Macro Midterm Review

suppose that Tiger Woods buys a golf ball in england for $1 and the marginal propensity to consume in england is 0.75. What is the total increase in England's real GDP resulting from Mr. Wood's purchase

$4

Julia would spend $30 per week even if she made no income. her weekly income is $1,000 and her marginal propensity to consume is 0.5. How much does Julia save per week

$470

assume commercial banks save no excess reserves and the reserve requirements is 20%. how much money is created in new loans from all banks after this bank receives a deposit of $1000

4,000

according to the aggregate expenditure graph above, what is the value of the expenditure multiplier

5

having a fractional reserve banking system means that

a bank cannot lend out all of its deposits

according to theory of rational expectations, an increase in government spending to increase AD as illustrated in the figure above will be ,et with which of the following

a decrease in AS

a use of easy money (expansionary) policy by the Fed could result in which of the following

a decrease in net exports

which of the following will shift the demand curve for the mexican peso to the left

a decrease in the international demand for mexican made textiles

the money supply will increase as a result of which of the following

a decrease in the required reserve ratio

which of the following creates the trade-off depicted by the Phillips Curve

a rightward shift in the aggregate demand curve

in order to go from national income to GDP, one must

all of the above

the aggregate supply curve will shift to the right in response to

an increase in investment in capital

suppose an economy is in long-run equilibrium at full employment level of output. If government spending then increases

an inflationary gap is created because the aggregate demand curve shifts to the right

the domestic purchasing power of a currency

is inversely related to the price level

the formula for the money multiplier is

1/required reserve ratio

a difference between M1 and M2 is that

M2 includes savings deposits

when the value of the US dollar appreciates relative to other currencies, which of the following is most likely to occur

US residents will take more vacations in foreign countries

assume Astobia and Bonovia are countries that exercise free trade. If the real interest rate in Astobia decreases in comparison to Bonovias real interest rate, then for Bonovia which of the following would be true of capital flow, the value of its currency, and its exports

capital flow --> inflow currency --> appreciation exports --> decrease

which of the following must exist to allow for mutual benefit from specialization and trade between two countries

comparative advantage in the production of a good or service

country A has a current account surplus; this means that

country A has a financial account deficit

a decrease in real investment stemming from higher interest rates due to government purchases is most commonly called

crowding out

assuming there is no statistical discrepancy, a trade surplus must be offset elsewhere in the

current account or financial account only

which of the following is illustrated in the figure above

demand pull inflation

on a bank's balance sheet, which of the following is considered a liability

deposits

which of the following would shift the aggregate demand curve to the right

depreciation in the international value of the dollar

which of the following would be an example of fiat money

dollar bills

expansionary fiscal policy would be best be prescribed to

eliminate a recessionary gap

in order to reduce or eliminate crowding out, expansionary fiscal policy can be accompanied by

expansionary monetary policy

which of the following will cause the aggregate demand curve to shift to the left

expectations of surpluses of goods in the future

according to Keynesian economists

fiscal policy is more effective than monetary policy

a budget deficit exists when

government spending exceeds tax collections for a given period

which of the following is direct, accurate link within the circular flow

household expenditures result in revenues for firms via the product markets

classical economists believe

in the quantity theory of money- that both the velocity and the quantity of goods and services sold per period are fairly stable

the natural rate of unemployment

includes structural and frictional unemployment

the GDP Deflator differs from the CPI in that the GDP deflator

incorporates current year quantities in its calculations

which of the following is the most likely to be a deterrent to growth in the economy

increases in the interest rate

among those hurt by inflation are

individuals on fixed incomes, those with savings earned at fixed interest rates, restaurant owners

which of the following is true when expansionary fiscal and expansionary monetary policy are used at the same time

interest rates will remain relatively constant

Kevin wants shoes and grows turnips. Lisa wants turnips and makes sheet metal. Bob wants sheet metal and makes shoes. Which function of money will cater most directly to the situation at hand

medium of exchange

in a given period, the average price level in the country of sherwood tripled, and Robin's income increased from $30,000 to $60,000. What happened to Robin's nominal and real income

nominal income--> increased real income --> decreased

the aggregate demand curve is

not found by adding product demand curves horizontally or vertically

every choice results in the foregone best alternative, which economists call the

opportunity cost

which group of people will suffer the most from a rising price level

people with fixed money incomes

the figure illustrates

phillips curve

the government of a country decides to increase government spending and taxes by the same amount in order to keep a balanced budget. The MCP is 0.75. Which of the following is true of this situation

policy direction--> expansionary expenditure multiplier--> 4 tax multiplier --> -3

a dark room technician who develops film into photographs loses his job because few people use film cameras anymore. This is an example of which of the following

structural unemployment

according to Say's Law

supply creates its own demand

droughts, technical glitches, and restrictions on the use of resources can all result in

supply shocks

when a banks balance sheet shows that the bank has excessive reserves

the bank can make additional loans

suppose yesterday the euro was trading on the foreign exchange market at $1.36 US and today its trading at $1.40 US. Which of the following is true

the euro has appreciated

the aggregate demand curve has a negative slope in part because when the price level increases

the interest rate increases

which of the following is included in the US GDP

the market value of blue jeans made in the US and sold in japan, the market value of wine made in the US by canadian citizens

it is a monetarist point of view that

the money supply should be increased steadily

the real interest rate is

the nominal interest rate minus anticipated inflation

which of the following results from stagflation

the phillips curve shifts to the right

if technology makes production less expensive and at the same time exports decrease, which of the following will result with certainty

the price levels will decrease

if prices are expected to rise more slowly in the future,

these expectations will become reality

a fixed output level in the long run at full employment output corresponds with which of the following shapes of the long run phillips curve

vertical

the upward sloping section of the aggregate supply curve can be explained by

wages and other input prices that adjust more slowly than output prices

classical economists generally believe that

wages fluctuate quickly, input and output prices will stay in line with each other, the government should not worry about maintaining aggregate demand at an adequate level