Econ 362 quiz questions

In the Keynesian-cross model, if the MPC= 0.75, then a $1 billion decrease in taxes increases planned expenditures by ____ and increases the equilibrium level of income by _____. -$0.75 billion; more than $0.75 billion -$1 billion; more than $1 billion -$0.75 billion; $0.75 billion -$1 billion; $1 billion

$.075 billion; more than $0.75 billion (HW7)

In the Keynesian-cross model, if the MPC equals 0.75, then a $1 billion increase in government spending increases planned expenditures by ____ and increases the equilibrium level of income by ___. -$0.75 billion; $0.75 billion -$1 billion; $1 billion -$1 billion, more than $1 billion -$0.75 billion; more than $0.75 billion

$1 billion; more than $1 billion (HW 7)

If the currency held by the public equals $100 billion, reserves held by banks equal $50 billion, and bank deposits equal $500 billion, then the monetary base equals:

$150 billion (3)

Assume that a rancher sells McDonalds a quarter-pound of meat for $1 and that McDonalds sells you a hamburger made from that meat for $2. in this case, the value included in GDP shoud be:

$2 (1)

If the average price of goods and services in the economy equals $10 and the quantity of money in the economy equals $200,000, then real balances in the economy equal:

$200,000/$10= $20,000 (4)

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $1.50 in 2009. If 4 apples were produced in 2002 and 5 apples in 2009, where as 3 oranges were produced in 2002 and 4 in 2009, then real GDP (in 2002 prices) in 2009 was:

$6.50 (1)

If the monetary base equals $400 billion and the money multiplier equals 2, then the money supply equals

$800 billion (3)

A bank balance sheet consists of only the following items: Deposits $1,000 Reserves $100 Securities $400 Debt $500 Loans $2000 What is the value of bank capital?

+$1000 (3)

In a Solow model with technological change, if population grows at a 2% rate and the efficiency of labor grows at a 3% rate, then in the steady state, output per effective worker grows at a ____ % rate

0 (6)

Assume that equilibrium GDP (Y) is 5,000. Consumption (C) is given by the equation C=500 +0.6Y. No government exits. In this case, equilibrium investment is

1,500 (2)

The nominal interest rate is 1% and the inflation rate is 5%, then the real interest rate is:

1-5= -4% (4)

Bank Balance Sheet Assets: Reserves- $10,000 Loans- 100,000 Securities- 40,000 Liabilities and Net Worth: Deposits- $100,000 Debt- 20,000 Equity- 30,000 Bases on the table, what is the reserve-deposit ration at the bank?

10% (3)

According to the Keynesian-cross analysis, if the marginal propensity to consume is 0.6, and government expenditures and autonomous taxes are both increased by 100, equilibrium income will rise by:

100 (HW7)

If there are 100 transactions in a year and the average value of each transaction is $10, then If there is $200 of money in the economy, transactions velocity is ___ times per year.

100 transactions x $10=$1000/$200= 5 (4)

If the money supply increases 12%, velocity decreases 4%, and the price level increases 5%, then the change in real GDP must be____ %

12-4=5+Y 8=5+Y Y=3 (4)

If nominal GDP grew by 5% and real GDP grew by 3% then the GDP deflator grew by __%

2

Recessions typically, but not always include at least ___ consecutive quarters of declining real GDP.

2 (7)

If nominal GDP grew by 5% and real GDP grew by 3%, then the GDP deflator grew by approximately ____%

2% (1)

If the currency-deposit ratio equals -.5 and the reserve-deposit ratio equals 0.1, then the money multiplier equals

2.5 (3)

All of the following transactions that took place in 2009 would be incouded in GDP for 2009 except the purchase of a -2001 Jeep Cherokee -ticket to see the movie 2001 -book printed in 2009, entitled The Year 3000 -year 2010 calendra printed in 2009

2001 Jeep Cherokee (1)

If the capital stock equals 200 in year 1 and the depreciation rate is 5% per year, then in year 2, assuming no new or replacement investment, the capital stock would equal ___ units.

200x.005=10 200-10=190 (5)

If the consumption function is given by C=500+0.5(Y-T), and Y is 6,000 and T is given by T=200+0.2Y, then C equals

2800 (2)

In a Solow model with technological change, if population grows at a 2% rate and the efficiency of labor grows at a 3% rate, then in the steady state, output per actual worker grows at a ___ % rate.

3 (6)

If the U.S. production function is Cobb-Douglas with capital share 0.3, output growth is 3 % per year, depreciation is 4% per year, and the golden rule steady-state capital-output ratio is 4.29, to reach the Golden Rule steady state, the saving rate must be:

30% (5)

If disposable income is 4,000, consumption is 3,500, government spending is 1,000, and taxes minus transfers are 800, national savings is equal too

300 (2)

If MPC=0.75 (and there are no income taxes) when G increases by 100, then the IS curve for any given interest rate shifts to the right by

400 (8)

Bank Balance Sheet Assets: Reserves- $10,000 Loans- 100,000 Securities- 40,000 Liabilities and Net Worth: Deposits- $100,000 Debt- 20,000 Equity- 30,000 Bases on the table, what is the leverage ration at the bank?

5 (3)

In a Solow model with technological change, if population grows at a 2% rate and the efficiency of labor grows at a 3% rate, then in the steady state, total output grows at a ___% rate.

5 (6)

Assume that the money demand function is (M/P)^d= 2,200-200r, where r is the interest rate in percent. The money supply M is 2,000 and the price level P is 2. The equilibrium interest rate is ___%.

6 (HW7)

In the Keynesian cross analysis, if the consumption function is given by C=100 +0.6(Y-TT), and planned investment is 100, G is 100, and T is 100, then equilibrium Y is:

600 (HW7)

If the per-worker production function is given by y=k^1/2, the saving ratio is 0.3, and the depreciation rate is 0.1, then the steady-state ration of capital to labor is:

9 (5)

According to the Institutions Theory of economic growth, which of the following is essential for a country's economic development?

A fair legal system which protects property rights

According to the quantity theory of money, ultimate control over the rate of inflation in the US is exercised by the

Fed

the quantity of money in the US is essentially controlled by the

Federal REserve

How does the distinction between flexible and sticky prices impact the study of the macro economy?

Flexible prices are typically assumed in the study of long run, while stick prices are assumed in the study of the short run

An increase in consumer saving for any given level of income will shift the: -LM curve downward and to the right -IS curve downward and to the left -IS curve upward and to the right -LM curve upward and to the left

IS curve downward and to the left (9)

The U.S. recession of 2001 can be explained in part by a declining stock market and terrorist attacks. Both of these shocks can be represented in the IS-LM model by shifting the ___ curve to the ___

IS; left (9)

Which of the following is the best example of structural unemployment?

Kirby is seeking a job as an airline pilot, but the high union wages in the industry have limited the number of jobs available

A decrease in the money supply would shift the

LM curce to the left (8)

The increase in income in response to a fiscal expansion in the IS-LM is: -less than in the Keynesian-cross model unless the LM curve is horizontal -less than in the Keynesian-cross model unless the IS curve is vertical -always less than in the Keynesian-cross model -less than in the Keynesian cross model unless the LM curve is vertical

Less than in the Keynesian-cross model unless the LM curve is horizontal (HM7)

Consider the money demand function that takes the form (M/P)^d=kY, where M is the quantity of money, P is the price level, k is a constant, and Y is real output. If the money supply is growing at a 10% rate, real output is growing at a 3% rate, and k is constant, what is the average inflation rate in this economy?

M=10, Y=3 P=M-Y =10 -3= 7% (4)

which of the following individuals would economists consider unemployed

a factory worker is temporarily laid off but expects to be called back to work soon

Assume that a country experiences a reduction in productivity that shifts the labor demand curve downward and to the left. If the labor market were always in equilibrium, this would lead to:

a lower real wage and no change in unemployment

The ex post real interest rate will be greater than the ex ante real interest rate when the

actual rate of inflation is less than the expected rate of inflation

The labor force participation rate is the percentage of the:

adult population that is in the labor force

Economic profit is zero if

all factors are paid their marginal products and there are constant returns to scale

If bread is produced by using a constant returns to scale production function, then if the:

amounts of equipment and workers are both doubled, twice as much bread will be produced

If the rate of separation is 0.02 and the rate of job finding is 0.08 but the current unemployment rate is ____ the equilibrium rate, and in the next period it will move ____ the equilibrium rate

below; toward

If the Fed announces that it will raise the money supply, in the future but does not change the money supply today,

both the nominal interest rate and the current price level will increase

Based on the graph for the market for real money balances, if the interest rate is above equilibrium, then people will ____ bonds and the interest rate will____.

buy; fall (HW7)

The inflation tax is paid

by all holders of money

The two most important factors of production are

capital and labor

If output is described by the production function Y=AK^0.2L^0.8, then the production function has:

constant returns to scale (2)

In the national income accounts, the purchase of durables, nondurables, and services by households are classified as:

consumption

In the IS-LM model, changes in taxes initially affect planned expenditures through: -consumption -investment -government spending -the interest rate

consumption (8)

In the US bank reserves consist of

currency and demand deposits

The money supply will decrease if the

currency-deposit ratio increases

If a larger share of national output is devoted to investment, then living standards will

decline in the short run and may not rise in the long run

If a larger share of national output is devoted to investment, then living standards will: -rise in the short run but may not rise in the long run -decline in the short run and may not rise in the long run -always rise in both the short run and long run -always decline in the short run but rise in the long run

decline in the short run and may not rise in the long run (6)

Assume that a war reduces a country's labor force but does not directly affect its capital stock. If the economy was in a steady state before the war and the saving rate does not change after the war, then, over time, capital per worker will ____ and output per worker will ____ as it returns to the steady state.

decline; decline (6)

If wage rigidity holds the real wage above the equilibrium level, an increase in the demand for labor will ___ the number of unemployed

decrease

According to the IS-LM model, if congress raises taxes but the Fed wants to hold income constant, then the Fed must ____ the money supply.

decrease (9)

If the Fed wishes to increase the money supply, it should:

decrease the discount rate

An increase in the supply of capital will:` -Decrease the real rental rate -decrease the real rental price of capital -increase the real rental price of capital -increase the productivity of capital

decrease the real rental price of capital (2)

In the IS-LM model, a decrease in government purchases leads to a(n) ____ in planned expenditures, a(n) ____ in money demand, and a(n)_____ in the equilibrium interest rate.

decrease; decrease; decrease; decrease (8)

When a firm sells a product out of inventory, investment expenditures ___ and consumption expenditures ____

decrease; increase

If there is an increase in government spending that shifts the IS curve to the right, then in order to keep output constant, the Fed should ___ the money supply to __.

decrease; left (9)

Other things equal, when the interest rate rises, demand for goods and services

decreases (7)

When the Fed makes an open-market sale, it:

decreases the monetary base (B)

In the neoclassical model with fixed income, if there is a decrease in taxes with no change in government spending, the public saving ___ and private saving ___

decreases; increases

Liabilities of a bank include

demand deposits

In the Solow growth model with population growth and technological change, the breakeven level of investment must cover: -depreciating capital -depreciating capital and capital for new effective workers -depreciating capital, capital for new workers, and capital for new effective workers -depreciating capital and capital for new workers

depreciating capital, capital for new workers, and capital for new effective workers (6)

According to the definition used by the U.S. Bureau of Labor Statistics, people are considered to be unemployed if they:

do not have a job, but have looked for work in the past 4 weeks (1)

When a firm sells a product out of inventory, GDP: -increases or decreases, depending on the year the product was produced -decreases -increases -does not change

does not change (1)

A decrease in the price level, holding nominal money supply constant, will shift the LM curve:

downward and to the right (HW7)

The short run refers to a period: -during which prices are sticky and unemployment may occur -during which capital and labor are fully employed -of several days -during which there are no fluctuations

during which prices are sticky and unemployment may occur (7)

If the national saving rate increases, the

economy will grow at a faster rate, until a new, higher, steady state capital- labor ratio is reached

The fact tat the Soviet Union's input was the same as the US but produced only 1/3 of the US GDP highlights the importance of what factor in growth?

efficiency

Imputed values included in GDP are the

estimated value of goods and services that are not sold in the market place (1)

When a person purchases a 90 day Treasury bond, he cannot know the

ex post real interest rate

When a person purchases a 90-day Treasury bill, he or she cannot know the: -ex post real interest rate -ex ante real interest rate -expected rate of inflation -nominal interest rate

ex post real interest rate (4)

In the Keynesian Cross, if firms are producing at a level below equilibrium, then inventories will ___, inducing firms to ___ production.

fall; increase (HW7)

In the IS-LM model when M rises but P remains constant, in the short-run equilibrium, in the usual case the interest rate ____ and output____. -rises; falls -rises; rises -falls; rises -falls; falls

falls; rises (8)

Money that has no value other than as money is called

fiat money

the compute the value of GDP

goods and services are valued at market prices

When the Federal Reserve increase the money supply, at a given price level the amount of output demanded is ___ and the aggregate demand curve shifts ____.

greater; outward (7)

Assume that a bakery hires more workers and pays them wages and that the workers produce more bread. GDP increases in all of the following cases except when the bread: -grows stale and is thrown away -is sold to other firms -is sold to households -is stored away for later use

grows stale and is thrown away (1)

The efficiency of labor is a term that does not reflect the:

high output that comes from labor cooperating with a large amount of capital

The efficiency of labor is a term that does not reflect the -high output that comes from labor cooperating with a large amount of capital -health of the labor force -skills of the labor force acquired though on-the-job training -education of the labor force

high output that comes from labor cooperating with a large amount of capital (6)

If there is an increase in government spending that shifts the IS curve to the right and the Fed does not change the money supply the new equilibrium will have a ___ income and ____ interest rate.

higher; higher (9)

An example of an imputed value in the GDP is the:

housing services enjoyed by homeowners

In the classical model with fixed income, an increase in the real interest rate could be the result of a(n): -decrease in desired investment -increase in taxed -increase in government spending -decrease in government spending

increase in government spending (2)

In the IS-LM model, a decrease in the interest rate would be the result of a(n): -increase in government purchases -increase in money demand -decrease in taxes -increase in the money supply

increase in the money supply (9)

According to the theory of liquidity preference, tightening the money supply will ____ nominal interest rates in the short run, and, according to the Fisher effect, tightening the money supply will ___ nominal interest rates in the long run.

increase; decrease (HW 7)

According to the theory of liquidity preference, holding the supply of real money balances constant, an increase in income will ____ the demand for real money balances and will ___the interest rate.

increase; increase (HW7)

An increase in investment demand for any given level of income and interest rates- due, for example, to more optimistic 'animal spirits'- will, within the IS-LM framework, ____ output and ___ interest rates. -lower; raise -increase; lower -increase; raise -lower; lower

increase; raise (9)

An increase in government spending shifts the IS curve to the right. In order to keep the interest rate constant. the Fed should ___ the money supply shifting the LM curve to the ___.

increase; right (9)

Which of the following changes would bring the U.S. capital stock, currently below the Golden Rule level, closer to the steady-state, consumption-maximizing level? -increasing the saving rate -increasing the rate of technological progress -increasing the rate of capital depreciation -increasing the population growth rate

increaseing the saving rate (6)

If the price of a bond decreases, then its interest rate

increases (7)

Starting from a steady-state situation, if the saving rate increases, the growth of capital per worker will: -decrease until the new steady state is reached -increase until the new steady state is reached -decrease and continue to decrease unabated -increase and continue to increase unabated

increse until the new steady state is reached (5)

If congress passed a tax increase at the request of the president to reduce the budget deficit, but the Fed held the money supply constant, then the 2 policies together would generally lead to ____ income and a ____ interest rate. -no change in; lower -no change in; higher -lower; lower -lower; higher

lower; lower (9)

An increase in the demand for money, at any given income level and level of interest rates, will, within the IS-LM framework, ____ output and ___ interest rates.

lower; raise (9)

Assume 2 economies are identical in everyway except one has a higher population growth rate. According to the Solow Model, in the steady state the country with the higher population growth rate will have a __ level of output per person and ____rate of growth of output per worker as rhw country with the lower population growth rate

lower; the same

REal GDP is a better measure of economic well-being than nominal GDP, because real GDP:

measures changes in the quantity of goods and services produced by holding prices constant

The cost of reprinting catalogs and price lists because of inflation are called: -shoeleather costs -menu costs -variable yardstick costs -fixed costs

menu costs (4)

Money's liquidity refers to the ease with which:

money can be converted into goods and services

Not included in M1

money market deposit accounts

An example of a nominal variable is the

money supply

In the Solow growth model of an economy with population growth but no technological change, if population grows at rate n, total output grows at rate __ and output per worker grows at rate __

n; 0 (5)

Okun's law is the ___ relationship between real GDP and the ____. -positive; inflation rate -negative; unemployment rate -positive; unemployment rate -negative; inflation rate

negative; unemplyment rate (7)

Equilibrium levels of income and interest rates are ___ related in goods and services market, and equilibrium levels of income and interest rates are ___ related in the market for real money balances.

negatively; positively (HW7)

credit card balances at included in

neither M1 nor M2

The opportunity cost of holding money is the

nominal interest rate

If the short-run aggregate supply curve is horizontal and the long-run aggregate supply curve is vertical, then a change in the money supply will change ____ in the short run and change ____ in the long run. -only output; only prices -both prices and output, both prices and out put -both prices and output, only prices -only prices; only output

only output; only prices (7)

discourages workers are counted as

out of the labor force

Assume that the economy starts from the long-run equilibrium. If the Federal Reserve increases the money supply, then ___ increase(s) in the short run and ___ increases(s) in the long run. -output; output -prices; prices -prices; output -output; prices

output, prices (7)

In the national income accounts, all of the following are classified as government purchases except

payments made to social security recipients

The rate of inflation is the:

percentage change in the level of prices

Consumption depends ____ on disposable income, and investment depends ___ on the real interest rate

positively; negatively

The right of seigniorage is the right to:

print money (4)

The supply of supply and demand for loanable funds determines the: -nominal interest rate -real rental price of capital -real wage -real interest rate

real interest rate (2)

efficiency-wage theories suggest that affirm may pay workers more than the market-clearing wage for all of the following reasons except

reduce the firm's wage bill

Any policy aimed at lowering the natural rate of unemployment must either __ the rate of job sepatation or __ the rate of job finding

reduce; increase

In the Solow growth model, the economy end sup with a steady state level of capital:

regardless of the starting level

In a 100% reserve banking system, if a customer deposits $100 of currency into a bank, then the money supply:

remains the same

In the IS-LM model when M remains constant but P rises, in short-run equilibrium, in the usual case the interest rate ____ and output_____. -falls; rises -falls; falls -rises; rises -rises; falls

rises; falls (8)

Othere things being equal, all of the following government policies are likely to increase national saving except

running a budget deficit

If the marginal product of capital net depreciation =8%, the rate of growth of population= 2% and the efficiency growth equals 2%, to reach the Golden Rule level of capital stock, the ___ rate in this economy must be ____

saving; increased

In the IS-LM model when the Federal Reserve decreases the money supply, people ____ bongs and the interest rate____, leading to a(n) in investment and income. -sell, falls, decrease -buy; rises; decrease -sell; rises; decrease -buy; rises; increase

sell; rises; decrease (8)

The inconvinence associated with reducing money holdings to avoids the inflation tax is

shoe leather costs

Using the IS-LM analysis, if the LM curve is not horizontal, the multiplier for an increase in government spending is ___ for an increase in government purchases using the Keynesian-cross analysis. -the same as the multiplier -sometimes larger and sometimes smaller than the multiplier -smaller than the multiplier -larger than the multiplier

smaller than the multiplier (8)

If an economy is in a steady state with no population growth or technological change and the marginal product of capital is less than the depreciation rate: -steady-state consumption per worker would be higher in a steady state with a lower saving rate -the economy is following the Golden Rule -the depreciation rate should be decreased to achieve the Golden Rule level of consumption per worker

steady state consumption per worker would be higher in a steady state with a lower saving rate (5)

The amount of capital in an economy is a ___ and the amount of investment is a __

stock; flow

An increase in the price of goods bought by firms and government will show up in:

the GDP deflator but not the CPI

A decrease in government spending shifts

the IS curve to the left (8)

Bass on the IS-LM graph, starting from equilibrium, a decrease in government spending would shift:

the IS curve to the left (HW7)

A tax cut shifts

the IS curve to the right (8)

In the Keynesian Cross, the equilibrium levels of income and expenditure occur where

the actual expenditure curve crosses the planned expeniture curve (HW7)

If the nominal interest rate increases, then

the demand for money decreases

Based on the Keynesian model, one reason to support government spending increases over ta cuts as measures to increase output is that: -increases in government spending increase planned spending, but tax cuts reduce planned spending -government spending increases the MPC more than tax cuts -government spending increases do not lead to unplanned changes in inventories, but tax cuts do -the government spending multiplier is larger than the tax multiplier

the government spending multiplier is larger than the tax multiplier (HW7)

If you hear the news that the Fed conducted open-market purchases, then you should expect the ___ to increase: -the reserve-deposit ratio -reserve requirement -the discount rate -the money supply

the money supply (3)

The vertical long-run aggregate supply curve satisfies the classical dichotomy because the natural rate of output does not depend on: -the money supply -the labor supply -the supply of capital -technology

the money supply (7)

If the ratio of reserves to deposits (rr) increases, while the ration of currency to deposits (cr) is constant and the monetary base (B) is constant, then: -the money supply increases -the money supply does not change -it cannot be determined whether the money supply increases or decreases -the money supply decreases

the money supply decreases (3)

In the Solow growth model with population growth but no technological progress, in the Golden Rule steady state, the marginal product of capital minus the rate of depreciation will equal: -output per worker -the saving rate -0 -the population growth rate

the population growth rate (6)

In a simple model of the supply and demand for pizza, the endogenous variables are:

the price of pizza and the quantity of pizza sold

In the long run, according to the quantity theory of money and the classical macroeconomic theory, if velocity is constant, then ___ determines real GDP and ___ determined nominal GDP

the productive capability of the economy; the money supply

The real wage will increase if: -the supply of labor increases -the price of output increases -the supply for capital decreases -the productivity of labor increases

the productivity of labor increases (2)

In the classical model what adjusts to eliminate any unemployment of labor in the economy

the real wage

If a war destroys a large portion of a country's capital stock but the savings rate is unchanged, the Solow model predicts that output will grow and that the new steady state will approach

the same level of output as before

If a war destroys a large portion of a countries capital stock but the saving rate is unchanged, the solow model predicts that output will grow and that the new steady state will approach: -a lower level of output per person that before -the Golden Rule level of output per person -a higher level of output per person -the same level of output per person

the same level of output per person (5)

Based on the graph of the market for real money balances, the equilibrium levels of interest rates and real money balances occurs at the intersection of ____. On the y axis: ____ on the x axis:_____.

the supply and demand curves; interest rate, r; real money balances, M/P (HW 7)

Assume that a war reduces a country's labor force but does not directly affect its capital stock. Then the immediate impact will be that: -both total output and output per worker will fall -total output will fall, but output per worker will rise -both total output and output per worker will rise -total output will rise, but output per worker will fall

total output will fall, but output per worker will rise (5)

All of the following are reasons for frictional unemployment except

unemployed workers accept the first job they are offered

All of th efollowing are causes of structural unemployment except:

unemployment insurance

When a pizza maker lists the price of pizza as $10, this is an example of using money as a

unit of account

When a pizza maker lists the price of a pizza as $10, this is an example of using money as a: -flow of value -unit of account -medium of exchange -store of value

unit of account (3)

the real wage is the return to labor measured in: - dollars -units of labor -units of output -units of capital

unites out output (2)

Which of the following is a stock variable? -consumption -investment -wealth -income

wealth (1)

The Golden Rule level of steady-state consumption per worker is

where the slope of the f(k*) curve= the slope of the depreciation k* curve at that point, the distance between the 2 curves. (5)

If 2 economies are identical (including having the same saving rates, population growth rates, and efficiency of labor), but one economy has a smaller capital stock, then the steady-state of income per worker in the economy with the smaller capital stock: -will be at a lower level than in the steady state of high capital economy -will be at the same level as in the steady state of the high capital economy -will be proportional to the ration of the capital stocks in the 2 economies -will be at a higher level in the steady state of the high capital economy

will be at the same level as in the steady state of high capital economy (6)

If two economies are identical (including having the same saving rates, population growth rates, and efficiency of labor) but one economy has a smaller capital stock, then the steady state level of income per worker in the economywith the smaller capital stock

will be at the same level in the steady state of the high capital economy

All of the following actions are investments in the sense of the term used by macroeconomists except

Sandra buying 100 shares of IMB stock

An increase in the print of imported goods will show up in: -the GDP deflator but not in the CPI -the CPI but not in the GDP deflator -neither the CPI nor GDP deflator -both the CPI and the GDP deflator

The CPI but not in the GDP deflator (1)

According to the quantity theory of money, ultimate control over the rate of inflation in the United States is exercised by:

The Fed (4)

Based on the IS-LM graph, starting from equilibrium, a tax cut would shift

The IS curve to the right (HW7)

Based on the IS-LM graph, starting from an equilibrium, a decrease in the money supply would shift

The LM curve to the left (HW7)

In the national income accounts, government purchases are goods and services purchased by

The federal state and local governments

The property of diminishing marginal product means that, after a point, when additional quantities of

a factor are added when another factor remains fixed, the marginal product of that factor diminishes

The golden rule level of steady-state investment per worker is:

Where the slopes of f(k*)=depreciation k* distance from depreciation k* curve to origin (5)

Assume that the consumption function is given by C=200+0.5(Y-T) and the investment function is I=1,000-200r, where r is measured in percentage, G= 100, and T=200. The IS curve can be represented by the equation

Y=2,800-400r (HW7)

Other things equal, and increase in the interest rate leads to

a decrease in th equantity of investment goods demenaded (2)

Other things equal an increase in the interest rate leads to

a decrease in the quantity of investment goods demanded

To make a trade in a barter economy requires

a double coincidence of wants

To make a trade in a barter economy requires:

a double coincidence of wants (3)

If the real interest rate and real national income are constant, according to the quantity theory and the Fisher effect, a 1% increase in money growth will lead to rises in: -inflation of 1% and nominal interest of 1% -inflation of 1% and nominal interest of less that 1% -both inflation and nominal interest rate of less than 1% -inflation of 1% and the nominal interest rate of more than 1%

inflation of 1% and the nominal interest rate of 1% (4)

___ causes the capital stock to rise, while ___ causes the capital stoke to fall

investment; depreciation

Over the business cycle, investment spending ____ consumption spending. -has about the same volatility as -is less volatile -is inversely correlated with -is more volatile that

is more volatile than (7)

Assets of banks include:

loans to customers

According to the Solow Model, what are the 3 main reasons why some countries are poorer than otheres

low saving and human capital, slow technological progress, and low efficiency

Consider the impact of an increase in thriftiness in the Keynesian cross analysis. Assume that the marginal propensity to consume is unchanged, but the intercept of the consumption function is made smaller so that at every income level saving is greater. This will: -lower equilibrium by the decrease in the intercept multiplied by the multiplier -raise the income by the decrease in the intercept multiplied by the multiplier -lower equilibrium income by the decrease in the intercept -raise equilibrium income by the decrease in the intercept

lower equilibrium income by the decrease in the intercept multiplied by the multiplier (HW7)