ECON 202- final
the Federal Reserve System was established in
1913
when government spending rises
aggregate demand rises
in using the income approach to GDP, the largest category is
compensation of employees
When the Bureau of Labor Statistics calculates the consumer price index (CPI), it assumes that
consumers do not substitute cheaper goods for goods whose prices have risen
if the reserve requirement is 25%, then a $1 increase in deposits means that the money supply
has the potential to increase by $4
the ________ let economists judge our nation's economic performance, compare U.S. income and output to that of other nations, and track the economy's condition over the course of the business cycle.
national income and product accounts
monetary targeting is setting a steady growth rate in
the money supply
If the Bureau of Economic Analysis reports that the annualized U.S. growth rate was 2.5% for the second quarter, then the actual growth rate from the first quarter to the second quarter was:
0.625%
suppose an economist breaks the unemployment rate into the following components: frictional (2%), structural (1%), and cyclical (4%). Based on these estimates, the natural rate of unemployment is:
3%
if the marginal propensity to save is 0.25, the multiplier is
4
over the past 150 years, the U.S. economy has endured a recession on average about every
4 to 5 years
if the Federal Reserve tries to target inflation near 2%, the inflation rate is 3%, and output is 3% below potential GDP, the target federal funds rate according to the Taylor rule is
4%
if the reserve requirement is 20%, the money multiplier is
5
if the reserve requirement is 18.5%, what is the money multiplier?
5.4
prices from about ________ goods and services are collected each month by the Bureau of Labor Statistics data collectors to be used in calculating the CPI
800,000
suppose there is news of rising unemployment. which scenario is most likely?
Households save in anticipation of bad times; the supply of loanable funds rises; interest rates fall; firms take advantage of lower interest rates and make more investments, which stimulates the economy.
which country has the largest public debt percentage of GDP
Japan
the study of macroeconomics as a specific discipline is due primarily to
John Maynard Keynes
for defining money, _______ and also include _____.
M2 includes M1; near money
which of the following is not involved in regulating financial markets?
New York Stock Exchange
Which of the following is not a criticism of the Fed's handling of the 2007-2009 financial crisis?
The Fed should have strengthened the dollar to shore up exports
(Figure) Which of the following would shift the aggregate demand curve from AD1 to AD2
a decrease in interest rates
which of the following would not cause a shift in the short-run aggregate supply curve?
a decrease in real interest rates
which of the following items is not a function of money?
a double coincidence of wants
_____ keeps the growth of money stocks, such as M1 and M2, on a steady path, following the equation of exchange
a monetary rule
which of the following does not increase productivity
an increased money supply
which of the following factors will cause the aggregate demand curve to shift to the left?
appreciation of the dollar
if the intersection of the short-run aggregate supply and the aggregate demand curves also intersects the long-run aggregate supply curve, then the economy is
at full employment
when the economy is at full employment, an expansionary fiscal policy results in a new long-run equilibrium at an output level ______ full employment and a _____ price level
at; higher
The use of money as a medium of exchange helps reduce the inefficiencies inherent in:
barter
Which of the following statements about stopping hyperinflation is not correct?
borrowing from foreign governments must take place.
(Figure) which of the following might be a cause of the change in the short-run aggregate supply curve?
businesses are increasingly optimistic about the future
which of the following lists represents monetary policy actions that are consistent with one another?
buy government bonds, lower reserve requirements, lower the discount rate
which of the following measures would increase the money supply?
buying government bonds
Quantitative easing refers to the process whereby the Fed
buys securities to stimulate the economy
which of the following actions is not a tool of monetary policy?
changing government spending and taxes
according to the crowing out effect, if the government sells bonds to finance spending, _______ can eventually fall
consumption and investment
the most common type of short-term debt is
credit card debt
when the economy is operating at the natural rate of unemployment:
cyclical unemployment is zero
automatic stabilizers are most associated with the ______ balanced budget
cyclically
which group is helped by inflation?
debtors
assuming full employment in the classical model, if velocity increases and the government wants stable prices, the government should
decrease the money supply
which of the following is not a source of productivity growth?
decreasing the capital-to-labor ratio
according to public choice economists, the federal government has expanded because
deficit spending has reduced the perceived cost of current government operations
which of the following assets is the most liquid
demand deposits
the situation when aggregate demand expands so much that equilibrium output exceeds full employment output and the price level rises is known as _______ inflation
demand-pull
Thelma grew some carrots in her garden. She needs a winter coat. John has an extra coat he doesn't need but would like to bake some carrot cake. The two find each other and make an exchange. This situation is called the:
double coincidence of wants
the three types of consumption are
durables, nondurables, and services
use of tax receipts to modernize the air traffic control system promotes economic growth by
enhancing physical and human capital
when the government funds Head Start, it is acting in its role to promote economic growth by
enhancing physical and human capital
an economy has historically grown at a rate of 2.25%. Currently, this economy is growing at a rate of 3%, and the unemployment rate is low by historical standards. The economy is expected to continue to grow in the near future, and the monetary authorities ________ stage of the business cycle.
expansion
what is the interest rate for money borrowed to satisfy daily reserve requirements?
federal funds rate
Arlina got a 5% raise while the rate of inflation was 6%. Arlina's standard of living:
fell by about 1%
gross private domestic investment, which consists of ________ and changes in private inventories, is an important determinant of ___________.
fixed investments; swings in the business cycle
economists who favor a ________ approach to the federal budget believe that the first priority of policymakers should be to keep the economy at full employment with stable prices
functional finance
in the circular flow diagram, the clockwise direction shows the flow of __________, where households supply __________ and businesses supply __________.
goods and services; labor; goods and services
the four types of spending in GDP are personal consumer spending, _________ private domestic investment, government spending, and _________.
gross; net exports
if the reserve requirement is %, then a $6000 decrease in deposits means that they money supply
has the potential to decrease by $60,000
As a rule, the more capital employed with workers, the ________ their productivity and the ________ their earnings.
higher; higher
which of the following actions would reduce frictional unemployment?
holding job fairs
a change in the Leading Economic Index is supposed to reflect
how the economy will behave in the near future
the ____ lag is the time required to turn fiscal policy into law and affect the economy
implementation
which two important leakages helped reduce the real life spending multiplier during the stimulus that was implemented during 2009?
imports and taxes
Technology
improves the productivity of all factors
which of the following factors is NOT a component of aggregate demand
income
which of the following is NOT a reason the aggregate demand curve is negatively sloped
income effect
For your purchasing power to stay the same, your wages must:
increase at the same rate as inflation
government spending on Social Security
increases aggregate demand
a lower reserve requirement
increases the ability of banks to make loans
a rising aggregate price level ________ an economy's interest rates and therefore ________ output demanded
increases; reduces
the housing bubble of 2004-2006 cause _____ pressure, leading the Fed to _____ interest rates
inflationary; raise
property rights consist of _____ goods that ______ be easily measured
intangible; cannot
the National Bureau of Economic Research
is a nonprofit research organization that dates business cycles in the United States
One important reason economists track business investment is that
it is a leading indicator of the business cycle
the costs of cyclical unemployment can be minimized by
keeping the economy on a steady, low-inflationary growth path
bonds are considered to be _____ than stocks because _______.
less risky; bondholders are less affected by a firm's bankruptcy
one of the reasons that property rights are important for economic development is that without legal ownership
loans are very difficult to obtain
the main reason people were unemployed in the U.S. in 2012 was because they
lost their job
some analysts blame the last economic crisis on Fed policy. They argue that
low interest rates encouraged excessive mortgage borrowing, leading to the housing bubble
according to the Taylor rule, the lower the inflation rate, other things equal, the
lower the federal funds rate
a criticism of GDP per capita is that it
might not fully reflect the standard of living of the typical citizen.
in a liquidity trap
monetary policy is ineffective in changing income and output
the U.S. Treasury sells $2 billion in bonds to the Federal Reserve. The Federal Reserve credits the Treasury's account by $2 billion. this exchange is best described as
monetizing the debt
which of the following assets is most liquid
money
the _____ measures the maximum amount the money supply can increase when new deposits enter the system
money multiplier
transfer payments are
monies paid directly to individuals by the government
*Tom is living with his parents. He looks at the help wanted ads but has not replied to any in the past four weeks. Tom is:
not in the labor force
Jordan Meadows lost his job as an airline pilot and has not been able to find another job as a pilot. Since he is old enough to be eligible for his pension, he decides to retire and devote himself to caring for his elderly parents. According to the Bureau of Labor Statistics, Jordan is:
not in the labor force
the classical form of the production function states that
output= f(L,K)
checking account balances are
part of M1 and part of M2
in the national income accounts, which of the following is not classified as government spending?
payments to Social Security recipients
when main street bank buys new automatic teller machines, the quantity of ______ in the economy increases
physical capital
one argument against using taxation to pay off the public debt is that it will redistribute wealth from
poorer people who do not own bonds to richer bondholders
advantages of coins over bills include all of the following except that
production costs are lower for coins than for bills
the consumer price index does NOT include
property taxes
tight monetary refers to the Fed
raising interest rates, usually to fight inflation
over the past century, when worker productivity rose,
real wages rose
because of the wealth effect, a rising aggregate price level ______ the purchasing power of wealth and therefore ________ output demanded
reduces; reduces
a monetary rule would make it difficult to
respond to unforeseen events
If Zachary deposits $500 cash into his checking account, then his bank's assets:
rise by $500, and its liabilities rise by $500
tightening monetary policy causes interest rates to ______ and aggregate _____ to ________.
rise; demand; decrease
when the Fed wants to decrease money supply, it will
sell bonds
which action is the Fed most likely to take to curb inflation?
sell securities in the open market
the membership of the Board of Governors of the Federal Reserve System consists of
seven persons appointed by the POTUS
the Great Depression demonstrated that
short-run equilibrium can occur at substantially less than full employment
the aggregate demand curve
shows the amount of real GDP that will be demanded at each possible price level
which of the following is not a form of U.S. public debt?
stocks
which of the following occurrences is the key explanation for the high economic growth in the United States in the past century
technology improvements
which of the following statements concerning the structure of the Federal Reserve System is correct
the chairman and vice-chairman of the Board of Governors are appointed by the president and confirmed by the Senate for terms of 4 years
suppose the Federal Reserve Bank of Chicago's National Activity Index drops to -0.83 this month after being above +0.36 for the previous three months. this movement in the index indicates that:
the economy has probably moved into a recession
which of the following is likely to lead to higher interest rates?
the end of a government program that provides taxpayers with additional incentives to invest in their retirement plans
the notion of functional finance says that
the government should not focus on any deficits or surpluses caused by the budget and focus on maintaining the economy at full employment
one issue regarding the national debt is that
the proportion of the debt held by foreigners is rising
short-run macroeconomic equilibrium cannot be achieved when
the quantity of short-run aggregate supply exceeds the quantity of aggregate demand
The labor force is defined as
the total number of the employed and unemployed
as the aggregate price level declines
there is a movement down along the aggregate demand curve
*Zach has been laid off from his job as an aircraft worker and is afraid that he will not be recalled. He has been actively looking for a job but has had no luck for the past six weeks. According to the Bureau of Labor Statistics, Zach is:
unemployed
which of the following fiscal items is not a component in the equation of exchange in classical economies
unemployment rate
the corporate income tax constitutes ______ of federal government revenues
up to 25%
the short-run aggregate supply curve is _____ and the long-run aggregate supply curve is _____.
upward sloping; vertical
policymakers look at ______ to compare growth rates over an entire year without seasonal ups and downs
year-over-year GDP growth rates
According to the table, when using the expenditure approach, GDP is
$1770 billion
If a person borrows $2,000 at 5% interest and never makes any payments, how much will the loan balance be after five years?
$2552.56
(Table) From the information in the table, the near monies for June 2010 amounted to
$6886.7 billion
the recent global financial instability
All of the answers are correct. (slowed down economic growth, harmed standards of living, and caused severe credit crunches)
If a country's population increases at a slower rate than the growth in its real GDP
GDP per capita has increased
one reasonably objective measure of intangible infrastructure is the
Index of Economic Freedom
which of the following statements is not a potential problem associated with cyclically balancing the federal budget?
Inflationary pressures can take hold, leading to the need later to enact extreme contractionary policy measures
which of the following Eurozone countries had to be bailed out by the European Central Bank?
Ireland
(Figure) If households decide to save a larger portion of their income because they fear job loss due to a recession, the loanable funds supply curve will shift from ___ to _____, and the new equilibrium point will be at point______.
S0; S1; b
in which city is the Federal Reserve's Board of Governors?
Washington, DC
without government spending, which of the following equations is true?
Y=C+S
Which of the following is an example of gross private domestic investment?
a change in business inventories
If Abigail withdraws $300 cash from her checking account, then her bank's assets:
fall by $300, and its liabilities fall by $300
which is NOT a criticism of the official unemployment rate
it is not reported frequently enough to provide a good picture of the state of the economy
the most important function of money is
medium of exchange