have at least as much real income as your grandmother did in 1964? Give your answer to two decimals.
562.62
Say the Dow Jones Industrial Average was 300 in October 1929 and 100 in October 1931. How much of a percentage decrease did it experience over that period? Give your answer to one decimal.
66.7%
You purchased an IBM bond with a face value of $10,000 and an interest rate of 25%. Suddenly, the market interest rate changes, which raises your bond price by $600. What was the original price of the bond? (Compute this answer to two decimal places.)--------- What is the new market interest rate? (Compute this answer to two decimal places.)----------
8,000.00 16.28
A municipal bond that matures in one year has a $5,000 face value and is currently priced at $4,550.00. Calculate the interest rate for this bond to two decimals. Suppose that inflation is exactly 2.00%. Calculate the real interest rate to two decimals.
9.89% 7.89%
When Nile and Josue lower the price at their restaurant, it provides----incentive for customers to choose it when they would not have otherwise done so. This leads to increased sales at the restaurant.
A direct
Which of the following statements are true about the velocity of money? Choose one or more: A. An increase in velocity, all else being equal, increases nominal GDP. B. Velocity is part of the equation of exchange. C. Velocity is the number of times a unit of currency exchanges hands in a given year. D. An increase in velocity, all else being equal, increases real GDP.
A, B, C
Which of the following choices properly match the financial tool with the objectives of the individual? A. Jordan doesn't want to pay back any of the people who give her money to expand her business, so she sells stocks instead of bonds. B. Maddie is interested in a fixed payout, so she buys a bond from IBM. C. Carol says without risk there is no reward. So, trying to get the highest bond return she can, she buys bonds with a CCC rating rather than bonds with a AAA rating. D. Mike wants to raise money for his company but doesn't want to give up any ownership, so he decides to issue bonds rather than stock. E. Dave wants to own part of a company, so he buys a bond from Goldman Sachs. F. Lewis is worried about bearing a lot of risk, so he buys a bond with a B rating.
A, B, C, and D
Which of the following will be counted in this year's GDP? A. You purchase an Investing for Dummies book at Barnes & Noble. B. You purchase a historic home without the help of a real estate agent. C. You bought a new Wii at GameStop last year and resold it on eBay this year. D. You detail your car so that it is spotless inside and out. E. Apple buys 1,000 motherboards for use in making new computers. F. Your therapist perfoms $300 of physical therapy on you but does not report it. G. Toyota produces 10,000 new Camrys that remain unsold at the end of the year. H. You purchase a new hard drive for your old laptop.
A,G,H
The table below provides information on the growth in the money supply (M), velocity (V), the price level (P), and real GDP (Y) for three countries. For each country, calculate the missing variable. For example, for country A you want to calculate the percent change in velocity V. Country, % change in M, % change in V, % change in P, % change in Y A, 0.00, ______, 1.50, 6.50 B, 1.00, 0.00, ______, -2.00 C, 0.00, 2.00, 2.00, ______
A. 1.50 + 6.50 - 0 = 8 B. 1 + 0 - (-2) = 3 C. 0 + 2 - 2 = 0
A mechanic builds an engine and then sells it to a customized body shop for $7,000. The body shop inserts the engine into the car and resells it to a dealer for $20,000. The dealer then sells the finished vehicle for $38,000. a. When the consumer drives off with the car, GDP increases by b. What is the value added by the mechanic? (Assume that the value of the materials used to build it is zero.) c. What is the value added by the body shop? d. What is the value added by the dealer? e. The total value added is------the amount that GDP increased.
A. 38,000 B. 7,000 C. 13,000 D. 18,000 e. Equal to
A. Suppose you borrow money at a nominal interest rate of 12%. At the time you borrow the money, you expect inflation to be 7%. The real interest rate you expect to pay on your loan is----- B. Suppose that when you pay back the loan, inflation turned out to be 8.5%. The real interest rate you actually pay back is---- C. Suppose that when you pay back the loan, inflation turned out to be 5%. The real interest rate you actually pay back is D. Think about the case where inflation turned out to be higher than expected. You initially thought inflation was going to be 7%, but it turned out to be 8.5%. Since the inflation rate turned out to be higher than expected, then------
A. 5.00% B. 3.50% C. 7.00% D. You are better off
Suppose Sally borrows $1,000 from Harry for one year and agrees to pay a nominal interest rate of 12%. When she borrows the money, both she and Harry expect an inflation rate of 3%. A. The expected real interest rate on the loan is--- B. Suppose that when Sally pays back the loan after one year, the actual inflation rate turns out to be 3%. The actual real interest rate on the loan is C. . If the inflation rate turned out to be higher than expected, then D. But if inflation turned out to be lower than expected, then
A. 9% B. 9% C. Sally is better D. Sally is worse
Consider an economy that produces only two goods: strawberries and cream. Use the table below to compute nominal GDP, real GDP, and the GDP deflator for each year. 2014 is the base year. (Unless it is a whole number, round your answer to two decimal places.) Year, Price of berries, Quantity of berries, Price of cream, Quantity of cream 2014, $1.25, 100, $3.00, 200 2015, $2.00, 125, $3.50, 400 2016, $3.00, 150, $4.00, 500 Year, Nominal GDP, Real GDP, GDP deflator 2014 $___a___ , $___b___ , ___c___ 2015 $___d___ , $___e___ , ___f___ 2016 $___g___ , $___h___ , ___i___
a. 725.00 b. 725.00 c. 100 d. 1650.00 e. 1356.25 f. 121.66 g. 2450.00 h. 1687.50 i. 145.19
A increase in the price level will-----the nominal interest rate and cause a(n)------movement along the aggregate demand curve.
increase upward
Technological innovations are often clustered in particular locations because of
institutions.
Technology is
knowledge that is available for use in other production.
Suppose your father earned $30,000 a year after he graduated from college. You have been offered a job paying $90,000 a year. Since the price level has increased since your father graduated from college, in real terms you will earn
less than three times more than what your father earned.
Economics is the study of how people allocate their resources to satisfy their nearly wants and needs.
limited; unlimited
What entity owns all of the factors of production in the simple circular flow diagram?
owned by households.
Of the following,------is the best measure of a nation's standard of living over time.
per capita real GDP
Many goods and services are illegally sold, or legally sold but not reported to the government. If we increased efforts to count those goods and services, GDP would----
rise
Although you have an exam tomorrow, you are considering watching one more episode of your favorite TV show. You will choose to stay on the couch if
the marginal benefit of watching one more episode of your favorite TV show outweighs the marginal cost.
You are trying to decide whether to pay a dog walker $400 or do the work yourself. It would be rational to hire a dog walker if
the opportunity cost of doing it yourself is more than $400.
Macroeconomics is the study of
the overall aspects and workings of an economy, such as inflation, growth, employment, interest rates, and the productivity of the economy as a whole.
Classify each of the following unemployment situations as either cyclical, frictional, or structural unemployment. A data-entry employee loses his job because it was permanently outsourced to India. Paul lost his job six months ago. His employment counselor at the labor office advises him to retrain. In 2011, Borders Books filed for bankruptcy, and 19,000 employees lost their jobs. Unemployment in Michigan increased as consumer demand for automobiles fell during the Great Recession. Large numbers of construction workers lost their jobs after the collapse of the housing bubble. Michael is temporarily out of work. He quit his job at Citibank to find another job as a financial analyst. Mary graduated from college with an economics degree. She doesn't have a job yet, but she has six interviews lined up.
Cyclical Unemployment- Unemployment in Michigan increased as consumer demand for automobiles fell during the Great Recession. Large numbers of construction workers lost their jobs after the collapse of the housing bubble. Structural Unemployment- A data-entry employee loses his job because it was permanently outsourced to India. Paul lost his job six months ago. His employment counselor at the labor office advises him to retrain. In 2011, Borders Books filed for bankruptcy, and 19,000 employees lost their jobs. Frictional Unemployment Michael is temporarily out of work. He quit his job at Citibank to find another job as a financial analyst. Mary graduated from college with an economics degree. She doesn't have a job yet, but she has six interviews lined up.
Data on the natural rate of unemployment and actual employment are provided in the table below. Natural rate of unemployment 5% Actual unemployment 9 % Based on these numbers, the amount of cyclical unemployment in the economy is
Positive
Sort the following four scenarios by whether they are a shift of aggregate demand, or a movement along the aggregate demand curve, for the U.S. economy. Consumers read positive economic news and then expect strong future economic growth. Several European economies go into recession. A decrease in the price level leads to more real wealth & savings, reducing the interest rate & increasing investment. A price-level increase in the US leads consumers to substitute from clothes made in the US to clothes made in Nicaragua.
Shift of AD- Consumers read positive economic news and then expect strong future economic growth. Several European economies go into recession. Movement along AD curve- A decrease in the price level leads to more real wealth & savings, reducing the interest rate & increasing investment. A price-level increase in the US leads consumers to substitute from clothes made in the US to clothes made in Nicaragua.
There are five statements below related to problems inflation can bring. Sort the statements into the relevant problem of inflation. Shoe-leather costs Money illusion Wealth redistribution Price confusion Menu costs
Shoe-leather costs:- The prevalence of debit cards has reduced this problem. Money illusion:- Isabella is happy she got a 20% raise to move to New York City. It costs a lot more to live there Wealth redistribution:- Donald borrowed $1,000 from Mickey. Inflation was much higher than expected. Price confusion:- Vito wonders if there is a shortage of milk. His cheese prices have risen again. Menu costs:- Heather walks out of Nordstorm when she sees shoe prices have risen again.
Which of the following is not an example of a technological advancement?
a resurgence of rainforest growth in Belize
To which component of U.S. GDP expenditure does each of the following belong? a. CDs recorded in Nashville and sent to Australia :b. Prescription medications purchased by the Health Department of a country :c. an oil change at the local garage: d. a new home:
a. net exports b. government purchases c. consumption d. investment
