Macro Exam 1-4 Questions

unemployment =

# of employed people/ labor force

Suppose a customer's WTP for a product is $5, and the seller's WTS is $2. If the negotiated price is $3, how much is the producer surplus?

$1

If you were not studyikng economics, you could be doing one of the following: sleeping in (which you value at $5), playing cards with your friends (which you value at $10), or working ( you would have earned an extra $8). The opportunity cost of studying economics is therefore:

$10

A bank has a reserve requirement of 15%. The bank currently has $1000 in bank vaults, $4000 in deposits at the Federal Reserve and $25000 in deposits. The bank has how many excess reserves?

$1250

If the MPC to consume is .75, by how much will government spending increase GDP?

$2,000

If Germany decided to produce skirts, what's Germany's opportunity cost? Sweaters Skirts Germany 6 12 Greece 4 20

.5 of a sweater

Suppose a market basket of goods costs $10,000 in 2009, the base period, and the same basket of goods now costs $11,200. What is the CPI for the current period?

11,200/ 10,000= 112.0

Last year the CPI was 115 while the CPI for this year is 125. The rate of inflation is?

115-125= -10/115= 8.7%

Nominal GDP in 2006 was $13458.2 billion. in 2006, the GDP deflator was 116.9. What was the real GDP for 2006 if the GDP deflator uses 2000 as the base year?

13458.2 / 1.169 = $11,512.6 billion

If the marginal propensity to consume is .6, then the multiplier is:

2.5

Mandatory spendign comprises nearly ____ of the federal budget

2/3

Unemployment rate is: Population 210 Military 30 employed 100 unemployed seeking work 30 discouraged workers 20 unpaid family members 10 retired 20

21.43%

the money multiplier is 4. What is the reserve requirement?

25%

If the reserve requirement is 20% and the new deposit of $400 leads to a potential increase in the money supply of

400/ .2 = $2000

Suppose that a bond has a face value (par value) of $1000 and a coupon rate of 10%. If the bond sells at a price of $2000, what is the yield?

5%

If disposable income is $5,000 and saving is $1,800, how much is consumption?

5,000-1,800= 3,200

If a person borrows $5000 at 10% interest and never makes any payment, how much will the loan balance be after 2 years?

6050

If an economy's GDP will double in 40 years, then its growth rate must be about

70 (always use 70)/ 40= 1.75%

If the growth rate in an economy is 10% then its GDP will double in about

70*.10= 7 years

Which of these would be MOST likely to cause the PPF to shift to the left? -a decrease in taxes -an increase in population -an advancement in technology -a decrease in the size of the labor force

A decrease in the size of the labor force

In the Keynesian Macroeconomic equilibrium:

AE=y and S=I

which of the following events cause a decrease in aggregate demand? a. improving consumer confidence b. increase in interest rates c. increasing government spending d. decrease in taxes

B

What's an explanation for aggregate demand curve to shift left? a. interest rates fall and boost investments b. government spending rises c. consumer confidence declines and consumption spending falls d. prices rise and reduce real wealth

C

which of the following is most liquid? a. house b. US treasury bond c. money in a checking account d. money in a savings account

C

Chris places $1000 from his savings account into his checking account at the same bank. Which is true? a. M1 is unchanged but M2 went down by $1000 b. M1 and M2 were reduced by $1000 c. M1 rose by $1000 and M2 fell by $1000 d. M2 is unchanged but M1 increases by $1000

D

The 12 federal reserve banks and their branches do all of the following except: a. distribute coins and currency b. serve as a banker for the US treasury c. regulate and supervise member banks d. accept deposits from US citizens

D

Which of the following statements is true? a. economic growth makes everyone better off. b. economic growth always leads to a more equitable distribution of income c. all countries have experienced positive economic growth over the past 200 years d. economic growth leads to increased consumption of goods and services

D

Which interest rate is the rate at which banks charge each other overnight loans?

Federal funds rate

If a country's population increases at a slower rate than the growth in its real GDP

GDP per capita has increased

Dave brags to his dad this his $45,000 starting salary as a computer programmer is much higher than his dad's $28,000 starting salary some years ago. If the CPI the year Dave begins work is 180.5 while the CPI the year his dad started work was 110.8, Dave is:

Incorrect; adjusting for price changes his salary is less than his dad's salary

An institution that enables buyers and sellers to interact and transact with each other is known as a(n):

Market

The expenditure category that accounts for the largest share of GDP is:

Personal consumption and expenditures

When production technology improves, supply increases and the equilibrium:

Q rises and the equilibrium P falls

Economic growth is most accurately measured using:

Real GDP per capita

The law of demand states:

The lower a products price, the more of that product consumers will purchase during a given period

The ______ shows the combination of two goods that are possible for a society to produce at full employment.

The productions possibilities frontier

Disposable income is equal to

Y-T

Scarcity refers to the fact that

a person must make choices given the resource limitations he or she faces

A PPF with constant opportunity costs is:

a straight line

If the government collects $3,400 in tax revenue and spends $2,600 it has:

a surplus if $800

A surplus is:

above equilibrium

If one country has a(n) _______ advantage in the production of one item, it can always produce more of the same item than another nation, given the same resources.

absolute

Marginal analysis would put an emphasis on:

additional costs and benefits

According to the textbook, what brought the US out of the Great Depression?

an increase in spending on WWII

Retirees and creditors:

are hurt by inflation because their purchasing power is reduced

When the supply curve shifts out (to the right) and the demand curve shifts in (to the left) the equilibrium Q will:

be indeterminate

Suppose the equil P for a gallon of milk is $2.50 but due to government price supports, the minimum legal is $2.75 per gallon. This price floor:

causes a surplus of milk in the market

MPC =

change in consumption/ change in income

What impact will a rising price level have on real GDP?

changes in the price level do not impact real GDP

GDP =

consumption + Investment + government spending + (exports- imports)

The best discretionary fiscal policy option is:

contradictory fiscal policy that leads to full employment

____ inflation occurs when a supply shock reduces aggregate supply .

cost-push

____ unemployment is the result of changes in the business cycle:

cyclical

A(n) ___ in market power and a(n) ___ in regulations will shift the short run aggregate supply curve to the right

decrease; decrease

Which scenario is the MOST likely to effect of an increase in the price of flashlights on the market for batters? -increased equilibrium P and increased equilibrium Q -Decreased equilibrium P and increased equilibrium Q -Decreased equilibrium P and decreased equilibrium Q -increased equilibrium P and decreased equilibrium Q

decreased equilibrium P and decreased equilibrium Q

in the US people are considered unemployed if they:

do not have a job but are available for work and have been actively seeing work

Wages set high to discourage employee turnover are called ___ wages

efficiency

In a simple circular flow diagram, total spending on goods and services in the product market:

equals the total income earned in the resource market

Net exports equal:

exports - imports

If the Fed reduces the supply of money in the market, bod prices will ____ and interest rates will ____

fall; rise

The US GDP is equal to the total market value of all:

final goods and services produced by resources in the US

In the Keynesian model, the price level is ___; in the aggregate demand and supply model, the price level is ___.

fixed; flexible

Natural rate of unemployment =

frictional + structural

Jennifer did not work during college. She obtained a degree in marketing and is now looking for a job. Jennifer is considered:

frictionally unemployed

Inflation is a:

general rise in prices

liquidity refers to

how quickly, easily and reliably an asset can be converted into a medium of exchange

As income increases, consumption ____

increases at a slower rate

What is a source of positive productivity growth?

increasing the quality of labor

Largest source of federal government revenues is

individual income taxes

Points that are obtainable but NOT efficient are:

inside the curve

Which pair does not relate: Entrepreneurial ability- profit labor-wages capital- interest land-revenue

land - revenue

When government spending decreases, the aggregate demand curve shifts to the ___ and the multiplier effect is dampened by a ___ in the aggregate price level

left; fall

The capital to labor ratio is:

low is poor countries

Corporate bonds generally have a ____ ROI than do stocks because bonds are ____

lower; less risky.

Producer surplus is the difference between the:

market price and the minimum price the seller is willing to accept

What is considered a land resource?

mineral deposits

On a graph short run economic growth:

moves points outward

on a graph, long run economic growth:

moves the entire curve outward

Which of the following is a tool of monetary policy?

open market operations

The high point of a business cycle is called the:

peak

The resource known as "labor" includes:

physical and mental skills and talents

A(n) ______ is the minimum legal price that can be charged for a product.

price floor

Production efficiency occurs when goods are:

produced with the lowest possible resource cost

Suppose that the price of a good is $650 and the equilibrium price is $675. Compared to the market equilibrium:

producer surplus is decreased and the DWL is increased

Other factors held constant, as the price of an iPad rises, the:

quantity demanded for iPads falls

___ government spending ___ transfer payments and ____ are all examples of expansionary fiscal policy

raising; increasing; reducing

The ___ lag is the time it takes for policymakers to confirm that the economy is trending in or out of a recession

recognition

A shift to the ____ of the ___ curve will cause the price level and employment to increase

right; aggregate demand

If oil prices fall, the SR aggregate supply curve will shift to the ___ and the price level will shift ___

right; down

If investment increases from $500 billion to $600 billion and the MPC is .75 then equilibrium income will:

rise by $400 billion

The supply curve for loanable funds represents ___ and is ___

savers; upward sloping

Economic growth is shown as a:

shift to the right of the long run aggregate supply curve

Which paid MOST likely includes substitute goods? -hot dogs and mustard -ramen noodles and water -pizza and chicken wings -soft drinks and lemonade

soft drinks and lemonade

Which of the following is not considered an automatic stabilizer

spending on research and development

If TV sellers expect the prices of TVs to fall in the future we are likely to see the:

supply of TVs increasse

the basic idea of opportunity cost is that:

the decision to use resources in one activity means that the resources cannot be used elsewhere

A good is a normal good if:

the demand curve shifts outward if income increases

If one person consumes a public good:

the others cannot be excluded from enjoying it

According to the law of supply, producers will supply more of their products when:

the price rises

Flu vaccinations provide external benefits. Thus:

too few flu vaccinations are given

Normative questions involve societal beliefs on what should or should not be done: true or false?

true

Production levels to the right of the PPF are:

unattainable

What are the primary functions of money?

unit of account, medium of exchange and store of value

The ___ effect is the reason for the negative slope of the aggregate demand curve

wealth

Microeconomics is concerned with issues such as: unemployment interest rates which job to take inflation

which job to take