Econ 315 Final

Reducing the maximum LTV is likely to ________ demand and thus ________ the housing price increase. decrease; slow down increase; slow down decrease; speed up increase; speed up

decrease; slow down

With the real wage on the vertical axis and the unemployment rate on the horizontal axis, we know that A. the WS curve is upward sloping. B. the WS curve is downward sloping. C. the PS curve is upward sloping. D. the PS curve is downward sloping.

the WS curve is downward sloping.

Which of the following countries had the highest level of output per capita in 1950? A. United States B. France C. Japan D. United Kingdom

A. United States

A reduction in money growth, holding all other factors constant, will cause a reduction in seignorage. an increase in seignorage. no change in seignorage. an ambiguous effect on seignorage.

a reduction in seignorage

Based on wage-setting behavior, we know that a reduction in the unemployment rate will cause A. No change in the real wage B. A reduction in the real wage C. An increase in the real wage D. An upward shift of the WS curve

an increase in the real wage.

Hyperinflation refers to inflation in excess of ________ per month. 10%. 20% 30% 40%.

-

The nominal interest will never be negative. can be negative if inflation is unexpected. can be negative if the inflation rate is greater than the nominal interest rate. can be negative if deflation occurs.

will never be negative.

If the efficiency wage theory is valid, we would expect a relatively low premium over the reservation wage when A. the unemployment rate is low. B. the job requires very little training. C. workers can be easily monitored. D. workers have few other options for employment in the area.

workers have few other options for employment in the area.

If the government runs a primary deficit in year zero of B0, and decides to repay it in year t (i.e., bring the debt back down to its pre-existing level), then in year t it must run a primary surplus equal to zero. one. B0. B0(1 + r). none of the above

-

A rule of thumb is that a 1% increase in output leads automatically to a reduction in the deficit of what percentage of GDP? 0.5% 1% 1.5% 2%

1%

In 2014, the average inflation rate in the OECD countries was 1.7%. 2.3%. 5.2%. 3.8%.

1.7%.

Today, about ________ of U.S. workers have their wages set by collective bargaining agreements. A. 10% B.15% C.20% D25%

10%

In 2010, the deficit-to-GDP ratio for the United States was approximately equal to 10%. 17%. 37%. 67%.

10%.

If output per capita grows by a constant 6% per year, then the standard of living would grow by about ________ over 3 years. A. 12% B. 17% C. 18% D. 19% E. 20%

19%

The non-institutional civilian population is 250 million, of which 100 million are employed and 10 million are unemployed. Based on the information above, the labor force participation rate is A. 36%. B. 40%. C. 44%. D. 90.1%. E. 66%.

44%.

The participation rate in the United States in 2014 was approximately equal to A.96% B.90% C.62% D.26%

62%.

Suppose we wish to examine the determinants of the equilibrium real wage and equilibrium level of employment (N). In a graph with the real wage on the vertical axis, and the level of employment on the horizontal axis, the price-setting relation will now be A. vertical line B. Horizontal line C. An upward sloping line D. A downward sloping line

A Horizontal line

Which of the following countries experienced the lowest level of output per capita in 2011? A. United States B. France C. Japan D. United Kingdom

B. France

Between 1950 and 2004, standards of living in the OECD countries A. did not change at all. B. were converging. C. all increased at the same rate. D. decreased at the same rate. E. decreased, but at different rates.

B. were converging.

Which of the following will cause a reduction in output per worker in the long run? A. capital accumulation or technological progress B. capital accumulation C. an increase in the number of workers D. expansionary monetary policy E. none of the above

C. an increase in the number of workers

Which of the following is a main conclusion about growth for OECD countries and the four rich countries examined in the chapter? A. There has been a large increase in the standard of living since 1950. B. The growth rates have decreased since the mid-1970s. C. There has been a convergence of output per capita since 1950. D. all of the above E. none of the above

D. all of the above

Which of the following is not correct about quantitative easing? It is one of the conventional monetary policy tools. It refers to the Fed's asset purchasing program. It helped reduce term premium on long-term government bonds. As a result, the balance sheet of the Fed is much larger than it was before the crisis.

It is one of the conventional monetary policy tools.

From 2000 to 2007, which country had the highest nominal house price increase? Spain Portugal Greece Italy

Spain

From 2000 to 2007, which country had the maximum LTV allowed? Netherlands United Kingdom Australia Canada United States

United States

Decreasing returns to capital (K) implies that a 4% increase in K will cause A. a reduction in output per worker (Y/N). B. a reduction in K/N. C. Y to increase by exactly 4%. D. Y to increase by less than 4%. E. no change in Y/N.

Y to increase by less than 4%.

A reduction in unemployment benefits will tend to cause which of the following? A. an upward shift in the WS curve B. a downward shift in the WS curve C. an upward shift in the PS curve D. a downward shift in the PS curve

a downward shift in the WS curve

Bracket creep would less likely occur in which of the following? a progressive income tax system a regressive income tax system a flat income tax system none of the above

a flat income tax system

Which of the following will not cause aggregate private spending to decrease? a reduction in expected future real interest rates a reduction in government spending an increase in future taxes all of the above none of the above

a reduction in expected future real interest rates

The IS curve shifts to the right where there is an increase in current taxes. a reduction in expected future taxes. a reduction in expected future output. all of the above

a reduction in expected future taxes.

Hyperinflation typically leads to a reduction in barter. a reduction in real money balances. a preference for domestic over foreign currency. an increase in real tax revenues collected by the government.

a reduction in real money balances.

Assume individuals consider only the long run effects of changes in future macro variables when forming expectations of future output and future interest rates. Suppose individuals expect future government spending to decrease. Given this information, individuals will expect a reduction in the expected future interest rate and no change in expected future output. a reduction in the expected future interest rate and an increase in expected future output. a reduction in the expected future interest rate and a reduction in expected future output. a reduction in the expected future interest rate and an ambiguous effect on expected future output.

a reduction in the expected future interest rate and an increase in expected future output.

Based on wage-setting behavior, we know that an increase in the unemployment rate will cause A. no change in the real wage. B. a reduction in the real wage. C. an increase in the real wage. D. an upward shift of the WS curve.

a reduction in the real wage.

Which of the following will not cause an increase in aggregate output (Y) in the long run? A. an increase in N B. an increase in K C. an increase in technology D. a reduction in the saving rate

a reduction in the saving rate

All else equal, a rise in the debt-to-GDP ratio implies a greater ratio of interest payments to GDP. a greater difference between the official and correct measures of the deficit as a fraction of GDP. a greater surplus is needed to prevent further rises in the debt-to-GDP ratio. all of the above none of the above

all of the above

Given the broadest interpretation of technology, technology will include which of the following? A. how well firms are run B. the organization and sophistication of markets C. the political environment D. the list of blueprints defining the types of products and the techniques available to produce them E. all of the above

all of the above

Government default is also called debt restructuring. debt rescheduling. private sector involvement. all of the above

all of the above

Suppose the central bank reduces the money supply. This monetary contraction will always cause a greater reduction in output when it is accompanied by an increase in expected future taxes. an increase in expected future interest rates. a reduction in expected future output. all of the above

all of the above

The "official measure" of the deficit (the one reported by the government) tells us the change in government nominal debt. is equal to nominal interest payments on the debt plus the primary deficit. overestimates the real budget deficit whenever the inflation rate is positive. all of the above

all of the above

To deal with dangerous behavior in the financial system, macro prudential tools can be used to aim directly at borrowers. lenders. banks and other financial institutions. none of the above all of the above

all of the above

Which of the following is an entitlement program? Social Security Medicare Medicaid all of the above none of the above

all of the above

Which of the following will cause a reduction in output per worker (Y/N)? A. a reduction in the capital stock (K) B. a reduction in the saving rate C. a reduction in K/N D. all of the above

all of the above

Which of the following will cause aggregate private spending to decrease? a reduction in government spending an increase in expected future interest rates an increase in expected future taxes all of the above none of the above

all of the above

The existence of inflation does which of the following? reduces tax distortions reduces shoe-leather costs allows for the possibility of negative real interest rates reduces the costs associated with money illusion

allows for the possibility of negative real interest rates

The existence of inflation does which of the following? reduces tax distortions allows governments to benefit from seignorage reduces shoe-leather costs reduces the costs associated with money illusion

allows governments to benefit from seignorage

The IS curve shifts to the left where there is a reduction in current taxes. an increase in expected future taxes. an increase in expected future output. all of the above none of the above

an increase in expected future taxes.

Suppose there is a fiscal expansion in the current period. This fiscal expansion will tend to cause a smaller increase in current output when an increase in current output causes an increase in expected future output. an increase in the current interest rate causes expectations of expansionary monetary policy in the future. an increase in the current interest rate causes an increase in expected future interest rates. both A and B

an increase in the current interest rate causes an increase in expected future interest rates.

Which of the following will cause a reduction in the debt-to-GDP ratio? an increase in the real interest rate an increase in the ratio of the primary deficit to GDP an increase in the growth rate of output all of the above

an increase in the growth rate of output

Suppose that increased international trade makes product markets more competitive in the U.S. Given this information, we would expect to observe which of the following? A. an upward shift in the WS curve B. a downward shift in the WS curve C. an upward shift in the PS curve D. a downward shift in the PS curve

an upward shift in the PS curve

Suppose we wish to examine the determinants of the equilibrium real wage and equilibrium level of employment (N). In a graph with the real wage on the vertical axis, and the level of employment on the horizontal axis, the wage-setting relation will now be A. a vertical line B. A horizontal line C. An upward sloping line D. A downward sloping line

an upward sloping line.

When a government partially defaults its debt, a "haircut" of 20% means that creditors receive 20% of what they owed. creditors receive 80% of what they owed. creditors receive 40% of what they owed. creditors receive 10% of what they owed.

creditors receive 80% of what they owed.

M1 consists of currency only currency plus travelers checks only. currency plus checkable deposits only. checkable deposits only. none of the above

currency plus travelers checks only.

Assume individuals consider only the short run effects of changes in future macro variables when forming expectations of future output and future interest rates. Suppose individuals expect the central bank to pursue a monetary expansion in the future. Given this information, we know with certainty that current output and the current interest rate will both increase. current output will decrease. the current interest rate will decrease. the current output effects are ambiguous.

current output and the current interest rate will both increase.

The existence of inflation does which of the following? facilitates the downward adjustment of real wages reduces shoe-leather costs reduces tax distortions reduces the costs associated with money illusion

facilitates the downward adjustment of real wages

The deficit at natural level of output is called full-employment deficit. mid-cycle deficit. structural deficit. cyclically adjusted deficit. all of the above

full-employment deficit.

Assume individuals consider only the long run effects of changes in future macro variables when forming expectations of future output and future interest rates. Suppose current government spending increases and that individuals expect future government spending to increase. Given this information, we know with certainty that current output and the current interest rate will both increase. current output will not change. future expected output will decrease. future expected output will not change.

future expected output will decrease.

LTV ratio appears to be positively related to bond price. stock price. housing price increase. none of the above all of the above

housing price increase.

For this question, assume that the Fed sets monetary policy according to the Taylor rule. Suppose current U.S. macroeconomic conditions are represented by the following: π = π?* and u < un. Given this information, we would expect that the Fed will implement a monetary contraction. implement a monetary expansion. maintain its current stance of monetary policy. more information is need to answer this question.

implement a monetary contraction.

For this question, assume that the Fed sets monetary policy according to the Taylor rule. Suppose current U.S. macroeconomic conditions are represented by the following: π > π?* and u < un. Given this information, we would expect that the Fed will implement a monetary contraction. implement a monetary expansion. maintain its current stance of monetary policy. more information is need to answer this question.

implement a monetary contraction.

For this question, assume that the Fed sets monetary policy according to the Taylor rule. Suppose current U.S. macroeconomic conditions are represented by the following: π > π?* and u = un. Given this information, we would expect that the Fed will implement a monetary contraction. implement a monetary expansion. maintain its current stance of monetary policy. more information is need to answer this question.

implement a monetary contraction.

For this question, assume that the Fed sets monetary policy according to the Taylor rule. Suppose current U.S. macroeconomic conditions are represented by the following: π < π?* and u > un. Given this information, we would expect that the Fed will implement a monetary contraction. implement a monetary expansion. maintain its current stance of monetary policy. more information is need to answer this question.

implement a monetary expansion.

For this question, assume that the Fed sets monetary policy according to the Taylor rule. Suppose current U.S. macroeconomic conditions are represented by the following: π = π?* and u > un. Given this information, we would expect that the Fed will implement a monetary contraction. implement a monetary expansion. maintain its current stance of monetary policy. more information is need to answer this question.

implement a monetary expansion.

Since the early 1980s, debt ratios for the OECD countries have increased. remained constant. decreased slightly. decreased dramatically, and are now close to zero.

increased.

"Animal spirits" refers to the stubborn refusal of many economic decision-makers to use rational expectations. movements in investment that cannot be explained by changes in current variables. the often-observed Fed refusal to cooperate with the government in setting its monetary policy. the impact of tax-evasion on the budget deficit.

movements in investment that cannot be explained by changes in current variables.

Based on price-setting behavior, we know that a reduction in the unemployment rate will cause A. no change in the real wage. B. a reduction in the real wage. C. an increase in the real wage. D. an upward shift of the PS curve.

no change in the real wage.

Suppose the Fed increases the money supply in the current period with no other policy change implemented or anticipated. This policy action will cause which of the following shifts in the IS and/or LM curves in the current period? IS left; LM up IS right; LM up no shift in IS; LM down IS left; LM down

no shift in IS; LM down

Suppose the Fed reduces the money supply in the current period with no other policy change implemented or anticipated. This policy action will cause which of the following shifts in the IS and/or LM curves in the current period? IS left; LM up IS right; LM up no shift in IS; LM up IS left; LM down

no shift in IS; LM up

A higher deficit in the current year will lead to increased debt in the future only if the deficit is greater than the previous year's deficit. the deficit-to-GDP ratio is greater than the debt-to-GDP ratio. it causes a drop in private saving. it causes an increase in private saving. none of the above

none of the above

Adaptive expectations assumes that individuals can accurately predict the future. base predictions on random events (i.e., animal spirits). form their predictions of macroeconomic variables randomly. none of the above

none of the above

Given the narrow interpretation of technology, technology will include which of the following? A. how well firms are run B. the organization and sophistication of markets C. the political environment D. none of the above

none of the above

The Taylor rule (where a and b are positive parameters) is represented by i = i* + a(π* - π) - b(un - u). i = i* + a(π - π *) + b(u - un). i = i* + a(π* - π) - b(u - un). none of the above

none of the above

The large increases in the deficit during the 1980s in the United States were associated with large increases in public saving. no change in public saving. large increases in private saving. all of the above none of the above

none of the above

The natural rate of unemployment is the rate of unemployment A. that occurs when the money market is in equilibrium. B. that occurs when the markup of prices over costs is zero. C. where the markup of prices over costs is equal to its historical value. D.that occurs when both the goods and financial markets are in equilibrium. E. none of the above

none of the above

When answering this question, assume individuals consider only the short-run effects of changes in future variables when forming expectations of future output and future interest rates. Suppose policy makers announce a reduction in future government spending. Which of the following will occur as a result of this expected reduction in government spending? a reduction in the expected future interest rate and no change in expected future output a reduction in the expected future interest rate and an increase in expected future output a reduction in the expected future interest rate and an ambiguous effect on expected future output none of the above

none of the above

Which of the following is considered out of the labor force? A. the unemployed B.those temporarily laid off who will soon be recalled C.those who worked full time, but in a family business D.those individuals who have started searching for employment for the first time E. None of the above

none of the above

Which of the following will cause the LM curve to shift up? an increase in the expected future interest rate an increase in current income an increase in expected future taxes all of the above none of the above

none of the above

Constant returns to scale implies that if N and K both increase by 3% that A. output (Y) will increase by 3%. B. Y/N will increase by 3%. C. Y/N will increase by less than 3%. D. the capital-labor ratio will increase by 3%.

output (Y) will increase by 3%.

Suppose there are two countries that are identical with the following exception. The saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run A. output per capita will be greater in B than in A. B. output per capita will be greater in A than in B. C. economic growth will be higher in A than in B. D. more information is needed to answer this question.

output per capita will be greater in A than in B.

Assume that employment decreases by 3%. Holding all other factors constant, we know with certainty that which of the following will occur? A. output will decrease by 3% B. output per capita will decrease by 3% C. output will decrease by less than 3% D. the capital labor ratio will decrease

output will decrease by less than 3%

If the government thinks the natural unemployment rate is 5%, when it is really 6%, then the government will overestimate the actual deficit. underestimate the actual deficit. overestimate the cyclically adjusted deficit. underestimate the cyclically adjusted deficit.

overestimate the cyclically adjusted deficit.

Suppose individuals wish to obtain the most accurate comparison of living standards between the Canada and Saudi Arabia. To do so, one would convert Saudi Arabian output into dollars using A. the current nominal exchange rate. B. the current real exchange rate. C. the prior year's real exchange rate. D. an average of the last five years' exchange rates. E. purchasing power parity methods.

purchasing power parity methods.

When switching from the "current exchange rate" method to the "purchasing power parity" method, India's standard of living in dollars A. decreases. B. remains essentially the same. C. rises, but still remains far below that of the U.S. D. rises almost to the level of the U.S. E. leapfrogs over that of the U.S.

rises, but still remains far below that of the U.S.

Suppose individuals expect that interest rates will decrease in the future. Also assume that the Fed wants to prevent any change in current output. Given this goal of the Fed, the Fed should implement a policy in the current period that shifts the IS curve rightward. shifts the IS curve leftward. shifts the IS curve leftward and the LM curve upward. shifts the LM curve upward.

shifts the LM curve upward.

Suppose there is an increase in the expected future interest rate. This will cause which of the following to occur? the IS curve to shift left in the current period the IS curve to shift right in the current period the LM curve to shift up in the current period the LM curve to shift down in the current period

the IS curve to shift left in the current period

Suppose there is a reduction in the expected future interest rate. This will cause which of the following to occur? the IS curve to shift left in the current period the IS curve to shift right in the current period the LM curve to shift up in the current period the LM curve to shift down in the current period

the IS curve to shift right in the current period

With the real wage on the vertical axis and employment (N) on the horizontal axis, we know that A. the WS curve is upward sloping. B. the WS curve is downward sloping. C. the PS curve is upward sloping. D. the PS curve is downward sloping.

the WS curve is upward sloping.

Suppose there are two countries that are identical with the following exception. The saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run A. the capital-labor ratio (K/N) will be greater in B than in A. B. the capital-labor ratio (K/N) will be greater in A than in B. C. the capital-labor ratio (K/N) will be the same in the two countries. D. economic growth will be higher in A than in B.

the capital-labor ratio (K/N) will be greater in A than in B.

A change in which of the following will have a direct effect on the amount of money individuals wish to hold in the current period? the current nominal interest rate the current real interest rate the expected future nominal interest rate the expected future real interest rate

the current nominal interest rate

A reduction in which of the following variables will cause an increase in the amount of money individuals wish to hold in the current period? current income the current nominal interest rate the current real interest rate expected future income

the current nominal interest rate

In the wage setting relation W = P^eF(u,z), the variable z does not include which of the following variables? A. the minimum wage B.unemployment benefits C. the extent to which firms mark up prices over their marginal cost D. all of the above

the extent to which firms mark up prices over their marginal cost

Of the following, the most often used measure of changing living standards is A. the growth rate of nominal GDP. B. the growth rate of real GDP. C. the growth rate of nominal GDP per capita. D. the growth rate of real GDP per capita. E. unemployment per capita.

the growth rate of real GDP per capita.

The difference between the official and correct measures of the deficit will be greater, the lower is government spending. the lower is the level of debt, B. the higher is inflation. none of the above

the higher is inflation.

The debt-to-GDP ratio is higher, the lower the real interest rate. the lower is the ratio of the primary deficit to GDP. the higher is the growth rate of output. none of the above

the lower is the ratio of the primary deficit to GDP.

Which of the following is an example of the "shoe-leather costs" of inflation? a rise in the cost of primary raw materials, like leather for shoes an artificial rise in the capital gains tax the need to take more trips to the bank miscalculations due to money illusion

the need to take more trips to the bank

"Convergence" has been occurring among the OECD countries because A. the richer countries give away more of their output than the poorer ones. B. the poorer countries have had higher growth rates than the richer ones. C. the richer countries have had higher growth rates than the poorer ones. D. the poorer countries have had positive growth rates, while the richer ones have had negative growth rates. E. the procedures for measuring output per capita have been changing.

the poorer countries have had higher growth rates than the richer ones.

The government budget constraint tells us that the budget deficit is equal to interest on the debt. the primary deficit. the primary deficit plus interest on the debt. imports minus exports. the primary deficit plus the trade deficit plus interest on the debt.

the primary deficit plus interest on the debt.

Labor productivity is represented by which of the following? A. the ratio of output to employment B. workers per unit of capital C. capital per worker D. the ratio of output to the labor force

the ratio of output to employment

Which of the following represents the participation rate? A. the ratio of the number employed to the size of the labor force B. the ratio of the number employed to the civilian noninstitutional population C. the ratio of the labor force to the civilian noninstitutional population D. the ratio of the labor force to the total number of employed and unemployed workers

the ratio of the labor force to the civilian noninstitutional population

The reservation wage is A.the wage that an employer must pay workers to reduce turnover to a reasonable level. B. the wage that ensures a laid-off individual will wait for re-hire, rather than find another job. C. the lowest wage firms are allowed by law to pay workers. D. the wage offer that will end a labor-strike. E. none of the above

the wage that an employer must pay workers to reduce turnover to a reasonable level.

In the wage-setting relation, the nominal wage tends to decrease when A. The price level increases B. The unemployment rate decreases C. Unemployment benefits decrease D. The minimum wage increases

unemployment benefits decrease.

An upward-sloping straight line on a linear scale will become a (an) ________ on a logarithmic scale. A. upward sloping straight line B. upward sloping curve that gets continually steeper C. upward sloping curve that gets continually flatter D. horizontal line

upward sloping curve that gets continually flatter