ECON FINAL

Which of the following is an example of structural​ unemployment?

Autoworkers lose jobs due to globalization and must retrain to find new jobs

​Currently, the unemployment rate​ is:

Between​ 6% &​ 8%

How does an increase in the price level affect the quantity of real GDP supplied in the long​ run?

Changes in the price level do not affect the level of GDP in the long run.

When we introduced employment in week two and we referenced Tweets by two US Politicians. Who were​ they?

Donald Trump​ & Bernie Sanders

What actions can Congress and the president take to move the economy back to potential​ GDP?

Increase government spending or decrease taxes

Which of the following is not a limitation to fiscal policy we spoke about this​ week?

Term Limits

Which committee sets the position of monetary​ policy?

The Federal Open Market Committee

Fiscal policy is conducted​ by:

The federal government controls fiscal policy.

Along the​ downward-sloping catch-up​ line, a country near the top of the line is

a poor country growing rapidly.

As the interest rate​ increases,

consumption, investment, and net exports​ decrease; aggregate demand decreases.

Monetary policy​ _______ are willing to sacrifice higher unemployment for lower levels of inflation.

hawks

Monetary policy​ _______ would shift aggregate demand to the left when an economy is experiencing stagflation.

hawks

Microeconomics is the study of

how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices.

Even after it is decided to take on monetary​ policy, the FOMC will need to meet and hash out exactly what needs to be​ done, and that takes time. Because of​ this, we see a​ ______ when it comes to monetary policy.

implementation lag

The financial account records

only net capital flows.

Which of the following will cause interest rates to​ rise?

open market sales

How would an increase in interest rates affect​ investment?

real investment spending declines

Economic growth will

slow down or stop if more capital per hour is used because of diminishing returns to capital.

In calculating​ GDP, which levels of government spending are included in government​ purchases?

spending by​ federal, state, and local governments

Which of the following does the aggregate expenditure macroeconomic model seek to​ explain?

the business cycle

The chairman of the Federal Reserve referenced the policy objectives of the Fed. What is another name for​ this?

the dual mandate

Gross domestic product is best defined as

the market value of all final goods and services produced in a country during a period of​ time, typically one year.

The seven members of the Board of Governors of the Federal Reserve are appointed by

the president

Real exchange rate is

the price of domestic goods in terms of foreign goods.

Which of the following sets a floor on the federal funds​ rate?

the reverse repo rate

If the Fed believes the inflation rate is about to​ increase, it should

use a contractionary monetary policy to increase the interest rate and shift AD to the left.

The wealth effect refers to the fact that

when the price level​ falls, the real value of household wealth​ rises, and so will consumption.

Which of the following transactions is not counted in​ GDP?

A consumer prepares meals for his family

Which of the following is not an explanation for why firms keep​ inventories?

Because goods are produced in quantities that match the exact amounts consumers want to purchase at a given time

The​ _________ is the most​ well-known publisher for data on prices.

Bureau of Labor Statistics​ (BLS)

The discussion this week about the deficit and debts were centered around an infographic released by​ the:

Congressional Budget Office​ (CBO)

What are the four major components of expenditures in​ GDP?

Consumption, Investment, Government​ Purchases, and Net Exports

If you are having an issue with MyEconLab or​ Packback, you should​ first:

Contact Pearson or Packback directly. Those websites are located on Troubleshooting Technology page on Canvas.

Consider the demand for Russian rubles in exchange for British pounds. Which of the following will not increase the foreign currency demand for the ruble​?

Currency traders who believe that the value of the ruble in the future will be less than its value today.

Cyclical unemployment

Cyclical unemployment is the component of overall unemployment that results directly from cycles of economic upturn and downturn.

Which of the following is an example of cyclical​ unemployment?

During a recession, aircraft assembles are laid off but expect to be recalled as the economy improves

In the circular flow of expenditure and​ income, why must the total value of production in an economy equal the total value of​ income?

Every penny spent on a good or service must end up as​ someone's income.

What are the four main determinants of​ investment?

Expectations of future​ profitability, interest​ rates, taxes and cash flow.

An increase in the discount rate makes it easier for banks to borrow from the Fed.

False

Before the 2007 financial​ crises, we would say that the banking system has ample reserves.

False

Crowding out makes it easier to estimate the actual multiplier effect.

False

If the Fed raises the required reserve​ ratio, liquid assets become scarcer and interest rates fall.

False

Inflation focuses on individual prices and not the price level as a whole.

False

Member banks cannot receive interest on reserves as they are unable to hold deposits at the Fed.

False

When reading about endogenous growth theory you will likely run into physical capital being referred to as ideas and knowledge capital being referred to as objects.

False

When the government starts running a larger​ deficit—which it does when it increases spending or decreases taxes​ (expansionary policy)—the supply curve shifts to the right and the interest rate increases.

False

What does the acronym FRED stand​ for?

Federal Reserve Economic Database

One definition of fiscal policy​ is:

Fiscal policy can be described as changes in government spending and taxes to achieve macroeconomic policy objectives.

frictional unemployment

Frictional unemployment is the result of voluntary employment transitions within an economy. Frictional unemployment naturally occurs, even in a growing, stable economy. Workers choosing to leave their jobs in search of new ones and workers entering the workforce for the first time constitute frictional unemployment.

Why is GDP an imperfect measurement of total production in the​ economy?

GDP does not include household production or production from the underground economy.

Which of the following is considered to be a problem in using GDP as a measure of national ​well-being​?

GDP does not include the value of leisure time

Even if GDP included these types of​ production, why would it still be an imperfect measure of economic​ well-being?

GDP is not adjusted for pollution and it does not account for unequal income distribution, GDP is not adjusted for crime or other social problems, The value of leisure is not included in GDP.

What happens if we measure GDP by adding up the value of every good and service produced in the​ economy?

GDP is overestimated because of double counting.

The term​ "crowding out" refers to a situation​ where:

Government spending increases interest rates and decreases private investment.

Which of the following is a way in which governments can directly promote savings and​ investment?

Governments can create tax incentives for both businesses and individuals.

GDP is an imperfect measure of economic​ well-being because it fails to measure what types of​ production?

Household production and the underground economy.

Which of the following is not a lag in fiscal policy we spoke about this​ week?

Information

When aggregate expenditure is equal to GDP​,

Inventories are unchanged, the economy is at economic equilibrium

Who is the current chairman of the Federal​ Reserve?

Jerome Powell

If the Fed thinks there needs to be more economic​ activity, they will want​ to:

Lower interes rates

Which of the following best explains what is actually happening to real per capita GDPs of​ countries?

Lower-income industrial countries are catching up with​ higher-income industrial countries.

If you think of the aggregate expenditure function as a line on the​ 45°-line diagram, the slope would be

MPC

The Fed buys bonds. This is an example of

Not a fiscal policy

The shoreline in New Jersey gets destroyed by a hurricane. The federal government increases spending to help rebuild. This is an example of

Not a fiscal policy

Which of the following is the correct formula for calculating the unemployment​ rate?

Number of employed/Labor force *100

When we talk about economic growth​ (increases in real GDP per​ capita), we can break it down into two​ sources: inputs and productivity. Which of the follow statements is​ true?

One way to increase productivity is to improve allocative efficiency.

What are the names of your​ professor, James​ Tierney's, two rescue​ dogs?

Penny​ & Dakota

How does real GDP deal with the problem inflation causes with nominal​ GDP?

Real GDP uses the prices of goods and services in the base year to calculate the value of goods in all other years, Real GDP separates price changes from quantity changes, By keeping prices​ constant, we know that changes in real GDP represent changes in the quantity of output produced.

Stagflation occurs when the price level​ _____ and output​ _____.

Rises, falls

A technological change will cause the​long-run aggregate supply curve to

Shift to the right

When interest rates​ fall, the aggregate expenditure​ function:

Shifts up

Which of the following best explains how and why the economy will adjust back to​ long-run equilibrium?

Short-run aggregate supply will increase​ (shift rightward) as the recession makes firms and workers willing to accept lower wages and prices.

Which celebrity did your​ professor, James​ Tierney, meet in the New Orleans​ Airport?

Snoop Dogg

structural unemployment

Structural unemployment is a form of involuntary unemployment caused by a mismatch between the skills that workers in the economy can offer, and the skills demanded of workers by employers.

Bob Wesley believes that structural unemployment should be eliminated in order for an economy to be healthy. In making this​ argument, which of the following relevant issues is he​ ignoring?

Structural unemployment will exist in an economy that is innovative.

Suppose that Sally J. Society recently lost her job as an underwater welder. In looking for a new​ job, she discovers that the only available jobs are for economists and that there are no openings for underwater welders because the trade is now obsolete. If Sally J. Society decides to return to school to earn an Economics​ degree, what is the best classification of her unemployment​ status?

Structurally unemployed

Refer to the diagram to the right. Currency speculators believe that the value of the Euro will increase relative to the dollar. Assuming all else remains​ constant, how would this be​ represented?

Supply would​ increase, demand would decrease and the economy moves from C to B to A.

For a country such as France which of the following statements is always​ true?

The balance of payments is zero.

What is the difference between the federal budget deficit and federal government​ debt?

The federal budget deficit is the​ year-to-year short fall in tax revenues relative to government spending ​ (T < G​ + TR), financed through government bonds. The federal government debt is the accumulation of all past deficits.

A way to achieve more economic growth is by increasing the knowledge capital of firms. Suppose policymakers wanted to assist in this increase. Which of the following policies would not​ help?

The government could reduce corporate tax rates for service and retail companies.

Which of the following is not a limitation to monetary policy mentioned in the​ lesson?

The information lag

The BLS collects price statistics from traditional​ full-price retail​ stores, which do not reflect the prices some consumers pay by shopping at discount stores or on the Internet. This is a description of which​ bias?

The outlet bias

What will be the effect of an increase in business taxes on the quantity of investment by firms and the​ economy's capital stock in the​ future?

The quantity of investment will decrease and the​ economy's future capital stock will decrease.

recognition lag

The time it takes for policy makers to recognize the existence of a boom or a slump.

How would it affect the unemployment rate if the Bureau of Labor Statistics counted as unemployed both​ (1) discouraged workers and​ (2) people who work​ part-time but would prefer to work​ full-time?

The unemployment rate would increase.

Before the Great​ Recession, almost all monetary policy in the U.S. was done through open market operations.

True

Crowding out is only when we see an increase in government​ purchases, not when we see a decrease.

True

Crowding​ out, with respect to fiscal​ policy, is when an increase in government purchases results in a decline in private expenditures.

True

Expansionary monetary policy results in lower interest rates.

True

If inflation is unexpectedly​ high, borrowers will benefit and lenders will be harmed.

True

Interest on reserves applies to both required reserves​ (IORR) and excess reserves​ (IOER).

True

Lower interest rates will increase economic activity.

True

Open market purchases will add liquid assets to the system and cause interest rates to fall.

True

The unemployment rate never reaches​ 0%

True

When interest rates​ rise, the dollar will become stronger​ (appreciate).

True

When incomes rise faster in the United States than in other​ countries,

U.S. net exports will fall.

Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the​ next?

When nominal GDP increases from year to​ year, the increase is due partly to changes in prices and partly to changes in quantities.

In the aggregate expenditure​ model, when is planned investment greater than actual​ investment

When there is an unplanned decrease in inventories.

Which equation represents the relationship between GDP and the four major expenditure​ components?

Y= C+ I+G+NX

Suppose that the inflation rate turns out to be much lower than most people expected. In that​ case

a borrower will lose from the situation while a lender will gain

Which of the following factors does not cause the aggregate demand curve to​ shift?

a change in the price level

The​ international-trade effect refers to the fact that an increase in the price level will result in

a decrease in exports and an increase in imports.

Which of the following is an example of an expansionary fiscal​ policy?

a decrease in taxes

A recession occurs when an economy experiences a period in which there is

a decrease in total production.

Suppose that you are available to go to work but have not looked for a job for at least the last four weeks because you believe that there​ aren't any jobs available. You would be counted as

a discouraged worker.

If the government cuts taxes in order to increase aggregate​ demand, the action is called

a discretionary fiscal policy.

Payroll taxes were temporary cut by Congress and the president. This is an example of

a discretionary fiscal policy.

When a local restaurant accepts your​ $20 bill when you purchase a​ to-go order of​ pasta, the​ $20 bill serves​ as:

a medium of exchange

Your university gives you an education each year in exchange for money in the future through student loans. This illustrates which function of​ money?

a standard of deferred payment

If whole avocados were used as a​ society's money, which of the following functions would be the hardest to​ satisfy?

a store of value

The​ statement, "A burrito at the student center on campus is only​ $5!" represents​ money's function as

a unit of account

Which of the following events would cause an increase in short−run aggregate supply​?

am improvements in technology

The revenue the federal government collects from the individual income tax declines during a recession. This is an example of

an automatic stabilizer.

Total unemployment insurance increases during an recession. This is an example of

an automatic stabilizer.

The multiplier effect is the process by​ which:

an increase in autonomous expenditure leads to a larger increase in real GDP.

Which of the following events would cause a decrease in aggregate demand​?

an increase in taxes

Which of the following events would cause an increase in long−run aggregate supply​?

an increase in the capital stock

Government spending and taxes that change without actions by the government are called

automatic stabilizers.

Some economies are able to maintain high growth rates despite diminishing returns to capital by using

better or enhanced​ technology, along with accumulating​ capital; these economies are growing because​ technology, unlike​ capital, is subject to increasing returns.

How can government policies shift the aggregate demand curve to the​ right?

by increasing government purchases

Which of the following is true about the Federal Reserve and its ability to prevent​ recessions? The Federal Reserve

cannot realistically fine tune the​ economy, but seeks to keep recessions shorter and milder than they would otherwise be.

An average of the prices of the goods and services purchased by a typical family is​ the:

consumer price index​ (CPI).

Unemployment data comes out the following month and is revised twice. GDP data takes several months to come out and also goes through revisions. Because of​ this, we see a​ ______ when it comes to monetary policy.

data lag

An increase in the interest rate should

decrease consumption spending.

Holding all else​ constant, a federal government budget deficit will

decrease the supply of loanable funds and increase the equilibrium real interest rate.

The LRAS curve is

determined by the number of​ workers, the amount of​ capital, and the available technology.

Monetary policy​ _______ are willing to sacrifice higher inflation for lower levels of unemployment.

doves

Monetary policy​ _______ would shift aggregate demand to the right when an economy is experiencing stagflation.

doves

The base interest rate in the US is called​ the:

federal funds rate

The new growth theory states that

firms will add to an​ economy's stock of knowledge capital by engaging in research and development or by contributing to technological change.

The interest rate effect refers to the fact that a higher price level results in

higher interest rates and lower investment.

If inflation in the United States is lower than inflation in other​ countries, then U.S. exports​ ________ and U.S. imports​ ________, which​ _________ net exports.

increase; decrease; increases

When households increase their consumption in anticipation of future tax​ decreases, all of the following​ hold, except that

investment increase

Which of the following would be most likely to induce the Federal Reserve to conduct expansionary monetary​ policy? A significant decrease in

investment spending

The rule of 70

is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to double.

The real interest rate

is equal to the nominal interest rate minus the inflation rate.

The unemployment rate that includes discouraged workers and people working​ part-time who would prefer​ full-time jobs

is higher than the official unemployment​ rate, and the difference between the two grows larger in recessions

Which of the following will cause interest rates to​ fall?

lowering the discount rate, lowering the required reserve ratio

The difference between microeconomics and macroeconomics is

microeconomics studies smaller parts of the economy such as markets and​ individuals, while macroeconomics studies the economy as a whole.

information lag

most data that policymakers need are not available until at least one quarter after the fact

The current account records

net​ exports, net investment​ income, and net transfers.

The government increases gasoline mileage requirement for new cars to try and help with the environment. This is an example of

not a fiscal policy

Imagine a 45°​-line ​(Keynesian cross) diagram in which the​ upward-sloping aggregate expenditure curve intersects the 45°​-line at point A. In the​ graph, a point where inventories are falling would be plotted

on the AE line to the left of point A.

If the GDP deflator in 2012 has a value of​ 98.0, then

prices have decreased 2 percent between the base year and 2012.

When the economy returns to​ long-run equilibrium​ again,

real​ GDP, the unemployment​ rate, and the price level will be the same as the initial equilibrium values prior to the increase in the price of oil.

Sometimes, the inflation rate may be stable and the unemployment rate may be going up just slightly.​ It's tough to know if the economy is in a recession or not. This is an example of​ the:

recognition lag.

Higher interest rates​ will:

shift the aggregate demand curve to the left.

Expansionary monetary policy​ will:

shift the aggregate demand curve to the right.

The type of unemployment most likely to result in hardship for the people who are unemployed is

structural because this type of unemployment requires retraining to acquire new job skills.

Monetary policy in the US is conducted​ by:

the Federal Reserve.

The new growth theory differs from the growth theory developed by Robert​ Solow, since

the Solow growth theory focuses on technological change and the quantity of capital available to workers whereas the new growth theory states that accumulation of knowledge capital is a key determinant of economic growth.

The balance of payments is equal to

the current account plus the financial account.

Macroeconomics is the study of

the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

the part of the balance of payments that records purchases of assets a country has made abroad and foreign purchases of assets in the country is called

the financial accounts

Which of the following sets a ceiling on the federal funds​ rate?

the interest paid on reserves

In determining whether to borrow​ funds, firms compare the rate of return they expect to make on an investment with

the interest rate they must pay to borrow the necessary funds.

The difference between the nominal interest rate and the real interest rate is

the nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest rate minus the inflation rate.

The federal funds rate​ is:

the overnight interest rate banks pay to borrow funds from each other.

Which of the following is included in the​ economist's definition of​ investment?

the purchase of new​ machines, factories, or houses

Changes in the CPI overstate the true inflation rate due to four​ "biases." If apple prices rise rapidly during the month while orange prices​ fall, consumers will reduce their apple purchases and increase their orange purchases. Which of the four biases is concerned with this consumer​ behavior?

the substitution bias

Data lag

the time it takes for policy makers to obtain data indicating what is happening in the economy

implementation lag

the time it takes to put the desired policy into effect once economists and policy makers recognize that the economy is in a boom or a slump

Which of the following factors determines the supply of loanable​ funds?

the willingness of households and governments to save

f the price level​ increases, then

there will be a movement up along a stationary aggregate demand curve.

Why do few economists argue that it would be a good idea to balance the federal budget every​ year?

to keep a balanced budget during a​ recession, taxes would have to increase and government expenditures would have to​ decrease, which would further reduce aggregate demand and deepen the recession.

The business cycle exists because

total production experiences periods of increases and periods of decreases.

Transfer payments are not included in GDP calculations because

transfer payments are simply transfers of income from one group to another and not a purchase of a new good or service.

When the economy is experiencing an expansion automatic stabilizers will​ cause:

transfer payments to decrease and tax revenues to increase.

When the economy is experiencing a recession automatic stabilizers will​ cause:

transfer payments to increase and tax revenues to decrease.

Member banks receive interest on reserves as they are able to hold deposits at the Fed.

true

The reverse repurchasing rate is around because of primary dealers who are unable to hold deoposits at the Fed.

true

The aggregate expenditures line will be

upward sloping with a flatter slope than the 45°​-line.

If the Fed believes the economy is about to fall into​ recession, it should

use an expansionary monetary policy to lower the interest rate and shift AD to the right.

The LRAS is

vertical because in the long​ run, changes in the price level do not affect potential​ GDP, as potential GDP depends on the size of the labor​ force, capital​ stock, and technology.

The macroeconomic equilibrium will be

where the AE line intersects the 45°​-line.

The three types of unemployment are

​frictional, structural, and cyclical unemploment.

When the Fed takes​ action, if there are​ _______ reserves in the​ system, interest rates will​ ______.

​less; rise