FINAL questions

Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals

$1,100.

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

$50,000.

in a small economy consumption spending in 2012 is 6,000 government spending is 1,200, gross investment is 1500 exports are 2000 and imports are 1000. what is gross domestic product in 2012

9700

How does a decrease in value of a country's currency relative to other currencies affect its balance of trade?

A decrease in value of a country's currency relative to other currencies reduces imports, raises exports, and increases the balance of trade.

Which of the following is a normative economic statement?

Fashion designers should be allowed to copyright designs to promote innovation.

The Federal Reserve System's four monetary policy goals are

The Federal Reserve System's four monetary policy goals are

when sophie, a french citizen, purchases a dell computer in paris that was produced in texas, the purchase is

a us export and an french import

which of the following would cause the dollar to appreciate?

an increase in the demand for dollars

--- a nation's production possibilities frontier represents economic growth

an outward shift of

Which of the following best describes supply-side economics?

ax cuts affect the incentive to work, save, and invest and, therefore, aggregate supply.

which of the following countries does not come close to the free market benchmark

cuba

M1 includes

currency in circulation, checking account deposits in banks, and holdings of traveler's checks

if you have trouble finding a job because of a slowdown in the overall economy, we would say that you are

cyclically unemployed

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?

consume a combination of goods that lies outside its own production possibilities frontier

the most widely used measure of inflation is based on which of the following price indicies

consumer price idex

which is a positive economic statement

due to a decrease in state funding university tuition has risen

the natural rate of unemployment is the amount of unemployment

equal to frictional plust structural employment

Jack just told his boss that he thinks his boss is an idiot. It is likely that Jack will be experiencing ________ unemployment in the near future

frictional

A government budget surplus from reduced government spending (no change in net taxes) will ________ the level of investment in the economy and ________ the level of saving (private plus public)

increase; increase

If a person withdraws $500 from his/her savings account and puts it in his/her checking account, then M1 will ________ and M2 will ________.

increase; not change

If inflation increases unexpectedly, then

lenders receive a lower real interest rate than they expected.

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

less likely to affect the unemployment rate.

The current exchange rate system in the United States is best described as a

managed float exchange rate system

The slope of a production possibilities frontier measures the ________ of producing one more unit of a good.

marginal opportunity cost

The costs to firms of changing prices are called

menu costs.

in a market economy who decides what goods and services will be produced

consumers and producers

If the current account is in deficit and the capital account is zero, then

he financial account must be in surplus.

Using the money demand and money supply model, an increase in money demand would cause the equilibrium interest rate to

increase

An increase in the U.S. interest rate should ________ the demand for dollars and the value of the dollar, and net exports should ________.

increase and decrease

a --- is represented by a rightward shift of the demand curve while a --- is represented by a movement along a given demand curve

increase in demand, increase in quantity demanded

Contractionary monetary policy on the part of the Fed results in

a decrease in the money supply, an increase in interest rates, and a decrease in GDP.

which of the following would cause an increase in the supply of cheese

a decrease in the price of wine

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

a higher inflation rate

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

more; fiscal policy takes longer to implement

When the value of a currency is determined ________, the exchange rate system is defined as managed float.

mostly by supply and demand, but with occasional government intervention

Considering the short-run aggregate supply curve on its own, an increase in the price level will:

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

During the expansion phase of the business cycle,

production increases.

at market equilibrium

quantity demanded equals quantity supplied

At market equilibrium,

quantity demanded equals quantity supplied.

In the figure above, if the economy is at point A, the appropriate monetary policy by the Federal Reserve would be to

raise interest rates.

spain-- saddles:75, spurs 225 mexico-- saddles:100, spurs 225 select the statement above that interprets the data in the table

spain has a comparative advantage in making spurs

By offering training to workers whose firms laid them off because of competition from foreign firms, the federal government is attempting to reduce

structural unemployment.

Fiscal policy is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability, high rates of economic growth, and high employment.

taxes; expenditures

For the federal deficit to be lowered,

the federal government's expenditures must be lower than its tax revenue.

Ceteris paribus, in the long run, a negative supply shock causes

the price level to rise initially, and then return to its lower level.

If national saving increases, ________. (Assume that the capital account is zero and net transfers are zero.)

the sum of domestic investment and foreign investment must increase

Without technological advancement, how can a nation achieve economic growth?

through an increase in supplies of factors of production

the minimum wage is an example of

price floor

The aggregate demand curve shows the relationship between the ________ and ________.

price level; quantity of real GDP demanded

examples of comparative advantage show how trade between two countries can make each better off

total consumption of goods is greater

Jack lost his job six months ago, and he's been actively looking for a new job ever since. The Bureau of Labor Statistics would classify Jack as

unemployed.

scarcity refers to the situation in which

unlimited wants exceed limited resources

Which of the following describes what the Fed would do to pursue an expansionary monetary policy?

use open market operations to buy Treasury bills

Discouraged workers are

workers who have stopped looking for work because they believe there are no jobs for them.

During a deflationary period,

the nominal interest rate is less than the real interest rate.

if brazil has a comparative advantage relative to cuba in the production of sugar cane then

the opportunity costs of production of sugar cane are lower in brazil than in cuba

Suppose that you deposit $2,000 in your bank and the required reserve ratio is 10 percent. The maximum loan your bank can made as a direct result of your deposit is

$1,800.

If real GDP in a closed economy is $40 billion, consumption is $20 billion, and government purchases are $10 billion, what is investment?

$10 billion

What is the opportunity cost of producing 1 ton of coconuts in Costa Rica?

2/3 of a ton of pineapples

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid?

3 percent

Assume the average annual CPI values for 2015 and 2016 were 207.3 and 215.3, respectively. What was the percent increase in the CPI between these two years?

3.86

year 2015, CPI 207 year 2016, CPI 215 inflation rate in 2016 is equal to

3.9 percent

If real GDP per capita doubles between 2005 and 2020, what is the average annual growth rate of real GDP per capita?

4.8%

if the number employed is 190 million the working age pop is 230 million and the number of unemployed is 10 million then the UR rate is

5%

If the number of unemployed workers is 200 million, the number of employed workers is 300 million, and the working-age, noninstitutionalized population is 800 million, what is the labor force participation rate?

62.5%

Referring to the graph above. 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 static AD-AS model in the figure above, this would be depicted as a movement from

A to B.

In the sequence of events shown in the documentary on the meltdown of the financial sector, the government stepped in to try to save _____________________ at first, and then proceeded to let ______________________ fail.

Bear Stearns; Lehman Brothers

If net foreign investment is positive, which of the following must be true? (Assume that the capital account is zero and net transfers are zero.)

Domestic investment must be less than national saving.

Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above, and the unemployment rate at A is the natural rate. If the economy was to move to point C, which of the following must be true?

Equilibrium GDP at point C must be above potential GDP.

Which of the following would result in a trade deficit for the United States?

Exports of goods = $450 billion Imports of goods = $450 billion Exports of services = $200 billion Imports of services = $250 billion

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 country has a comparative advantage in the production of coconuts?

Guatemala

Which of the following is likely to increase measured GDP?

Marijuana becomes legal to grow and sell.

gdp in the economy is measured by the

dollar value of all final goods and services produced in the economy

If actual inflation is greater than expected inflation, what is the relationship between the actual real wage and the expected real wage?

The actual real wage will be lower than the expected real wage.

How will contractionary monetary policy in Japan affect the demand and supply of the Japanese yen in the foreign exchange market?

The demand for the yen will increase, and the supply of the yen will fall.

Suppose a positive technological change in the production of disease-resistant corn caused the price of corn to fall. Holding everything else constant, how would this affect the market for wheat (a substitute for corn for consumers only)?

The demand for wheat would decrease and the equilibrium price of wheat would decrease.

Which of the following would be classified as fiscal policy?

The federal government cuts taxes to stimulate the economy.

The recession of 2007-2009 made many consumers pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve?

This will shift the aggregate demand curve to the left.

Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. Which of the following will happen in the short run?

Unemployment will decline.

If a German firm produces cars in the United States, that production should count towards

U.S. GDP.

Which of the following is a drawback to having a common currency across countries, as in the European Union?

With a common currency, individual countries are no longer able to run independent monetary policies.

which of the following transactions would be included in the official calculation of GDP

You buy a new ipod

Which of the following transactions represents the purchase of a final good?

Your father buys a new John Deere riding lawn mower.

which of the following is the best example of a tariff

a 5,000$ per car fee imposed on all sports utility vehicles imported into the US

which of the following would cause a decrease in the equilibrium price and decrease in the equilibrium quantity of papayas

a decrease in demand

Which of the following would cause an increase in the equilibrium price and decrease in the equilibrium quantity of watermelon?

a decrease in supply

Money is

an asset that people are willing to accept in exchange for goods and services.

When individuals use ________ about an economic variable to make a decision, expectations are rational.

all available information

Which of the following is a factor of production?

an acre of forested land

The increase in government spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion is an example of

automatic stabilizers.

Voluntary exchange increases economic efficiency

because neither the buyer nor the seller would agree to a trade unless they both benefit.

a production possibilities frontier with a --- shape indicates increasing opportunity costs as more and more of one good is produced

bowed outward

Tax increases on business income decrease aggregate demand by decreasing

business investment spending.

Net foreign investment is equal to

capital outflows minus capital inflows.

economics is the study of the --- people make to attain their goals, given their --- resources

choices, scarce

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

decrease interest rates.

To fight against a recession with discretionary fiscal policy, Congress and the president should

decrease taxes to increase consumer disposable income.

Using the money demand and money supply model, an open market purchase of Treasury securities by the Federal Reserve would cause the equilibrium interest rate to

decrease.

The nation of Hyperbole is in a recession, and the government decides to increase taxes and reduce government spending to reduce the growing deficit. This will ________ aggregate demand and will likely ________ real GDP and employment.

decrease; decrease

suppose the Fed purchases Treasury securities. Interest rates in the United States will ________ and the U.S. dollar will ________ against foreign currencies.

decrease; depreciate

According to the World Bank, Albania did one of the worst jobs as a country enforcing the rule of law. The consequence of a weak rule of law is

difficulty in attracting investment and low economic growth.

which of the following cause the unemployment rate as measured by the bureau of labor statistics to understate the true extent of joblessness

discouraged workers

the law of demand implies, holding everything else constant, that as the price of yogurt

increases, the quantity of yogurt demanded will decrease

adam smith's --- refers to the process by which individuals acting in their own self interest bring about a market outcome that benefits society as a whole

invisible hand

The purchase by a foreign government of an airplane produced in the United States is included in U.S.

net exports.

GDP deflator is equal to

nominal GDP divided by real GDP multiplied by 100

If expected inflation rises, the long-run Phillips curve will

not be affected

someone who is available for work but has not actively looked for work in the previous four weeks would be classified as

not in the labor force

If actual inflation is greater than expected inflation,

real wages fall.

The period between a business cycle peak and a business cycle trough is called

recession

if the Fed raises the interest rate, this will ________ inflation and ________ real GDP in the short run.

reduce and lower

If the Fed raises the interest rate, this will ________ inflation and ________ real GDP in the short run.

reduce; lower

Suppose the Fed pursues a policy that leads to higher interest rates in the United States. How will this policy affect real GDP in the short run if the United States is an open economy? This policy

reduces investment spending, consumption spending and net exports, all of which reduce GDP.

what are menu costs

the costs to a firm of changing prices

according to the production possibility model if more resources are allocated to the production of physical and human capital then all of the following are likely to happen except

the country total production will fall

When the market value of the dollar rises relative to other currencies around the world, we say that

the dollar has appreciated.

opportunity cost is defined as

the highest valued alternative that must be given up to engage in an activity

Which of the following would you expect to result in faster economic growth?

the invention of new computers that increase labor productivity

The use of fiscal policy to stabilize the economy is limited because

the legislative process can be slow, which means that it is difficult to make fiscal policy actions in a timely way.

If the economy receives an influx of new workers from immigration,

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

which of the following is a positive economic statement

the minimum wage law causes unemployment

Suppose the Fed used contractionary policy to push short-run equilibrium to point C. If the inflation rate associated with point C continues long enough,

the short-run Phillips curve would shift down.

f the long-run aggregate supply curve is vertical,

the trade-off between unemployment and inflation cannot be permanent.

gross domestic product understates the total production of final goods and services because of the omission of

the underground economy

Economists consider full employment to occur when

the unemployment rate consists of only frictional and structural unemployment.