ECON Final 2011

The abbreviation "GDP" stands for

Gross Domestic Product

A bank has $400 in checkable deposits, $800 in savings deposits, $700 in time deposits, $900 in loans to businesses, $300 in outstanding credit card balances, $500 in government securities, $10 in currency in its vault, and $20 in deposits at the Fed. The bank deposits that are part of M1 are equal to

$400

In 2000, US exports of goods and services were $1096 billion and imports of goods and services were $1476 billion. What was the value of net exports?

-$380 billion

Classify each of the following items as a final good or an intermediate good, and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services. -Aluminum sheets bought by Boeing -Security system bought by the White House -New Airplanes bought by United Airlines -Starbuck's Frappe bought by a student

-intermediate good -final good that is a gov't expenditure -final good that is an investment -a final good that is consumption expenditure

When the U.S. price level rises relative to other nations' price levels, then

U.S. exports decrease, U.S. imports increase, and there is a movement upward along the aggregate demand curve.

If the costs of production increase, there is

a decrease in aggregate supply and the AS curve shifts leftward

The economy is in a boom and the inflationary gap is large. Discretionary fiscal policy that might occur is

a decrease in government expenditure and an increase in taxes.

Money serves the function of being ___.

a medium of exchange, which means that it is generally accepted in return for goods and services.

To measure GDP by using the income approach, we must add all incomes and then ___ depreciation and ___ net taxes less subsidies.

add; add

If the money wage rate increases, then the

aggregate supply curve shifts leftward.

An economy is at full employment when ____.

all unemployment is frictional and structural (cyclical unemployment is zero).

An increase in the price level leads to

an upward movement along the aggregate supply curve.

Which statement about money is most correct?

Money has been around for a long time and can include anything that is accepted as a means of payment

Stagflation is a combination of ____ real GDP and a ____ price level.

decreasing; rising

The aggregate demand curve illustrates the relationship between

the price level and the quantity of goods demanded by households, firms, government, and foreigners.

An increase in the income tax rate is an example of __.

discretionary fiscal policy.

When Jamie purchases a classic 1968 Plymouth Cuda convertible from Shane, GDP

does not change because the car was not produced this year

Suppose a 23 year old graduate student is looking for a full-time job, but has to take a part-time job instead, He or she will be categorized in the Current Population Survey as ___ when calculating the unemployment rate.

employed

The working age population includes

employed and unemployed people over the age of 16.

The items that firms in the US produce and sell to the rest of the world are ____.

exports of goods and services

An open market operation is____.

the purchase or sale of government securities by the Federal Reserve System in the open market.

The Fed raises the interest rate when it

fears inflation

What is outsourcing?

firms producing at least some component of their goods in other countries

The US labor force participation rate ____.

fluctuates with the business cycle

When tax revenue exceeds the government's outlays, the budget

has a surplus and the national debt is decreasing.

The items that households, firms, and governments in the US buy from the rest of the world are ___.

imports of goods and services

Higher unemployment benefits create:

incentives for longer job searches and higher frictional unemployment

The category of "rent" in the income approach to GDP:

includes the money paid to use land and other rented inputs

To eliminate an inflationary gap using fiscal policy, the government could

increase taxes

What of the following are included in the expenditure approach to calculating GDP?

investment, government expenditure on goods and services, consumption expenditure

Economic freedom is crucial for achieving economic growth because ____.

it gives the incentive to save, invest, expand human capital, and discover and apply new technologies

Pamella just graduated with a music degree and has been sending applications to symphony orchestras. Pamella is a ___.

job market entrant

Potential GDP is the level of

real GDP that the economy could produce at full employment

When the price level rises, the real interest rate ___ and the quantity of real GDP demanded ___.

rises; decreases

Structural unemployment includes people who become unemployed from

technological changes

When the economy is at full employment:

the amount of cyclical unemployment equals zero

The Fed's chief executive is ____ and the Fed's main policy tools are _____.

the chairman of the Board of Governors; required reserve ratios, discount rate, and open market operations

The Keynesian macroeconomic model states that

the economy is inherently unstable and government intervention is required to maintain continued economic growth

The federal funds rate is

the interest rate banks charge each other on overnight loans.

The Classical macroeconomic model proposes that

markets work efficiently to produce the best macroeconomic outcomes.

Money serves as a

medium of exchange, unit of account, and store of value

Frictional unemployment is a result of

normal labor market turnover

The unemployment rate equals 100 multiplied the

number of people unemployed divided by the labor force

Real GDP measures the value of goods and services produced in a given year valued using

base year prices

GDP is equal to the market value of all the final goods and services ___ in a given period of time.

produced within a country

The value of exports of goods and services and services minus the value of imports of goods and services is ___.

called new exports of goods and services.

For an asset to be a "means of payment" means the asset

can be used to settle a debt

Because the Federal Reserve System is a central bank, it provides banking services to

commercial banks (and government)

Cisco is considering opening a financial institution that accepts savings deposits from only its employees and makes loans to only its employees. The best description of this financial institution is that it is a

credit union

Which of the following are included in the M1 definition of money?

currency and checkable deposits

In order to help the economy recover from a recession using fiscal policy, the government can _______ so that demand increases.

cuts taxes

As a recession begins, firms quickly make layoffs. The resulting rise in unemployment is mostly a rise in ___ employment.

cyclical

An electrician who is laid off because the economy is in a recession and who gets rehired some months later when the expansion begins; he experiences ___.

cyclical unemployment

The unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the location of jobs is ___.

structural unemployment

According the Keynesian macroeconomic model, which of the following was responsible for starting the Great Depression?

too little private spending

Which of the following is true regarding the measurement of GDP?

wages and profit income are used in the income approach to GDP

___ is an example of US consumption expenditure.

you purchase of a model car kit

Which of the following is included in the measure of US GDP?

A Hershey's kiss produced and sold in the US

If Consumption expenditure is 7.7, government expenditure is 2.0, investment is 1.7, and net exports is -0.5, what is the US GDP using the expenditure approach? (all numbers in trillions)

10.9 trillion

The Federal Reserve System is organized into

12 districts, diving up the United States.

Suppose the working age population is 500 million, the labor force is 200 million, and the unemployment rate is 15 percent. The number of unemployed people is:

30 million (rate = #of unemployed people/labor force*100)

If the Labor force is 153, Employment is 141, and working age population is 232, what is the unemployment rate? (numbers in millions)

7.8 (rate = # of unemployed/labor force), (the # of unemployed = labor force - employed) & (working age population is extraneous data)