KATECO

When the Fed sells government bonds the money supply increases and the federal funds rate decreases.

False

An improvement in technology would cause the long-run aggregate-supply curve to shift

a.right.

Which of the following is not an example of currency?

d.A $1,000 balance stored in a checking account

If the number of people unemployed rises from 3 million to 3.2 million while the number of people employed rises from 60 million to 66 million, and the population rises from 100 million 103 million, the unemployment rate rises.

False

If the real exchange rate between India and Thailand is 1 and purchasing-power parity holds, then 1 Indian rupee buys 1 Thai bhat.

False

In the open-economy macroeconomic model, the key determinant of net capital outflow is the real exchange rate.

False

Refer to the figure. The shift of the short-run aggregate-supply curve from SRAS1 to SRAS2

a.causes the economy to experience a decrease in the unemployment rate.

Recessions occur at ________ intervals and are ________ to predict with much accuracy.

a.irregular; almost impossible

One issue with using changes in U-3 as evidence of the health of the labor market is that an increase in the number of people working part-time who were working full-time (and would still like to work full-time) will ____

b. not change U-3, all else being equal, because part-time and full-time work are both counted as employed.

Someone who quits their job is _________ for unemployment benefits. Someone who loses their job because the company they work for has gone out of business is _______ for unemployment insurance benefits.

b. not eligible, eligible

Which of the following rise during a recession?

b.Both losses and unemployment

The decline in investment spending accounts for approximately how much of the decline in output during a recession?

b.Two-thirds

Which of the following will both make people buy less?

b.Wealth falls and interest rates rise

Which of the following shifts short-run aggregate-supply curve to the right?

b.a decrease in price expectations

A U.S. manufacturing company borrows money to buy a forklift from a U.S. company and a conveyor belt from a company in Japan. Which of the following is true regarding the money borrowed for these capital asset purchases?

b.borrowing both capital asset purchases are included in the demand for loanable funds in the U.S.

The official government unemployment rate (U-3) fails to fully capture labor utilization because it does not capture

b.discouraged workers.

One purpose of government sponsored job training is to reduce

b.frictional unemployment by giving workers skills to work in growing industries.

Suppose that coffeehouse employees are not unionized. If they unionize, then the supply of labor in other sectors of the economy will

b.increase, reducing wages in industries that are not unionized

Under what reserve ratio is a bank unable to create money?

a.100%

Which type of money has no intrinsic value?

b.Fiat money

Refer to the figure. If the government imposes a minimum wage of $9, then how many workers will be unemployed?

c.8,000

Which of the following rises during expansions?

c.Both employment and consumer spending

Which of the following assets is most liquid?

c.Money

The unemployment that results from the job search is ____

c.frictional.

Refer to the table. If the local government imposed a minimum wage of $11 in Crabapple Corners, how many people would be unemployed?

d.1,000

If the reserve ratio is 20 percent, the money multiplier is

d.5.

Which of the following is not correct?

d.Unions are subject to antitrust laws./ a.When real GDP expands, the rate of unemployment rises.

Which of the following would decrease the price level?

d.a decrease in the money supply.

Other things the same, when the government spends less, the initial effect is that

d.aggregate-demand curve shifts left.

Which of the following would cause prices and real GDP to fall in the short run?

d.aggregate-demand curve shifts to the left

If businesses in general decide that they have underbuilt and so now have too little capital, their response to this would initially shift

d.aggregate-demand curve to the right.

Suppose the exchange rate rises. All else equal, which of the following could cause this in the open-economy macroeconomic model?

d.an increase in the demand for net exports

First Bank of Zogua, a fictional bank, has made a $1 million loan. This loan appears on what part of T-account of the First Bank of Zogua?

d.assets.

Suppose that there is a decrease in the costs of production that shifts the short-run aggregate-supply curve right. If there is no policy response, then eventually

d.because unemployment is low, wages will be bid up and short-run aggregate-supply curve will shift left.

An increase in the capital stock shifts

d.both short-run and long-run aggregate-supply curve to the right.

Suppose there are a large number of teens who used to work or seek work who now no longer do either, but instead focus on school work to prepare for college and careers. Other things the same, this makes

d.both the number of people unemployed and the labor force fall.

If the dollar buys more rice in Thailand than in the United States, then traders could make a profit by

d.buying rice in Thailand and selling it in the United States, which would tend to raise the price of rice in Thailand.

When it buys government bonds to increase the money supply, the Fed is

d.conducting an open-market purchase.

As a result of sizable losses in 2008 and 2009, banks experienced a shortage of capital, which induced them to ____

d.decrease lending because they had to meet capital requirements.

In a system of fractional-reserve banking, the amount of money in the economy depends on the behavior of ____

d.depositors and bankers, which prevents the Fed from perfectly controlling the money supply.

Real GDP is most commonly used to monitor short-run changes in

d.economic activity.

The long-run aggregate-supply curve shifts left if

d.either emigration abroad increases or important technology is outlawed.

When output rises, unemployment

d.falls.

The supply of loanable funds curve is upward sloping because, all else equal,

d.higher real interest rates lead to higher national saving.

The money supply increases if

d.households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively less excess reserves and make more loans.

One of the key differences between a fractional-reserve banking system and a 100-percent-reserve banking system is that

d.in a fractional reserve banking system, banks only keep a fraction of deposits as reserve, while banks in a 100-percent-reserve banking system keep all deposits as reserves.

Refer to the Table. The required reserve ratio is 10 percent and First National Bank sells $200 of its short-term securities to the Federal Reserve. This action will initially

d.increase First National's reserves by $200. Its excess reserves are $1,200.

Efficiency wages

d.increase productivity and profits./ c.create a surplus of labor and so create structural unemployment.

If the minimum wage is above the equilibrium wage, then an increase in the minimum wage ______ the quantity of labor supplied and ______ the quantity of labor demanded.

d.increases, decreases

For an economy as a whole, net capital outflow

d.is always equal to net exports.

Which of the following decrease when the Fed makes open market purchases?

d.neither currency nor reserves

In response to the credit crunch in 2008 and 2009, the U.S. Treasury ____

d.put public funds into the banking system to increase the amount of bank capital.

When a union forms in some industry its negotiations

d.raise wages and create a surplus in the market for labor in that industry.

If wages are sticky, then a smaller than expected increase in the price level

d.raises the real costs of production, so the aggregate quantity of goods and services declines.

If the government institutes an investment tax credit and decreases income taxes,

d.real GDP and the price level rise.

Suppose the economy is in long-run equilibrium. If there is a decrease in the supply of labor as well as a decrease in the money supply, then we would expect that in the short run,

d.real GDP will fall and the price level might rise, fall, or stay the same.

Unionization in one industry causes wages to

d.rise in that industry causing labor supply to rise in industries that are not unionized.

People will want to buy fewer bonds and the interest rate will rise, as the price level

d.rises.

Caroline is the president of a nationwide company that provides janitorial services. She decides to raise the wages of her workers so that they are above equilibrium. According to the theory of efficiency wages her workers are likely to

d.shirk less and stay on the job longer.

People who are unemployed because wages are, for some reason, set above the level that brings labor supply and demand into equilibrium are best classified as

d.structurally unemployed.

In the U.S. minimum-wage laws create significant unemployment for

d.teenagers but not workers such as experienced plumbers.

Claire manages a health clinic. Once receptionists, patient-care representatives, and record keepers are trained they often leave to find other work. Claire considers paying a higher wage hoping workers will stay on the job longer. According to the theory of efficiency wages, if Claire raises wages paid to these types of employees they will

d.tend to stay on the job longer and profits will rise.

One reason that the Fed's control of the money supply is not precise is because ____

d.the Fed does not control the amount that banks choose to lend. / d.households' decisions, which are out of the Fed's control, impact the money supply.

U.S. exports and U.S. imports both decrease if

d.the U.S. imposes import quotas on foreign imports.

Unemployment data are collected

d.through a regular survey of about 60,000 households.

In which of the following situations is a firm most likely to see the largest benefits by paying above equilibrium wages?

d.worker turnover is high, the cost of hiring and training new workers is high.

According to the theory of efficiency wages, it cannot be profitable for firms to keep wages above equilibrium.

False

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply curve is upward-sloping.

False

Capital flight from the United States decreases net capital outflow.

False

Data on the unemployment rate in the U.S. since 1960 show that the unemployment rate is sometimes very close to zero.

False

Efficiency wages create frictional unemployment.

False

If a country raises its budget deficit then both its supply of and demand for loanable funds shift.

False

If aggregate demand and aggregate supply both shift left, we can be sure that the price level is higher in the short run.

False

If the Fed conducts open-market purchases, the money supply decreases and aggregate demand shifts right.

False

In 1914, Henry Ford began paying his workers $5 per day, about twice the going wage. As a result, turnover and absenteeism fell. However, profits fell.

False

In the open-economy macroeconomic model, the supply of dollars (or any domestic currency) in the foreign-currency exchange is horizontal.

False

Increased optimism about the future leads to falling prices and falling unemployment in the short run.

False

Most economists believe unions are good for the economy as a whole.

False

Most macroeconomic variables that measure some type of income, spending, or production fluctuate very separately from each other.

False

Most people do not primarily rely on labor income to maintain their standard of living.

False

People who report not being in the labor force but who, in fact, want to work but have given up trying to find a job after an unsuccessful search cause the reported unemployment rate to be higher than otherwise.

False

Refer to the Figure. You can explain a decrease in Y from Y1 to Y2 in the following way: A decrease in P in P2 to P1 causes the money-demand curve to shift from MD1 to MD2; this shift of MD causes r to increase from r1 to r2; and this increase in r causes Y to decrease from Y1 to Y2.

False

Someone who loses his job at a futon store because the demand for futons has fallen and the demand for other types of beds has risen, is structurally unemployed.

False

The Fed most often influences the money supply by changing reserve requirements for banks.

False

The Federal Open Market Committee (FOMC) is responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system.

False

The U.S. minimum-wage laws has a large effect on the employment of workers with some basic skills and experience.

False

The agency responsible for regulating the money supply in the United States is U.S. Treasury.

False

The logic of the wealth effect begins with a change in the price level changing the interest rate.

False

The primary reason for unemployment in the U.S. is the minimum wage.

False

The unemployed who quit their jobs are eligible for unemployment insurance.

False

Unemployment generated by the existence of labor unions is frictional unemployment and so contributes to the natural rate of unemployment.

False

When output rises, unemployment also rises.

False

Which famous company executive introduced an innovative pay system that is consistent with the theory of efficiency wages?

Henry Ford

Which of the following would not shift the supply of dollars in the market for foreign-currency exchange of the open-economy macroeconomic model?

The exchange rate rises

A minimum wage above equilibrium results in unemployment by creating a surplus in some labor markets. True

True

An increase in real interest rates in the United States encourages both U.S. and foreign residents to buy U.S. assets.

True

Net capital outflow is a part of the demand for loanable funds, and the source of the supply of dollars in the foreign exchange market.

True

Other things the same, a government regulation that prevents using a current technology raises the price level.

True

Purchasing-power parity theory does not hold at all times because many goods are not easily transported.

True

Raymond works as a valuation expert. His job is to look at companies, assess how much their assets and liabilities are worth, and place a dollar valuation on the company that other companies must pay in an acquisition. Raymond's company valuations are an example of the unit of account function of money.

True

Sectoral shifts are changes in the demand for workers across industries or regions.

True

Stagflation results from continued decreases in aggregate supply. True

True

The recessions associated with the business cycle come at irregular intervals.

True

The unemployment that results from the process of matching workers and jobs is called frictional unemployment.

True

U.S. dollars are an example of fiat money and alcohol used to make trades is an example of commodity money.

True

When a country experiences capital flight, the interest rate rises because the demand for loanable funds shifts right.

True

When inflation turns out to be higher than expected, wealth is redistributed from lenders to borrowers.

True

Suppose the price level has increased from 103 to 107. Which of the following is the inflation rate?

a.3.88%

If imports = 300 billion yen, exports = 600 billion yen, purchases of domestic assets by foreign residents = 400 billion yen, and purchases of foreign assets by domestic residents = 700 billion yen, what is the quantity of yen demanded in the market for foreign-currency exchange?

a.300 billion yen

Suppose the Consumer Price Index has increased from 100 to 105. What is the inflation rate?

a.5%

During the last half of 2012, the U.S. unemployment rate was above the natural rate and real GDP growth was low. Which of the following is the most likely unemployment rate for this time period?

a.8 percent

Refer to the figure. If the government imposes a minimum wage of $8, how many workers will be employed?

a.8,000

Which of the following both shift aggregate-demand curve to the right?

a.A decrease in taxes and at a given price level consumers feel more wealthy

Which of the following would not explain why the aggregate demand curve slopes downward?

a.A higher price level increases real wealth, which stimulates spending on consumption.

Which of the following is an example of an efficiency wage?

a.An above-equilibrium wage offered by a firm to attract a more talented pool of job applicants.

Which of the following illustrates how the investment accelerator works?

a.An increase in government expenditures increases aggregate spending so that Starshine Inc. finds it profitable to update its car-wash equipment.

If the fictional country of Joplait experienced capital flight 10 years ago, what should have happened to Joplait's net capital outflow?

a.It should have increased.

You sell your old smartphone online for cash. The fact that you accept cash for your old smartphone best illustrates which function of money?

a.Medium of exchange

Who of the following would be included in the Bureau of Labor Statistics' "unemployed" category?

a.Mike, who is waiting to be recalled from a job from which he has been laid off

Sam quit his job because he wanted to move somewhere else. Amy just started looking for work after being out of the labor market for a couple of years. Mason was laid off because his employer's sales had fallen due to economic conditions. Who is currently eligible for unemployment insurance benefits?

a.Only Mason.

Which of the following lists all items included in M2 but not in M1?

a.Savings deposits, small time deposits, money market mutual funds and other minor categories

Suppose a change in the stock market makes people feel wealthier, increases consumption, and shifts the aggregate-demand curve right. What must have happened in the stock market?

a.Stock prices increased.

Which of the following best describes what occurs under the Fed's Term Auction Facility?

a.The Fed auctions a set amount of funds, and the bank that offers to pay the highest rate for the funds will get to borrow from the Fed.

Which of the following will make banks want to hold more reserves at the Fed, causing the money multiplier to decrease?

a.The Fed increases the interest rate on bank deposits held at the Fed.

Which of the following is not correct about the Fed?

a.The Federal Reserve Chair is appointed by the speaker of the house to a four-year term.

Which of the following best defines liquidity?

a.The ease with which an asset is converted to the medium of exchange.

Suppose the real exchange rate is such that the market for foreign-currency exchange has a shortage of dollars. This shortage will lead to

a.an appreciation of the dollar, a decrease in U.S. net exports, and so a decrease in the quantity of dollars demanded in the foreign exchange market.

The principle of monetary neutrality implies that

a.an increase in the money supply will increase the price level, but not real GDP.

Which of the following would lower net capital outflow, thereby decreasing the quantity of loanable funds demanded?

a.an increase of the U.S. real interest rate

As recessions begin, employment

a.and income both fall.

Tony has just finished high school and started looking for his first job, but has not yet found one. Other things the same, when Tony starts looking for work the unemployment rate

a.and the labor-force participation rate both increase.

All else equal, which of the following will cause the money supply to fall?

a.banks decide to hold more excess reserves relative to deposits.

If the money multiplier is 5 and the Fed wants to increase the money supply by $100,000, it could

a.buy $20,000 worth of bonds.

The Fed conducts open market operations that cause bank withdrawals and lending to decrease. The Fed has

a.conducted open market sales.

If the natural rate of unemployment is 5 percent and the actual rate of unemployment is 5.5 percent, then by definition there is

a.cyclical unemployment amounting to 0.5 percent of the labor force.

Suppose that in a country people lose confidence in the banking system and so hold relatively more currency and less deposits. As a result, bank reserves will

a.decrease and the money supply will eventually decrease.

A decrease in a supply of oil could ____

a.decrease long-run aggregate supply.

If the minimum wage were currently above the equilibrium wage, then a decrease in the minimum wage that kept it above equilibrium would _____ the _______ of labor.

a.decrease, surplus

Assume banks hold no excess reserves. If the Fed increases the reserve ratio from 5 percent to 10 percent, then the money multiplier

a.decreases from 20 to 10.

The aggregate-demand curve shows that an increase in the price level

a.decreases the real value of goods and services demanded in the economy.

If the price level rises, the real value of a dollar

a.falls, so people will want to buy less.

Other things the same, people in the U.S. would want to save less if the real interest rate in the U.S.

a.fell. The decreased saving would decrease the quantity of loanable funds supplied.

The theory of efficiency wages explains why

a.firms may increase productivity and profits by setting wages above the equilibrium level.

The unemployment rate is computed as 100 times the number of people unemployed divided by the number of people

a.in the labor force.

If the reserve ratio is 10 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $50 million worth of government bonds, bank reserves

a.increase by $50 million and the money supply eventually increases by $500 million.

Suppose the Fed purchases $50,000 worth of government bonds from the public. You know that eventually the money supply will

a.increase by more than $50,000.

If a government has a budget deficit, then public saving

a.is negative and decreases national saving.

The worker health version of the efficiency wage theory is

a.less relevant for explaining unemployment in developed countries than in less developed countries.

If outsiders had more say in union contracts then it is likely that union wages would be

a.lower which would make structural unemployment lower.

Refer to the figure. Y2 represents the

a.natural level of output.

When the Fed buys U.S. government bonds, it has conducted

a.open market purchases, which increase the money supply.

Steve manages a warehouse where workers need to find, pack, and ship items ordered by online customers. He considers raising wages hoping that workers will spend more time doing their work and less time chatting with each other and checking their cell phones. According to efficiency wage theory if Steve decides to pay higher wages

a.profits will rise but he will hire fewer workers.

During recessions, changes in investment spending are the biggest contributor to changes in

a.real GDP.

Refer to the Figure. What are the equilibrium values of the real exchange rate and net exports?

a.real exchange rate of 1, net exports of $500

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to ________ the quantity of goods and services they produce.

a.reduce

Economists mostly agree that reducing unemployment benefits would

a.reduce unemployment, but there is disagreement about its effects on economic well-being.

Evidence shows that unemployment benefits may _________ job search efforts which by itself would ________.

a.reduce, raise frictional unemployment.

The amount of reserves banks must hold against deposits is known as

a.reserve requirement.

Suppose that autoworkers are unionized. If autoworkers choose to abolish their union, then the quantity of autoworkers demanded will

a.rise. The supply of workers in other industries will fall.

Tom has no job but keeps applying for one at a business that is unionized. He is qualified and he finds the pay attractive, but the firm always has many applicants. Tom is

a.structurally unemployed. Structural unemployment is created by above equilibrium wages.

To calculate the value of a country's net exports,

a.subtract the value of goods and services imported from the value of goods and services exported.

Suppose the government in country A decreases government expenditures while keeping government revenue the same. This would cause

a.the domestic real interest rate to fall and investment to rise.

Which of the following is an example of an automatic stabilizer?

a.the unemployment compensation system

As the price level decreases,

a.the value of money increases.

Suppose that in the fictional country of Oflos, the real interest rate leads to a national saving level of $80 billion, domestic investment is $40 billion, and net capital outflow is $30 billion, then

a.there is a surplus in the loanable funds market and the real interest rate will fall.

Gwen is on layoff expecting to be recalled. The Bureau of Labor Statistics counts Gwen as

a.unemployed and in the labor force.

Suppose the loanable funds market in country A is in equilibrium. Country A has domestic investment of $300 billion. Its citizens purchase $100 billion of foreign assets and foreign citizens purchase $50 billion of its assets. What is national saving?

b.$350 billion

The fictional country of Peclos has private saving of $80 billion, public saving of -$30 billion, domestic investment of $40 billion, and net capital outflow of $10 billion. What is the quantity supplied of loanable funds in Peclos?

b.$50 billion

Below are pairs of GDP growth rates and unemployment rates. Economists would not be shocked to see most of these pairs in the U.S. Which pair of GDP growth rates and unemployment rates is not realistic?

b.-2 percent; 2 percent

Refer to the figure. At the equilibrium wage, how many workers are unemployed?

b.0

Refer to the figure. If the government imposes a minimum wage of $5, how many workers will be unemployed?

b.0

Refer to the table. If the local government imposed a minimum wage of $10 in Crabapple Corners, how many people would be unemployed?

b.0

scenario 34-1. Take the following information as given for small, imaginary economy: When income is $10,000, consumption spending is $6,500. When income is $11,000, consumption spending is $7,100. Refer to the scenario. The marginal propensity to consume for this economy is

b.0.60

About what fraction of U.S. jobs are destroyed in the U.S. each year?

b.10 in 100

In February 2015 the Bureau of Labor Statistics reported an adult population of 250 million, unemployment of 10.4 million, employment of 142.8 million, and .8 million marginally attached workers. Based on these numbers the labor force participation rate was

b.100 x 153.2/250.

The manager of the bank where you work tells you that your bank has $10 million in excess reserves. She also tells you that the bank has $200 million in deposits and $165 million in loans. Given this information you find that the reserve requirement must be

b.25/200.

About what fraction of workers leave their jobs in a typical month?

b.3 in 100

The real interest rate is 5%, inflation is 3%, and the marginal income tax rate is 25%. What is after-tax real rate of interest?

b.3%

In 2009 Michigan had an adult population of about 7.8 million, a labor-force participation rate of 63 percent, and an unemployment rate of 13.4 percent. About how many people were employed?

b.4.25 million

If the reserve ratio is 20 percent, the money multiplier is

b.5.

If a good that costs $1 in the U.S. cost two-thirds of a Swiss franc in Switzerland, the real exchange rate would be computed as how many Swiss goods per U.S. goods?

b.50% more than the number of Swiss francs it takes to buy a U.S. dollar

In 2013 in Alaska the adult noninstitutionalized population was 537 thousand, 340 thousand people were employed, and 24 thousand people were unemployed. According to these numbers, the Alaskan labor force participation rate and unemployment rate were about

b.63.3%, 4.5%

Which of the following is the most likely response to an increase in the U.S. real interest rate?

b.A German bank purchases a U.S. Treasury bond instead of a Canadian bond because U.S. bonds are now a more attractive investment

Which of the following will cause a rise in the real interest rate in the market for loanable funds?

b.A shortage of loanable funds.

Which of the following is not true in a system of 100-percent-reserve banking?

b.Banks influence the supply of money.

The Central Bank of Wiknam decreases the money supply at the same time the Parliament of Wiknam repeals a new investment tax credit. Which of these policies shifts aggregate-demand curve to the left?

b.Both the money supply decrease and the investment tax credit repeal

Which of the following Fed actions would increase the money supply?

b.Buying bonds

The best description of the economy in the long run comes from which macroeconomic theory?

b.Classical

Bertha lends $1,000 to Danko for 2 years and charges an annual interest rate of 6%. Bertha had anticipated the inflation rate of 2%, but it actually turned to be 2.5%. In two years, as a result of the higher-than-expected inflation,

b.Danko is better off at the expense of Bertha.

If the fictional country of Joplait experienced capital flight 10 years ago, what should have happened to Joplait's net exports?

b.They should have increased.

Jerome Powell was

b.appointed Chair of the Board of Governors in 2017 by President Donald Trump.

An argument against the presence of unions is that they ____

b.are essentially a cartel.

Tony manages a company where electrical engineers work to improve existing products and develop new ones. He considers paying higher wages in hopes of attracting better applicants. According to efficiency wage theory Tony will get a

b.better pool of applicants but hire fewer workers.

According to 2012 data for U.S. teenagers (ages 16-19) ______ had the highest unemployment rate and _______ had the lowest unemployment rate

b.black males, white females.

The natural rate of unemployment includes

b.both unemployment created by job search and unemployment created by above equilibrium wages.

Net capital outflow and net exports fall as a result of a

b.budget deficit.

If the Federal Reserve decided to lower interest rates, it could

b.buy bonds to raise the money supply.

Which of the following was not among the four industries with the largest employment in the United States a century ago?

b.communications

Other things the same, continued losses in technological ability and continued decreases in the money supply would unambiguously lead to

b.declining real GDP only.

One issue with using changes in U-3 as evidence of the health of the labor market is that an increase in the number of unemployed persons who become disabled will ____

b.decrease U-3, all else being equal, because they are not counted in the labor force.

According to the theory of efficiency wages, if a firm stops paying efficiency wages it is likely to see a(n)

b.decrease in the quality of job applicants and need to replace workers more frequently.

A change in weather patterns that makes farming more difficult would ____

b.decrease long-run aggregate supply.

During a recession, unemployment typically

b.rises.

Real wealth falls, interest rates rise, and the dollar appreciates as the price level

b.rises.

A change in weather could ____

b.shift the long-run aggregate-supply curve.

Refer to the figure. A move by the economy from Z to P3 and Y1 would be consistent with

b.stagflation.

Minimum wages create

b.structural unemployment if they create a surplus in the labor market.

Refer to the Figure. If the real exchange rate is 1.4, then there is a

b.surplus of 200 so the real exchange rate will fall.

The long-run effect of a decrease in household consumption is to lower

b.the price level and leave real output unchanged.

In the model for an open economy, S (national saving) is equal to

c. I + NCO, domestic investment plus net capital outflow

If the reserve ratio is 5 percent, then $500 of new reserves can generate

c.$10,000 of new money in the economy.

Refer to the Table. What is the M2 money supply?

c.$440 billion

If a bank has just enough reserves to meet the required reserve ratio of 25 percent, and receives a deposit of $800, it has initially experienced a

c.$600 increase in excess reserves and a $200 increase in required reserves.

Refer to the figure. If unemployment is 4,000 workers, then the minimum wage must be

c.$8.

The labor force participation rate is computed as 100 x

c.(the number of people employed + the number of people unemployed) divided by the adult non institutionalized population.

Refer to the Figure. At what real exchange rate is the quantity of dollars demanded equal to 700?

c.0.6

Spells of unemployment end with job seekers exiting the labor force about

c.1/2 of the time.

If the local government imposed a minimum wage of $12 in Crabapple Corners, how many people would be unemployed?

c.2,000

Refer to the table. What was Lazonia's unemployment rate in 2015?

c.9.7%

Which of the following would fit an economist's definition of "money"?

c.A $20 bill

Which of the following are used to defer payments and are therefore not money?

c.Credit cards

Which of the following lists accurately describes M1?

c.Demand deposits, traveler's checks, other checkable deposits and currency

The government of fictional country of Dobar has decided to use paper currency, known as Dobar dollars, as money. Which of the following best describes Dobar dollars?

c.Dobar dollars are fiat money with no intrinsic value.

Refer to the figure. Which of the long-run aggregate-supply curves is consistent with long-run equilibrium?

c.LRAS2

If you want to measure and record economic value, you will primarily use which function of money?

c.Money as a unit of account

If R represents the reserve ratio for all banks in the economy, then the money multiplier must be equal to 1 divided by what?

c.R

The Bureau of Labor Statistics classifies some marginally attached workers as discouraged workers. What additional criteria has to be met for a marginally attached worker to be a discouraged worker?

c.She provides a job-market related reason for not looking for work.

Troy is looking for work after school, but everywhere he fills out an application, the managers say they always have a lot more applications than open positions. Ben has a business degree. Several companies have made him offers, but he thinks he might be able to find a job in a more desirable location.

c.Troy is structurally unemployed, and Ben is frictionally unemployed.

Which of the following is not correct?

c.Union membership is very small in most European countries./ b.Collective bargaining by unions raises the wages of both union and nonunion workers.

Which scenario is the best example of the unit of account function of money?

c.You have a yard sale, and you put a price tag of $50 on your old television and $10 for your old pots.

The members of the Federal Reserve's Board of Governors

c.are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Derrick worked part time for his mother's business without pay. Tyler was absent from work because he had the flu. The Bureau of Labor Statistics counts

c.both Derrick and Tyler as employed.

Fluctuations in real GDP are caused

c.by changes in aggregate demand and/or changes in aggregate supply.

When it sells government bonds to decrease the money supply, the Fed is

c.conducting an open-market sale.

Which of the following is not among the four industries with the largest employment in the United States today

c.cotton goods

As a result of sizable losses in 2008 and 2009, banks experienced a shortage of capital, which induced them to ____

c.decrease lending because they had to meet capital requirements.

To increase the money supply the Fed can conduct open-market purchases. Alternatively, the Fed can

c.decrease the discount rate.

The Fed changes the discount rate and, as a direct result, reserves have increased. The Fed has most likely

c.decreased the discount rate.

Funds in an account where you can access by writing a check or through your debit card are best described as

c.demand deposits.

Central banks are institutions

c.designed to oversee the banking system and regulate the quantity of money in the economy.

Discouraged workers, as defined by the Bureau of Labor Statistics, are

c.excluded from both the number of unemployed and the labor force.

When the price level rises,

c.firms will spend less on new business buildings and business equipment, and households will want to spend less on building new homes.

Suppose that consumers decide to ride buses more often and own fewer cars. Bus companies hire more drivers, while automobile companies lay off workers. The unemployment this creates is an example of

c.frictional unemployment created by sectoral shifts.

Suppose that people choose to increase the use of e-readers and decrease the number of printed books they buy. Companies hire more workers to produce e-readers and publishing companies lay off printers. The unemployment this creates is an example of

c.frictional unemployment created by sectoral shifts.

Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called

c.frictional unemployment.

The Fed changes the discount rate and, as a direct result, reserves have decreased. The Fed has most likely

c.increased the discount rate.

The misperceptions theory of the short-run aggregate supply curve says that the quantity of output supplied will decrease if the price level

c.increases by less than expected so that firms believe the relative price of their output has decreased.

In the context of the aggregate-demand curve, when the price level increases, households increase their holdings of money, interest rates increase, and spending on investment goods decreases because of the ________ effect.

c.interest-rate

If the economy is initially at long-run equilibrium and aggregate demand expands, then in the long run the price level

c.is higher and output is the same as the original long-run equilibrium.

The fictional country of Joplait experienced capital flight 10 years ago, what should have happened to Joplait's real interest rate?

c.it rose and the peso depreciated.

Frictional unemployment is caused by

c.job search and sectoral shifts.

Other things the same, if the money supply rises by 5% and people were expecting it to rise by 2%, then some firms have

c.lower than desired prices, which increases their sales.

According to 2012 data on the U.S. population, which of the following was correct for the adult population of prime working age, ages 25-54? White females had a

c.lower unemployment rate than black females but a similar labor force participation rate.

The two primary tasks of the Federal Reserve are

c.monetary policy and bank regulation.

Tom becomes unemployed but is unemployed for only a few weeks. Arnold becomes unemployed and remains so for fifteen weeks. During a typical year there are _____ unemployed persons whose experience is similar to Tom's than to Arnold's. Persons with unemployment experiences similar to _____ count for most of the unemployment at any point in time.

c.more, Arnold's

In the open economy macroeconomic model, if a country's interest rate increases, then its

c.net capital outflow and its net exports fall.

When the Fed sells U.S. government bonds, it has conducted

c.open market sales, which decrease the money supply.

Mary manages a data entry center. Workers sometimes play games on the internet, check their personal email, or go slow. According to efficiency wage theory to reduce this shirking Mary couldc.pay above equilibrium wages. This would raise unemployment.

c.pay above equilibrium wages. This would raise unemployment.

The official government unemployment rate (U-3) fails to fully capture labor utilization because it does not capture

c.people who are working part-time and would like to work full-time.

The New York Federal Reserve Bank

c.president always gets to vote at the FOMC meetings.

Historical evidence for the U.S. economy indicates that changes in investment over the business cycle are the biggest cause of changes in

c.real GDP.

The sticky-wage theory of the short-run aggregate-supply curve says that when the price level is higher than expected,

c.relative to prices wages are lower and employment rises.

During the 1770s, the United States ____

c.relied heavily on the inflation tax.

Frictional unemployment in the U.S. is inevitable because

c.sectoral shifts are always happening.

One reason purchasing-power parity is not completely accurate is that ____

c.some goods are not perfect substitutes when produced in different countries.

When prices and unemployment rise, such an event is sometimes called

c.stagflation.

If the wage is kept above its equilibrium for any reason, the result is

c.structural unemployment.

The unemployment that results from minimum-wage laws is ____

c.structural.

Minimum wages create unemployment in markets where they create a

c.surplus of labor. Most U.S. workers get paid more than the minimum wage.

Which of the following would not be caused by the imposition of an import quota?

c.the demand for currency shifts left.

Imagine two economies that are identical except that, for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $1,500 billion. It follows that

c.the price level, but not real GDP is higher in country B.

When a union bargains successfully with employers, in that industry,

c.the quantity of labor demanded falls and the quantity of labor supplied rises.

Suppose the money multiplier has increased. Which of the following is the most likely cause?

c.the reserve ratio decreases.

The idea that nominal wages are slow to adjust to changing economic conditions can explain the ________ slope of the short-run aggregate-supply curve.

c.upward

A difference between the unemployment arising from minimum-wage laws and from frictional unemployment is that with minimum-wage laws people are ____ for jobs and with frictional unemployment, people are ____ for jobs.

c.waiting, searching.

Right-to-work laws mean that

c.workers cannot be required to join the union where they work.

Frictional unemployment can be the consequence of

c.workers leaving jobs to find ones that suit them better, firms going out of business, and firms firing workers.

If the exchange rate is 0.75 Swiss francs = $1, a chocolate bar that costs 2 Swiss francs costs

d.$2.67.

Suppose the market for loanable funds in country A is in equilibrium. Country A has I = $300 billion, S = $600 billion, and purchased $500 billion of foreign assets, how many of its assets did foreigners purchase?

d.$200 billion

A bank's reserve ratio is 20 percent and the bank has $1,000 in deposits. Its reserves amount to

d.$200.

The loanable funds market is in equilibrium for country A. Country A has national saving of $70 billion, government expenditures of $20 billion, domestic investment of $20 billion, and net capital outflow of $50 billion. What is the quantity supplied of loanable funds in country A?

d.$70 billion

If the reserve ratio is 20 percent, then $150 of new reserves can generate

d.$750 of new money in the economy.

Suppose the banking system currently has $100 billion in reserves, the reserve requirement is 10 percent, and excess reserves amount to $5 billion. What is the level of deposits?

d.$950 billion

Refer to the figure. At the equilibrium wage, how many workers are employed?

d.10,000

Suppose that the adult non-institutionalized population of California is 30 million. If 18 million people are employed and 1.5 million are unemployed, then

d.19.5 million are in the labor force.

Suppose a bank has total assets of $1,000, capital of $50, and liabilities of $950; the leverage ratio for this bank is ____.

d.20

If $200 of new reserves generates $1,000 of new money in the economy, then the reserve ratio is

d.20 percent.

A typical American worker covered by unemployment insurance receives _____ percent of his former wages for up to ________ weeks.

d.50, 26

Which of the following is not a function of money?

d.A tool to increase barter

Under what system do banks generally lend out the majority of the funds deposited?

d.Fractional reserve banking

An upward-sloping short-run aggregate-supply curve is represented by which of the following equations?

d.Quantity of output supplied = Natural level of output + a(Actual price level - Expected price level)

Which of the following is equal to net exports, provided there is an open economy with a loanable funds market at equilibrium? (Note: S=national saving, I=domestic investment, NCO=net capital outflow)

d.S - I.

Blake is not looking for work because there have been many job cuts where he lives, and he doesn't think it is likely that he will find work. Sierra hasn't looked for work for six weeks, but she would like a job, and she has looked for work in the past. Who does the Bureau of Labor Statistics count as marginally attached workers?

d.Sierra but not Blake

How does the aggregate-demand curve shift when increased uncertainty and pessimism about the future of the economy lead firms to desire less investment spending?

d.The curve shifts to the left.

If the price of a good in the U.S. is $20 and the unit of foreign currency is the rupee, in which case is the real exchange rate 5/6?

d.The exchange rate is 50 rupees per dollar and the foreign price is 1,200 rupees.

Which of the following scenarios does not involve the use of commodity money?

d.The government of the fictional country of Owana orders the use of paper dollars as money.

Which of the following most closely fits an economist's definition of "money"?

d.The set of assets in an economy that people regularly use to buy goods and services

Refer to the Table. The required reserve ratio is 10 percent. Which of the following is true?

d.This banks reserve ratio is 20 percent. Its excess reserves are $1,000.

In the fictional country of Ubos, the amount of Ubosian capital assets purchased by foreign countries exceeds the amount of foreign assets purchased by the residents of Ubos. This means that

d.Ubos has a negative net capital outflow, which subtracts from its demand for domestically generated loanable funds.

Which of the following includes everyone in the adult population that the Bureau of Labor Statistics counts as "unemployed?"

d.anyone who is not employed, is available for work, has looked for work in the past four weeks, and anyone who is waiting to be recalled from a job from which they have been laid off.

Unions

d.are cartels and they may balance a firm's power and so protect workers.

In order to ensure banks can pay back depositors, Bank regulators impose

d.capital requirements.

Refer to the figure. The shift of the short-run aggregate-supply curve from SRAS1 to SRAS2

d.causes the economy to experience a decrease in the unemployment rate.

In a 100-percent-reserve banking system, if an individual deposits money in their checking account, currency would

d.decrease, but demand deposits would increase by the same amount and M1 would not change.

Which of the following is the source of demand for loanable funds in an open economy?

d.domestic investment + net capital outflow

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

d.e(P/P*).

Suppose the U.S. exchange rate increases relative to foreign currencies. This means that U.S. citizens pay

d.fewer dollars for foreign bonds and also get fewer dollars from interest payments.

Government-run employment agencies and public job training programs are intended primarily to reduce

d.frictional unemployment. Some economists claim that government can't do these things better than private firms and individuals.

Efficiency wages

d.increase profits and unemployment

Other things the same, if the price level is higher than expected, then some firms believe that the relative price of what they produce has

d.increased, so they increase production.

In the open-economy macroeconomic model, if the supply of loanable funds shifts right, net capital outflow

d.increases and the real exchange rate decreases.

Assume banks hold no excess reserves. If the Fed decreases the reserve ratio from 20 percent to 10 percent, then the money multiplier

d.increases from 5 to 10.

Suppose you observe Japan's net capital outflow increase. Based on the open-economy macroeconomic model, which of the following could have caused this?

d.real interest rates in the U.S. increase.

Suppose that neither workers in the paper industry nor workers in the furniture industry are unionized. If workers in the paper industry unionize, the supply of workers in the furniture industry will

d.rise, reducing the wages of workers in the furniture industry.

You are hired by the state to help people find jobs. You meet with each unemployed person for half an hour each week. Over the course of the year most of the persons you work with will be unemployed for a _______ time. Over the course of a day most of your time will be spent working with people who will be unemployed for a ______ time.

d.short, long

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate-demand curve

d.slopes downward.

The rate charged at the Fed's "discount window" is known as the

d.the discount rate.

The supply of loanable funds shifts left. According to the open economy macroeconomic model, which of the following could have caused this?

d.the government has increased the size of its budget deficit

Most economists believe that money neutrality holds in

d.the long run.

Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes lowered. At the same time, Senator B succeeds in getting major restrictions on logging enacted. In the short run

d.the price level will rise, and real GDP might rise, fall, or stay the same.

All else equal, a decrease in the domestic real interest rate causes

d.the quantity of loanable funds supplied to fall because national saving falls.

If 1/R is the money multiplier in an economy, what must R represent?

d.the reserve ratio for all banks in the economy

In the open-economy macroeconomic model, if the supply of loanable funds shifts left, then

d.the supply of dollars in the market for foreign-currency exchange shifts left.

After an import quota, but before any exchange rate adjustment,

d.there is a shortage in the market for foreign-currency exchange.

The classical view that money does not matter is sometimes described by the saying, "Money is a

d.veil."

Over the past several decades in the United States, the labor force participation rate(s) of

d.women has increased while that of men has decreased.

Mark is having a policy debate with his cousin Gina. Gina points out that the political process is mostly responsible for the lag in implementing

fiscal policy

Suppose the money multiplier is equal to 1 in the economy of the fictional country of Opria. What does this indicate about the type of banking system in Opria?

a.Opria uses a 100-percent reserve system and banks do not create money.

Suppose the Fed wishes to decrease the money supply, which of the following open market operations will the Fed conduct to accomplish this goal?

a.Sells bonds to the public.

If countries that imported goods and services from the United States recovered from recession, we would expect that U.S. net exports would

b. rise, making aggregate-demand curve shift to the right.

Which of the following macroeconomic variables is a small part of real GDP, yet accounts for a large share of the fluctuation in real GDP?

b.Investment

The banking system currently has $200 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 20 percent. If the Fed lowers the reserve requirement to 10 percent and at the same time buys $20 billion worth of bonds, then by how much does the money supply change?

b.It rises by $1,200 billion.

Which of the following is NOT true about the Employment Act of 1946?

b.It states that the government should not promote full employment and production.

Why do people believe in the inflation fallacy?

b.People tend to forget that inflation in prices goes hand in hand with inflation in incomes.

Which of the following is an example of menu costs?

b.Stores advertising new prices.

Jason is a critic of stabilization policy. Which of the following statements would he NOT agree with?

b.The Fed should try to fine-tune the economy during times of economic fluctuations.

Which of the following is not true regarding the Federal Reserve?

b.The Fed was created to facilitate the federal government's collection of taxes as well as its expenditures.

First Bank of Zogua, a fictional bank, has just received a $100 deposit from an individual. This deposit appears on what part of T-account of the First Bank of Zogua?

b.liabilities.

Which of the following, other things the same, would make the price level increase and real GDP decrease?

b.long-run aggregate-supply curve shifts to the left

When the price level rises less than expected, a firm with a sticky price will sell its output at a price that is

b.more than the firm desires and decrease its production.

Refer to the figures. Unemployment is represented by

a.Line X only.

A store of value is

D.) an item that people can use to transfer purchasing power from the present to the future

The interest rate at which banks lend reserves to each other overnight is known as

c.the federal funds rate.

Refer to the figure. If the government imposes a minimum wage of $9, then how many workers will be employed?

d.6,000

Refer to the table. How many people were employed in Lazonia in 2015?

d.9,300

Which of the following does the Federal Reserve do?

d.Act as a lender of last resort to banks

Which of the following would be included in aggregate demand?

d.Firms' purchases of newly produced machinery

A U.S. bank wants to buy yuan in order to buy Chinese bonds. In the open-economy macroeconomic model, this transaction would be part the supply of currency in the foreign exchange market, and part of the supply of loanable funds.

False

Refer to the figure. Real GDP is represented by

a.Line A only.

During expansions,

a.sales and profits rise.

Refer to the table. How many people were unemployed in Lazonia in 2015?

b.1,000

Hasina is a plant manager at a factory in a relatively poor country. Even though market wages are low, she decides to raise the wages of her workers so they can have a more nutritious diet. According to efficiency wage theory the increase in wages will

b.raise productivity but increase unemployment.

Efficiency wages

b.raise structural unemployment.

If the minimum wage were currently above equilibrium, then a decrease in the minimum wage would

b.reduce structural unemployment.

From 2001 to 2005 there was a dramatic change in the price of houses. This change made people feel wealthier and shifted aggregate demand curve to the right. The price of houses must have

b.risen.

As the reserve ratio increases, the money multiplier

c.decreases.

If the exchange rate is 7 Argentinian pesos per U.S. dollar, a side of beef costs 6,000 Argentinian pesos in Argentina, and a side of beef costs $1,000 in the U.S., then

c.the real exchange rate is greater than one and arbitrageurs could profit by buying beef in Argentina and selling them in the U.S.

A policy that directly influences the quantity of goods and services that a country imports or exports is known as a

c.trade policy

Which of the following increases in response to the interest-rate effect from a decrease in the price level?

d .Both investment and consumption

Bank assets divided by bank capital is known as

d.the leverage ratio

The inflation tax is not exactly like other taxes because ____

no one receives a bill from the government for the tax.

Which of the following is correct?

. d.MOST SPELLS OF UNEMPLOYEMENT ARE SHORT/ d.Sometimes recessions are close together.

A tax increase has a multiplier effect but not a crowding-out effect.

False

Given the following information, what are the values of M1 and M2?

M1 = $340 billion, M2 = $1,400 billion

Sadie buys stock in a company in Italy. Mike opens an espresso bar in Italy. Both Sadie and Mike are American residents. Whose purchase, by itself, increases Italy's net capital outflow?

Neither Mike's nor Sadie's

Advocates of government-run employment agencies and public-training programs believe they make job search more efficient and that they reduce the inequities of changing job markets.

True

Aggregate-demand curve shifts to the left if the money supply decreases.

True

Cyclical unemployment is closely associated with the short-run ups and downs of economic activity.

True

From 1980 to 1987, U.S. net capital outflows decreased. According to the open-economy macroeconomic model, a decrease in the supply of loanable funds could have caused this.

True

If the U.S. were to impose import quotas the demand for dollars in the market for foreign-currency exchange would increase, but the demand for loanable funds would not. True

True

Import quotas do not alter the trade balance because they cannot alter the national saving or domestic investment of the country that implements them.

True

In the open-economy macroeconomic model, if the U.S. interest rate rises, then U.S. net capital outflow falls, so the supply curve of dollars in the market for foreign exchange shifts left.

True

Most economists agree that eliminating unemployment insurance would decrease the amount of unemployment in the economy.

True

Other things the same, if people who were employed become unemployed, real GDP falls.

True

When the Fed purchases government bonds the money supply increases and the federal funds rate decreases.

True

Negative public saving and a decreased national saving are a result of

a. a budget deficit

The manager of the bank where you work tells you that the bank has $500 million in deposits and $350 million dollars in loans. If the reserve requirement is 5 percent, how much is the bank holding in excess reserves?

a.$125 million

Refer to the table. If unemployment is 3,000, what is the minimum wage in Crabapple Corners?

a.$13

If a country had a trade surplus of $15 billion and then its exports rose by $10 billion and its imports fell by $5, its net exports would now be

a.$30 billion.

A candidate for political office announces the following policies which, she says, economics clearly demonstrates will lead to higher output in the long run: 1. decrease immigration from abroad 2. make trade more open between the U.S. and other countries.

a.1 shifts long-run aggregate-supply curve to the left, 2 shifts long-run aggregate-supply curve to the right.

About what percentage of manufacturing jobs are destroyed every year, and about what percentage of workers leave their jobs in a typical month?

a.10% and 3%

scenario 34-1. Take the following information as given for small, imaginary economy: When income is $10,000, consumption spending is $6,500. When income is $11,000, consumption spending is $7,100. Refer to the scenario. The marginal propensity to consume for this economy is

a.2.50

Which of the following best defines commodity money?

a.Money that takes the form of a commodity with intrinsic value

Which of the following describes the Fisher effect?

a.The nominal interest rate adjusts to the inflation rate.

Which of the following best illustrates the concept of a store of value?

a.You purchase a home in anticipation of selling it in 2 years when the real estate market "heats up."

The term "capital flight" refers to

a.a large and sudden movement of funds out of a country.

An increase in the availability of an important major resource such as oil shifts the:

a.aggregate-supply curve to the right.

Tony manages a company where electrical engineers work to improve existing products and develop new ones. He considers paying higher wages in hopes of attracting better applicants. According to efficiency wage theory Tony will get a

a.better pool of applicants but hire fewer workers.

Banks can borrow money from the Fed's discount window. Alternatively banks can

a.borrow money from the Fed's Term Auction Facility.

When U.S. net exports rise, which increases the aggregate quantity of goods and services demanded, the dollar must have

a.depreciated.

When the U.S. real interest rate rises, purchasing U.S. assets becomes

a.more attractive to both U.S. and foreign residents.

Which of the following both shift aggregate-demand curve to the left?

b. Net exports fall for some reason other than a price change and government purchases fall.

When U.S. net exports fall, which decreases the aggregate quantity of goods and services demanded, the dollar must have

b. appreciated.

An increase in natural resources would ____

b. increase long-run aggregate supply.

The fictional country of Ubril has national saving of $200 billion, government expenditures of $50 billion, domestic investment of $120 billion, and net capital outflow of $70 billion. What is the quantity demanded for loanable funds in Ubril?

b.$190 billion

Bertha purchased 100 shares of BestSnack, Inc. stock for $20 per share; in one year, she sold the 100 shares for $25 a share. Over the year, the inflation rate was 3%. If the tax rate on nominal capital gain is 50%, how much tax does Bertha pay on her gain?

b.$250

The fictional country of Ublos has output of $750 billion, consumption of $400 billion, government expenditures of $100 billion and investment of $80 billion. What is the quantity of loanable funds supplied in Ublos?

b.$250 billion

Economists have found that union workers earn what percent more than similar nonunion workers?

b.10 to 20

Refer to the Figure. Which of the following is true?

b.If the current interest rate is 2 percent, people will sell more bonds, which drives interest rates up.

Which of the following reforms would allow for the taxation of only real interest earnings?

b.Indexing the tax system to take into account the effects of inflation.

Clyde is the president of a firm that bottles beer in St. Louis, Missouri. There are many other such firms in the area. Clyde decides that if he pays his workers a wage higher than the going market wage, his profits will increase. Which of the following is a likely explanation for his decision?

b.The higher the wage, the more he can charge for his beer.

All else equal, which of the following would cause Americans to buy more foreign assets, resulting in an increase in U.S. net capital outflow?

b.a decrease in the U.S. real interest rate

Refer to the figure. If the economy starts at Y, then W represents

b.a recession.

Paying efficiency wages means that wages are

b.above equilibrium, and unemployment is higher than otherwise.

In the open-economy macroeconomic model, the purchase of a foreign capital asset by a domestic resident

b.adds to the demand for loanable funds

In the open economy macroeconomic model, the real exchange rate

b.adjusts to balance quantity supplied and demanded in the market for foreign-currency exchange.

Which of the following would cause U.S assets to become more attractive thereby decreasing U.S. net capital outflow?

b.an increase in the U.S real interest rate.

Which of the following shifts the short-run but not the long-run aggregate-supply curve left?

b.an increase in the expected price level

National saving equals domestic investment plus net capital outflow in

b.an open economy.

If a country went from a government budget surplus to a deficit, national saving would

b.decrease, shifting the supply of loanable funds left.

Suppose the economy is in long-run equilibrium. If the government decreases its expenditures, eventually the decrease in aggregate demand causes price expectations to

b.fall. This fall in price expectations shifts the short-run aggregate-supply curve to the right.

Since the 1940's U.S. union membership has

b.fallen. Union membership is lower in the U.S. than Europe. / d.fallen. This decline should have reduced the natural rate of unemployment

Suppose that the Bureau of Labor Statistics predicts that the number of jobs for nurses will grow faster than most occupations, while the number of jobs for oil workers will decline. This change in the labor market would lead to

b.frictional unemployment created by sectoral shifts.

Rudy has graduated from college and is devoting his time to searching for a job. He has seen plenty of openings but has not yet been offered one that best suits his tastes and skills. Rudy is

b.frictionally unemployed. Frictional unemployment exists even in the long run.

An argument for the presence of unions is that they ____

b.help firms respond to workers' concerns. /b.are a necessary antidote to the market power of firms./ b.increase the happiness and productivity of workers.

A wage above equilibrium

b.helps explain structural unemployment and the natural rate of unemployment.

To decrease the money supply the Fed can conduct open-market sales. Alternatively, the Fed can

b.increase the discount rate.

In a 100-percent-reserve banking system, if an individual withdraws money from their checking account, currency would

b.increase, but demand deposits would decrease by the same amount and M1 would not change.

If the Mexican government decreases its budget deficit, then Mexico's net capital outflows will

b.increase, so its exchange rate will fall.

If expected inflation is constant and the nominal interest increases by 3 percentage points, then the real interest rate

b.increases by 3 percentage points.

An argument against the presence of unions is that the resulting allocation of labor ____

b.is inequitable.

Tax increases shift aggregate-demand curve to the:

b.left, while increases in government spending shift the aggregate-demand curve to the rig

If there is a natural disaster, the long-run aggregate-supply curve shifts

b.left.

Unemployment insurance makes workers _____ likely to negotiate for job security when searching for a job and _____ likely to have a long job search.

b.less, more

Like real GDP, investment fluctuates, but it fluctuates ________ real GDP.

b.much more than

In the open-economy macroeconomic model, the amount of dollars supplied for the purpose of buying foreign assets is represented by

b.net capital outflow

The Fed has decreased the money supply through open market operations. Which of the following has occurred?

b.open market sales, and bank reserves decrease.

In the short run a decrease in the costs of production makes

b.output rise and prices fall.

The official government unemployment rate (U-3) fails to fully capture labor utilization because it does not capture

b.potential skill mismatches.

If the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts left, then the price must have

b.risen.

If U.S. residents want to buy fewer foreign bonds, then in the market for foreign-currency exchange the equilibrium exchange rate

b.rises and the quantity of dollars traded falls.

The Bureau of Labor Statistics places people in the "employed" category if they are

b.temporarily absent from work due to illness.

A company in Spain wants to buy footballs from the U.S. In the open-economy macroeconomic model, this is included in

b.the demand for U.S. dollars in the market for foreign-currency exchange.

The supply of loanable funds shifts right and increases investment spending. Which of the following could cause this result?

b.the government begins running a budget surplus.

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large emigration of skilled workers, a major depletion of oil fields, and a major new regulation limiting electricity production. In the short run, we would expect

b.the price level to rise and real GDP to fall.

A U.S. box factory wants to build a new box assembly facility in China. In the open economy model, this is included in

b.the supply of U.S. dollars in the market for foreign-currency exchange.

The Bureau of Labor Statistics includes

b.those who worked in a family business without pay as employed and those waiting to be recalled to a job from which they have been laid off as unemployed.

What could cause U.S. goods to become less attractive to consumers in the U.S. and abroad?

b.when the U.S. real exchange rate increases.

Suppose a bank is operating with a leverage rate of 20. A 4 percent increase in the value of assets

b.will result in an 80 percent increase in owner's equity.

Suppose foreign citizens want to buy more U.S. goods and services at every given exchange rate. This

b.will shift the demand for dollars in the market for foreign currency exchange to the right

A vertical long-run aggregate-supply curve represents

c .both the classical dichotomy and monetary neutrality.

Arbitrage may not eliminate a price difference for a haircut in Paris versus a haircut in New York because ____

c.international travel would be too costly.

Unemployment?

c.moves in the opposite direction as real GDP.

In the open-economy macroeconomic model, the source of the supply of loanable funds is

c.national saving

People hold less money and lend more and the interest rate falls when the price level

d. decreases.

A bank which must hold 100 percent reserves opens in an economy that had no banks and a total initial money supply (currency) of $1,000. If customers deposit $87 into the bank, what is the value of the money supply?

d.$1,000

Refer to the Table. This bank's leverage ratio is

d.24.