interm macro final

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute

$250 to GDP.

If currency held by the public equals $350 billion, reserves held by banks equal $150 billion, and bank deposits equal $500 billion, then the money supply equals:

$850 billion

If the capital stock equals 200 units in year 1 and the depreciation rate is 5 percent per year, then in year 2, assuming no new or replacement investment, the capital stock would equal _____ units.

190

Consider a closed economy. Assume that GDP (Y) is 5,000. Consumption (C) is given by the equation C = 1,200 + 0.3(Y - T) - 50r, where r is the real interest rate. Investment (I) is given by the equation I = 1,500 - 50r. Taxes (T) are 1,000 and government spending (G) is 1,500. What is the equilibrium value of real interest rate (r)?

4

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $1.50 in 2009. If 4 apples were produced in 2002 and 5 in 2009, whereas 3 oranges were produced in 2002 and 4 in 2009, then real GDP (in 2002 prices) in 2009 was:

6.50

According to the quantity theory of money, if money is growing at a 10 percent rate and real output is growing at a 3 percent rate, and velocity is constant over time, the rate of inflation must be:

7 percent

The marginal product of labor is:

additional output produced when one additional unit of labor is added.

If bread is produced by using a constant returns to scale production function, then if the:

amounts of equipment and workers are both doubled, twice as much bread will be produced.

The money supply will decrease if the:

currency-deposit ratio increases

In the Solow growth model, if investment is less than depreciation, the capital stock will ______ and output will ______ until the steady state is attained.

decrease; decrease

In a small open economy, if exports equal $5 billion and imports equal $7 billion, then there is a trade ______ and ______ net capital outflow.

deficit; negative

Consumption depends positively on ______ and investment depends negatively on ______.

disposable income; the real interest rate

A production function is a technological relationship between:

factors of production and the quantity of output produced.

A bank accepted $100 million of deposits and decided to choose a 12.5% reserve ratio. All of a sudden, some depositors say they want to withdraw a total of $10 million from the bank. The bank is having a liquidity problem.

false

According to the quantity theory of money, a positive money growth rate always leads to a positive inflation rate.

false

The market value of all final goods and services produced within an economy in a given period of time is called:

gross domestic product

People use money as a store of value when they

hold money to transfer purchasing power into the future

An effective policy to reduce a trade deficit in a small open economy would be to:

increase taxes.

If a U.S. corporation sells a product in Europe and uses the proceeds to purchase shares in a European corporation, then U.S. net exports ______ and net capital outflows ______.

increase; increase

A Texas household uses $500 to purchase a $460 television made in Korea by a Korean firm and a $40 dinner at a local restaurant. As a result, U.S. GDP

increases by $40.

If there is a decrease in government spending with no change in taxes, then public saving ______ and private saving ______.

increases; does not change

In a small open economy, policies that increase:

investment tend to cause a trade deficit.

People in Germany use euros to buy goods and services. This is an example of using money as a:

medium of exchange

Two economies are identical except that the level of capital per worker is higher in Highland than in Lowland. The production functions in both economies exhibit diminishing marginal product of capital. An extra unit of capital per worker increases output per worker:

more in Lowland.

The production function y = f (k) means

output per worker is a function of capital per worker.

In the Solow growth model, the economy ends up with a steady-state level of capital

regardless of the starting level of capital.

Investment per worker i as a function of the saving ratio s and output per worker f(k) may be expressed as

s f(k)

If the ratio of reserves to deposits (rr) increases, while the ratio of currency to deposits (cr) is constant and the monetary base (B) is constant, then:

the money supply decreases

A firm has $250 million of assets and $30 million of capital (shareholders equity). When the firm loses $50 million of its assets, it becomes insolvent.

true

People in France use euros to post prices. This is an example of using money as a:

unit of account