macro final (ch 7, 20, 22, 22)

according the the figure, if there is international trade in this market, and the world price of a tv is $500, buyers and sellers will make exchanges at a price of ____ because buyers will refuse to pay ____ than the world price

$500; more

suppose that the world price of TVs in $400, and the government imposes a $100 tariff. according to the figure, domestic consumers purchase ____ units from domestic producers and ____ units from foreign producers after the tariff

40,000; 30,000

when using the fed model to diagnose the economy, if a shock causes the real interest rate to rise, then the economy has been hit by ____ shock

a financial

a debt crisis occurs when

a government cannot repay its loans

in 2018, the unemployment rate in the US went as low as 3.7%, as measured by the Bureau of Labor Statistics. This historically low level of unemployment occurred simultaneously with a larger trade deficit. this provides evidence against which of the following argument against international trade?

international trade may lead to job loss

suppose that one hour of labor in Singapore can produce 20 computers or 40 cellphones. further, suppose that one hour of labor in ireland can produce 10 computers or 15 cellphones. ____ has a comparative advantage in the production of computers. ____ has a comparative advantage in the production of cellphones.

ireland; singapore

if inflation is 4% and a firm gives its workers a 1.5% nominal wage raise then

real wages have fallen by 2.5%

What was the Fed's inflation target in 2019?

2%

a tariff is

a tax on imported products

if a spending shock increases aggregate expenditure by $35 billion and the multiplier is 2.5, then the IS curve will shift

right by $87.5 billion

The standard deduction for a single person is $12,200. Based on this table, if your total income is $84,200, what is the amount of tax you will pay on your taxable income?

$11,699

according the the figure, if there is international trade in this market, and the world price of an engine is $800, the value of the consumer surplus is

$250,000

Payroll taxes are 6.2%, and Medicare taxes are 2.9%. If your employer owes you $665, approximately how much will you get after these deductions?

$604.49

payroll taxes are 6.2%, and medicare taxes are 2.9%. your employer owes you $665. how much will your work cost your employer

$725.52

monetary policy is defined as the

adjustment of interest rates to influence economic conditions

a financial shock is any change in

borrowing conditions that changes the real interest rate at which people can borrow

why is the discount rate the upper bound for the federal funds rate

it is set high then the federal funds rate

if the actual inflation is greater than the target inflation rate, then relative to the neutral interest rate, the fed reserve will ____ the real interest rate to drive ____ consumption and investment

raise; down

if the output gap is positive, then the federal reserve will use its floor framework to ____ the federal funds rate, influence shoer- and long- term interest rates ___, and ___ total spending in the economy

raise; upwards; decrease

Suppose a high-income person, a middle-income person, and a low-income person purchase identical houses that are financed by similar mortgages. Who gets the largest tax benefit?

the high-income person

You are sitting at your desk in your new job as the Chair of the Federal Reserve Bank of the United States. The interest rate where potential GDP meets real GDP is 2%, the inflation rate is 1%, and the output gap is -1%. What is the appropriate new nominal federal funds rate that you should set for the economy?

1.5%

you are the chair of the fed reserve bank of the us. the neutral rate of interest is 2%, the inflation rate is 1% and the output gap is -0.5%. using the fed's rule of thumb, what is the appropriate new nominal federal funds rate that you should set for the economy?

2%

take a look at the IS-MP-PC model. the equilibrium real interest rate is:

3%

in the IS-MP analysis in the fed model, contractionary fiscal policy will shift the

IS curve to the left

the fed model links the IS, MP and phillips curves. in the IS-MP analysis, an increase in exports will shift the

IS curve to the right

the fed model combines the __ curve, the __ curve, and the __ curve to link interest rates, the output gap, and inflation

IS; MP; phillips

in the IS-MP analysis in the fed model, a decrease in the risk-free rate shifts the

MP curve down

you have saved $747. where should you go if you want to open a checking account

a commercial bank

russia and kazakhstan both produce horses and oil. if kazakhstan is much more efficient than russia in the production of horses and slightly more efficient than russia in the production of oil, ____ can benefit from trading horses and oil with each other

both countries

which of the following services are provided by local government

bus services

which is NOT a trade cost?

cost of producing a good

a supply shock is any change in

production costs that leads suppliers to change the prices they charge at any given level of output

an export is a good or service

sold to a foreign buyer.

the government's debt is

the accumulation of all the deficits

once you have connected the output gaps from the IS-MP model and the phillips curve, the next step is to identify the

unexpected inflation from the phillips curve

you are an economic adviser using the fed model to analyze the economy. now suppose that manufacturers in china face rising costs of ribber as an input. what is the effect on the economy?

an unchanged real interest rate, an unchanged output gap, and unexpected inflation

argentine and chile both produce copper and timber. if chilly produces copper much more efficiently than argentine and timber slightly more efficiently than argentina, ____ can benefit from trading copper and timer with each other.

both countries

when a spending shock occurs, the IS curve shifts by the

change in spending times the multiplier

in the IS-MP analysis in the fed model, the MP curve shows you the

current real interest rate

the affordable care act is an example of

discretionary spending

the federal reserve's lender- of- last- restore function has been curtailed over time by the

dodd-frank act

according the the figure, if there is international trade in this market, and the world price of an engine is $800

domestic producers will export 300 units

according the the figure, if there is international trade in this market, and the world price of an engine is $1000

domestic producers will export 600 units

an import is a good or service

purchased from a foreign seller

if inflation is 0%, and a firm wants to lower real wages by 1% it will need to:

lower nominal wages by 1%

tariffs on inputs lead to a ___ shock

supply

Payroll taxes are 6.2%, and Medicare taxes are 2.9%. Your employer owes you $850. How much will your work cost your employer?

$927.35

when using the fed model, the first step is to

identify the shock and shift the curve

in the IS-MP analysis in the fed model, a fall in interest rate causes a

movement to the right along the IS curve

In your current job, you earn $41,000. You take the standard deduction of $12,200. You have an offer of a new job working for a different employer. Your salary would go up by $6,500. How much extra will you owe in federal income taxes if you take the new job?

$780

In order to boost output, the federal government engages in _____ fiscal policy, which _____ government spending and _____ taxes.

expansionary; raises; lowers

one of the reasons that government spending rose during 2007 to 2008 period was the introduction of

the affordable care act

fiscal policy is increased in its effectiveness through

the multiplier effect

a budget deficit occurs when

government spending exceeds government revenue

suppose that the federal reserve has a 2% target on inflation. if actual inflation is 1%, then the fed will want the new real interest rate to be

lower than the neutral interest rate

if the output gap is negative, then relative to the neutral interest rate, the federal reserve will ___ the real interest rate to drive ___ consumption and investment

lower; up

once you have identified the point of equilibrium in the IS-MP graph in the fed model, the horizontal axis will show you the

output gap

forward guidance occurs when the federal reserve

provides information about the future course of monetary policy in order to influence expectations about future interest rates

The Philippines government provides retirement benefits, unemployment benefits, maternity leave benefits, death and funeral benefits, and other benefits. These are examples of:

social insurance

if you see a newspaper headline that says "still prices rise sharply" this is an example of __ shock

supply

which of the following is an example of a trade cost associated with a us citizen importing a sweater produced in india

the cost of the tariff on imported sweaters from india

You are the manager of a local bank. Due to unstable financial conditions, savers are worried that your bank may fail. When they show up in large numbers to withdraw their savings, you find that you do not have enough cash to meet the obligations. Where can you turn for a loan if no other bank will lend to you?

the discount window

what is the floor framework that the federal reserve uses to influence the federal funds rate

the fed's approach of setting other interest rates to put a lower bound on how low the federal funds rate can go

during the 2008 to 2009 financial crisis, imports as a share of GDP fell in the US. which of the following could explain this phenomenon?

the percentage decrease in imports was greater than the percentage decrease in GDP

if the output gap is positive, the fed reserve will ___ the real interest rate to ____

raise; cool inflationary pressures

if the US dollar appreciates which of the following graphs correctly represents the effect on the IS curve

real interest rate, decreased spending

which of the following graphs correctly represents the effect of increases consumer confidence and spending on the IS curve?

real interest rate, increased spending

which of the following is LEAST likely to be traded internationally?

sports arenas

a bank run occurs when

many people want to withdraw their savings from a bank at the same time, and the bank does not have enough cash on hand

if there is no international trade in this market, the value of the consumer surplus is

$360,000

on which of the following is there a tax incentive in the US

health insurance purchased through employers, rental value on owner-occupied housing, your mortgage

the federal reserve was created after

a series of bank runs and bankruptcies

which of the following is a reason to worry about government debt

high and rising debt slows economic growth

with a progressive tax, those with ____ income tend to pay a ____

more; higher share of their income in taxes

why don't most expenditures help much if your federal tax bill is zero

most tax breaks reduce taxable income, but reducing taxable income below zero does not reduce the tax bill

Suppose a high-income person, a middle-income person, and a low-income person purchase identical houses that are financed by similar mortgages. who spends the most on tax-preferred goods?

the high-income person

countries benefit from trade by exporting goods in which their opportunity costs are relatively _____ and importing goods in which their opportunity costs are relatively ____

low; high

what is a reserve requirement

the minimum amount of reserves that each bank must hold

fiscal ploy works best when it is

timely, targeted, temporary

which of the following did the new deal create

unemployment benefits

the economy shown here begins at a 0% output gap. now suppose that manufacturers in china face rising costs of rubber as an input. this leads to:

unexpected inflation of 1%

which of the following graphs correctly represents the effect on the Phillips curve in Ethiopia if the ethiopian birr appreciates

unexpected inflation, falling costs