Macro Practice Quiz

If currency held by the public equals $100 billion, reserves held by banks equal $50 billion, and bank deposits equal $500 billion, then the money supply equals:

$600 billion.

If GDP measured in billions of current dollars is $5,465 and the sum of consumption, investment, and government purchases is $5,496, while exports equal $673, imports are:

$704.

If income is 4,800, consumption is 3,500, government purchases is 1,000, and taxes minus transfers are 800, public saving is:

-200.

If the money supply increases 12 percent, velocity decreases 4 percent, and the price level increases 5 percent, then the change in real GDP must be ______ percent.

3

If 7 million workers are unemployed, 143 million workers are employed, and the adult population equals 200 million, then the unemployment rate equals approximately ______ percent.

4.7

Assume that the consumption function is given by C = 150 + 0.85(Y - T), the tax function is given by T = t0 + t1Y, and Y is 5,000. If t1 decreases from 0.3 to 0.2, then consumption increases by:

425.

To increase the monetary base, the Fed can:

conduct open-market purchases.

According to the model developed in Chapter 3, when taxes are increased but government spending is unchanged, interest rates:

decrease.

If the money supply is held constant, then an increase in the nominal interest rate will ______ the demand for money and ______ the price level.

decrease; increase

When a firm sells a product out of inventory, investment expenditures ______, and consumption expenditures ______. Group of answer choices

decrease; increase

If inflation was 6 percent last year and a worker received a 4 percent nominal wage increase last year, then the worker's real wage:

decreased 2 percent

When the Fed decreases the interest rate paid on reserves, it:

decreases the reserve-deposit ratio (rr).

According to the definition used by the U.S. Bureau of Labor Statistics, people are considered to be unemployed if they:

do not have a job but have looked for work in the past four weeks.

The government raises lump-sum taxes on income by $100 billion, and the neoclassical economy adjusts so that output does not change. If the marginal propensity to consume is 0.6, private saving:

falls by $40 billion.

To avoid double counting in the computation of GDP, GDP includes only the value of ______ goods.

final

The economy begins in equilibrium at point E, representing the real interest rate r1 at which saving S1 equals desired investment I1. What will be the new equilibrium combination of real interest rate, saving, and investment if the government raises taxes, holding other factors constant?

point B

An example of a real variable is the:

quantity of goods produced in a year.

The amount of capital in an economy is a(n) ______, and the amount of investment is a(n) ______.

stock; flow

An increase in the price of goods bought by firms and the government will show up in:

the GDP deflator but not in the CPI.

The theoretical separation of real and monetary variables is called:

the classical dichotomy.

People use money as a medium of exchange when they:

use money to buy goods and services.

The quantity theory of money assumes that:

velocity is constant.

If nominal GDP in 2009 equals $14 trillion and real GDP in 2009 equals $11 trillion, what is the value of the GDP deflator?

1.27

If the consumption function is given by C = 500 + 0.5(Y - T), and Y is 6,000 and T is given by T = 200 + 0.2Y, then C equals:

2,800.

In the classical model with fixed income, if the demand for goods and services is greater than the supply, the interest rate will:

Increase.

The marginal product of capital is:

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

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

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

To increase the money supply, the Federal Reserve:

buys government bonds.

According to the neoclassical theory of distribution, in an economy described by a Cobb-Douglas production function, workers should experience high rates of real wage growth when:

labor productivity is growing rapidly.

According to the neoclassical theory of distribution, total output is divided between payments to capital and payments to labor depending on their:

marginal productivities.