ECON 103 final review

If the reserve requirement is 10%, a withdrawal of $500 leads to a potential decrease in the money supply of

$5,000

which statement lists consistent monetary policies?

The Fed sells bonds, raises the discount rate, and raises the reserve requirements

a stronger dollar will shift US aggregate demand curve to the ___ and ___ output demanded

left; decrease

How much is a bond worth if it pays $55 per year in interest forever and the market interest rate is 8%?

$687.50

Say your parents gave you a used car valued at $8,000 as a gift for your birthday...

$8,000

Karl's Keychain Company produces keychains that sell in stores for $1 each. On January 1, 2015, the company had inventory of 10,000 keychains. During 2015, the company sold 900,000 keychains. At the end of the business year in December 31, 2015, the company's inventory of keychains was 6,000. How much did Karl's output contribute to GDP in 2015?

$896,000

Contractionary fiscal policy

decreases aggregate demand

An increase in the interest rate causes the aggregate ____ curve to shift ____.

demand; leftward

Assume that the reserve requirement is 20% and the Federal Open Market Committee buys a $100,000 bond. The money supply

increases by a maximum of $500,000

which event causes a decrease in aggregate demand?

increases in taxes

In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts in these two curves, what is a likely outcome?

inflation

If the Fed is buying bonds, then it wants bond prices to ____ and the federal funds rate to ____.

rise; fall

Assume initially the economy is at full employment. If aggregate demand increases, the aggregate price level and costs will ____, and ultimately, the short run aggregate supply curve shifts to the ____.

rise; left

If interest rates rise, the burden of a nation's public debt will ____ and it will be ____ difficult to service its debt

rise; more

A reduction in the interest rate causes consumption and investment to ____, which shifts the aggregate demand curve ____.

rise; rightward

An increase in demand causes the equilibrium price to ____ and the equilibrium quantity to ____.

rise; rise

Suppose a perpetuity bond with a face value of $1,000 has a coupon rate of 10%. If market interest rates fall to 8%, the price of the bond

rises to $1,250

As market interest rates rise, the cost of the public debt

rises, because the government must make larger interest payments

If the government offers firms investment tax credits for building new factories, the after-tax rate of return _____, causing the loanable funds ____ curve to shift ____, leading to _____ interest rates

rises; demand; rightward; higher

the quantity of loanable funds supplied by ____ is ____ related to the real interest rate

savers; positively

The supply of loanable funds includes

saving by the public, government entities, and business firms

If a pill is discovered that allows people to work twice as fast as they would ordinarily work, then the aggregate supply curve will:

shift to the right

Which of these is NOT a form of U.S. public debt?

stocks

Over the past 10 years, laptop computer prices have decreased while their quantity has increased. This indicates that

supply has increased more than demand

_____ are components of consumer spending that affect aggregate demand

taxes

What is the primary explanation for the rapid growth of the U.S. economy over the past century?

technological progress

Suppose the Federal Reserve raises interest rates. Which situation would MOST likely trigger such a policy move?

the U.S. dollar had depreciated and indalation was high

The reason bond prices and interest rates are inversely related is because

the coupon payment is fixed for the term of a bond

If the expansionary policy pushes output beyond the full-employment level of GDP

the short-run aggregate supply curve will shift to the left

If a country's population increases at a higher rate than the growth in its real GDP:

the standard of living in the country has decreased

If a country's population increases at a higher rate than the growth rate of its real GDP

the standard of living in the country has decreased

Sumit deposits $1,500 cash into his checking account, which his bank puts in the vault. The reserve requirement is 25%. What is the change in his bank's excess reserves?

$1125

Which of these will cause the supply of loanable funds curve to shift leftward?

an increase in the government deficit

Which policy would cause a reduction in both excess bank reserves and aggregate demand?

an increase in the reserve requirement

To have long-term economic growth, the production function suggests

availability of technology, capital, and labor

a lower interest rate increases consumption, investment and ___, which ___ aggregate demand

exports; increases

If Abigail withdraws $300 cash from her checking account, then her bank's assets:

fall by $300 and liabilities fall by $300

When the interest rate falls, the value of the U.S. dollar in foreign exchange markets tends to _____ and net exports tend to _____.

fall; increase

loosening monetary policy causes interest rates to __ and consumption and investment to ___

fall; increase

If interest rates fall, the burden of a nation's public debt will ____ and it will be ____ difficult to service its debt

fall; less

when interest rates rise, exports ____ and imports _____

fall; rise

Suppose a perpetuity bond with a face value of $1000 has a coupon rate of 8%. If a market interest rate rises to 12%, the price of the bond

falls to $666.67 --> 1000%0.08 = $80 --> 80/0.12

In counteracting a negative supply shock, the Federal Reserve could achieve ____ by using ______

full employment but not price stability, expansionary

Sumit deposits $1,500 cash into his checking account. The reserve requirement is 25%. What is the change in his bank's required reserves?

$375

how much is a bond worth if it pays $55 per year in interest forever and the market interest rate is 8%?

$687.50 --> $55/0.08

The yield on a perpetuity bond that has an interest payment of $60 and a price of $1,200 is

5%

Labor includes all of the following factors EXCEPT: A. the physical talents of people. B. the ability to use physical resources in creative ways to produce goods and services. C. the mental talents of people. D. the time and effort provided by migrant workers on farms.

B

151. In February 2010, the Central Bank of Brazil raised reserve requirements. By raising reserve requirements, Brazil was attempting to: A) increase its money supply. B) stabilize its money supply. C) decrease its money supply. D) improve the liquidity of its banks

C

Which one of these would be included in GDP calculations? (2)

a hamburger purchased by a hungry restaurant patron

What would cause the price level to rise and employment to increase?

a shift to the right of the aggregate demand curve

The solution to simultaneous deflation and unemployment is to shift the:

aggregate demand curve to the right

An economy is expected to produce higher profits for business owners at the same time that the country's stock market surges. What changes can be expected in the country's market for loanable funds?

an increase in demand and a decrease in supply

the _____ is the amount by which annual tac revenues exceed government expenditures

budget surplus

Suppose the government raises income taxes, so consumers have less disposable income. This policy will cause a(n)

decrease in aggregate demand

Which short-run economic shock would be the MOST difficult to address through monetary policy?

decrease in the short-run aggregate supply

If a government collects $1,400 in tax revenue and spends $1,600, it has a

deficit of $200

A solution to the simultaneous emergence of deflation and unemployment is to use policies that shift the aggregate

demand curve to the right

an individual bank can, at most, lend out all of its

excess reserves

_______ policy involves increasing government spending, increasing transfer payments, and/or decreasing taxes

expansionary fiscal

When the Federal Reserve increases excess reserves to reduce interest rates and stimulate spending, it is said to engage in _____ policy

expansionary monetary

When interest rates rise, exports ____ and imports ____

fall; rise

Institutions that serve as the bridge between savers and borrowers are known as

financial intermediaries

Jennifer did not work during college. She just obtained a bachelor's degree in marketing and is now looking for a marketing job in the retail industry. Jennifer is considered

frictionally unemployed

corporate bonds generally have a ____ return on investment than do checking deposits because bonds are ___

higher; riskier

Which group benefits from an unanticipated rise in the inflation rate?

homeowners with a fixed-rate mortgage

Assume the reserve requirement is 10%. If the federal Open Market Committee buys a $10,000 bond from bank A, Bank A's reserves

increase by $10,000.

Which measure would decrease the money supply?

increasing the reserve requirement

The short-run aggregate supply curve is positively sloped because

many input prices are slow to change in the short run

Which technology most strongly affected the growth in U.S. productivity in recent decades?

microcomputers

If an expansionary policy pushes output beyond the full employment level of GDP:

the short-run aggregate supply curve will shift to the left

In the market for electric vehicles (EVs), more vehicle manufacturers are releasing electric models at the same time that consumer preferences are changing toward EVs. If manufacturers are releasing new electric models at a faster rate than consumer preferences are changing towards EVs, we can expect

a decrease in the equilibrium price and an increase in the equilibrium quantity

Monetary policy is LEAST effective in reversing:

an adverse supply shock

Which factor will cause the aggregate demand curve to shift to the left?

an appreciation of the dollar

When the value of the dollar rises against foreign currencies, exports ____ and imports _____.

fall; rise

The Fed announced in September 2013 that it would postpone monetary stimulus until the economic recovery was stronger. When the Fed does begin to reduce bond purchases

interest rates will rise

In the national income accounts, which of these is NOT classified as government spending?

payments to social security recipients

when the Fed wants to decrease the money supply, it will?

sell bonds

which action is the federal reserve most likely to take to curb inflation?

sell securities in open market

The government can finance a budget deficit by

selling assets

Economic growth is shown as a ____ aggregate supply curve

shift to the right of the long-run

If a $1,000 perpetuity bond has a coupon rate of 11% and the market interest rate falls to 7%, what would a person expect to pay for that bond?

$1,571.43

A bond issued 10 years ago had a face value of $2000; a coupon rate of 5%; and a yield of 6% when it was sold last month in the secondary bond market. At what price did the bond sell in the secondary market?

$1,666.67

Assume that the Federal Reserve sets the reserve requirement at 10%. If a bank has $100 million in deposits, then its required reserves must equal

$10 million

Callie withdraws $600 from her bank account. If the reserve requirement is 15%, by how many dollars must her bank reduce its lending? A) $510 B) $600 C) $90 D) $667

$510

the quantity of loanable funds demanded by ___ is ___ related to the real interest rate. A.) Savers; negatively B.) borrowers; negatively C.) savers; positively D.) borrowers; positively

B

Which one of these would be included in GDP calculations? (1)

a laptop computer purchased by a consumer

What would cause inflation and employment to increase?

a leftward shift of the short-run aggregate supply curve

Which resource is an example of infrastructure?

an elementary school

which of these is included in gross private domestic investment?

an increase in business inventories

In the market for cable television, fewer people are subscribing to cable while the cost of providing cable television has increased. As a result, since the drop in cable subscribers has a bigger impact on the market, we can expect a(n):

decrease in the equilibrium price and quantity of cable television

In times of economic downturn, the Fed will engage in ____ monetary policy by ____ bonds.

expansionary; buying

Suppose that while households are decing to increase savings, the demand by firms for investment funds fall. In the market for loanable funds the real interest rate will ____ and the quantity of loanable funds will ____

fall; rise, fall, or stay the same

Assume initially that market interest rates are 7% and the bondholder is receiving a $70 coupon payment per year on a bond with a face value of $1,000. If market interest rates rise to 8%, the bond price:

falls to $875

Dave brags to his dad that his $45,000 starting salary as a computer programmer is much higher than his dad's $28,000 starting salary some years ago. If the consumer price index the year Dave begins work is 180.5 and the year his dad started work it was 110.8, Dave is:

incorrect; adjusting for price changes, his salary is less than his dad's salary

suppose the economy is in a recession. To increase demand using discretionary fiscal policy, the government can

increase government spending or reduce taxes

the federal government can finance its debt by all of these measures EXCEPT a(n)

increase in the federal funds rate

Which of these is an alternative to monetary policy and also aims to reduce inflation? A.) increase taxes B.) reduce the money supply C.) reduce taxes D.) raise government purchases

increase taxes

When the economy is overheating and policymakers pursue contractionary fiscal policy, they express willingness to trade off _________ output for a ________ price level

lower; lower

Jill has an escalator clause in her labor contract that gives her a raise equal to the change in the consumer price index (CPI). Last year she earned $40,000 and the CPI was 100. If the CPI this year is 110, her new salary is:

$44,000

If the reserve requirement is 10%, a withdrawal of $500 leads to a potential decrease in the money supply of? $50. $2,500. $5,000. $4,500.

$5,000

a higher interest rate ______consumption, investment and ___, which ___ aggregate demand

decreases; exports, decreases

With a negative supply shock, the Federal Reserve has to decide whether to

increase inflation and decrease unemployment or decrease inflation and increase unemployment.

You are deciding whether to spend the evening at movie theater, staying home watching a show, or doing your laundry. If you are willing to pay $50 to have someone else do your laundry, and value the movie theater at $20, what would be the opportunity cost of staying home watching the show?

$50

As interest rates fall A.) there is a movement upward along the supply curve for loanable funds B.) there is a movement downward along the supply curve for loanable funds C.) the supply curve for loanable funds shifts to the right D.) the supply curve for loanable funds shifts to the left

B

In the market for loanable funds, the government announces new tax breaks for saving for retirement while there is an increase in demand for products, which raises the return on investment in capital. What should be expected in the market for loanable funds as a result of these two events? A. The interest rate will rise, but there is uncertainty about any change in the amount of borrowed funds. B. The interest rate will fall, but there is uncertainty about any change in the amount of borrowed funds. C. The amount of funds borrowed will rise, but there is uncertainty about the direction of any change in interest rates. D. The amount of borrowed funds will fall, but there is uncertainty about the direction of any change in interest rates.

C

In the market for loanable funds, there are indications of a forthcoming recession with concurrent reductions in job security and a lower demand for products. What changes should be expected in the market for loanable funds due to these events?

The interest rate will fall, but there is uncertainty about any change in the amount of borrowed funds

In the market for widgets, more sellers exit the market at the same time that consumer preferences are changing, such that people like widgets a lot less than before. If the rate at which sellers are exiting the market is faster than the rate that consumer preferences are changing, we can expect

a decrease in the equilibrium quantity and an increase in the equilibrium price of widgets

Which one of these would NOT lead to higher prices?

an increase in the supply of food

Which list represents monetary policy actions that are consistent with one another?

buy government bonds, lower reserve requirements, lower discount rate (all are expansionary)

which measure would increase the money supply? A.) increasing the discount rate B.) increasing the reserve requirement C.) bulling government bonds D.) selling government bonds

buying government bonds

Which type of fiscal policy involves reducing government spending, reducing transfer payments, or raising taxes to decrease aggregate supply?

contractionary

Increasing taxes to combat inflation is an example of ____ policy

contractionary fiscal

To counteract a positive demand increase, the Federal Reserve uses _____ monetary policy, which ____

contractionary; reduces both output and the price level

Suppose that anticipated inflation is 4% for the coming year, with loan contracts set at 7% with the expectation of a 3% return after inflation. If the actual inflation rate at the end of the year is 2%:

creditors gain at the expense of debtors

if both the supply of and the demand for a good increase simultaneously

equilibrium quantity increases and the effect on equilibrium price is indeterminate

Which of these would cause the equilibrium interest rate to rise and the equilibrium quantity in the loanable funds market to fall?

expectations of greater job security

When the Fed buys bonds, its demand _____ the prices of bonds, ____ nominal interest rates

increase; decreasing

If the Federal Reserve increases its purchases of bonds, then money supply will ____ and aggregate demand will _____.

increase; increase

When current real output exceeds potential real output, the Federal Reserve will ____ rates in an effort to fight ____

increase; inflation

Rising productivity will increase economic growth and raise the average standard of living, shifting the ____ curve to the ____.

long-run aggregate supply, right

When prices are rising, real GDP tend to be _____ then nominal GDP for the same year

lower

If the economy is currently operating below long-run output, what should the Federal Reserve do?

lower interest rates from their current level (expansionary monetary policy)

Bond prices and their yields are _____ because the bond's face value and _____are fixed, forcing its _____ to change in response to changing market conditions.

negatively related; coupon payment; sales price

Government spending on Social Security

increases aggregate demand

If a student were not studying econ, he could be doing one of the following: sleeping in (which he values at $5), playing cards with his friends (which he values at $10), or working (he would have earned an extra $8). The opportunity cost of studying economics is therefore

$10

If the reserve requirement is 25%, a new deposit of $1,000 leads to a potential increase in the money supply of

$4,000

what is the yield on a perpetuity bond sold for $1850 that pays $25.50 in annual interest

1.38%

There are 15 million people living in Marketstan, of whom 9 million are working and 1 million are actively looking for work. What is the size of Marketstan's labor force?

10%

Suppose the ZZZ Corporation sells a perpetuity coupon bond for $1,000 and its coupon payment is $100. In this example, the yield is _____. If instead the price of the bond is $500, the yield is _____. A) 10%; 10% B) 100%; 200% C) 100%; 100% D) 10%; 20%

10%; 20%

a bank has $50,000 in deposits from checking account customers and loans of $49,000. Of the $49,000 loaned out $43,000 had remained in the checking accounts of the loan recipients but now has been withdrawn as cash by the loan recipients. The bank had $50,000 cash on hand prior to the remaining loan proceeds being converted to cash, and the reserve requirement is 25%. The reserve ratio for this bank after the remaining loan proceeds are converted to cash is ____, and tt ____ meeting its reserve requirement

14%; is not

suppose in 2010 the cost of purchasing a basket of goods was $100. That same basket cost $150 in 2011. If 2010 is the base year, the consumer price index for 2011 is

150

A bond has a face value of $1,000 and an annual interest payment of $44. What is its coupon rate, and what is its yield if it is sold for $1,100 in the secondary market?

4.4% and 4.0%, respectively

Which of these would be an example of a short-run economic growth?

A country reports that employment rises by 200,000 workers, reducing the unemployment rate

Expansionary monetary policy shifts the ____ curve to the ____

AD; right

as the real interest rate falls A.) move saving is supplied to the market B.) the supply of loanable funds decreases C.) the quantity supplied of loanable funds decreases D.) the supply of loanable funds increases

B

Assume that butter is a substitute for margarine. What would be the result in a drop in the price of margarine?

Both the price of butter and quantity of butter fall

Which policy would cause a reduction in both excess bank reserves and aggregate demand? A.) a reduction in the discount rate B.) the Federal Reserve purchasing government securities in the open market C.) an increase in the reserve requirement D.) a reduction in taxes

C

Suppose short run aggregate supply shifts to the left because of a decrease in the supply steel. The federal Reserve fights the resulting recession with expansionary monetary policy. This will...

Cause inflation

An airplane finds that its morning flights are half-empty, but the mid-afternoon flights are full. Which would be the MOST plausible statement for an economist to make?

Cut the prices of early morning flights and raise the prices of afternoon flights

Which of these is NOT a policy tool of the Federal Reserve?

Fiscal Policy

Jose is putting money for college in a savings account. The bank makes the money available to business borrowers. In essence

Jose is supplying loanable funds for business investments.

which situation indicated that total output in a country has grown the most when the starting output is the same in all situations?

Output per worker grows by 10% while the labor force grows by 10%.

Suppose the government increases aggregate demand to a level that increases GDP above its long-run equilibrium level. what sequence of events would follow?

Prices rise, GDP rise, workers demand higher wages, SRAS shifts LEFT, GDP drops

Suppose the economy is in full employment equilibrium. Then a positive supply shock, caused by a fall in oil prices, hits the economy. A expansionary monetary policy will

Stabilize prices but at a much higher output level in the short run

_____ are components of consumer spending that affect aggregate demand.

Taxes

Jody purchases a stock from her employer, Acme Corporation. This is an example of ________ finance: A) unregulated B) indirect C) direct D) investor

direct

The ability to use physical resources in creative ways to produce goods and services is known as:

entrepreneurial ability, technology, and ideas

when the economy is at full​ employment, expansionary fiscal policy results in a new long-run equilibrium at an output level ___ full employment and a ___ price level

equal to; higher

Improvements in technology

explain most of the economic growth in recent decades

The opportunity costs of attending college do NOT include

food expenditures

Joan is trying to gather information on the membership at her Zen Center. She estimates that it will cost around $1000 to gather the information but expects the information to lead to increased membership revenue of $1,100. Based on this information, Joan should

gather the information since the net gain will be $100

Which of the following strategies is an example of increasing the capital-to-labor ratio?

giving a construction crew more backhoes

When prices are falling, real GDP rates tend to be ____ than nominal GDP for the same year

greater

which activity is an example of a nonmarket transaction?

growing your own food in a vegetable garden

Which group is MOST likely to favor a tight monetary policy?

importers

An increase in physical capital per worker will

lead to more output per worker

if the British pound sterling depreciates against the US dollar, England buys ___ US goods, causing the US aggregate demand curve to shift to the ____

more; right

Suppose the economy is in full employment equilibrium. Then a positive supply shock, caused by a fall in oil prices, hits the economy. A contractionary monetary policy will

move the economy back to full employment output but at a much lower price level.

Which is NOT a source of productivity growth?

moving resources from production to pension benefits

An economy is operating at long-run equilibrium. What is the most likely result of an aggressive expansionary fiscal policy?

no change in long-run GDP and employment

An example of intangible infrastructure is

patent laws

Which item would be included in the GDP accounts?

paying $50 consultation fee over the phone with a psychic adviser

If the Fed lowers the reserve requirement

the money multiplier will rise.

labor productivity is NOT a major determinant of

the money supply

A sheep ranch produces $30 worth of wool. A suit manufacturer produces $60 worth of suits. A retail outlet sells a suit to a customer for $180. The change in GDP would be:

$180

Suppose a bank has $1 million in deposits, a reserve requirement of 10%, and a bank reserves of $300,000. The bank has excess reserves of

$200,000

Suppose a bank has $1 million in deposits, a reserve requirement of 20%, and bank reserves of $400,000. The bank has excess reserves of

$200,000

Assume that the reserve requirement is 20%. A bank has $20 billion in demand deposits. How much money does the bank have to keep in reserves?

$4 billion

The Fed buys a bond from Sumit and deposits $1,500 cash into his checking account. The reserve requirement is 25%. How many dollars' worth of loans can the banking system create?

$4,500

Say someone gave you a used phone valued at $500 as a gift. Unfortunately, you were hoping for a model that sells for $800. The opportunity cost to you keeping the phone is:

$500

Heather has one employee in her sweater shop who can sew six sweaters a day. When she hires a second person, the two employees can make ten sweaters together. Thinking at the margin, the extra benefit received from hiring a second worker is _____ sweaters.

4

If an economy's GDP will double in 15 years, then its growth rate must be about

4.7%

a bank has $50,000 in deposits from checking account customers and loans of $49,000. Of the $49,000 loaned out $43,000 remains in the checking accounts if the loan recipients. the bank has $50,000 cash on hand and the reserve requirement is 25%. The reserve ratio is ___ and ___ meeting its reserve requirements.

53.76%; it is

If a country's currency appreciates, what impact will it have on aggregate demand or aggregate supply?

Aggregate demand will rise because the currency will buy more abroad

A solution to the simultaneous emergence of deflation and unemployment is to use policies that shift the: A) aggregate supply curve to the right. B) aggregate demand curve to the right. C) aggregate supply curve to the left. D) aggregate demand curve to the left.

B

Which statement about fiscal policy and aggregate supply is correct?

Fiscal policies that influence aggregate supply increase inflationary pressures as output expands

If in the past, you always painted your own house but now you hire a painting contractor to do the work, what effect does this have on GDP?

GDP rises as a result of this change

Martin purchases 500 shares of stock in ABC Company at a price of $10 per share. He pays his stockbroker a commission of $50 for helping with the transaction. How much does GDP change as a result of Martin's commission payment?

GDP rises by $50

investment in structures, equipment, software, and net inventory is known as

GPD investment

Bonds are considered to be ____ than stocks because ____.

Less risky; bondholders are less affected by a firm's bankruptcy

The ____ curve is vertical at full employment

Long run aggregate supply

Suppose Mary saves enough funds for a down payment on a house. When she buys her home, she withdraws the savings to make the down payment and borrows $200,000 on a mortgage loan. Which statement accurately describes Mary's interactions with her bank?

Mary goes from being a supplier to demanding loanable funds, with the bank acting as an intermediary

Suppose the economy is at full employment and a booming stock market encourages consumption spending to rise dramatically. What would be the MOST likely long-run impact?

Real GDP first rises and then falls back to long-run equilibrium

Which statement lists contractionary policies?

The Fed sells bonds, raises the discount rate, and raises the reserve requirements

The central bank of the United States is

The Federal Reserve System

If income increases across Europe, what will happen to the aggregate demand curve for the United States?

The aggregate demand curve will shift to the right

In the market for loanable funds the government announces new tax breaks for saving for retirement while there is an increase in demand for products. What should be expected in the market for loanable funds as a result of these two events?

The amount of funds borrowed will rise, but there is uncertainty about the direction of any change in the interest rates.

what would the effect on the equilibrium price and equilibrium quantity of new housing if mortgage interest rates rise and the costs of building a house rise simultaneously?

The equilibrium price cannot be predicted, but the equilibrium quantity will fall.

Which of these will increase aggregate supply?

The president asks congress for $200 billion for rebuilding roads and bridges

If the producers of cotton shirts face higher cotton prices, which scenario is likely to occur?

The supply of cotton shirts decreases, the equilibrium price of shirts rises, and the equilibrium quantity falls

If the Federal Reserve pursues an expansionary monetary policy

U.S. exports to other countries will rise

Whispering Valley Furniture hires 5 employees working right hours to produce 80 rocking chairs. Rockey Gap Furniture hires 10 employees working right hours to produce 100 rocking chairs. Which company's workers are more productive?

Whispering Valley Furniture's workers are more productive

In the market for widgets, more sellers exit the market at the same time that consumer preferences are changing, such that people like widgets a lot less than before. If the rate at which sellers are exiting the market is slower than the rate that consumer preferences are changing, we can expect

a decrease in equilibrium price and quantity of widgets

Which event will shift the aggregate demand curve to the right?

a new government program implemented to eliminate poverty

The price of apples has recently fallen in the marketplace. From this information, we can safely infer that

a surplus of apples must have existed at the previous price

Econia's currency appreciates. This will cause: A) aggregate demand to rise. B) aggregate demand to fall. C) a movement upward along Econia's aggregate demand curve. D) a movement downward along Econia's aggregate demand curve.

aggregate demand to fall

What happens if business expectations improve

aggregate supply shifts right

Which of these would cause both the equilibrium interest rate and the equilibrium quantity to fall in the market for loanable funds

an adjustment to building codes that make it more difficult to get government permits to build new buildings

Which policy would cause a reduction in both excess bank reserves and aggregate demand

an increase in reserve requirement

In the market for good X, more people are purchasing good X, while the manufactuing costs of building good X has increased. If the magnitude of the corresponding demand and supply shifts are the same for both events, we can expect

an increase in the equilibrium price and no change in the equilibrium quantity of good X

If a perpetuity bond has an interest payment of $80 and your required yield is 10%, the most you would be willing to pay for the bond (the price) is: a.) $80. b.) $800. c.) $1,000. d.) $8,000.

b

If the supply of a good increases while the demand for that food decreases, the equilibrium quantity will

be indeterminate

If the Fed reduces money supply through open market operations

bond prices fall

When the Federal Reserve Bank increase the money supply:

bond prices rise

financial intermediaries match

borrowers with savers.

In counteracting demand shocks, the Federal Reserve can achieve

both full employment and price stability

Which of these is an example of an economic investment?

building a new sales force training facility

Suppose short-run aggregate supply shifts to the left because of a decrease in the supply of steel. The Federal Reserve fights the resulting recession with expansionary monetary policy. This will

cause inflation

what are the determinants of short-run aggregate supply?

changes in input prices, taxes, and business and inflationary expectations

Supply shocks are NOT caused by:

changes in money supply

Contractionary fiscal policy is typically used to

combat inflation stemming from an overheated economy

An individual bank can, at most, lend out all of its

excess reserves

Expansionary fiscal policy is typically used to ____ aggregate demand in order to ____

increase; avoid a recession

when current real output exceeds potential real output, the Federal Reserve will ____ interest rates in an effort to fight ____

increase; inflation

Suppose the economy is at full employment, and consumers spend more than usual. In the short run, output will ____; in the long run, output will ____

increase; remain unchanged

In the long run, attempts to expand beyond an economy's natural rate of unemployment tend to result in

increased inflation

A lower researve requirement

increases the ability of banks to make loans

A stronger dollar will shift the U.S. aggregate demand curve to the _____ and _____ output demanded.

left; decrease

Increased taxes will shift the aggregate demand curve to the _____ and ____ output demanded

left; decrease

When the interest rate falls, American bonds become ______ attractive to foreign investors, often leading to a(n) ____ in the value of the U.S. dollar in foreign exchange markets.

less; decrease

developed countries tend to have

limited labor supplies but lots of capital

If an economy is producing at a level beyond full employment, using contractionary fiscal policy to reduce aggregate demand means a tradeoff between ____ price levels and ____ output

lower; lower

Physical capital includes

manufactured products that are used to produce other goods and services

in the market for cable television, fewer people are subscribing to cable while the cost of providing cable television has increased. if the magnitude of the corresponding demand and supply shifts are the same for both events, we can expect?

no change in the equilibrium price but a decrease in the equilibrium quantity of cable

What is the likely chain of events if asset prices rise?

people feel wealthier, so their spending rises and their saving falls, causing interest rates to rise

When Main Street Bank buys new automatic teller machines, the quantity of _____ in the economy increases.

physical capital

In the short run, the aggregate supply curve is ____ because input prices are _____.

positively sloped; not completely flexible

Karl's Keychain Company produces keychains that sell for $1 each. On January 1, 2015, the company had inventory of 8,000 keychains. During 2015, the company sold 900,000 keychains. At the end of the business year in December 31, 2015, the company's inventory of keychains was 9,000. What was the value of Karl's total production and inventory investment in 2015?

production = $901,000; inventory investment = $1,000

What is a determinant of aggregate supply?

productivity

A firm will MOST likely decrease the price of its output if the

quantity supplied of the good exceeds the quantity demanded

If the economy is facing inflationary pressures, the Federal Reserve will

raise interest rates

In the market for loanable funds, an increase in the real interest rate:

raises the demand for loanable funds

Financial instituions

reduce information costs, reduce transaction costs, and diversify assets

If the economy has high levels of unemployment, the Federal Reserve will

reduce interest rates

Which of these is an example of contractionary fiscal policy?

reducing military spending

All of these are considered expansionary fiscal policies EXCEPT a(n)

reduction in unemployment compensation

Opportunity costs exist because

resources are limited

Increased consumer confidence will shift the aggregate demand curve to the ___ and ___ output demanded

right; increase

decreased interest rates will shift the aggrgate demand curve to the ___ and ____ output demanded

right; increase

If technology is held constant, an increase in capital concurrent with a decrease in labor input causes output to

rise, fall, or stay the same

Tightening the money supply causes interest rates to ___ and aggregate ___ to ____

rise; demand; decrease

If the Fed increases the supply of money in the market through open market operations, bond prices will ____ and interest rates will ____

rise; fall

Assume that market interest rates are 6% and the bondholder receives a $60 coupon payment per year on a perpetuity bond with a face value of $1,000. If market interest rates fall to 4%, the bond price

rises to $1,500

If national incomes of foreign countries fall at the same time the dollar appreciates, then in the United States, the aggregate demand curve

shifts to the left

The solution to simultaneous presence of inflation and unemployment is to implement policies that shift the

short-run aggregate supply curve to the right

Which of these will cause the supply of loanable funds curve to shift rightward?

stock prices fall

increases in ___ often lead to economic growth

technology

The long-run aggregate supply curve is vertical because

the economy will gravitate to the position of full employment when all variables are flexible

The opportunity cost of buying a ticket to a major league baseball game and then going to the game is

the next best alternative that could have been undertaken

which of these is included in personal consumption expenditures?

the purchase of a new TV by a household

As the real interest rate falls

the quantity demanded of loanable funds rises.

As the real interest rate falls:

the quantity demanded of loanable funds rises.

In 2009, a market basket of goods and services cost $100 in Merryland while the same basket cost $200 in Berryland. In 2010 the cost in Merryland was $150 and in Berryland, the cost was $225. Based on the given information, which statement is TRUE?

the rate of inflation is four times as large in Merryland as in Berryland

Which statement is NOT true?

the supply of funds to the loanable funds market is inversely related to the interest rate

If monetary policy is tight

the value of the dollar will rise

Monetary policy is LEAST effective in maintaining low inflation and high GDP when

there has been a supply shock

Aggregate supply increases when

there is a decrease in firms' market power.

As interest rates rise

there is a movement upward along the demand curve for loanable funds.

Which of these would not be included in the GDP accounts?

value of time spent learning how to prepare your personal income tax return

John chose to buy a pizza. If he had not bought the pizza, he would have bought either a hot dog or a hamburger. John's opportunity cost of buying the pizza is

whichever alternative, the hot dog or the hamburger, has the next highest value to John

the corner store has pizza, soup, or salad for lunch, and they all cost the same. You decide to have soup today, but if they were out of soup, you would have bought a salad. Your opportunity cost of the soup is

your enjoyment of the salad