ECO2013 (Ch 11-13, 15 & 16)

Which of the following is a function of money?

All of the above is correct.

What part of the Fed meets to discuss changes in the economy and determine monetary policy?

the FOMC

The agency responsible for regulating the money supply in the United States is

the Federal Reserve.

An important difference between the GDP deflator and the consumer price index is that

the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of some goods and services bought by consumers.

A COLA automatically raises the wage rate when

the consumer price index increases.

The relationship between the quantity of output created and the quantity of inputs needed to create it is called

the production function.

The discount rate is

the rate at which the Fed lends to banks.

Economists use the word "money" to refer to

those assets regularly used to buy goods and services.

Which of the following is a renewable natural resource?

timber

A closed economy does not

trade with other economies.

Which of the following is not a widely acknowledged problem with the CPI as a measure of the cost of living?

unmeasured price change

Indexation refers to

using a law or contract to automatically correct a dollar amount for the effects of inflation.

Cyclical unemployment refers to

year-to-year fluctuations of unemployment around its natural rate.

Money

All of the above is correct.

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 195 for 2005. Ruth's 1931 salary was equivalent to a 2005 salary of about

$1,026,000.

Suppose a closed economy had public saving of $3 trillion and private saving of $2 trillion. What is national saving and investment in this country?

$5 trillion, $5 trillion

If the consumer price index was 100 in the base year and 107 in the following year, the inflation rate was

7 percent.

In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 195 for 2005. President Hoover's 1931 salary was equivalent to a 2005 salary of about

$962,171.

In a small closed economy investment is $20 billion and private saving is $22 billion. What is public saving and national saving?

-$2 billion and $20 billion

In the US each additional year of schooling has historically raised a person's wage on average by about

10 percent.

Refer to Table 24-1. Suppose the typical consumer basket consists of 10 bushels of peaches and 15 bushels of pecans. Using 2005 as the base year, the CPI for 2006 is

120.

Suppose that in a closed economy GDP is equal to 11,000, Taxes are equal to 1,500, Consumption equals 7,500, and Government purchases equal 2,000. What is national saving?

1500

Suppose that in a closed economy GDP is equal to 11,000, Taxes are equal to 2,500, Consumption equals 7,000, and Government purchases equal 3,000. What are private saving and public saving?

1500 and -500

Labor Stats The Labor Market This table shows the 2003 data for males and females ages 16 and over in the imaginary country of Meditor. -- Refer to Labor Stats. What is the adult labor force in Meditor?

160 million

Cedar Valley Furniture uses 5 workers working 8 hours to produce 80 rocking chairs. What is the productivity of these workers?

2 chairs per hour.

Labor Stats The Labor Market This table shows the 2003 data for males and females ages 16 and over in the imaginary country of Meditor. -- Refer to Labor Stats. What is the adult population in Meditor?

240 million

If the reserve ratio is 4 percent, the money multiplier is

25

If the cost of housing increases by 10 percent, then, other things the same, the CPI is likely to increase by about

4.2 percent.

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is

5 percent.

Which of the following is an example of the "brain drain"?

A country's most highly educated workers emigrate to rich countries.

If this year the CPI is 125 and last year it was 120, then

All of the above are correct.

Investment from abroad

All of the above are correct.

Stock represents

All of the above are correct.

The BLS produces data on

All of the above are correct.

Which of the following is a determinant of productivity?

All of the above are correct.

Which of the following executes open-market operations?

New York Federal Reserve Bank.

Which of the following is an acknowledged problem of the consumer price index (CPI) as a measure of the cost of living?

The CPI fails to measure all changes in the quality of goods.

An organization that tries to encourage the flow of investment to poor countries is the

World Bank.

The identity that shows that GDP is both total income and total expenditure is represented by

Y = C + I + G + NX.

Which of the following is a financial intermediary?

a mutual fund.

The primary advantage of mutual funds is that they

allow people with small amounts of money to diversify.

The natural rate of unemployment is the

amount of unemployment that the economy normally experiences.

Outward-oriented policies

have generally led to high growth for the countries that pursued them.

The Federal Funds rate is the interest rate

banks charge each other for short-term loans of reserves.

A bond is a

certificate of indebtedness.

Which type of currency has intrinsic value?

commodity money.

Unemployment insurance

creates frictional unemployment and unions create structural unemployment.

To increase the money supply, the Fed could

decrease the reserve requirement.

Profits paid out to stockholders are

dividends.

If your firm has constant returns to scale, then if you doubled all your inputs your firm's output would

double.

Foreign saving is used for domestic investment when foreigners engage in

either foreign direct investment or foreign portfolio investment.

The labor force

equals the number of people employed plus the number of people unemployed.

Other things equal, relatively poor countries tend to grow

faster than relatively rich countries; this is called the catch-up effect.

Institutions in the economy that help to match one person's saving with another person's investment are collectively called the

financial systems.

People who are unemployed because of job search are best classified as

frictionally unemployed.

The CPI is a measure of the overall cost of

goods and services bought by a typical consumer.

Inward-oriented policies

include imposing tariffs and other trade restrictions.

If there are diminishing returns to capital, then

increases in the capital stock increase output by ever smaller amounts.

Which of the following is not a tool of monetary policy?

increasing the deficit.

When the overall level of prices in the economy is increasing, we say that the economy is experiencing

inflation.

A nation's standard of living is determined by

its productivity.

Human capital is the

knowledge and skills that workers acquire through education, training, and experience.

Proprietary technology is knowledge that is

known only by the company that discovered it.

The consumer price index is used to

monitor changes in the cost of living.

Data on unemployment is reported

monthly.

The CPI is calculated

monthly.

By not taking into account the possibility of consumer substitution, the CPI

over states the cost of living.

The inflation rate is defined as the

percentage change in the price level from the previous period.

Using the production function and notation in the text, K/L measures

physical capital per worker.

The slope of the supply of loanable funds curve represents the

positive relation between the real interest rate and saving.

Patents turn new ideas into

private goods, and increase the incentive to engage in research.

In a closed economy, what does (Y - T - C) represent?

private saving

Using the notation and production function in the text, Y/L is

productivity.

A budget deficit

raises the interest rate and reduces investment.

A nation's standard of living is measured by its

real GDP per person.

A budget surplus

reduces the interest rate and raises investment.

Other things the same, a higher interest rate induces people to

save more, so the supply of loanable funds slopes upward.

An understanding of the best ways to produce goods and services is called

technology.

Which of the following agencies calculates the CPI?

the Bureau of Labor Statistics.

Which of the following has a four-year term?

the Chair of the Board Governors.