ECN 211

M2...

M1 saving deposits money market mutual funds small time deposits other

Suppose the entire economy has: - $150 dollars kept in coffee cans and wallets - $300 in saving accounts - $200 in credit card limits - $20 in traveler's checks - $350 in checking accounts - $400 in money market mutual funds What's M1 and M2?

M1: (150+20+350) M2: (M1+400+300)

a fractional reserve banking does not create what?

it creates money, but not wealth

A lends B $100 today in return for B repaying $110 one year from today. During the year, the CPI increases from 200 to 204. For this loan, the nominal interest rate is ______ while the real interest rate is _____.

10%, 8%

is growth in capital a source of sustained economic growth?

NO it can lead to growth in real GDP per person though

Calculate the unemployment rate? Calculate the labor force participation rate? Employed: 78 mil Part time employed: 22 mil Unemployed: 12 mil Marginally attached: 3 mil Not in the labor force: 30 mil Discouraged: 4 mil

UR: 13.33% LFPR: 75% (employed+unemployed)/(that+NOT IN THE LABOR FORCE)

If a country increases its saving rate, a. capital increases and productivity growth increases for a short while b. capital increases and productivity growth increases permanently c. capital increases and productivity growth decreases for a short while d. capital increases and productivity growth decreases permanently

a

When the Fed decreases the discount rate, the banks will a. borrow more from the Fed and lend more to the public. The money supply increases. b. borrow more from the Fed and lend less to the public. The money supply decreases. c. Borrow less from the Fed and lend more to the public. The money supply increases. d. Borrow less from the Fed and lend less to the public. The money supply decreases.

a

Which of the following statements is correct? a. Human capital per worker is a determinant of productivity b. A nation cannot be highly productive in producing goods and services without abundant quantities of natural resources. c. Human capital and technological knowledge are the same thing d. All technological knowledge is proprietary.

a

frictional unemployment is the result of.. a. the search process of matching workers with jobs b. a slowdown in the economy c. the ups and downs in inflation d. a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs

a

The Karmic Deed Restaurant uses all of the following to produce vegetarian meals. Which of them is an example of physical capital? a. The tables and chairs in the restaurant b. The fresh fruits, vegetables, and grains the restaurant uses to prepare its meals c. The owner's knowledge of how to prepare vegetarian entrees. d. The money in the owner's account at the bank from which she borrowed money.

a choice b is natural resources

Which of the following is considered money a. A savings deposit in the amount of $1000 b. A treasury bond with a face value of $10,000 c. An ounce of god bullion d. A money market deposit in the amount of $50,000

a d

Which list ranks assets from most to least liquid? a. currency, houses, stocks b. currency, stocks, houses c. houses, currency, stocks d. houses, stocks, currency

b

In each scenario, determine the effects on the CPI and the GDP deflator. a. Starbucks raises the price of muffins. b. Caterpillar raises the price of the industrial tractors it manufactures at its Illinois factory c. Armani raises the price of the Italian jeans it sells in the U.S

a. CPI and GDP deflator both rise b. GDP rises, CPI does not c. CPI rises, GDP does not

When the CPI falls, the typical family... a. can spend fewer dollars to maintain the same standard of living b. has to spend more dollars to maintain the same standard of living c. can offset the effects of rising prices by saving more d. finds that its standard of living is not affected

a. can spend fewer dollars to maintain the same standard of living

Leverage Ratio=

assets/capital

If the Fed raised the reserve requirement, the demand for reserves would... a. increase, so the fed funds rate would fall b. increase, so the fed funds rate would rise c. decrease, so the fed funds rate would fall d. decrease, so the fed funds rate would rise

b

which of the following can be measured by the level of real GDP per person? a. neither the standard of living nor productivity b. the standard of living c. productivity d. both productivity and standard of living

b

which of the following is true? a. abundant natural resources are required for sustained growth in real GDP per person b. growth in productivity is required for sustained growth in real GDP per capita c. growth in capital per worker is required for sustained growth in real GDP per person d. stable or declining population is required for sustained growth in real GDP per person

b

Which causes a decrease in the unemployment rate? a. Hailey lost her job and begins looking for a new one b. Josiah, a steelworker who has been out of work since his mill closed last year, becomes discouraged and gives up looking for work. c. Karim, sole earner in his family of 5, just lost his $80,000 job as a research scientist. Immediately, he takes a part time job at McDonalds until he can find another job in his field

b - for a, Hailey becomes unemployed --> increases UR - for c, he is still employed ---> doesn't affect UR bc employed and labor force stay the same cuz he "immediately" got a new job - for b, he was unemployed but then became discouraged ---> decreases UR

Please select all cases that are frictional unemployment a. Konrad was furloughed from his hotel job as a result of COVID 19. He is currently awaiting recall. b. Larissa just graduated from college. She has not found work yet, but is actively looking. c. Warren retired last year. However, concerns about long term finances caused him to search for part time work d. Elizabeth waited in line for hours to apply for a min wage job. She didn't get the job. More workers applied than jobs available. e. Johnny lost his job in retail. His generous jobless benefits have resulted in him being very choosy about what jobs he considers applying for

b, c, e

Bank Capital (Owner's Equity)=

bank assets-bank liabilites

When a bank is insolvent..

bank capital is negative liabilities exceed assets it is at risk of being closed by regulators.

How do banks affect size of money supply in a 100% reserve banking system..

banks do not affect size of money supply.

All else equal, if there are diminishing returns, then.. a. capital produces fewer goods as it ages b. old ideas are not as useful as new ones c. increases in the capital stock increase output by ever smaller amounts d. increases in the capital stock eventually decrease output

c

The CPI differs from the GDP deflator in that.. a. CPI is a price index while GDP deflator is an inflation index b. substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator c. increases in the prices of foreign produced goods that are sold to the U.S. consumers show up in the CPI but not in the GDP deflator d. increases in the prices of domestically produced goods that are sold to the U.S government show up in the CPI but not the GDP deflator

c

Which of the following would be most likely to reduce frictional unemployment? a. the government eliminates the minimum wage b. the government increases unemployment insurance benefits c. more workers post their resumes at Linked.com, and more employers use Linked.com to find suitable workers to hire d. sectoral shifts become more frequent

c

In the CPI, goods and services are weighted according to: a. how long a market has existed for each good and service b. the extent to which each good or service is regarded by the government as a necessity c. how much consumers buy of each good/service d. the number of firms that produce and sell each good/service

c. how much consumers buy of eacg good/service

One problem with the CPI stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called.. a. price-change neglect b. unmeasured quality change c. substitution bias d. relative bias

c. substitution bias

M1...

currency demand deposits traveler's checks other checkable deposits

money supply =

currency (or loans on the T sheet) + deposits

If the Fed wants to lower the Federal Funds rate, it will.. a. buy government securities in order to decrease the quantity of reserves b. sell government securities in order to increase the quantity of reserves c. sell government securities in order to decrease the quantity of reserves d. buy government securities in order to increase the quantity of reserves

d

Productivity is the amount of goods and services... a. An economy produces. It is not linked to a nation's economic policies. b. An economy produces. It is linked to a nation's economic policies. c. Produced for each hour of a worker's time. It is not linked to a nation's economic policies. d. Produced for each hour of a worker's time. It is linked to a nation's economic policies

d

cyclical unemployment... a. has a different explanation than does the natural rate of unemployment b. refers to the year to year fluctuation in unemployment around an economy's natural rate of unemployment c. is closely associated with short run ups and downs of economic activity d. all of the above

d

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI... a. fails to account for consumer spending on housing b. accounts only for consumer spending on food, clothing, and energy c. fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods d. fails to account for the introduction of new goods

d. fails to account for the introduction of new goods

India imports all of its smartphones from the U.S. If there is an increase in the price of smartphones in India due to an increase in the price paid to U.S. suppliers, then in India the GDP deflator ____ while the CPI _____

does not change, increases

If the Fed carries out an open market sale of U.S. government securities, the quantity of bank reserves ____ and the money supply____

falls, decreases

Senior citizens devote a higher fraction of their spending to prescription drugs than average. If the price of prescription drugs increase by 10% while the prices of all goods increase by 5%, then the CPI will increase by ________ 5% and will _______ the change in senior citizens' cost of living

more than, understate

reserve ratio=

reserves/deposits