Economics final review
the labor force includes
employed workers and persons who are officially enemployed
the amount that a commercial bank can lend is determined by its:
excess reserves
net export:
exports less imports
most modern banking systems are based on:
fractional reserves
search unemployment and wait unemployment are types of
frictional unemployment
a nation'g gross domestic product (GDP):
is the dollar value of the total output produced within the borders of the nation
which of the fallowing is not part of the m2 money supply? a) money market mutual fund balances b) money market deposit accounts c) currency d) large (100,000 or more) time deposits
large (100,000 or more) time deposits
the rate of inflation can be found by subtracting
last years price index from this years price index and dividing the difference by last years price index
currency in circulation is part of:
m1, m2, and m3
the presence of discouraged workers:
may cause the official unemployment rate to understate the amount of unemployment
the transactions demand for money is most closely related to money functioning as a:
medium of exchange
the GDP is the:
monetary value of all final goods and services produced within a nation in a particular year
fiat money is:
money because the government asserts that it is
credit card balances are:
not a component of m1, m2, and m3
in calculating GDP, governmental transfer payments, such as social security of unemployment compenstation are:
not counted
demand-pull inflation
occurs when total spending exceeds the economy's ability to provide output at the existing price level
the unemployment rate is the:
percentage of the labor force which is out of work
the demand curve shows the relationship between:
price and quantity demanded
inflation means that:
prices in the aggregate are rising, although some particular prices may be falling
when the reserve requirement is increased:
the excess reserves of member banks are reduced
tom atoe grows tomatoes for home consumption. this activity is:
productive but is excluded from GDP becuase no market transaction occurs
the primary purpose of the legal reserve requirement is to:
provide a means by which the monetary authorities can influence the lending ability of commercial banks
a $200 price tag on a cashmere sweater in a department store window is an example of money functioning as a:
unit of account
with an MPS of .4, the MPC will be..
1.0 minus .4
if the price index rises from 100 to 120, the value of the dollar will fall by:
1/6th
if the consumer price index rises from 300 to 333 in a particular year, the rate of inflation in that year is:
11 percent
the consumer price index was 166.6 in 1999 and 172.2 in 2000. therefore, the rate of inflation in 2000 was about:
3.4 percent
the paper money used in the United States is:
Federal Reserve Notes
suppose the total market value of all final goods and services produced in a partlicular country in 2001 is $500 billion and the total market value of final goods and services sold is $450 billion. we can conclude that:
GDP in 2001 is $500 billion
if you write a check on a bank to purchase a used honda civic, you are using money primarily as:
a medium of exchange
net export are negative when:
a nation's imports exceed its exports
cost-push inflation may be caused by:
a negative supply shock
a college graduate using the summer following graduation to search for a job would best be classified as:
a part of frictional unemployment
money functions as:
a store of value, a unit of account, a medium of exchange.. ect
if ben's MPC is .80, this means that he will:
spend eight-tenths of any increase in his disposable income
if the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent, then the:
cyclical unemployment rate is 4 percent
the three main tools of monetary policy are:
the discount rate, the reserve ratio, and open-market operations
to be officially unemployed a person must:
be in the labor force
refer to the above table. the value of the dollar in year 2 is:
$.80
refer to the above diagram. the break-even level of GDP (=income) is:
$150
a reserve requirement of 20% means a bank must have a $1000 of reserves if its checkable deposits are:
$5000, 1000 is 20% of 5000
suppose a family's consumption exceeds of its disposable income. this means that its:
APC is greater than 1
GDP is equal to:
C + Ig + G + Xn
which of the fallowing is correct?
MPC + MPS = APC + APS
in the aggregate expenditures model, the:
MPC is greater than zero, but less than one
which of the fallowing is a tool of monetary policy? a) open market operations b) changes in banking laws c) changes in tax rates d) changes in government spending
a) open market operations
the 45-degree line on a chart relating consumption and income shows:
all the points at which consumption and income are equal
in the united states monetary policy is the responsiblity of the:
board of governors of the federal reserve system
which of the fallowing relations is not correct? a) 1-MPC = MPS b) APS + APC = 1 c) MPS = MPC +1 d) MPC + MPS = 1
c) MPS = MPC +1
the MPC can be defined as that fraction of a:
change in income that is spent
the fed can change the money supply by:
changing bank reserves through the sale or purchase of government securites, changing the quantities of required and excess reserves by altering the legal reserve ratio, changing the discount rate so as to encourage or discourage commercial banks in borrowing from the central banks
checkable deposits are also called:
checking accounts
in the united states, the money supply 1, is compromised of:
coins, paper currency, and checkable deposits
Holly's break-even level of income is $10,000 and her MPC is .75. If her actual disposable income is $16,000, her level of:
consumption spending will be $14, 500
the APC is calculated as:
consumption/ income
inflation initiated by increases in wages of other resource prices is labled:
cost-push inflation
suppose there are 5 million unemployment workers seeking jobs. after a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. as a result of this, the official unemployment rate would:
decline
real income can be determined by:
deflating nominal income for inflation
if the consumer price index falls from 120 to 116 in a particular year, the economy has experienced:
deflation of 3.33 percent
"too much money chasing too few goods" best describes:
demand-pull inflation
excess reserves refer to the:
difference between actual reserves and required reserves
the interest rate at which the Federal Reserve banks lend to commercial banks is called the:
discount rate
kimberly voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. with degree in hand she is now searching for a position in management. kimberly presently is:
frictionally unemployed
part-time workers are counted as:
fully employed and therefore the offical unemployment rate may understate the level of unemployment
in national income accounting, G stands for:
government purchases
for all levels of income to the left of the intersection of the 45-degree line and the consumption schedule, the APC is:
greater than 100 percent
GDP differs from NDP in that
gross investment is used in calculating GDP and net investment is used in calculating NDP
gross domestic product (GDP) measures and reports output:
in dollar amounts
checkable deposits are:
included in m1
the value of money varies
inversely with the price level
GDP can be calculated by summing
investment, government purchases, consumption, and net exports
suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. the person's real income will:
rise by about 1 percent
at the point where the consumption schedule intersects the 45-degree line:
saving is zero
if the consumption schedule is linear, then the:
saving schedule will also be linear
if the price of product L increases, the demand curve for close-substitue product J will:
shift to the right
unemployment involving a mishmatch of the skills of unemployed workers and the skills required for available jobs is called:
structural unemployment
value added can be determined by:
subtraccting the purchase of intermediate products from the value of the sales of final products
consumption of fixed capital (depreciation) can be determined by:
subtracting NDP from GDP
in the aggregate expenditures model, dissaving means
that the households are spending in excess of their current incomes
at the point where the consumption schedule intersects the 45-degree line:
the APC is 1.00
"value added" refers to:
the difference between the value of a firm's output and the value of the inputs it has purchased from others
the difference between m1 and m2 is that:
the latter includes small time deposits, noncheckable savings accounts, money market deposit accounts, and money market mutual fund balances
real GDP is:
the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation
in presenting the idea of a demand curve economists presume that the most important variable in determining the quantity demanded is:
the price of the product itself
open-market operations refer to:
the purchase or sale of government securities by the Fed
at the equilibrium price:
there are no pressures on price to either rise or fall
in defining money as m1 economists exclude time deposits because:
they are not directly or immediately a medium of exchange
checkable deposits are classified as money because:
they can be readily used in purchasing goods and paying debts
cost-of-living adjustment clauses (COLAs):
tie wage increases to changes in the price level