Econ Macro Final Chapters 9-17

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Refer to the diagram to the right. Which of the points in the above graph are possible long run​ equilibria?

Any points that are on the vertical LRAS line

The Congressional Budget Office reported that federal budget deficits in the United States were likely to increase during the next​ decade, and due to these higher​ deficits, "the​ nation's capital stock ultimately would be​ smaller, and productivity and income would be lower than would be the case if the debt was​ smaller." This higher budget deficit would be represented graphically by

a shift in the supply curve for loanable funds to the left

Which of the following would make gold a poor medium of exchange?

a supply that would be difficult to control because of the unpredictability of new gold discoveries

The level of long−run aggregate supply is affected by all of the following except A. changes in the number of workers. B. changes in the capital stock. C. changes in the technology. D. changes in the price level.

D. Changes in the price level

Expansionary monetary policy refers to the ________ to increase real GDP.

Federal Reserve's increasing the money supply and decreasing interest rates.

In a small economy in​ 2022, aggregate expenditure was​ $800 million while GDP that year was​ $850 million. Which of the following can explain the difference between aggregate expenditure and GDP that​ year?

Firm investment in inventories was grater than anticipated in 2022

Refer to the figure. Suppose the Fed lowers its target for the federal funds rate. Using the basic AD-AS model in the​ figure, this situation would be depicted as a movement from Part 2

From A to B

How to find T if not provided

G + TR

Consumption. Disposable Income ​$1,200. $3,000 ​2,100. 4,000 ​3,000. 5,000 Given the consumption schedule in the table​ above, the marginal propensity to save is

The answer is 0.1 because you need to do change in savings divided by change in income so you would need to do 3,000 - 1200 , 4000 - 2100, and 5000 - 3000 and you would get 1800, 1900, and 2000 which they are 100 apart so you then would do the difference in disposable income which is 100 and then you would do 100 / 1000 to get an MPS of .1

During an​ expansion, how do inflation and unemployment typically​ change?

Inflation rises and unemployment falls

If aggregate expenditure is greater than​ GDP, how will the economy reach macroeconomic​ equilibrium?

Inventories will decline and GDP and employment will rise.

In a closed economy, what is the relationship between saving and investment

Investment is equal to saving

To find the maximum loan of something ex: with required reserve ratio of 10% Assets Liabilities Reserves: + $8,000 Deposits: + $8,000 Refer to the table above. Suppose a transaction changes a​ bank's balance sheet as indicated in the following T−​account, and the required reserve ratio is 10 percent. As a result of the​ transaction, the bank can make a maximum loan of

So first you would need to find the minimum of the ration which would be Reserve = Deposit x Required reserve ration so it would be 8,000 x 10% = 800 (minimum) Then you would do Loan = Deposit - Required Reserve So it would be 8,000 - 800 = $7,200 (which is the answer)

Imagine that Kristy deposits​ $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is​ 20%. Refer to the scenario above. As a result of​ Kristy's deposit, Bank​ A's reserves immediately increase by

Since it is asking what she immediately increases by the answer would just be $10,000

If the government purchases multiplier equals​ 2, and real GDP is​ $14 trillion with potential real GDP​ $14.5 trillion, then government purchases would need to increase by​ ________ to restore the economy to potential real GDP.

So what you want to do here is 14.5 - 14 which equals .5 then you want to do 500 divided by 2 because .5 trillion = 500 billion and then the answer is 250.

Why does the short run aggregate supply curve shift to the right in the long​ run, following a decrease in aggregate​ demand?

Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices

In a closed​ economy, private saving is equal to which of the​ following? ​ (Y =​ GDP, C​ = Consumption, G​ = Government​ purchases, T​ = Taxes, and TR​ = Transfers)

Y - C - T + TR

Private Savings Formula

Y - C - T + TR

If real GDP per capita measured in 2009 dollars was​ $6,000 in 1950 and​ $48,000 in​ 2022, we would say that in​ 2022, the average American could buy​ ________ times as many goods and services as the average American in 1950.

You just do the New divided by the old and then that is the number which would be 8

According to the short−run Phillips​ curve, which of the following would result in low rates of​ unemployment?

a higher inflation rate

An increase in the interest rate causes

a movement up along the money demand curve.

Using the quantity equation, if the velocity of money grows 5 percent, the money supply grows 10 percent, and real GDP grows at 4 percent, then the inflation rate would be

So you want to use the equation M + V = P + Y So if you fill that in you get 10 + 5 = P + 4 15 = P + 4 P = 11 (which is the answer because P = Inflation)

Consider the following data for a closed​ economy: Y​ = $12 trillion C​ = $8 trillion I​= $2 trillion G​ = $2 trillion TR​ = $2 trillion T​ = $3 trillion Refer to the scenario above. Based on the information​ above, what is the level of public​ saving? What is the public savings formula?

T - G - TR negative $1 trillion (a deficit of $1 trillion)

When the government runs a​ deficit, which of the following is​ true?

T < G + TR

Which of the following is a true statement regarding the economic growth​ model's predictions and how it actually affects the real​ world?

Te growth model predicts that poor countries should catch up with rich countries, but developing countries are not catching up to lower --- income industrialized countries as a group

A higher inflation rate can lead to lower unemployment if​ ________ mistakenly expect the inflation rate to be lower than it turns out to be.

both workers and employers

Economies where goods and services are traded directly for other goods and services are called _________ economies.

barter economies

The substitution bias in the consumer price index refers to the idea that consumers​ ______ the quantity of products they buy in response to​ price, and the CPI does not reflect this and​ ________ the cost of the market basket.

change; over estimates

A good can serve as money only if

citizens accept the good as a means of payment for transactions and debts.

Silver is an example of a

commodity money

Which of the following price indices comes closest to measuring the cost of living of the typical​ household?

consumer price index

Which of the following is counted as a liability for a bank?

customer deposits

When housing prices​ fall, as they did beginning in 2006 following the housing market​ bubble, consumption spending on​ furniture, appliances, and home improvements​ ________ as many households found it​ ________ to borrow against the value of their homes.

declined; harder

If the price level rose in three consecutive years from 100 to 120 to​ 140, then the annual inflation rate over those years would

decrease because you do 120 - 100 / 100 then 140 - 120 / 120 then compare if the second one is smaller than it is a decrease.

In the dynamic model of AD−AS in the diagram to the​ right, if the economy is at point A in year 1 and is expected to go to point B in year​ 2, the Federal Reserve would most likely

decrease interest rates because point B has a higher price level than point A

To combat a recession with discretionary fiscal​ policy, Congress and the president should

decrease taxes to increase consumer disposable income

An increase in the price level results in​ a(n) ___________ in the quantity of real GDP demanded because​ ___________.

decrease; a higher price level reduces consumption, investment, and net exports

Last​ week, six Swedish kronor could purchase one U.S. dollar. This​ week, it takes eight Swedish kronor to purchase one U.S. dollar. This change in the value of the dollar will​ _____________ exports from the U.S. to Sweden and​ __________ U.S. aggregate demand.

decrease; decrease

If technological change increases the profitability of new investment for​ firms, then the​ ________ curve for loanable funds will shift to the​ ________ and the equilibrium real interest rate will​ ________.

demand; right; rise

Active changes in tax and spending by government intended to smooth out the business cycle are called​ ________, and changes in taxes and spending that occur passively over the business cycle are called​ ________.

discretionary fiscal policy; automatic stabilizers

Technological improvements are more likely to occur if

entrepreneurs are compensated for taking risks with higher profits.

The tax multiplier equals the change in​ ________ divided by the change in​ ________.

equilibrium real GDP; taxes

An increase in aggregate demand results in​ a(n) ________ in the​ ________.

expansion; short run

The actual real wage is lower than the expected real wage if

expected inflation is less than actual inflation

In the graph to the​ right, suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B. Which of the following policies could Congress and the president use to move the economy to point C​?

increase government purchases

In the graph to the​ right, suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B. Which of the following policies could Congress and the president use to move the economy to point C​? Switch points B and C on the graph

increase income taxes

From an initial long−run macroeconomic​ equilibrium, if the Federal Reserve anticipated that next year aggregate demand would grow significantly faster than long−run aggregate​ supply, then the Federal Reserve would most likely

increase interest rates

increases in price level

increase the quantity of money needed for buying and selling

An increase in the interest rate should _______ the demand for dollars and the value of the dollar, and net exports should _________.

increase; decrease

Suppose the government wants to maintain a balanced budget. To achieve this​ goal, when the economy falls into recession government would need to​ ________ taxes, which would cause aggregate demand to​ ________.

increase; decrease

A policy that offers parents a tax reduction based on how much they are saving for their​ children's college education should​ _________ the equilibrium level of loanable funds and​ _____________ the rate of long term growth.

increase; increase

Tax reduction and simplification should​ ________ long−run aggregate supply and​ ________ aggregate demand.

increase; increase

A recession tends to cause the federal budget deficit to​ ________ because tax revenues​ ________ and government spending on transfer payments​ _________.

increase; rise; fall

During the recession phase of the business​ cycle,

interest rates are usually falling

Goods that have been produced but not yet sold are referred to as

inventories

The cost to firms of changing prices

is called a menu price

The federal funds rate

is determined by the supply and demand for bank reserves

if the point is on the long run Phillips curve we can insist that

it is the point where the unemployment rate equals the natural unemployment rate.

Refer to the diagram to the right. Based on the​ per-worker production​ function, if the economy raises capital per hour worked from​ $35,000 to​ $40,000, by how much will real GDP per hour worked​ increase?

just read the graph should be an easy question but the answer would be 150 because the ya axis is Real GDP and not the x axis.

Your grandfather tells you that he earned​ $7,000 per year in his first job in 1961. You earn​ $35,000 per year in your first job in 2022. You know that average prices have risen steadily since 1961. You earn

less than 5 times are much as your grandfather in terms of real income

Which of the following is an asset for the bank?

loans

When the economy enters a​ recession, your employer is unlikely to reduce your wages because​ ________ during a recession.

lower wages increase your incentive to find employment elsewhere

Contractionary fiscal policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be​ ________ and real GDP to be​ _________.

lower; lower

When a grocery store accepts your $5 bill in exchange for bread and milk, the $5 bill serves as a

medium of exchange

Rising Prices erode the value of money as a _______ and as a _________.

medium of exchange; store of value

The real interest rate equals the nominal interest rate​ ________ the inflation rate.

minus

The quantity theory of money predicts​ that, in the long​ run, inflation results from the

money supply growing at a faster rate than real GDP

According to the quantity theory of money, deflation will occur if the

money supply grows at a slower rate than real GDP

The quantity equation states that the

money supply times the velocity of money equals the price level times real output.

If wages and prices adjust slowly, we would expect expansionary monetary policy to be

more likely to affect the unemployment rate.

Since​ 1900, real GDP in the U.S. has grown

more rapidly than the population

It is​ ________ difficult to effectively time fiscal policy than monetary policy because​ ________.

more; fiscal policy takes longer to implement

An increase in the price level will

move the economy up along a stationary aggregate demand curve

An increase in the price level will

move the economy up along a stationary short run aggregate supply curve

If households in the economy decide to take money out of checking account deposits and hold it as​ currency, this will initially

not change M1 and not change M2

If credit card balances rise in the economy, then M1 will ________ and M2 will _________.

not change; not change

If you transfer all of your currency to your checking account, then initially, M1 will _______ and M2 will ________.

not change; not change

Which of the following would most likely suffer the least from the costs of​ inflation?

persons whose income rises more rapidly than inflation

Crowding out refers to a decline in​ ________ as a result of an increase in​ ________.

private expenditures; government purchases

In the figure on the​ right, if the economy in Year 1 is at point A and is expected in Year 2 to be at point B​, then the appropriate monetary policy by the Federal Reserve would be to

raise interest rates because B has a higher price level than A

Enforcing property rights in an economy will

raise the level of investment

Year Potential Real GDP Real GDP Price Level 2022. $18.0 trillion. $18.0 trillion. 150 2023. $18.5 trillion. $18.8 trillion. 154 Consider the hypothetical information in the table for potential real​ GDP, real​ GDP, and the price level in 2022 and in 2023 if Congress and the president do not use fiscal policy. If Congress and the president use fiscal policy successfully to keep real GDP at its potential level in​ 2023, which of the following will be lower than if Congress and the president had taken no​ action?

real GDP and the inflation rate

Year. Potential Real GDP. Real GDP. Price Level 2022. $18.0 trillion. $18.0 trillion. 150 2023. $18.5 trillion. $18.2 trillion. 152 Consider the hypothetical information in the table for potential real​ GDP, real​ GDP, and the price level in 2022 and in 2023 if Congress and the president do not use fiscal policy. If Congress and the president use fiscal policy successfully to keep real GDP at its potential level in​ 2023, which of the following will be higher than if Congress and the president had taken no​ action?

real GDP and the inflation rate

A decrease in aggregate demand causes a decrease in​ ________ only in the short​ run, but causes a decrease in​ ________ in both the short run and the long run.

real GDP; the price level

If real GDP per capita in the United States is​ $8,000, what will real GDP per capita in the United States be after 5 years at an annual growth rate of​ 3.2%?

the formula should be 8,000(1 + 3.2/100)^5 and the answer would be 9,365

U.S. net export spending rises when

the growth rate of the U.S. GDP is slower than the growth rate of GDP in other countries

In the long run, the Federal Reserve can control which of the following?

the inflation rate

What two factors are the keys to determining labor​ productivity?

the level of technology and quantity of capital per hour worked

Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a​ result,

the long run aggregate supply curve will shift to the right

If stricter immigration laws are imposed and many foreign workers in the United States are forced to go back to their home​ countries,

the long-run aggregate supply curve will shift to the left.

The Federal Reserve's two main monetary policy targets are

the money supply and interest rates

The real interest rate is equal to​ ________.

the nominal interest rate adjusted for inflation

The rule of 70 states that

the number of years it takes an economy to double in size is 70 divided by the growth rate.

The major shortcoming of a barter economy is

the requirement of a double coincidence of wants

Workers and firms both expect that prices will be​ 3% higher next year than they are this year. As a​ result,

the short -- run aggregate supply curve will shift to the left as wages increase.

Suppose the Fed used expansionary policy to push​ short-run equilibrium to point B. If the​ short-run equilibrium remained at point B long​ enough, (point B is at the top of the graph not on the long run Phillips curve)

the short-run Phillips curve would shift up

The more excess reserves banks choose to keep

the smaller the deposit multiplier.

Which of the following is an example of discretionary fiscal policy?

the tax cuts passed by Congress in 2001 to combat the recession

What is the natural rate of unemployment?

the unemployment rate that exists when the economy is at potential GDP

Deflation occurs when

there is a decline in the price level

If inflation is positive and is perfectly​ anticipated,

those that hold paper money lose

You earned​ $30,000 in​ 2015, and your salary rose to​ $80,000 in 2022. If the CPI rose from 82 to 202 between 2015 and​ 2022, which of the following is true​?

to figure it out you do new CPI - Old and then multiply that number by the original salary you earned and if that number is higher than your new salary then you lost money but if it is lower than your new salary increased

At macroeconomic​ equilibrium,

total spending equals total production.

The largest fastest growing category of federal government expenditures is

transfer payments

Typically, as an economy begins to emerge from a recessionary phase of the business​ cycle, Part 2

unemployment continues to rise

In the long​ run,

unemployment is at its natural rate.

If the Fed's policy is contractionary, it will

use open market operations to sell Treasury bills.

Bank reserves include

vault cash and deposits with the federal reserve.

In the long​ run, the Phillips curve is a​ ________ at​ ________.

vertical line; the natural rate of unemployment

Which of the following is a function that money serves?

All of the above, which is unit of account, store of value, and a medium of exchange

Suppose that real GDP for 2021 was​ $10,000 billion and real GDP for 2022 was​ $11,000 billion. What is the rate of growth of real GDP between 2021 and​ 2022?

11,000 - 10000 / 10000 = 10%

If the required reserve ratio is 5 percent, then the simple deposit multiplier is

20 so to understand that its basically like if you have 100 x 5% you get 5 and what times that number would equal 100 which is 20 so that would be the deposit multiplier.

If the growth rate of real GDP rises from​ 3% to​ 4% per​ year, then the number of years required to double real GDP will decrease from

23.3 years to 17.5 because you just do 70 divided by 3 and then 4

Consumption spending is​ $5 million, planned investment spending is​ $8 million, unplanned investment spending is​ $2 million, government purchases are​ $10 million, and net export spending is​ $2 million. What is​ GDP?

27 because GDP = C + I + G + NX

​If, in a closed​ economy, real GDP is​ $30 billion, consumption is​ $20 billion, and government purchases are​ $5 billion, what is total saving in the​ economy?

5 billion

Refer to the figure. Suppose the economy is in​ short-run equilibrium below potential GDP and Congress and the president lower taxes to move the economy back to​ long-run equilibrium. Using the basic AD-AS model in the​ figure, this would be depicted as a movement from

A to B

Refer to the figure. Suppose the economy is in a recession and no policy is pursued. Using the basic AD-AS model in the​ figure, this situation would be depicted as a movement from

A to E which would be a lower price level on the AD curve and increased GDP

Which of the following is one of the most important benefits of money in an economy? A. Money makes exchange​ easier, leading to more specialization and higher productivity. This is the correct answer. B. Money allows for the accumulation of wealth. C. Money encourages people to produce all of their own goods ​(self−​sufficiency) and therefore increases economic stability. D. Money allows for the exchange of goods and services.

A. Money makes exchange easier, leading to more specialization and higher productivity.

Consumption spending is​ $22 million, planned investment spending is​ $7 million, actual investment spending is​ $7 million, government purchases are​ $9 million, and net export spending is​ $3 million. Based on this​ information, which of the following is​ true?

Aggregate expenditure is equal to GDP. Aggregate expenditure + GDP = C + I + G + NX

If firms find that consumers are purchasing more than​ expected, which of the following would you​ expect?

Aggregate expenditure will likely be grater than GDP

Which of the following best describes how banks create money?

Banks create checking account deposits when making loans from excess reserves.

________ are financial securities that represent promises to repay a fixed amount of funds.

Bonds

Refer to the figure. Suppose the economy is in​ short-run equilibrium above potential GDP and wages and prices are rising. If contractionary policy is used to move the economy back to​ long-run equilibrium, this would be depicted as a movement from​ _______ using the basic AD-AS model in the figure.

C to B

Refer to the figure. Suppose the economy is in​ short-run equilibrium above potential​ GDP, the unemployment rate is very​ low, and wages and prices are rising. Using the basic AD-AS model in the​ figure, the correct Fed policy for this situation would be depicted as a movement from

C to B, which would be a decrease in price level on SRAS and decrease of Real GDP

The Soviet​ Union's economy grew rapidly in terms of GDP per hour worked in the​ 1950s, but eventually this growth slowed. Why did this​ occur?

Capital per hour worked grew rapidly from 1950 to 1980, but technological change occurred very slowly.

All of the following are components of aggregate expenditure except A. government spending. Your answer is not correct. B. net export spending. C. consumption spending. D.actual investment spending.

D. actual investment spending.

Monetary policy refers to the actions the

Federal Reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives.

Which of the following is not one of the key services provided by the financial​ system?

Generating information, liquidity, and risk sharing are all provided by the financial system decreasing taxes

​________ is defined as the value of a​ household's assets minus the value of its liabilities.

Household wealth

In a closed​ economy,

I = Y - C - G

Given the following economic​ data, what is the value of investment in a closed​ economy? Also What is the investment formula Y​ = $10 trillion C​ = $5 trillion TR​ = $2 trillion G​ = $2 trillion

I = Y - C - G 3 trillion

With a required reserve ratio of 20 percent, an increase in reserves of 10,000 could lead to a maximum increase in checking account deposits in the entire banking system of

In this problem you just do the increase in reserves divided by the reserve ratio to find the entire banking system so it would be 10,000 / .20 which = $50,000 (which is the answer)

Suppose you withdraw​ $500 from your checking account and bury it in a jar in your backyard. If the required reserve ratio is 10​ percent, checking account deposits in the banking system as a whole would drop up by a maximum of

Key word is drop so you would do 500 / .10 which would be $5,000

The most liquid measure of money supply is

M1

How to calculate inflation rates

New - Old / Old

Real GDP ​(Billions of 2000​ dollars) 2019. $8,700 2020. $8,875 2021. ​$9,000 2022 $9,280 Using the​ table, what is the approximate average annual growth rate from 2019 to​ 2022?

New / Old - 1 x 100 for each of the terms than divide by three to get the average annual growth ate which would be 2 %

How to calculate cost of living percentage

New CPI - Old CPI divided by Old CPI times 100 Example: 2021: CPI 100 2022: CPI 113 113 - 100 / 100 = 13%

How to calculate CPI with Market Expenditure

New expenditure divided by old expenditure x 100

When the point is lower than the original point on the supply curve we can concur that

New government regulations decrease the profitability of new investment.

How to find real average earnings

Nominal Average times percentage of CPI then do New - Old divided by Old wages to get the answer Example: Year Nominal Average Hourly Earnings CPI ​(1982−1984=​100) 1965 ​$2.65 32 2010 22.59 219 Answer: (1965) 2.65 x .32 = 8.28125 (2010) 22.59 x 2.19 = 10.31506849 2010 - 1965 / 1965 = 24.6%

If firms and workers have rational​ expectations, an expansionary monetary policy will cause the​ short-run Phillips curve to move from, (the graph is a long run and short run Phillips curve with Point B on the far left and the equilibrium at point A and above point A is point C which is not on the short run curve)

Point A to C

If firms and workers have adaptive​ expectations, an expansionary monetary policy will cause the​ short-run equilibrium to move from

Point A to Point B

Refer to the figure. Suppose that the economy is currently at point A. If the Federal Reserve engaged in contractionary monetary​ policy, where would the economy end up in the short​ run? (point C is above on the same line and Point B is below on the same line)

Point B because you want to get lower inflation rates.

Employees at the university have negotiated a 5 percent increase in wages for the next​ year, based on their inflation expectations. If inflation is actually 4 percent over the next​ year, which of the following will​ occur?

Real wages for the university employees will rise.

Suppose the economy is at a​ short-run equilibrium GDP that lies below potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential​ GDP?

Short-run aggregate supply will shift to the right

​________ describes the relationship between consumption spending and disposable income.

The consumption function

Suppose the economy is at point B in the figure. Which of the following is true​? We could assume that Point A which falls on the long run curve is the expected point

The expected rate of inflation is 3%

You agree to lend​ $1,000 for one year at a nominal interest rate of​ 10%. You anticipate that inflation will be​ 4% over that year. If inflation is instead​ 3% over that​ year, which of the following is​ true?

The person who borrowed the $1,000 will be worse off as a result of the unanticipated decrease in inflation

Between 2021 and​ 2022, the CPI of a small nation rose from 182 to 185. If household incomes rose by​ 3% during that period of​ time, which of the following is true​?

The purchasing power of household income rose between 2021 and 2022

When aggregate expenditure is less than​ GDP, which of the following is​ true?

There was na unplanned increase in inventories

How do lower taxes affect aggregate​ demand?

They increase disposable income, consumption, and aggregate demand.

If disposable income increases by​ $100 million, and consumption increases by​ $90 million, then the marginal propensity to consume is

To find marginal propensity in this you just do 90 / 100 and then you get the answer which is .9

Currency ​$1,000 Checking Account Balances ​2,000 Savings Account Balances ​ 5,000 ​Small-Denomination Time Deposits ​ 6,000 Non-institutional Money Market Fund Shares ​ 7,000 Consider the information in the scenario above for a simple economy. M2 in this simple economy equals A. ​$8,000. B. ​$21,000. C. ​$14,000. D. ​$3,000.

What you need to know for this problem is that M1 = Currency + Checking Account Balances = $1,000 + $2,000 = $3,000, and M2 = M1 + Savings Account Balances + Small Denomination Time Deposits + Non-institutional Money Market Fund Shares, which is $3,000 + $5,000 + $6,000 + $7,000 = $21,000

Consider the following T−account for National City​ Bank: Assets Liabilities Reserves ​ $10,000 Deposits ​ $100,000 Loans ​ $90,000 If the required reserve ratio is lowered to 8​ percent, how much can National City loan​ out?

What you want to do here is do 10,000 time .8 then subtract that by 10,000 so you get 10,000 x .8 = 8,000 10,000 - 8,000 = 2,000 which is the answer

If there is a change in the ability of a firm to produce a given level of output with a given level of​ inputs, we say there is

technological change

The broadest measure of the price level that includes all final goods and services is

the GDP deflator

What is human capital?

accumulated knowledge and skills acquired by a worker

Short−run macroeconomic equilibrium occurs when

aggregate demand and short -- run aggregate supply intersect

If the Fed pursues expansionary monetary policy,

aggregate demand will rise, and the price level will rise

Firms in a small economy anticipated that inventories would grow over the past year by​ $500,000. Over that​ year, inventories did grow by exactly​ $500,000. This implies that

aggregate expenditure that year was equal to GDP that year.

Firms in a small economy anticipated that inventories would grow over the past year by​ $500,000. Over that​ year, inventories actually grew by only​ $400,000. This implies that

aggregate expenditure that year was grater than GDP that year.

Investment spending increases during​ ________, and decreases during​ ________.

an expansion; a recession

Which of the following will raise consumer​ expenditures?

an increase in expected future income

If aggregate demand just​ increased, which of the following may have caused the​ increase?

an increase in government purchases

In the figure to the​ right, the movement from point A to point B in the money market would be caused by (no change in quantity of money)

an increase in the price level because the quantity of money remained the same and the interest rate increased

An increase in the real interest rate results in which of the​ following?

an increase in the quantity of loanable funds supplied

In the figure to the​ right, the movement from point A to point B in the money market would be caused by

an open market sale of Treasury securities by the Federal Reserve. because the new MS line has a greater quantity of money and a lower interest rate

Which of the following goods would see the largest decline in demand during a​ recession?

automobiles

An economic growth model

explains changes in real GDP per capita in the long run

If your nominal wage rises more slowly than the price​ level, we can say your real wage has​ ________ and the purchasing power of a dollar has​ ________.

fallen, fallen

Actual real GDP will be above potential GDP if

firms are producing above capacity.

When firms benefit from the results of research and development they​ didn't pay​ for, we say firms

free ride

Which of the following would contribute to a sustained high rate of economic growth in the long run in an​ economy?

growth in capital per hour worked accompanied by technological change

Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be​ ________ and real GDP to be​ ________.

higher; lower

If the MPC is​ 0.95, then a​ $10 million increase in disposable income will

increase consumption by 9.5 million

If the economy is growing beyond potential real​ GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long−run aggregate​ supply? An increase in

taxes

When banks gain ________, they can ________ their loans; and the money supply ________.

reserves; increase; expands

A decrease in expected inflation will

shift the short-run Phillips curve to the left

The aggregate expenditure model focuses on the​ _____________ relationship between real spending and​ ______.

short -- run; real GDP

The basic aggregate demand and aggregate supply curve model helps explain​ ________ fluctuations in real GDP and the price level.

short -- term

The long run adjustment to a negative supply shock results in

short run aggregate supply shifting to the right

If the tax multiplier is -1.5 and a​ $200 billion tax increase is​ implemented, what is the change in​ GDP, holding all else​ constant? (Assume the price level stays​ constant.)

so when the tax multiplier is negative you just want to multiply it by the tax increase so it would be 200 x 1.5 which would equal 300

One difference between stocks and bonds is that

stocks do not involve a promise to repay a purchaser of the stock, while bonds represent a promise to repay the purchase price of the bond

Which of the following functions of money would be violated if inflation were high?

store of value

If whole tomatoes were money, which of the following functions of money would be the hardest for tomatoes to satisfy?

store of value because they can go bad


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