Macroeconomic 2105 Final Exam UGA, UGA Macro CH 9 Problems and Applications (Book), Econ 2105 Chs 9-12, Macroeconomic 2105 Final Study Guide

T112. The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.20, and the marginal propensity to import is 0.14. The autonomous tax multiplier is​ _______.

-1.6

DSM7. If the inflation rate is 6 percent and the nominal rate of interest is 4 percent, then the real interest rate is __________.

-2 percent

DSM6. During the past decade, a nation's average annual rate of population growth was 4 percent, and its average annual real GDP growth rate was 1 percent. Thus, the average annual rate of growth in per capita real GDP was __________.

-3.0 percent

T112. An economy has a consumption function of C​ = 10​ + 0.8Y​, investment of​ 6, government expenditure of​ 10, exports of​ 10, and an import function of M​ = 0.1Y. If government expenditure increases to​ 15, what is the increase in equilibrium​ expenditure?

16.65

T92. Choose the correct statements. 1. Foreign currency is always in the form of notes or coins. 2. The foreign exchange market is made up of thousands of people comma including international tourists and foreignThe foreign exchange market is made up of thousands of people, including international tourists and foreign exchange brokers.exchange brokers. 3. The foreign exchange market is the market in which the currencyThe foreign exchange market is the market in which the currency of one country is exchanged for the currency another.of one country is exchanged for the currency another. 4. The foreign exchange market is a place.

2 and 3

T111. An economy has a consumption function of C​ = 15​ + 0.7Y​, investment of​ 8, government expenditure of​ 12, exports of​ 20, and an import function of M​ = 0.2Y. If government expenditure increases by​ 10, what is the increase in equilibrium​ expenditure?

20

mt1. At which levels of production is Alice producing​ inefficiently?

200 units of lemonade and 50 units of pizza

P111. An economy has no imports and no taxes. The marginal propensity to save is 0.4. A​ ______ increase in autonomous expenditure increases equilibrium expenditure by​ $60 billion. The multiplier is​ ______.

24 billion; 2.50

T112. An economy has a consumption function of C​ = 10​ + 0.8Y​, investment of​ 6, government expenditure of​ 10, exports of​ 10, and an import function of M​ = 0.1Y. What is the multiplier for this​ economy?

3.33

P12. An economy is at potential GDP and the price level is 100 in the figure. If aggregate demand unexpectedly​ increases, the inflation rate is​ ______.

33 percent a year

P9. If the US interest rate is 1.5​ percent, Canada's interest rate is 1​ percent, the US inflation rate is 1.2​ percent, and​ Canada's inflation rate is 0.70​ percent, then calculate the US interest rate differential.

0.5

mt3. If equilibrium expenditure changes by​ $50 billion that results from an increase in autonomous taxes by​ $80 billion, find the autonomous tax multiplier.

0.625

11. The graph shows an economy that has no taxes or imports. AD0 is the aggregate demand curve when investment is​ $1.0 ​ trillion, and AD1 is the aggregate demand curve when investment is​ $1.5 trillion. What is the size of the multiplier in the short​ run? The size of the multiplier in the short run is

4

PT5. 2013 2014 Item Price Quantity Price Quantity Books ​$4 5 ​$5 8 Pens ​$6 6 ​$4 9 In 2013 and in​ 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for​ Dexter's CPI is 2013 and 2013 is also the year of the Consumer Expenditure Survey. The CPI in 2014 is​ ______.

87.5

9. If the exchange rate between the U.S. dollar and the Japanese yen is $1 = 100 yen, the price level in the United States is 90 and the price level in Japan is 100, what is the real exchange rate?

90

hw4. The Bureau of Labor Statistics reported the following data for August 2017August 2017. Labor force 160,571 Employed 153,439 Working-age population 255,357 Use the above data to calculate for August 2017August 2017​: ​>>> Answer each to one decimal place. Unemployment rate Labor force participation rate Employment to population ratio

4.4 Percent 62.9 Percent 60.1 Percent

PT6. Year Real GDP ​ (trillions of dollars​) Population ​(billions) 2007 30,000 150 2008 32,240 155 The table provides some data on real GDP and the population of Pacifica in 2007 and 2008. What is the growth rate of real GDP in Pacifica in 2008​? What is the growth rate of real GDP per person in Pacifica in 2008​? The growth rate of real GDP in PacificaPacifica in 2008 is ____ percent. The growth rate of real GDP per person in Pacifica in 2008 is ___ percent.

7 5

hw8. The bank plans to hold ​$8 for every​ $100 in deposits. The bank holds desired reserves of ​$5,000 and actual reserves of ​$11,000. What is the​ bank's desired reserve ratio and its excess reserves​? The​ bank's desired reserve ratio is ____ percent. The banks excess reservesexcess reserves are ​$_____.

8.0 6000

DSM7. What is the relationship between real interest rates and investment, other things being equal?

A negative relationship

mt1. The price of a bag of corn chips is​ $3, and the price of a bottle of soda is​ $1. What is the relative price of a bottle of​ soda?

1/3 bag of corn chips

T92. Choose the statement that is incorrect.

Against the Chinese Yuan, the dollar appreciated between 2005 and 2014.

DSM13 Which of these fiscal policy actions will increase real GDP in the short run?

An increase in government expenditures

DSM8. Which of these will shift the money demand curve to the right?

An increase in real GDP

DSM3. Which of the following is consistent with the law of supply?

An increase in the market price of MP3 players causes an increase in the production of MP3 players.

T91. Choose the statement about a crawling peg that is incorrect.

A crawling peg makes the exchange rate fluctuate wildly.

short run macroeconomic equilibrium

a situation that occurs when the quantity of real GDP demanded equals the quantity of real GDP supplied - at the point of intersection of the AD curve and the SAS curve

DSM3. Other things remaining equal, the law of demand says that higher prices will lead to:

a smaller quantity demanded and lower prices to a larger quantity demanded.

P132.Fiscal policy attempts to achieve all of the following objectives except​ ______.

a stable money supply

DSM3. The condition that exists when quantity supplied exceeds quantity demanded at the current price is known as __________.

a surplus or excess supply

Keynesian cycle theory

a theory that fluctuations in investment driven by fluctuations in business confidence - summarized by the phrase "animal spirits" - are the main source of fluctuations in aggregate demand

mortgage backed security

a type of bond that entitle its holder to the income from a package of mortgages

mt3. A decrease in the marginal propensity to import​ _______, everything else remaining the same.

makes the multiplier larger

10. At arrow​ 2, the economy is in​ ______ full-employment equilibrium and the intersection of the AD and SAS curves is to the​ ______ of the LAS curve.

an​ above; right

9. A crawling peg exchange rate policy is one that​ _______.

follows a path determined by a decision of the government or the central bank and is achieved by central bank intervention in the foreign exchange market

9. A country that allows demand and supply to determine the value of its currency is said to have a __________.

flexible exchange rate

hw4. Which of the following is a final​ good?

flour purchased at the store to bake cookies

P12. According to RBC​ theory, the source of the business cycle is​ _______, which result mainly from​ _______.

fluctuations in​ productivity; fluctuations in the pace of technological change

land

gifts of nature that we use to produce goods and services

P12. The ​long-run Phillips curve is the relationship between​ _____ and​ _____ when the economy is at full employment. The​ long-run Phillips curve is a​ _____ line at the​ _____ unemployment rate.

inflation; unemployment;​ vertical; natural

mt2. Nation's Economic Pain Deepens- The unemployment rate in May 2008 is​ ______ the estimated natural unemployment rate. This implies that real GDP is​ ______ potential GDP at this time.

greater than; less than

P101. Draw an aggregate demand curve in an economy with an above​ full-employment equilibrium. Label it AD. Draw a point at the above​ full-employment equilibrium. Draw a horizontal arrow at the equilibrium price level that shows the output gap. The output gap in the graph is​ ______ because​ ______.

inflationary gap; potential GDP is less than real GDP

hw2. Ann currently produces at point A in the figure. If Ann moves from point A to point C​, her opportunity cost of a modem ​_______.

increases

mt1. An economy produces at point a on the PPF shown in the figure. A drought reduces the amount of wheat produced and the economy produces at point b. The opportunity cost of a unit of wheat​ ________.

increases

P112. Consumption expenditure minus​ imports, which varies with real​ GDP, is called​ _______.

induced expenditure

DSM5. If the inflation rate is low, steady, and anticipated, __________.

inflation may not be a major problem

P9. A flexible exchange rate is one that​ _______.

is determined by demand and supply in the foreign exchange market with no direct intervention by the central bank

P102. ​Long-run macroeconomic equilibrium​ ______.

occurs when real GDP equals potential​ GDP, and the LAS​, SAS​, and AD curves intersect

laffer curve

relationship between the tax rate and the amount of tax revenue collected

12. A Phillips curve is a curve showing the __________.

relationship between the unemployment rate and the inflation rate

Positive relationship

relationship between two variables that move in the same direction

DSM3. In a price system:

relative prices change constantly to reflect changes in supply and demand.

DSM13. Supply-side economics emphasizes the role that __________ play in the supply of output in the economy.

taxes

PQ13. The cyclical surplus or deficit is the budget balance that arises because​ _____ and​ _____ are​ _____ their​ full-employment levels.

tax​ revenues; outlays; not at

trend

tendency for a variable to move in one general direction

quantity demanded

the amount of a good or service that consumers plan to buy during a given time period at a particular price

quantity supplied

the amount of a good or service that producers plan to sell during a given time period at a particular price

DSM7. In the long run, the amount of investment a firm can make is dependent on:

the amount of household savings

saving

the amount of income that is not paid in taxes or spent on consumption goods and services

PT5. All of the following statements are included in new growth theory except​ ______.

the forces of competition destroy incentives to make new discoveries.

10. In the long-run, the level of output is:

the full-employment level of output

P121. The impulse in RBC theory is​ _______.

the growth rate of productivity that results from technological change

opportunity cost

the highest valued alternative that we must give up to get something

PT5. The fundamental precondition for labor productivity growth is​ _______.

the incentive system created by​ firms, markets, property​ rights, and money

wages

the income that labor earns

mt3 An economy has a zero marginal tax rate. When real GDP​ increases, the change in consumption expenditure equals​ _______. When real GDP​ increases, the change in imports equals​ _______.

the marginal propensity to consume times ×the increase in real GDP the marginal propensity to import times the increase in real GDP

P102. When firms are unable to meet the demand for their​ output, _____. Prices​ _____.

the quantity of real GDP demanded is greater than the quantity of real GDP​ supplied; rise

marginal cost

the opportunity cost of producing one more unit of a good or service. it's the best alternative forgone. increase in total cost/ increase in output

unemployment rate

the percentage of people in the labor force who are unemployed

labor force participation rate

the percentage of the working age population who are members of the labor force

DSM13 Many economists believe that tinkering with the economy via discretionary fiscal policy is not effective due to:

the presence of time lags.

PQ13. Fiscal imbalance is the present value of the​ government's commitments to pay benefits minus​ _____.

the present value of its tax revenues

10. Everything else remaining the​ same, an increase in aggregate demand increases​ ______.

the quantity of real GDP supplied

P101. When unwanted inventories pile​ up, ​_____. Prices ​_____.

the quantity of real GDP supplied is greater than the quantity of real GDP demanded; fall

mt3. With a rise in the money wage​ rate, ______.

the quantity that firms are willing to supply at each price level decreases

12. A stagflation can turn into a​ cost-push inflation process when​ _______.

the quantity of money persistently increases

P121. A stagflation can turn into a​ cost-push inflation process when​ _______.

the quantity of money persistently increases

P101. With a rise in the money wage​ rate, ______.

the quantity that firms are willing to supply at every level decreases

10. According to the graph, an increase in the quantity of money is best described by:

the shift in the AD curve

T122. If the expected inflation rate increases and the natural rate of unemployment remains​ constant, then​ _______.

the short-run Phillips curve shifts upward and the long-run Phillips curve does not change

mt2. Gross investment is​ ______. Net investment is​ ______.

the total amount spent on new​ capital; the change in the value of capital

hw8. When the Fed buys securities from a​ bank, a sequence of events begins. The events are listed below. Number each event in the order in which it occurs.

Banks have excess reserves. Banks lend excess reserves. The quantity of money increases. New money is used to make payments. Some of the new money remains on deposit. Some of the new money is a currency drain. Desired reserves increase because deposits have increased. Excess reserves decrease.

DSM7. Which of these are financial instruments that represent promises to repay a fixed amount of funds?

Bonds

P132. Choose the statement about U.S. international debt that is incorrect.

Borrowing from the rest of the world as a source of loanable funds decreased during the late 1990s and 2000s

mt1. Which of the following statements is​ true?

Both​ life-saving drugs and ice cream are examples of scarce goods.

DSM4. How does the Bureau of Economic Analysis of the U.S. Department of Commerce measure GDP?

By adding the value in dollar terms of all the final goods and services produced domestically.

10. How can government policies shift the aggregate demand curve to the right?

By increasing government purchases

E. Capital and Financial Account

Capital and Financial Account= Foreign Investment in the US - US Investment Abroad + Statistical Discrepancy

mt2. Choose the statement that is incorrect.

Changes in relative prices lead consumers to change the items they buy, and the CPI reflects this substitution.

hw8. What is the largest component of​ M1? What is the largest component of​ M2?

Checkable deposits Savings deposits

mt1. Which of the following is an example of a final good or service​?

Dan bought a Toyota Camry.

mt3. Which of the following fiscal policies combats​ inflation?

Decreasing government spending

hw8. Choose the correct statement.

Deposits are​ money, checks are not​ money, and credit cards are not money.

9. The U.S. dollar exchange rate decreased from$1.33 Canadian in October, 2016 to 1.25 Canadian in October, 2017​, and it increased from 103.91 Japanese yen in October, 2016 to 112.50 yen in October, 2017. Did the U.S. dollar appreciate or depreciate against the Canadian​ dollar? Did the U.S. dollar appreciate or depreciate against the Japanese​ yen?

Depreciated; Appreciated

13. Categorize the following statements as either true or false. Congress can pass budget laws only once a year. The President has veto power to eliminate specific items in a budget bill and approve others. Congress attempted to grant the President a line dash item veto but the Supreme declared this unconstitutional. For the United States budget comma the fiscal year runs from January 1 to December 31.

False False True False

DSM2. In the circular flow model, who supplies factors of production in exchange for income?

Households

DSM3. Assume the cost of aluminum used by soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases.

II and III

PT7. Choose the statement that is incorrect.

If a financial​ institution's net worth is​ positive, the institution must be solvent and liquid.

P9. Choose the correct statement about purchasing power parity.

If purchasing power parity does not​ prevail, the demand for U.S. dollars changes and the supply of U.S. dollars changes.

T92. Choose the statement about fixed exchange rates that is incorrect.

If the Fed wanted to fix the US dollar exchange rate with the Japanese Yen, the Fed would have to buy US dollars to prevent the exchange rate from rising above the target value.

PT5. Choose the statement that is incorrect.

In the United States in​ 2009, 22 million fewer people had jobs than in 1989.

DSM5. Government policies can help to reduce the levels of frictional and structural unemployment, but they can also help to increase them. Which of these policies can cause an increase in the levels of frictional and structural unemployment?

Increasing the minimum wage

P9. Choose the correct statement about interest rate parity

Interest rate parity means equal rates of return.

10. Which of these shifts the aggregate demand curve to the right?

Lower interest rates

DSM7. What is the relationship between investment and real interest rates, all other things being equal?

Lower interest rates stimulate investment.

DSM8. The equation of exchange is:

M x V = P x Q

DSM8. The sum of all currency in the hands of the public, checkable deposits and traveler's checks is the official definition of __________.

M1

P101. Choose the statement that is incorrect.

Over the business cycle, aggregate supply fluctuates around potential GDP.

10. Choose the statement that is incorrect.

Over the business​ cycle, aggregate supply fluctuates around potential GDP.

PQ13. The Council of Economic Advisers monitors the economy and keeps the​ _____ informed about the current state of the economy and the best available forecasts of where it is heading.

President and the public

DSM6. Which of these government policies can help economic growth?

Promoting higher rates of saving

DSM2. What are copyrights designed to accomplish?

Protect intellectual property rights

hw4. Choose the option that is an example of government expenditure.

Secret service protection for the President

DSM8. The Board of Governors of the Federal Reserve has _________ members that are appointed for staggered _________ by the __________ and confirmed by the Senate.

Seven, 14-year terms, President

DSM2. Which of the following is critical to the success of the market system?

To allow individuals or firms to have exclusive use of their property

P132. Choose the correct statement.

Tax cuts can increase tax revenue.

DSM6. Which of these will ensure that an economy experiences labor productivity growth?

Technological change

DSM6. Which of these factors contributes to economic growth?

Technological progress

PQ13. Which of the following statements illustrates fiscal policy​?

The US government has proposed a hike in the corporate tax rate.

DSM3. Which of the following represents an inferior good?

When consumer income increases, the demand for bologna decreases.

P131. Choose the statement that is incorrect.

When full employment returns in 2018, the CBO says that that cyclical deficit will continue to be large

DSM8. When is the opportunity cost of holding money higher?

When interest rates are high

P131. Choose the statement that is incorrect.

When real GDP decreases in a​ recession, the poor become​ poorer, but at the same time the rich become richer and tax revenues increase.

PT6. Choose the statement that is incorrect.

The demand for labor is the relationship between the quantity of labor demanded and the money wage rate.

hw5. Choose the correct statement. The CPI in 2006 was 201.6. The CPI in 2007 was 207.3. The inflation rate in 2007 was ___ percent.

The inflation rate is the annual percentage change in the price level. 2.8

T122. Choose the correct statement.

The long-run Phillips curve shifts rightward when the natural unemployment rises and leftward when natural employment falls

DSM3. The market for corn is initially in equilibrium. Suppose that the production of biofuels, which use corn as an input, increase, and at the same time, increases in the price of oil cause farm production costs to rise. Which of the following explains the effect on equilibrium price and quantity in the corn market?

The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information.

PT6.Choose the statement that is incorrect.

The return of full employment in an expansion phase of the business cycle is economic growth.

mt3. Choose the statement about flexible exchange rates that is incorrect.

The world economy has operated a flexible exchange rate regime since the end of World War II.

DSM13 What happens when government spending is greater than government tax revenues?

There is borrowing by the government and the government debt rises.

DSM5. Which of these are included in the labor force?

Those who are employed and those who are unemployed

PQ13. In​ 2015, the federal budget has projected​ _______.

a​ $644 billion budget deficit

P102. A business cycle can be described by the following​ sequence: ​______ equilibrium,​ ______ equilibrium,​ ______ equilibrium.

below​ full-employment; full-employment; above​ full-employment

DSM8. To increase the money supply, the Fed __________.

buys securities from the public

10. Stagflation is a:

combination of inflation and recession

mt3 The components of aggregate expenditure that are influenced by real GDP are​ ______.

consumption expenditure and imports

mt1. The expenditure approach to measuring GDP sums together​ ______, and the largest component is​ ______.

consumption​ expenditure, investment, government expenditure on goods and​ services, and net​ exports; consumption expenditure

PT8. Depository institutions provide four​ benefits, which are​ ______.

creating liquidity, lowering the cost of borrowing, lowering the cost of monitoring borrowers, and pooling​ risk.

DSM13 In 2008, spending on Social Security, Medicare and Medicaid was less than 10% of the GDP. By 2030 this amount is expected to be around 17% of GDP. One government option to solve this problem is to:

decrease benefits.

depreciation

decrease in the value of a firm's capital that results from wear and tear and obsolescence

10. In the short run, an unexpected decrease in oil prices will:

decrease the price level but increase real GDP

10. A higher exchange rate will result in:

a decrease in net exports and a decrease in aggregate demand

mt1. Orange juice drinkers want to consume more orange juice at a lower price. Which of the following events would have this​ effect?

a decrease in the price of orange juice processing

P102. Examples of monetary policy that decrease aggregate demand include​ ______.

a decrease in the quantity of money and an increase in interest rates

mt1. A changes in which of the following shifts the demand curve for​ hamburgers?

a fall in the price of french​ fries, a complement for hamburgers

PT7. A mortgage is​ _______.

a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments​ (repayments and​ interest)

hw7. A mortgage is​ _______.

a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments​ (repayments and​ interest)

classical

a macroeconomist who believes that the economy is self-regulating and always at full employment

current account

a record of receipts from exports of goods and services, payments for imports of goods and services, net interest income paid abroad, and net transfers received from abroad

linear relationship

a relationship between 2 variables that's illustrated by a straight line

production efficiency

a situation in which goods and services are produced at the lowest possible cost

long run macroeconomic equilibrium

a situation that occurs when real GDP = potential GDP - the economy is on its long run aggregate supply curve

DSM3. All of the following will decrease the supply of airline flights except:

a technological change that makes airplanes safer and more fuel-efficient.

monetary policy instrument

a variable that the Fed can directly control or at least very closely target

final good

an item that is bought by its final user during the specified time period

intermediate good

an item that's produced by one firm, bought by another firm, and used as a component of a final good or service

recessionary gap

an output gap in which potential GDP exceeds real GDP

PQ13. The structural surplus or deficit is the budget balance that would occur if the economy were​ _____.

at full employment

price level

average level of prices

economic model

description of some aspect of the economic world that includes only those features of the world that are needed for the purpose at hand

DSM4. In measuring changes in the standard of living of a country, economists rely heavily on comparisons over time of real GDP per capita because:

despite its well-known flaws, it is the best means we have of comparing the performance of an economy over time

11. The multiplier increases when the marginal propensity to import​ ______ or the income tax rate​ ______.

decreases; decreases

mt3. ​Yesterday, the current exchange rate was ​$1.05 Canadian per U.S. dollar and traders expected the exchange rate to remain unchanged for the next month. ​Today, with new​ information, traders now expect the exchange rate next month to fall to​ $1 Canadian per U.S. dollar. The revised expected future exchange rate​ ______ the demand for U.S. dollars and​ ______ the supply of U.S. dollars.

decreases; increases

mt3 A decrease in U.S. demand for imports​ ______ the supply of U.S. dollars. A fall in the U.S. interest rate differential​ ______ the supply of U.S. dollars. A rise in the expected future exchange rate​ ______ the supply of U.S. dollars. A decrease in the world demand for U.S. exports​ ______ the supply of U.S. dollars.

decreases; increases decreases; does not change

T92. Suppose a Canadian dollar bank deposit in Toronto earns 3 percent a year and a U.S. dollar bank deposit in Chicago earns 4 percent a year. What expectations do people hold if interest rate parity is to​ hold? For interest rate parity to​ hold, people expect that the U.S. dollar will ____ by ____ percent.

depreciate; 1

preferences

description of a person's likes and dislikes and the intensity of those feelings

PT6. Year Real GDP ​ (trillions of yen​) Population ​(billions) 2011 280,000 400 2012 288,456 404 The table provides some data on real GDP and the population of Asiana in 2011 and 2012. If the growth rates of 2012 are maintained in future​ years, real GDP per person in Asiana will​ ______.

double by 2047

DSM8. Assuming there are no leakages out of the banking system, a money multiplier equal to 5 means that:

each additional dollar of reserves creates $5 of deposits.

PQ13. The tax multiplier is the effect of a change in taxes on​ _____.

equilibrium real GDP

P10. A below​ full-employment equilibrium is an equilibrium in which potential GDP​ _____ real GDP.

exceeds

hw4. I calculated real GDP by summing the components of aggregate​ _____, so I used the​ _____ approach.

expenditure; expenditure

P9. The official settlements account records the change in U.S. official​ reserves, which are the​ government's holdings of​ ______. If U.S. official reserves decrease​, the official settlements account balance is​ ______.

foreign currency; positive.

budget deficit

government's budget balance that is negative - outlays exceed receipts

PQ13. A tax on interest income has a _______ impact than the same percentage tax on labor income. Suppose the real interest rate is 3 percent a year and the tax rate is 60 percent. The inflation rate is 2 percent a year. What is the real​ after-tax interest​ rate? The real​ after-tax interest rate is ___ percent a​ year, and the true tax rate is ____ percent. A tax on interest income ____ the​ after-tax interest​ rate, _____ ​saving, and ____ investment.

greater 0, 100 lowers, decreases, decreases

PT7. A government budget deficit​ occurs, which​ ______. The real interest rate​ ______. Private saving ______ and investment ______

increases the demand for loanable funds; rises increases, decreases

10. Aggregate demand decreases if fiscal policy​ ______ taxes or​ ______ transfer payments.

increases​; decreases

P131. The quantity of investment and borrowing that firms plan to undertake depends on​ ______.

how productive capital is and what it costs

PT6. The fundamental source of labor productivity growth is​ ______.

human capital

entrepreneurship

human resource that organizes the other 3 factors of production: land, labor and capital

DSM13 When the economy is in a recession, the government can:

increase government purchases or decrease taxes in order to increase aggregate demand.

11. The multiplier matters because we can use it to determine by how much we should change autonomous expenditure to​ ______.

increase real GDP by a given amount

DSM7. A federal government budget deficit will __________.

increase the demand for loanable funds and increase the equilibrium interest rate

9. If consumers in the United States decrease their demand for imports, the result will be to __________.

increase the exchange rate of the U.S. dollar

P9. A creditor nation is a country that during its entire history has​ _____ the rest of the world than other countries have​ _____ it.

invested more​ in; invested in

9. A flexible exchange rate is one that​ _______.

is determined by demand and supply in the foreign exchange market with no direct intervention by the central bank

DSM13 The structural budget deficit or surplus:

is measured as if the economy were at full employment.

9. A fixed exchange rate is one that​ _______.

is set by the government or the central bank and is achieved by central bank intervention in the foreign exchange market

P131. The structural surplus or deficit​ ______.

is the budget balance that would occur if the economy were at full employment

P9. Arbitrage​ _______.

is the practice of seeking to profit by buying in one market and selling for a higher price in another related market

DSM5. If inflation is anticipated, __________.

it costs less to society than if unanticipated

10. If the economy moves into a recession, monetarists argue that the Fed should:

keep the money supply growing at a constant rate.

mt2. According to new growth​ theory, ______ experience diminishing returns.

knowledge is capital that does not

DSM8. When we say that one of the functions of the Fed is to be a lender of last resort, we mean that the Fed __________.

lends to banks that are short of reserves and cannot find any other source of funds

equilibrium expenditure

level of aggregate expenditure that occurs when aggregate planned expenditure equals real GDP aggregate planned expenditure = real GDP

DSM8. On the balance sheet of commercials banks __________.

loans are the largest asset

DSM8. When interest rates on Treasury bills and other financial assets are low, the opportunity cost of holding money is __________ , so the quantity of money demanded will be __________.

low, high

9. The exports effect is the result that the lower the exchange​ rate, other things remaining the​ same, the​ ______.

lower are the prices of​ U.S.-produced goods and services to foreigners and the greater is the volume of U.S. exports

DSM5. In calculating the CPI, the __________.

market basket does not include large equipment purchased by firms

M2

measure of money that consists of M1 + time deposits, savings deposits, money market mutual funds and other deposits

12. If inflation is​ expected, _______.

neither a​ cost-push inflation nor a​ demand-pull inflation occur

PT5. If we count marginally attached workers as unemployed​ ______.

no change occurs in employment-to-population ratio

12. Monetary stimulus designed to increase aggregate demand would have __________ on real output according to real business cycle theory.

no impact

P9. Foreign currency is the money​ _____ regardless of whether that money is in the form of​ notes, coins, or bank deposits.

of other countries

law of demand

other things remaining the same, the higher the price of a good, the smaller is the quantity demanded of it; the lower the price of a good, the larger the quantity demanded inverse relationship P:^ so Qd: v P: v so Qd: ^

scarcity

our inability to satisfy all our wants

hw2. Unattainable points are​ ______.

outside the PPF

DSM5. Many economists believe the CPI __________ inflation because it fails to consider quality improvements in products.

overstates

hw3. The equilibrium price is the best deal available for both buyers and sellers because buyers​ ______ and sellers​ ______.

pay the highest price they are willing to​ pay; receive the lowest price at which they are willing to sell

export subsidy

payment by the government to a subsidy to the producer of an exported good so it increases the supply of exports

mt2. Unemployment arises for all of the following reasons except​ ______. Some unemployment is unavoidable because​ ______.

people leave the labor force people are making transitions through the stages of life and businesses are making transitions

mt2. Depository institutions balance risk and return by​ _______.

placing some funds into safe low​ interest-earning assets and other funds into​ high-interest risky assets

hw6. The fundamental precondition for labor productivity growth is the incentive system created by all of the following except​ ______.

population growth

DSM5. The output gap is the difference between __________.

potential GDP and actual GDP

P131. The​ ______ is an amount of money​ that, if invested​ today, will grow to equal a given future amount when the interest that it earns is taken into account.

present value

P9. An exchange rate is the​ _____ at which one currency exchanges for another in the foreign exchange market.

price

P102. The quantity of real GDP supplied depends on all of the following except the​ _______.

quantity of real GDP demanded

labor productivity

quantity of real GDP produced by an hour of labor

PT6. Convergence between real GDP per person in the United States and Japan was relatively​ ______ during the​ 1960s; convergence has recently been​ ______.

rapid; decreasing

federal discount rate

rate at which an eligible financial institution may borrow funds directly from a Federal Reserve Bank influences other short term interest rates

prime rate

rate at which banks will lend money to their most favored customers

money multiplier

ratio of the change in quantity of money to the change in the monetary base

P10. The gap between​ ______ is the output gap. When​ _____, the output gap is called an inflationary gap.

real GDP and potential​ GDP; real GDP exceeds potential GDP

DSM4. The GDP per capita is computed by dividing a country's:

real GDP by its population

mt1. An expansion is a period during which​ _____.

real GDP increases

P132. If a structural surplus exists but the​ government's budget is​ balanced, then​ ______.

real GDP is less than potential GDP.

consumption function

relationship between consumption expenditure and disposable income, other things remaining the same

DSM8. The name given to the fraction of deposits that a bank is legally required to hold in its vault, or as deposits at the Fed, is __________.

required reserves

P9. In January 2010​, the exchange rate was 91 yen per U.S. dollar. By September 2010​, the exchange rate had fallenfallen to 84 yen per U.S. dollar. As the exchange rate falls​, the prices of​ foreign-produced goods and services to Americans​ ______ and the volume of U.S. imports​ ______.

ride; decreases

9. When the real exchange rate decreases, a country's net exports will __________.

rise

P111. A fall in the price level​ _______.

shifts the AE curve upward and brings a movement down along the AD curve

mt2. An increase in labor productivity​ ______.

shifts the demand curve for labor rightward and the production function upward

P9. In June 2011​, the exchange rate was 0.69 euros per U.S. dollar. By June 2012​, the exchange rate had risen to 0.79 euros per U.S. dollar. Given the information​ above, for a given expected future exchange​ rate, the expected profit from holding U.S. dollars is ______ in June 2012 than June 2011

smaller

P9. The quantity of U.S. dollars demanded is​ ______ in June 2012 than in June 2011. And the quantity of U.S. dollars supplied is​ ______ in June 2011 than in June 2012.

smaller; smaller

U.S. official reserves

the U.S. government's holdings of foreign currency

U.S. interest rate differential

the U.S. interest rate - the foreign interest rate

T92. The U.S. interest rate differential falls when​ ______.

the US interest rate falls and the foreign interest rate rises

hw5. The price level is​ ______.

the average level of​ prices, and the value of money

self interest

the choices that you think are the best ones available for you

T122. When inflation is correctly​ anticipated, _______.

the economy remains at full employment

benefit

the gain or pleasure that something brings and is determined by preferences

tax wedge

the gap between the before- tax and after - tax wage rates and the returns to other factors of production

imports

the goods and services that we buy from people in other countries

PT7. When the price of an asset​ rises, ______.

the interest rate falls

PT5. When cyclical unemployment increases and other things remain the​ same, ______.

the natural unemployment rate does not change

PT5. All of the following statements are correct except​ _______.

the return of full employment in an expansion phase of the business cycle is economic growth

property rights

the social arrangements that govern the ownership, use, and disposal of anything that people value. Enforceable in the courts

Monetary base

the sum of currency and reserves of the depository institution deposits

working age population

the total number of people aged 16+ and who are not in jail, hospital or some other form of institutional care

consumption expenditure

the total payment for consumer goods and services

fiscal stimulus

the use of fiscal policy to increase production and employment

potential GDP

the value of production when all the economy's labor, capital, land and entrepreneurial ability are fully employed; quantity of real GDP at full employment

T91. If most prices have decreased in the United States and not decreased in Japan and other​ countries, ______.

then for purchasing power parity to​ hold, the value of the U.S. dollar in the foreign exchange market will riserise

PT5. An economy is at full employment when​ ______.

there is no cyclical unemployment

DSM6. According to theory regarding labor productivity growth, workers will be more productive if __________.

they have more human capital

hw8. When the Fed buys securities from a​ bank, ______.

the​ bank's reserves increase but its deposits do not change

10. According to Keynesian theory, fiscal policymakers can combat the impact of recessions by:

increasing government spending.

T122. When costs increase and the Fed wants to return the economy to full​ employment, the Fed responds by​ ______ the quantity of money. If the Fed continually responds to successive increases in​ costs, a​ ______ inflation evolves.

increasing; cost-push

federal funds rate

interest rate that the banks charge each other on overnight loans

DSM5. If the consumer price index was 73 in 1979 and 225 in 2011, then prices in 2011 were on average:

three times as high as 1979

DSM13. Many economists believe that increases in government debt are not necessarily problematic if the funds are used:

to build infrastructure.

capital

tools, equipment, buildings and other constructions that businesses use to produce goods and services

gross investment

total amount spent on purchases of new capital and on replacing depreciated capital

government debt

total amount that the government has borrowed. sum of past budget deficits - sum of past budget surpluses

DSM13The largest and fastest growing category of federal expenditures is __________.

transfer payments

real GDP

value of final goods and services produced in a given year when valued at the prices of a reference base year

P131. A country has been in existence for only two years. In the first​ year, receipts were​ $1.0 million and outlays were​ $1.5 million. In the second​ year, receipts were​ $1.5 million and outlays were​ $2.0 million. At the end of the second​ year, the government had issued debt worth​ ______.

​$1 million

PQ13. If tax revenues are​ $3,650 billion and outlays are​ $3,400 billion, calculate the budget surplus. If tax revenues are​ $4,000 billion and outlays are​ $4,800 billion, calculate the budget deficit.

​$250 billion;​ $800 billion

mt1. Real GDP is the value of the​ _____ goods and services produced in a given year expressed in terms of the prices in​ _____ year. Nominal GDP is the value of the​ _____ goods and services produced in a given year expressed in terms of the prices of ​ _____ year.

​final; a​ base; ​final; that same

mt1. Gross domestic product ​(GDP​) is the market value of all the​ _____ goods and services produced​ _____ a country in a given time period.

​final; within

mt2. When the unemployment rate is less than the natural unemployment​ rate, real GDP is​ ______ than potential GDP and the output gap is​ ______.

​greater; positive

P9. Explain the effect of the Bank of​ Japan's announcement on the demand for and supply of U.S. dollars. The Bank of​ Japan's announcement would​ _____ the demand for U.S. dollars and​ _____ the supply of U.S. dollars on June 2.

​increase; decrease

T91. If the U.S. exchange rate changes from​ $1.00 Canadian to​ $1.05 Canadian, then the U.S. dollar has​ _______ and the Canadian dollar has​ _______.

​appreciated; depreciated

P9. Arbitrage is the practice of seeking to profit by​ _____ in one market and​ _____ in another related market.

​buying; selling for a higher price

P9. The​ ______ account records receipts from exports of goods and services sold​ abroad, payments for imports of goods and services from​ abroad, and​ ______.

​current; net interest income paid abroad and net transfers

P132. Potential GDP is​ $10 trillion and actual real GDP is​ $8 trillion. The economy has a structural deficit of​ $1.5 trillion and an actual deficit of​ $2 trillion. The cyclical deficit is​ ______.

$0.5 trillion

PT7. Rob takes a summer job with a landscaping firm. During the​ summer, he earns an​ after-tax income of ​$4,500 and he spends ​$2,500 on living expenses. Everything else remaining the​ same, what was the change in​ Rob's wealth during the​ summer?

$2000

hw4. An economy produces only digital​ cameras, chocolate​ bars, and watches The table gives the quantities produced and prices in 2013 and 2014. The base year is 2013. What is real GDP in 2014 in terms of the​ base-year prices? Real GDP in 2014 in terms of​ base-year prices is ___

$30

PT5. Item Millions Employment 143 Unemployment 12 Not in the labor force 89 The table gives information reported by the Bureau of Labor Statistics for September​, 2012. What is the labor force participation​ rate? The labor force participation rate is ____ percent.

63.5

velocity of circulation

average number of times a dollar of money is used annually to buy the goods and services that make up GDP

hw8. A central bank is​ ______. The central bank in the United States is the​ ______.

a​ bank's bank and a public authority that regulates a​ nation's depository institutions and conducts monetary​ policy; Federal Reserve System

DSM13. The decline in private expenditures that results from an increase in government borrowing is known as:

crowding out.

9. In the balance of payment accounts, the sum of exports minus imports, net interest income, and net transfers is called the __________.

current account balance

9. If the sum of net exports, net interest income received from abroad, and net transfer payments from abroad yields a negative number, we say that a country's __________.

current account is in deficit

hw3. American to cut​ flights, charge for luggage- Read the news​ clip, then answer the following question. The news clip illustrates a change in the supply of flights when it reports that American Airlines is​ _______.

cutting the number of flights with no mention of a change in the airfare

mt2. An electrician who is laid off because the economy is in a recession experiences ​______.

cyclical unemployment

DSM5. At full employment, __________.

cyclical unemployment is zero

hw4. In August 2016​, the U.S. unemployment rate was 4.9 percent. In August 2017​, the unemployment rate was 4.4 percent. Assuming that the labor force remained constant between August 2016 and August 2017​, then unemployment​ _______.

decreased

T92. The expectations about the exchange rate​ ______ the demand for U.S. dollars and​ ______ the supply of U.S. dollars.

decreased; increased

mt2. The tables describe an​ economy's labor market and its production function in 2014. In​ 2015, the population increases and labor hours supplied increase by 10 at each real wage rate. The​ economy's standard of living​ ______ in 2015 because​ ______.

decreased; real GDP per person is smaller in 2015 than in 2014

P10. The following events have occurred at times in the history of the United States. 1. A deep recession hits the world economy 2. The world oil price rises sharply 3. U.S. businesses expect future profits to fall Event 1​ ______. Event 2​ ______. Event 3​ ______.

decreases aggregate​ demand; decreases​ short-run aggregate supply decreases aggregate demand

PQ13. A tax on labor income​ ______. The equilibrium quantity of labor​ ______. At the new equilibrium quantity of​ labor, the​ before-tax wage rate ______ and the​ after-tax wage rate _____

decreases the supply of​ labor; decreases rises; falls

P132. Tax revenues​ ______ during a recession. ​Needs-tested spending​ ______ during an expansion.

decreases; decreases

10. Aggregate demand decreases if expected future​ income, inflation, or profits​ ______. And aggregate demand decreasesdecreases if fiscal policy​ ______ government expenditure.

decreases; decrease​;

10. Aggregate demand decreases if monetary policy​ ______ the quantity of money and​ ______ interest rates.

decreases; increases

PQ13. A decrease in the tax on capital income​ ______ the real interest rate and​ ______ investment and economic growth.

decreases; increases

hw6. An increase in the population​ ______ the real wage rate and​ ______ the equilibrium quantity of labor. Potential GDP​ ______ and potential GDP per hour of labor​ ______.

decreases; increases ​increases; decreases

mt2. An increase in current income taxes​ ______ the supply of loanable funds today because it​ ______. A decrease in expected future income​ ______.

decreasesdecreases​; decreasesdecreases disposable​ income, which decreasesdecreases saving increasesincreases the supply of loanable funds today because households with smallersmaller expected future income will save moremore today

P10. Chinese Premier Wen Jiabao has warned Japan that its companies operating in China should raise the pay for their workers. A rise in wages in China​ _______ aggregate supply.

decreases​ China's short-run

P10. The​ "average overall increase across the​ board" wage increase​ _______.

decreases​ short-run aggregate supply

P132. Potential GDP is​ $12 trillion and if real GDP equaled potential​ GDP, the budget deficit would be​ $1 trillion. Real GDP actually equals​ $14 trillion and the budget surplus is​ $3 trillion. The economy has a structural​ ______ and a cyclical​ ______.

deficit of $1 trillion; surplus of $4 trillion

P9. In the long​ run, the real exchange rate is determined by​ ______ and the nominal exchange rate is determined by​ ______.

demand and supply in the markets for goods and​ services; the quantities of money in two countries

P12. ​Official: China May Face Heavy Inflation Pressure- Read the news​ clip, then answer the following question. China is experiencing a​ ______ inflation caused by​ ______.

demand-pull; loose monetary​ policy, which increases aggregate demand

P12. In new classical cycle theory​, the rational expectation of the price​ level, which is determined by potential GDP and expected aggregate​ _____, determines the​ _____ and the position of the SAS curve.

demand; money wage rate

10. When aggregate demand increases, unemployment will usually __________ and inflation will __________.

fall, rise

12. The consequences of deflation include all of the following except​ _______.

falling real wage rates for workers with​ long-term wage contracts

P12. The consequences of deflation include all of the following except​ _______.

falling real wage rates for workers with​ long-term wage contracts

mt3. The consequences of deflation include all of the following except​ _______.

falling real wage rates for workers with​ long-term wage contracts

hw3. ​Consumers' actions indicate that airline tickets and hotel rooms are complements. Suppose that for some reason the price that airline companies pay to buy airplane fuel falls. As a result​ --- assuming all other relevant factors remain unchanged​ --- the price of airline tickets​ _____________, and the price of hotel rooms​ _______________.

falls; rises

12. An economy at a​ full-employment equilibrium experiences an increase in aggregate demand. The unemployment rate​ ______ its natural​ rate, and to return to the​ long-run equilibrium, the money wage rate begins to​ ______.

falls​ below; rise

DSM5. The unemployment that occurs with the normal workings of the economy, such as workers taking time to search for suitable jobs and firms taking time to search for qualified employees, is called:

frictional unemployment

government expenditure

goods and services bought by governments

exports

goods and services that we sell to people in other countries

13. 2012​ Deficit: Smaller, But Still Big- The components of government outlays and receipts which have changed most to contribute to the huge budget deficits in 2011 and 2012 are​ ______.

government expenditure and transfer payments

PT5. When the unemployment rate is less than the natural unemployment​ rate, real GDP is​ ______ than potential GDP and the output gap is​ ______.

greater; positive

PT6. According to new growth​ theory, ______.

growth can persist indefinitely

capital acumulation

growth of capital resources, including human capital

DSM8. In the long run, the rate of inflation is determined by the __________.

growth of the money supply

P12. In monetarist cycle theory​, fluctuations in both​ _____, driven by fluctuations in the growth rate of the quantity of​ money, are the main source of fluctuation in aggregate demand.

investment and consumption expenditure

mt3. In monetarist cycle theory​, fluctuations in both​ _____, driven by fluctuations in the growth rate of the quantity of​ money, are the main source of fluctuation in aggregate demand.

investment and consumption expenditure

P12. In Keynesian cycle theory​, fluctuations in​ _____ driven by fluctuations in business confidence​ - summarized by the phrase​ "animal spirits"​ - are the main source of fluctuations in​ _____.

investment; aggregate demand

mt1. Adam​ Smith's ________ refers to the process by which individuals acting in their own selfminus−interest bring about a market outcome that benefits society as a whole.

invisible hand

10. Stagflation​ ______.

is a combination of recession and inflation

T91. One consequence of China operating a crawling peg is that China​ ______. China fixes its exchange rate​ ______.

is accumulating US dollars as a way of achieving a low inflation rate

mt3. A flexible exchange rate is one that​ _______.

is determined by demand and supply in the foreign exchange market with no direct intervention by the central bank

P131. The cyclical surplus or deficit​ ______.

is the actual surplus or deficit minus the structural surplus or deficit

DSM5. The unemployment rate in the United States is usually __________ than the unemployment rates in most European countries, partly because the United States has __________ generous benefits for the unemployed.

lower, less

DSM13 According to supply-side theory, fiscal policymakers can combat the impact of recessions by:

lowering tax rates.

keynesian

macroeconomist who believes that, left alone, the economy would rarely operate at full employment and that to achieve full employment, active help from fiscal policy and monetary policy is required

P112. A decrease in the marginal propensity to import​ _______, everything else remaining the same.

makes the multiplier larger

11. An increase in income taxes​ _______, everything else remaining the same.

makes the multiplier smaller

13. Which of the following is not a role played by the Budget Committees of the House of Representatives and the Senate in creating fiscal​ policy?

making the initial budget proposal in February

PQ13. Which of the following is not a role played by the Budget Committees of the House of Representatives and the Senate in creating fiscal​ policy?

making the initial budget proposal in February

bond market

market in which bonds issued by firms and governments are traded

gross domestic product (GDP)

market value of all final goods and services produced within a country during a given time period

DSM4. Gross domestic product (GDP) is best defined as the __________.

market value of the final goods and services produced within a country in a given time period

hw3. The quantity demanded of a good or service is​ ______.

measured as an amount per unit of time

foreign currency

money of other countries regardless of whether that money is in the form of notes, coins or bank deposits

10. The classical view assumes:

money wage rates adjust quickly.

mt3. Purchasing power parity is equal value of​ _____ - a situation in which​ _____ buys the same amount of goods and services in different currencies.

money; money

P9. A net borrower is a country that is borrowing​ _____ from the rest of the world​ _____ it is lending to the rest of the world.

more; than

mt3. According to mainstream business cycle​ theory, ______ grows at a steady rate and​ ______ grows at a fluctuating rate.

potential​ GDP; aggregate demand

P12. The mainstream business cycle theory is that​ ______ grows at a steady rate while​ ______ grows at a fluctuating rate. In mainstream business cycle​ theory, the money wage rate is ____. If aggregate demand grows faster than potential​ GDP, ______ gap emerges and if it grows more slowly than potential​ GDP, ______ gap emerges.

potential​ GDP; aggregate demand sticky an​ inflationary; a recessionary

P12. The combination of a rising​ _____ and decreasing​ _____ is called stagflation.

price​ level; real GDP

DSM2. Absolute advantage is the ability of an individual, firm, or country to:

produce more of a good or service than competitors using the same amount of resources

mt1. A substitute in production is a good that is​ _____ another​ good, and a complement in production is a good that is​ _____ another good.

produced in place of; produced together with

hw2. What kind of efficiency do we achieve when we produce goods and services at the lowest possible​ cost?

production

P12. The newest theory of the business​ cycle, known as real business cycle theory ​(or RBC​ theory), regards random fluctuations in​ _____ as the main source of economic fluctuations.

productivity

equilibrium quantity

quantity bought and sold at the equilibrium price

DSM3. At the market equilibrium price:

quantity demanded equals quantity supplied.

mt3 The quantity of real GDP supplied depends on all of the following except the​ _______.

quantity of real GDP demanded

P132. Four alternative fiscal policy changes that could be made to help the federal government meet its Social Security obligations are ______ income​ taxes, ______ Social Security​ taxes, ____ Social Security​ benefits, and _____ federal government discretionary spending.

raise raise cut cut

PT6. Real GDP per person grows when​ ______.

real GDP grows at a faster rate than the population grows

DSM6. Because the focus of long-run economic growth is on the standard of living of the average person, we measure the standard of living in terms of:

real GDP per capita

mt2. Neoclassical growth theory is the proposition that​ _____ grows because technological change induces saving and investment that make​ _____ grow.

real GDP per​ person; capital per hour of labor

P12. The government of Shell Island announces an increase in spending of​ $50 billion a year and the central bank will increase the quantity of money to pay for the spending. Does the economy go into a​ boom? Will there be​ inflation? The economy​ _____ into a​ boom, real GDP​ _____ billion, and​ _____ arises.

rises to​ 130; increases to​ $625; a​ one-time change in the price level and has an inflationary gap

hw3. When a shortage​ arises, the price​ ______ to its​ equilibrium, which​ _______.

rises; decreases the quantity demanded and increases the quantity supplied

DSM6. The defining characteristic of long-run economic growth is:

rising productivity

T91. Between 2012 and​ 2014, the U.S. exchange rate​ ______ against the Japanese yen because the U.S. interest rate differential was expected to​ _______.

rose; increase

P9. 1. What happened to the​ yuan-dollar exchange rate in recent​ days? The​ yuan-dollar exchange rate has decreased in recent days. 2. What might have changed the demand for​ yuan? A fall in the yuan interest rate differential has decreased the demand for yuan. 3. What might have changed the supply of​ yuan? Market intervention by the​ People's Bank of China has increased the supply of yuan.

see term side

P9. The Fed​ "counters disorderly conditions in exchange​ markets" by doing all of the following except​ ______.

selling foreign​ reserves, which raises the U.S. exchange rate when the supply of dollars dramatically decreases

Macroeconomics

study of the performance of the national economy and the global economy

mt1. People buy more of good 1 when the price of good 2 rises. These goods are

substitutes

induced expenditure

sum of the components of aggregate planned expenditure that vary with real GDP. consumption expenditure - imports = induced expenditure

net taxes

taxes paid to governments minus cash transfers received from governments

hw3. A supply curve​ _______.

tells us the lowest price at which someone is willing to sell

12. An economy is at potential GDP when it experiences an increase in costs. The economy experiences​ _______.

stagflation

An economy is at potential GDP when it experiences an increase in costs. The economy experiences​ _______.

stagflation

technological change

the development of new goods and of better ways of producing goods and services

T91. When there is a surplus of dollars in the foreign exchange​ market, ______.

the forces of supply and demand pull the foreign exchange market into equilibrium

T92. When there is a shortage of dollars in the foreign exchange​ market, ______.

the forces of supply and demand pull the foreign exchange market into equilibrium

T91. The demand for U.S. dollars changes when there is a change in any of the following except​ ______.

the foreign exchange rate

T91. The supply of U.S. dollars changes when there is a change in any of the following except​ ______.

the foreign exchange rate

mt3. The supply of U.S. dollars changes when there is a change in any of the following except​ ______.

the foreign exchange rate

9. The U.S. interest rate differential rises if​ ______, and the larger the U.S. interest rate​ differential, the​ ______ is the demand for U.S. dollars in the foreign exchange market.

the foreign interest rate​ falls; greater

mt3. The marginal propensity to consume is​ ______. The marginal propensity to save is​ _______. The marginal propensity to consume is equal to​ ______, and the marginal propensity to save is equal to​ ______.

the fraction of a change in disposable income that is spent on consumption the fraction of a change in disposable income that is saved ΔC ÷ΔYD​; ΔS ÷ΔYD

marginal propensity to consume

the fraction of a change in disposable income that's spent on consumption. change in consumption expenditure / change in disposable income

marginal propensity to import

the fraction of an increase in real GDP thats spent on imports. change in imports / change in real GDP expecting that all else stays the same

interest

the income that capital earns

hw2. The table shows some of​ Brazil's production possibilities for ethanol and food crops. Marginal cost of a good is​ _______. When the quantity of food produced is 2.5 tons a​ day, the marginal cost of producing a ton of food is ____ barrels of ethanol.

the opportunity cost of producing one more unit of it 14

demand for money

the relationship between the quantity of real money demanded and the nominal interest rate when all other influences on the amount of money that people wish to hold remain the same

real exchange rate

the relative price of US produced goods and services to foreign produced goods and services

PQ13. An automatic fiscal policy is a fiscal policy action that is triggered by​ _____. A discretionary fiscal policy is a fiscal policy action that is initiated by​ _____.

the state of the​ economy; an act of Congress

mt1. Nominal GDP is​ ______. Real GDP is​ ______.

​a more precise name for GDP; the value of final goods and services produced in a given year when valued at the prices of a reference base year

P9. The U.S. dollar exchange rate increased from ​$0.96 Canadian in June 2011 to ​$1.03 Canadian in June 2012, and it decreased from 81 Japanese yenJapanese yen in June 2011 to 7878 Japanese yen in June 2012. Between June 2011 and June 2012​, the U.S. dollar​ ______ against the Canadian dollar. Between June 2011 and June 2012, the U.S. dollar​ ______ against the Japanese yenJapanese yen.

​appreciated; depreciated

11. The multiplier is the amount by which a change in​ ______ expenditure is magnified or multiplied to determine​ ______.

​autonomous; the change in equilibrium expenditure and real GDP

PQ13. The government increases the tax rate on labor income. As a​ result, the supply of labor​ ______ and the demand for labor​ ______. The equilibrium level of employment ______. At the equilibrium level of​ employment, the​ before-tax wage rate​ ______ and the​ after-tax wage rate​ ______. Potential GDP _____.

​decreases; does not change decreases rises; falls decreases

P10. A Classical macroeconomist believes that the economy is​ self-regulating and always​ _____.

at full employment

P10. The defining feature of the classical view of macroeconomics is that the economy is​ ______. Classical macroeconomists recommend​ ______.

​self-regulating and always at full employment policies that minimize the disincentive effects of taxes on​ employment, investment, and technological change

P10. The defining feature of the monetarist view of macroeconomics is that the economy​ is______. Monetarist macroeconomists recommend​ ______.

​self-regulating and that it will normally operate at full​ employment, provided that monetary policy is not erratic and that the pace of money growth is kept steady policies that keep taxes low to avoid disincentive effects that decrease potential GDP

P101. The business cycle is actually a continuous series of different​ ______.

​short-run macroeconomic equilibriums

P131. When a tax is applied to labor​ income, the result is a​ ______ full-employment quantity of labor and a​ ______ potential GDP.

​smaller; lower

PQ13. The effect of tax cuts depends on who receives the tax cuts because the greater the amount of disposable income that is​ ______ the greater is the increase in​ ______.

​spent; aggregate demand

PQ13. A budget deficit that needs government action to remove it is a​ ______ deficit. A​ ______ deficit will disappear when the economy moves back to full employment.

​structural; cyclical

hw3. Coal and oil are​ ______. A skateboard and an iPod are​ ______. A cellphone and a phone call are​ ______. A text message and an email are​ ______. Pasta and pizza are​ ______. A video game and a laptop are​ ______. Pizza and sausage are​ ______. Wheat and rye are​ ______.

​substitutes; complements ​complements; substitutes ​substitutes; complements ​complements; substitutes

P112. An increase in investment shifts the AE curve​ _______ and the AD curve​ _______.

​upward; rightward

P121. If the trend rate of change of velocity is 1 percent a​ year, potential GDP grows by 4 percent a​ year, and the money growth rate is 2 percent a​ year, what is the trend inflation​ rate?

-1 percent a year

10. Which of these factors will cause the aggregate demand curve to shift?

A change in the expectations of households and firms

DMS6. Which of these will cause the quantity of goods and services that can be produced by one worker, or in one hour of work, to increase?

A technological change

DSM3. Which of the following will cause an outward (rightward) shift in supply?

A technological improvement.

hw5. Choose the statement that is incorrect.

A wage contract linked to the CPI gives the workers less real income than the firm intended.

mt2. Choose the statement about money that is incorrect.

A work of art is an example of money because it can act as a store of value.

mt1. Markets

All of the above answers are correct.

mt1. When the price is less than the equilibrium​ price,

All of the above answers are correct.

P102. Choose the statement that is incorrect.

Along the LAS curve the money wage rate is constant and the real wage rate rise as the profit rises

P102. Choose the statement that is incorrect.

Along the SAS​ curve, the real wage rate and the price level change by the same percentage.

mt1. The​ "law of​ demand" predicts​ that, other things being​ equal,

An increase in the price of pizza decreases the quantity of pizza demanded

DSM13 Which of these is an example of an automatic fiscal policy?

An unemployment benefit program

DSM4. Which is the largest component of GDP?

Consumption

mt1. Economics promotes which of the following as the way to make the best​ decision?

Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost.

E. Current Account

Current Account= (Exports-Imports) + Net Interest Income + Net Transfers

DSM6. Which of these factors inhibit economic growth?

Discouraging international trade

P112. Planned saving​ + Planned consumption expenditure​ = ______.

Disposable income

mt2. Choose the statement that is incorrect.

Each additional hour of labor increases real GDP by successively larger amounts

PT6. Choose the statement that is incorrect.

Each additional hour of labor increases real GDP by successively larger amounts.

T122. Choose the statement about real business cycle theory that is incorrect.

Economists have not been able to isolate RBC impulse

E. Exchange Rate

Exchange Rate= Real Exchange Rate x Foreign Price Level/ US Price Level

9. Which of the following is a determinant of exchange rates?

Expected future exchange rate

DSM5. When the economy is at full employment, which types of unemployment remain?

Frictional and structural

mt2 U.S. Workers​ World's Most Productive- Read the news​ clip, then answer the following questions. The article defines productivity as​ ______. Real GDP per person is​ ______.

GDP divided by the number of people employed; real GDP divided by the population

DSM2. In the circular flow model, which of the following refers to markets where goods such as computers or services such as medical treatment are offered?

Goods markets

E. Government Sector Balance

Gov Sector Balance= taxes - gov expenditure

12. Which of the following shifts the aggregate demand curve rightward year after year?

Growth in the quantity of money

mt2. Lori is a student who teaches golf on Saturdays. In a year she earns ​$35,000 after paying her taxes. At the beginning of 2014​, Lori owned ​$2,000 worth of​ books, CDs, and golf clubs and she had ​$6,000 in a savings account at the bank. During 2014​, the interest on her savings account was ​$420 and she spent a total of ​$25,000 on consumption goods and services. There was no change in the market values of her​ books, CDs, and golf clubs. How much did Lori save in 2014 and what is her wealth at the end of 2014​?

In 2014, Lorie saved $10,420 ​Lori's wealth at the end of 2014 is ​$18420

P102. Choose the statement about the business cycle that is incorrect.

In a business​ cycle, real GDP shows steady growth and steady inflation.

balance of payments accounts

a country's record of international trading, borrowing and lending

10. According to the graph, an increase in government spending, all else equal, will shift the AD curve from the initial AD curve to the curve labeled:

Increased AD

P11. The multiplier increases when the marginal propensity to consume ____. The multiplier increases when the marginal propensity to import​ ______ or the income tax rate​ ______.

Increases decreases; decreases

10. An increase in expected future income ---- aggregate demand. An increase in the expected future inflation rate ----- aggregate demand. An increase in expected future profits ----- aggregate demand.

Increases for all blanks

DSM6. Which of these is most likely to increase productivity?

Investments in research and development

mt1. What is an economic​ model?

It is a simplified version of some aspect of economic life used to analyze some economic issue

DSM6. Which of these factors does not contribute to economic growth?

Nationalization of foreign investments

PT6. ​______ sees the economy as a perpetual motion machine.

New Growth Theory

DSM6. The process by which competition for profits leads to technological progress and perpetual economic growth best fits which growth theory?

New growth theory

DSM2. What is the name given to the highest-valued alternative that must be given up to engage in any activity?

Opportunity cost

mt1. Assume that the graphs in this figure represent the demand and supply curves for ramen​ noodles, an inferior good. Which panel describes what happens in this market as a result of an increase in​ income?

Panel​ (d)

10. The 1974-1975 recession was a result of a:

a leftward shift of the short-run aggregate supply curve

P11. ​______ bring business cycle turning points. ​______ is triggered by a decrease in autonomous expenditure and​ ______ is triggered by an increase in autonomous expenditure.

Swings in autonomous expenditure A​ recession; an expansion

P10. Labor productivity is rising at a rapid rate in China and wages are rising at a similar rate. Choose the statement that is incorrect.

The increase in labor productivity has no effect on​ short-run aggregate supply.

mt1. Russell studies instead of playing tennis. The opportunity cost to him of studying is

The forgone value of playing tennis.

mt2. Choose the statement that is incorrect.

The greater the default​ risk, the greater is the supply of loanable funds.

P132. Choose the statement that is incorrect.

The true tax rate on interest income is lower than that on labor income because of the way in which inflation and taxes on interest income interact.

P10. Geithner Urges Action on Economy- Choose the statement that is incorrect.

Treasury Secretary Timothy Geithner most likely follows the monetarist school of thought if he thinks that a falling money wage rate will respond quickly to changes in government tax policy.

mt3. Geithner Urges Action on Economy- Read the news​ clip, then answer the following question. Choose the statement that is incorrect..

Treasury Secretary Timothy Geithner most likely follows the monetarist school of thought if he thinks that a falling money wage rate will respond quickly to changes in government tax policy.

P9. Choose the statement that is incorrect.

Trends around which the exchange rate fluctuates are impossible to predict.

P9. The United States is a debtor​ nation, and since 1980 it has piled up trade deficits that total​ $9 trillion. At its peak in​ 2006, the current account deficit was almost 6 percent of GDP. To pay for the​ $9 trillion of goods and services​ we've imported in excess of our​ exports, we have borrowed from the rest of the world. Foreigners have purchased large amounts of U.S. assets. A current account deficit means we must borrow more from abroad than we lend abroad or use our official reserves to cover the shortfall. The debtor nation status of the United States would be a concern if the borrowed funds were used to finance​ ______.

True Consumption

DSM8. Velocity of circulation is defined as __________.

V = (P x Y) / M

mt1. ​______ is an example of U.S. consumption expenditure.

Your purchase of a coffee from Starbucks

hw4. ​______ is an example of U.S. consumption expenditure.

Your purchase of a tire for your car

creditor nation

a country that during its entire history has invested more in the rest of the world than other countries have invested in it invested more

net borrower

a country that is borrowing more from the rest of the world than it's lending to it borrowing country

DSM2. You and your neighbor pick apples and cherries. If you can pick apples at a lower opportunity cost than your neighbor can, which of the following is true?

You have a comparative advantage in picking apples.

depository institution

a financial firm that takes deposits from households and firms

stock market

a financial market in which shares of stocks of corporations are traded

flexible exchange rate

an exchange rate that's determined by demand and supply in the foreign exchange market with no direct intervention by the central bank

DSM13 Changes in tax rates impact the economy through:

both aggregate demand and aggregate supply.

hw6. Potential GDP is​ ______.

determined by the​ full-employment quantity of labor

DSM5. A firm that pays an efficiency wage is paying a wage that is __________ the current market wage.

higher than

cyclical unemployment

higher than normal unemployment at a business cycle trough and the lower than normal unemployment at a business cycle peak

9. During the 1990s, the flow of foreign investment in the United States __________.

increased dramatically

P10. The table shows the aggregate demand and​ short-run aggregate supply schedules of Lizard Island in which potential GDP is​ $600 billion. Calculate the​ short-run equilibrium real GDP and price level. Does the country have an inflationary gap or a recessionary gap and what is its​ magnitude? The country has​ _____ gap and its magnitude is​ $ _____ billion. If aggregate demand increases by​ $50 billion, what is the new​ short-run macroeconomic equilibrium and the output​ gap? The economy has _______ gap.

real GDP: 575 price level: 110 recessionary; 25 real GDP: 600 price level: 120 no

P10. As the price level​ rises, interest rates _____ and real wealth _______ People substitute goods in the ______ for goods in the ____ So, as the price level​ rises, there is​ ______.

rises; decreases future; present decrease in quantity of real GDP demanded

9. A recession in the United States will __________.

shift the supply curve of dollars to the left

P12. Tight Money​ Won't Slay​ Food, Energy Inflation- Read the news​ clip, then answer the following question. Choose the correct statement.

"Slowing growth" can reduce inflationary pressure if aggregate demand growth slows.

mt3. Tight Money​ Won't Slay​ Food, Energy Inflation- Read the news​ clip, then answer the following question. Choose the correct statement.

"Slowing growth" can reduce inflationary pressure if aggregate demand growth slows.

PQ13. In June​ 2014, ______ of U.S. government debt was held by the rest of the world.

$5.8 trillion

P111. An economy with no income taxes or imports has a marginal propensity to consume of 0.75. The multiplier in the long run is​ _______.

0

P11. If equilibrium expenditure changes by​ $50 billion that results from an increase in autonomous taxes by​ $80 billion, find the autonomous tax multiplier.

0.625

mt3. An economy has a consumption function of C​ = 15​ + 0.7Y​, investment of​ 8, government expenditure of​ 12, exports of​ 20, and an import function of M​ = 0.2Y. What is equilibrium real​ GDP?

110

T112.An economy has a consumption function of C​ = 10​ + 0.8Y​, investment of​ 6, government expenditure of​ 10, exports of​ 10, and an import function of M​ = 0.1Y. What is equilibrium real​ GDP?

120

hw5. Jobless Rate Soars to​ 6.1%-The unemployment rate peaked​ ______ after the 2001 recession. During the​ 2002-2008 recession, the unemployment rate reached its lowest point at the beginning of​ ______. The expansion of​ 2002-2008 created jobs at​ ______ rate. The first two years of the expansion created few jobs because​ ______. The slow job growth and rise in unemployment after​ mid-2007 is most likely​ ______. Choose the statement that is incorrect.

18​ months; 2007 an unusually​ slow; the expansion was very​ weak, so employment growth was weak cyclical The U.S. government cannot create jobs. Jobs are created by the private sector.

PT7. Year Wealth Saving ​(billions of​ dollars) 1995 27,700 308 1996 29,713 272 1997 32,854 248 The table provides official estimates of U.S. wealth and U.S. saving in three years. The change in U.S. wealth exceeds U.S. saving in​ ______. U.S. saving exceeds the change in U.S. wealth in​ ______.

1996 and 1997​; none of the years in the table

P112. In an economy without taxes and​ imports, an increase in investment of​ $50 billion increases equilibrium expenditure by ​$125 billion. What are the values of the multiplier and the slope of the AE​ curve?

2.5 0.6

T112. The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.20, and the marginal propensity to import is 0.14. The government increases government expenditure and autonomous taxes each by​ $50 billion. What is the resulting change in equilibrium​ expenditure?

20

mt2. 1. To keep pace with a growing​ population, approximately​ _______ jobs must be created each month. 2. Normally when the pace of job creation exceeds the increase in​ population, the unemployment rate ​_______. 3. When the pace of job creation exceeds the increase in​ population, the unemployment rate sometimes increases because​ _______. 4. We would expect the labor force participation rate to​ _______ in response to job creation in excess of population growth. 5. We would expect an increase in the growth rate of real GDP to​ _______ jobs and​ _______ unemployment.

20,000 falls discouraged workers return to the labor force increase increase; decrease

PT7. Cindy takes a summer job painting houses. During the​ summer, she earns an​ after-tax income of ​$3,000 and she spends $1,000 on living expenses. What was​ Cindy's saving during the​ summer? ​Cindy's saving during the summer was ​$_____.

2000

hw2. Two​ countries, Alpha and​ Beta, have identical production possibilities frontiers. If Alpha produces at point A and Beta produces at point B​, then​ _______.

Alpha consumes less than Beta​ today, but it will grow faster than Beta

P132. Choose the statement that is incorrect.

An increase in government expenditure increases government borrowing (or decrease government lending if there is a budget surplus) and lowers the real interest rate.

DSM5. Which of these factors can cause the natural rate of unemployment to change?

Demographic changes

DSM13 Which of these is the main reason for the long-run funding problems of Social Security?

Demographic changes.

hw8. Choose the statement that is incorrect.

Deposits are not money because you cannot settle a debt with a deposit.

PT8. Choose the correct statement.

Deposits are​ money, checks are not​ money, and credit cards are not money.

mt3. A​ demand-pull rise in the price level will initially move the economy to point​ _______ and to point​ _______.

E when aggregate demand increases; D when money wage rate rises

PQ13. Senate Approves Obama Tax Cut Plan- Choose the statement that is incorrect. A​ same-sized decrease in taxes and increase in government expenditure​ ______ real GDP.

Extending the​ Bush-era tax cuts to everyone decreases the demand for loanable funds may​ increase, decrease, or not change

PQ13. True or False Congress can pass budget laws only once a year. For the United States budget, the fiscal year runs from January 1 to December 31. The President has veto power to eliminate specific items in a budget bill and approve others. The President proposes a budget to Congress each February.

False False False True

T92. Choose the statement that is incorrect.

In the long run, the change in nominal exchange rate brings an equivalent change in the real exchange rate.

P9. Choose the statement that is incorrect.

In the long​ run, China manages its exchange rate to keep its export prices low and to make it easier to compete in world markets.

PT6. Choose the statement that is incorrect.

Labor hours are all equally productive.

hw6. Choose the statement that is incorrect.

Labor hours are all equally productive.

P101. Which of the following statements about the monetarist view of the macroeconomy is ​incorrect?

Left alone, the economy rarely operates at full employment

10. Which of the following statements about the monetarist view of the macroeconomy is ​incorrect?

Left​ alone, the economy rarely operates at full employment.

P111. Which of the following equations is incorrect​?

MPC + MPS = change in YD

mt3. Which of the following equations is incorrect​?

MPC ​ + MPS​ = ΔYD

mt2. The equation of exchange is​ ______ and it is true​ ______.

MV​ = PY​; by definition

hw2. Martha can produce 60 quilts or 180 batches of chocolate chip cookies in a month. Jane can produce 9 quilts or 18 batches of chocolate chip cookies in a month. ________ has an absolute advantage in both goods. ​______ has a comparative advantage in quilts. ​______ has a comparative advantage in chocolate chip cookies.

Martha Jane; Martha

10. Which of these policies affects the economy through intended changes in the quantity of money and interest rates?

Monetary policy

P10. The table shows the aggregate demand and​ short-run aggregate supply schedules of a country in which potential GDP is​ $1,050 billion. What is the​ short-run equilibrium real GDP and price​ level? The country has _____ gap. The magnitude of the _____ gap is _____ billion.

Short-run equal real GDP: 1000 Price level: 130 a recessionary recessionary; 50

mt3. Choose the correct statements. 1. The foreign exchange market is a place. 2. A rise in the exchange rate is called an appreciation of the dollar. 3. The exchange rate fluctuates. 4. A fall in the exchange rate is called a devaluation of the dollar.

Statements 2 and 3 are correct

mt2. The Bureau of Labor Statistics reports six alternative measures of the unemployment rate. Choose the correct statements. a. U-4 adds discouraged workers to the official unemployment rate. b. U-5 adds all marginally attached workers to the official unemployment rate. c. U-3 adds discouraged workers to the official unemployment rate. d. U-4 is the official unemployment rate.

Statements a and b are correct.

DSM13. __________ maintains that tax policy can either create or destroy incentives to work, save, and invest.

Supply-side theory

PT7. I​ = ______.

S​ + ​(T​ - G​) ​+ ​(M - X​)

P102. Which of the following statements about the Keynesian view of the macroeconomy is ​incorrect?

Technological change is the most significant influence on both aggregate demand and aggregate supply.

P10. Which of the following statements illustrate monetary policy​?

The Fed has raised the federal funds rate by 0.3 percent.

lender of last resort

The Fed is the lender of last resort - depository institutions that are short of reservers can BORROW from the Fed

DSM8. Which body of the Federal Reserve System sets the majority of U.S. monetary policy?

The Federal Open Market Committee

PT8. Choose the statement that is incorrect.

The deposits of commercial banks represent 69 percent of M1 and 45 percent of M2.

DSM2. In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon?

The division of labor

P111. The multiplier is greater than 1 because the change in autonomous expenditure leads to​ _______.

The multiplier is greater than 1 because the change in autonomous expenditure leads to​ _______.

mt2. Choose the statement that is incorrect.

The nominal interest rate is the real interest rate adjusted to remove the effects of inflation on the buying power of money

PT7. Choose the statement that is incorrect.

The nominal interest rate is the real interest rate adjusted to remove the effects of inflation on the buying power of money.

DSM7. The real interest rate is:

The nominal interest rate minus the inflation rate.

mt1. Which of the following statements by Tom demonstrates that his buying plans obey the law of demand​?

The only thing​ that's changed is the price of​ textbooks: they've become more expensive and now​ I'm not buying as many.

PT5. Choose the statement about an increase in the population that is incorrect.

The production function shifts upward.

hw6. Choose the statement about an increase in the population that is incorrect.

The production function shifts upward.

DSM4. Which of the following is included in the economist's definition of investment?

The purchase of new machines, factories, or houses

DSM3. Washington state had a bumper apple crop this year, significantly increasing the supply of apples in the U.S. Given this information, choose the statement that correctly describes the effect on the U.S. apple market.

The quantity of apples demanded will increase as the price of apples falls.

mt1. Which of the following will hold true if the market for cameras is in equilibrium at a price of​ $40?

The quantity of cameras produced will equal the quantity of cameras bought in the market.

DSM5. Which of these groups is included in the labor force?

The unemployed

PT5. Choose the statement that is incorrect.

The unemployment rate includes all underutilized labor.

Nominal GDP

The value of the final goods and services produced in a given year valued at the prices that prevailed in that same year. More precise name for GDP

PQ13. Choose the statement that is incorrect. The _____ the interest​ rate, the greater is the present value of a given future amount.

There is no uncertainty about which interest rate to use to calculate the present value of the​ government's debts to older Americans in the form of pensions and medical benefits. lower

E.U.S. Interest Rate Differential

U.S. Interest Rate Differential= US Interest Rate - Foreign Interest Rate

9. What events in the foreign exchange market could have brought this rise in the value of the U.S.​ dollar? 1. World demand for U.S. exports increases Upper YY 2. World demand for U.S. exports decreases Upper NN 3. U.S. import demand increases Upper NN 4. U.S. import demand decreases Upper YY 5. The U.S. interest rate differential rises Upper YY 6. The U.S. interest rate differential falls Upper NN 7. The expected future exchange rate rises Upper YY 8. The expected future exchange rate falls Upper NN

YY is Yes NN is No

offshore outsourcing

a U.S. firm buys finished goods, components, or services from firms in other countries

excess reserves

a bank's actual reserves minus its desired reserves actual - desired

central bank

a bank's bank and a public authority that regulates the nation's depository institutions and conducts monetary policy, which means it adjusts the quantity of money in circulation and influences interest rates

reserves

a banks reserves consist of notes and coins in its vaults plus its deposit at the Federal Reserve System

10. If an economy is at a​ full-employment equilibrium and a decrease in consumption expenditure​ occurs, the new​ short-run equilibrium is​ _____ and​ _____ gap emerges.

a below​ full-employment equilibrium; a recessionary

expansion

a business cycle phase between a trough and a peak - a period in which real GDP increases

recession

a business cycle phase in which real GDP decreases for at least 2 successive quarters

PQ13. The tax wedge is the gap created by a tax between what​ _____ and what​ _____.

a buyer​ pays; a seller receives

rational choice

a choice that compares costs and benefits and achieves the greatest benefit over cost for the person making the choice

Short run Phillips curve

a curve that shows the tradeoff between inflation and unemployment, when the expected inflation rate the natural unemployment rate are held constant

P9. A fixed exchange rate is an exchange rate that is determined by​ ______ and is achieved by central bank intervention in the foreign exchange market to block​ _____.

a decision of the government or the central​ bank; the unregulated forces of demand and supply

P12. A​ cost-push inflation begins with​ ______ as the result of an increase in the money wage rate or an increase in the money prices of raw materials.

a decrease in​ short-run aggregate supply

mt1. Classify each of the following items as a final good or an intermediate​ good, and identify which is a component of consumption​ expenditure, investment, or government expenditure on goods and​ services: Item 1. A new limousine for the president Item 2. Banking services bought by Google Item 3. A new coffee grinder bought by Starbucks Item 4. A textbook bought by a student Item 1 is​ ______ and item 2 is​ ______. Item 3 is​ ______ and item 4 is​ ______.

a final good which is government expenditurea final good which is government expenditure​; an intermediate good a final good that is investment; a final good that is consumption expenditure

financial institution

a firm that operates on both sides of the market for financial capital. borrows in one market, lends in another

automatic fiscal policy

a fiscal policy action that is triggered by the state of the economy with no action by the government

inferior good

a good for which demand decreases as income increases

P132. When the government imposes a tax on labor​ income, ______ the production function occurs and potential GDP​ ______.

a leftward movement​ along; decreases

P10. A rise in the money wage rate with no change in potential GDP creates​ ______.

a leftward shift of the SAS curve and no change in the LAS curve

mortgage

a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments

mt2. A mortgage is​ _______.

a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments​ (repayments and​ interest)

Below full employment equilibrium

a macro equilibrium in which potential GDP exceeds real GDP

full-employment equilibrium

a macroeconomic equilibrium in which real GDP = potential GDP

Above full employment equilibrium

a macroeconomic equilibrium where real GDP exceeds potential GDP

Monetarist

a macroeconomist who believes that the economy is self-regulating and that it will normally operate at full employment, provided that monetary policy is not erratic and that the pace of money growth is kept steady

New Keynesian

a macroeconomist who holds the view that not only is the money wage rate sticky but also that the prices of goods and services are sticky

discouraged worker

a marginally attached worker who has stopped looking for a job because of repeated failure to find one

competitive market

a market that has so many buyers and so many sellers, so no single buyer or seller can influence the price

M1

a measure of money that consists of currency and traveler's checks plus checking deposits owned by individuals and businesses

means of payment

a method for settling a debt

fiscal imbalance

a mismatch in the revenue powers and expenditure responsibilities of a governmen

New Keynesian cycle theory

a rational expectations theory of the business cycle that emphasizes the fact that today's money wage rates were negotiated at many past dates, which means that past rational expectations of the current price level influence the money wage rate and the position of the SAS curve

P111. You observe that unplanned inventories are increasing. You predict that there will be​ _______.

a recession

capital and financial account

a record of foreign investment in a country minus its investment abroad

tariff

a tax that is imposed by the importing country when an imported good crosses its international boundary

new growth theory

a theory of economic growth based on the idea that real GDP per person grows because of the choices that people make in the pursuit of profit and that growth will persist indefinitely

neoclassical growth theory

a theory of economic growth that proposes that real GDP per person grows because technological change induces an amount of saving and investment that makes capital per hour of labor grow

real business cycle theory

a theory of the business cycle that regards random fluctuations in productivity as the main source of economic fluctuations

Monetarist cycle theory

a theory that fluctuates in both investment and consumption expenditure, driven by fluctuations in the growth rate of the quantity of money, are the main source of fluctuations in aggregate demand

P12. Deflation occurs when​ _______.

aggregate demand increases at a persistently slower rate than aggregate supply

growth rate

annual percentage change of a variable - the change in the level expressed as a percentage of the initial level

P9. Explain the effect of the two announcements on the U.S. dollardash-yen exchange​ rate: Would the U.S. dollar appreciate or​ depreciate? The two announcements on the U.S.​ dollar-yen exchange rate would​ _____ the U.S. dollar.

appreciate

mt1. Ted quits his ​$60,000−a−year job to be a stay−at−home dad. What is the opportunity cost of his​ decision?

at least​ $60,000

mt2. The discount rate is the interest rateThe discount rate is the interest rate ​______. The Fed is the lender of last​ resort, which means​ _______.

at which the Fed stands ready to lend reserves to depository institutions if depository institutions are short of​ reserves, they can borrow from the Fed

P11. A multiplier is the amount by which a change in any component of​ _____ is magnified or multiplied to determine the change in​ _____ and​ _____ that it generates.

autonomous​ expenditure; equilibrium​ expenditure; real GDP

mt2. Cyclical unemployment is the fluctuating unemployment over the business cycle that increases during​ _____ and decreases during​ _____.

a​ recession; an expansion

P101. In the​ graph, the vertical distance between the horizontal line and point 2 is​ _____ gap. At point​ 2, the intersection of the AD and SAS curves is to the​ _____ of the LAS curve. The vertical distance between the horizontal line and point 3 is​ _____ gap. At point​ 3, the intersection of the AD and SAS curves is to the​ _____ of the LAS curve.

a​ recessionary; left; an​ inflationary; right

rational expectation

best forecast possible, a forecast that uses all the available information

DSM13. Every time the federal government runs a budget deficit, the government must:

borrow, which adds to the government debt.

P9. A debtor nation is a country that during its entire history has​ _____ the rest of the world than it has​ _____ the rest of the world.

borrowed more​ from; lent to

hw4. An U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is​ true? I. U.S. net exports decrease. II. U.S. investment increases.

both I and II

10. An increase in potential GDP increases​ ______.

both​ long-run aggregate supply and​ short-run aggregate supply

P102. An increase in potential GDP increases​ ______.

both​ long-run aggregate supply and​ short-run aggregate supply

DSM13 A government that spends more than it collects in taxes experiences a:

budget deficit

DSM13. A government that collects more in taxes than it spends experiences a:

budget surplus

hw4. Real GDP​ ______.

does not include a measure of leisure time or environmental quality

DSM8. Credit cards are:

not part of the money supply.

profit

the income earned by entrepreneurship

saving function

the relationship between saving and disposable income, other things remaining the same

P9. If all​ (or most) prices have increased in the United States and not increased in​ Japan, then people will generally expect that the foreign exchange value of the dollar will​ ______. The demand for dollars​ ______.

​fall; decreases and the supply of dollars increases

P9. You can purchase a laptop in Tokyo for 88,000 Japanese yen If the exchange rate is 80.00 Japanese yen per U.S. dollar and if purchasing power parity​ prevails, at what price can you buy an identical computer in​ Dallas, Texas?

$1,100

PQ13. If tax revenues are​ $3,500 billion and the​ government's budget balance is a​ $720 billion​ deficit, calculate the​ government's outlays.

$4,220

P9. Net exports equals​ ______. If the government sector deficit​ increases, with no change in the private sector​ surplus, net exports​ ______.

(T − G​) ​+ ​(S − I​) decrease

mt3. Deflation in Japan arose because​ _______.

. ​Japan's money stock did not grow fast enough to accommodate the growth of potential GDP and a trend rise in velocity.

P9. The U.S. dollar exchange rate increased from ​$0.96 Canadian in June 2011 to ​$1.031.03 Canadian in June 2012​, and it decreased from 81 Japanese yenJapanese yen in June 2011 to 78 Japanese yen in June 2012. In June 2011​, the value of the Canadian dollar was $_____ US In June 2012​, the value of the Canadian dollar was $ _____ US The Canadian dollar ________ against the U.S. dollar between June 2011 and June 2012.

1.04 0.97 Depreciated

P10. Consider the following events. Event​ 1: Growth in the world economy slows. Event​ 2: The world price of oil rises. Event​ 3: U.S. labor productivity declines. Choose the statement that is correct.

A classical macroeconomist and a monetarist recommend that taxes be kept low to avoid disincentive effects for all of the events and a Keynesian recommends active fiscal policy and monetary policy to offset all events.

DSM7. Which of these is a financial institution?

A commercial bank

PT7. Choose the statement that is incorrect.

A government budget surplus competes with investments for funds.

DSM3. When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of?

A market

T122. Choose the statement about the​ long-run Phillips curve that is incorrect.

An unexpected increase in aggregate demand shifts the​ long-run Phillips curve rightward.

PT5. Choose the statement that is incorrect.

An unexpected inflation or deflation has no effect on the economy.

P12. The table shows the aggregate demand and​ short-run aggregate supply schedules of Shell Island in which potential GDP is​ $600 billion. The economy is at​ full-employment. The price of oil falls unexpectedly and aggregate supply increases by​ $50 billion. What type of output gap​ appears? If the central bank responds to close the output​ gap, does Shell Island experience inflation or​ deflation? ​_____ gap appears and the central bank closes the output​ gap, aggregate demand​ _____ and a​ _____ is created.

An​ inflationary; decreases;​ cost-push deflation

PT6.Choose the statement that is incorrect.

Classical growth theory tells us that technological change induces a level of saving and investment that makes capital per hour of labor grow indefinitely.

mt2. Choose the statement that is incorrect.

Coins, which are issued by the treasury are an asset to the Fed and a component of the monetary base.

PQ13. The President submits a budget proposal to Congress in​ ______. After this​ date, Congress​ debates, amends, and enacts the budget until​ ______. Fiscal 2015 begins on​ ______ and supplementary budget laws for 2015 may be passed until fiscal 2015 ends on​ ______.

February​ 2014; October 1, 2015 October​ 1, 2014; September​ 30, 2015

DSM5. Of the eight categories in the CPI market basket, which three categories make up more than 70% of the basket?

Housing, transportation, and food

T91. If in the long​ run, the U.S. dollar appreciates against the Japanese​ yen, then​ ______.

Japan has created money at a faster pace than has the United​ States, and the price level in Japan has risen more rapidly than the U.S. price level

12. According to _______ cycle theory, fluctuations in aggregate demand are primarily caused by fluctuations in confidence.

Keynesian

mt2. ​______ sees the economy as a perpetual motion machine.

New growth theory

E. Official Settlements

Official Settlements= -1* (Capital and Financial + Current Accounts)

PQ13. Fiscal imbalance is the ______ value of the​ government's commitments to pay benefits minus the ______ value of its tax revenues. The division of the fiscal imbalance between the current and future​ generations, assuming that the current generation will enjoy the existing levels of taxes and​ benefits, is called​ ______ imbalance.

Present, Present generational

mt2. Choose the statement that is incorrect.

President Roosevelt's "New Deal" minimized the role of government in economic lifePresident Roosevelt's "New Deal" minimized the role of government in economic life.

DSM4. Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant?

Real GDP

hw6. Choose the statement that is incorrect

Real GDP per person grows whenever real GDP grows.

hw5. Choose the correct statements. 1. The unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the locations of jobs is frictional unemployment. 2. The unemployment that arises from normal labor turnover is structural unemployment. 3. When a steel plant becomes more automated and workers lose their jobs comma the workers are structurally unemployed. 4. The unemployment that arises from normal labor turnover is frictional unemployment.

Statements 3 and 4 are correct

hw2. Choose the correct statements. a. Opportunity cost of a good is the increase in the quantity produced of one good divided by the decrease in the quantity b. The opportunity cost of an action is the highest dash valued alternative forgone. c. Opportunity cost of a good is the decrease in the quantity produced of one good divided by the increase in the quantity d. Opportunity cost of a good cannot be accurately measured along a PPF because the PPF shows only two goods.

Statements b and c are correct.

hw5. Choose the statement about the Consumer Price Index that is incorrect. CPI​ = ______.

The CPI is defined to equal 1.00 for a period called the reference base period. ​(Cost of CPI basket at​ current-period prices ÷Cost of CPI basket at​ base-period ​prices) ×100

P10. Which of the following economies is facing a stagflation​?

The European economy is experiencing a decrease in real GDP for three quarters and a rise in the price level.

mt1. Which of the following is an example of government expenditure on goods and services​?

The White House buying internet services.

10. Which of these factors will cause the long-run aggregate supply curve to shift to the right?

The accumulation of more machinery and equipment

P121. Choose the statement that is incorrect.

The price level falls if aggregate supply increases at a persistently slower rate than aggregate demand.

DSM7. If the government begins running a budget surplus, what impact will the surplus have on the loanable funds market?

The supply of loanable funds will increase.

DSM7. Which of these determines the supply of loanable funds?

The willingness of households and governments to save

mt1. Which of the following best describes an assumption economists make about human​ behavior?

They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.

PQ13. Summers Calls for Infrastructure Spending-This infrastructure spending is fiscal stimulus. Such spending is​ _______ fiscal policy. Choose the statement that is incorrect.

True discretionary Government spending on​ roads, bridges, and airports decreases the government budget deficit.

mt3. Explain for each event whether it changes the quantity of real GDP demanded or aggregate demand in the United States. U.S. exports in the European Union boom. U.S. firms build new​ gas-fuel utilities. The U.S. inflation rate is expected to rise next year. The U.S. price level rises.

U.S. aggregate demand increases U.S. aggregate demand increases U.S. aggregate demand increases. The quantity of U.S.real GDP demanded decreases.

DSM7. A share of stock is __________.

a certificate of ownership and claim to the firm's profits

stock

a certificate of ownership and claim to the firm's profits

change in demand

a change in BUYERS' plans that occurs when some influence on those plans other than the price of the good changes. It's illustrated by a SHIFT of the demand curve

change in the quantity demanded

a change in BUYERS' plans that occurs when the price of a good changes but all other influences on buyers' plans remain unchanged. illustrated by movement ALONG the demand curve

real income

a household's income expressed as a quantity of goods that the household can buy

purchasing power parity

a situation in which the prices in two countries are equal when converted at the exchange rate

hw4. The use of purchasing power parity prices

accounts for differences in the prices of the same goods in different countries when measuring real GDP.

hw4. Potential GDP is

achieved when all factors of production are fully employed.

mt1. Mrs. Lovejoy decides to invest in companies which she believes are producing its goods based on the preferences of consumers. Mrs. Lovejoy is investing in companies that are

allocatively efficient.

multiplier

amount by which a change in autonomous expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP

DSM2. Ms. Boulware is the best lawyer and the best secretary in town. She has:

an absolute advantage in both jobs

Generational accounting

an accounting system that measures the lifetime tax burden and benefits of each generation

firm

an economic unit that hires factors of production and organizes those factors to produce and sell goods and services

mt3. A​ demand-pull inflation begins with​ _______.

an increase in aggregate demand

demand-pull inflation

an inflation that starts because aggregate demand increases

inflationary gap

an output gap in which real GDP exceeds potential GDP

mt2. Categorize the following items as either an asset of the Fed or a liability of the Fed. U.S. government securities Federal Reserve notes Loans to depository institutions Depository institution deposits The monetary base is equal to​ ______.

asset; liability; asset; liability the​ Fed's liabilities together with coins issued by the Treasury

12. If the government increases its expenditure on goods and services and as a​ result, the money wage rate​ increases, the economy has experienced​ _______.

a​ demand-pull rise in the price level

12. A rise in the price of oil creates​ _______.

a​ one-time cost-push rise in the price level

T92. Suppose the exchange rate is 90 yen per U.S. dollar and the United States wants to keep the exchange rate at a target rate of 90 yen per U.S. dollar. If the demand for U.S. dollars decreases​, the Fed​ ______.

buys dollars to raise the exchange rate

DSM5. A sustained decrease in the average level of prices in the economy is __________.

called deflation

P12. ​Pakistan: Is it​ Cost-Push Inflation?- Read the news​ clip, then answer the following question. Pakistan is experiencing​ ______ inflation.

cost-push

P12. An inflation that is kicked off by an increase in​ _____ is called ​cost-push inflation.

costs

13. Economy Needs Treatment- A​ "credible business​ plan" for the government to adopt is a plan to​ ______.

decrease government expenditure

P9. A flexible exchange rate is an exchange rate that is determined by​ ______ in the foreign exchange market with no direct intervention by the​ _____.

demand and​ supply; central bank

mt2. The table provides some data on real GDP and the population of Atlantis in 2010 and 2011. If the growth rates of 2011 are maintained in future​ years, real GDP per person in Atlantis will​ ______.

double by 2029

PT7. The​ Ricardo-Barro effect _____ crowding out.

eliminates

P10. When potential GDP​ _____ real​ GDP, the output gap is called a recessionary gap.

exceeds

P9. U.S. official reserves are the​ government's holding of​ _____.

foreign currency

DSM5. The "normal or natural" underlying level of unemployment in the economy is the __________.

full employment rate of unemployment

12. According to real business cycle theory, shifts in aggregate demand:

have no impact on real GDP.

P12. Suppose that the business cycle in the United States is best described by RBC theory. An advance in technology increases productivity. The​ when-to-work decision depends on the real interest rate. The​ _____ the real interest​ rate, other things remaining the​ same, the​ _____ is the supply of labor today. RBC theorists believe the​ when-to-work effect is ____.

higher; larger large

hw4. If we compare the four sources of spending in the economy we see that

household consumption is the largest.

rent

income that land earns

DSM13 When the economy is at full employment, a cut in household taxes will __________.

increase consumption

11. The multiplier increases when the marginal propensity to consume

increases

PQ13. Fiscal stimulus that increases an existing government budget deficit​ ______ loanable funds and​ ______ investment.

increases the demand​ for; decreases

P9. An increase in world demand for U.S. exports​ ______ the demand for U.S. dollars. A fall in the U.S. interest rate differential​ ______ the demand for U.S. dollars.

increases; decreases

DSM5. A sustained increase in the overall level of prices is known as:

inflation

DSM5. The percentage rate of change in the price level is the definition of the:

inflation rate

P12. The ​short-run phillips curve is a curve that shows the relationship between the​ _____ rate and​ _____ when​ _____ and the​ _____ remain constant.

inflation; the unemployment​ rate; the natural unemployment​ rate; expected inflation rate

mt3. Balance of payments accounts are the accounts in which a nation records its​ _____.

international​ trading, borrowing, and lending

hw3. A demand curve​ _______.

is a willingness-and-ability-to-pay curve

P9. A fixed exchange rate is one that​ _______.

is set by the government or the central bank and is achieved by central bank intervention in the foreign exchange market

PT5. The natural unemployment rate​ _______.

is the unemployment rate at full employment

mt2. The key proposition of new growth theory that makes growth persist is that​ ______ is not subject to diminishing returns.

knowledge capital

P111. An increase in income taxes​ _______, everything else remaining the same.

makes the multiplier smaller

mt3. An increase in income taxes​ _______, everything else remaining the same.

makes the multiplier smaller

DSM4. The GDP is a measure of the __________.

market value of the final goods and services produced within a country in a given time period

DSM5. The consumer price index __________.

measures the average of prices paid by urban consumers for a fixed basket of consumer goods and services

mt1. Real GDP​ ______ indicator of the standard of living because​ ______.

might be an​ unreliable; the standard of living depends on many​ factors, some of which are not part of real GDP

12. The school of thought that believes the activist policies of the Federal Reserve exacerbate economic fluctuations is __________

monetarist cycle theory

P10. ​Long-run aggregate supply is the relationship between the quantity of real GDP supplied and the price level when the ​ _____ changes in step with the price level to maintain full employment.

money wage rate

hw8. The money multiplier is the ratio of the change in the quantity of​ ______ to the change in the quantity of​ ______.

money; monetary base

P9. Purchasing power parity is equal value of​ _____ - a situation in which​ _____ buys the same amount of goods and services in different currencies.

money; money

hw2. The figure shows the circular flows in the market economy. When Apple Inc. pays the designers of the iPad​, the flows are a​ ______ from firms to households and a​ ______ from households to firms. When you buy a new e dash book from Amazon​, the flows are a​ ______ from households to firms and a​ ______ from firms to households.

money​ flow; real flow money​ flow; real flow

P9. A net lender is a country that is lending​ _____ to the rest of the world​ _____ it is borrowing to the rest of the world.

more; than

mt1. A country that must decrease production of one good in order to increase the production of another

must be producing on its production possibilities frontier.

PT6. Between 1960 and​ 2010, the gap between real GDP per person in the United States and real GDP per person in Japan​ ______.

narrowed

T91. A country that is borrowing more from the rest of the world than it is lending to the rest of the world is a​ ______, and a country that during its entire history has borrowed more from the rest of the world than it has lent to it is a​ ______. ​Currently, the United States is a

net borrower; debtor nation debtor nation

T92. A country that is lending more to the rest of the world than it is borrowing from the rest of the world is a​ ______. A country that during its entire history has invested more in the rest of the world than other countries have invested in it is a​ ______. China, Japan, and Saudi Arabia are ______. The US is

net​ lender; creditor nation net lenders; net borrower

P102. A​ ______ macroeconomist believes that business cycle fluctuations are the efficient responses of a​ well-functioning market economy that is bombarded by shocks that arise from the uneven pace of technological change. A​ ______ macroeconomist believes that the​ short-run aggregate supply curve is horizontal at a fixed price level.

new classical; new Keynesian

PT5. The main sources of bias in the CPI are​ ______. The bias in the CPI is a problem because​ ______ .

new goods​ bias, quality change​ bias, commodity substitution​ bias, and outlet substitution bias it distorts wage agreements linked to the CPI

T122. In​ ______ cycle​ theory, the rational expectation of the price​ level, which is determined by potential GDP and expected aggregate​ demand, determines the money wage rate and the position of the SAS curve. In​ ______ cycle​ theory, past rational expectations of the current price level influence the money wage rate and the position of the SAS curve.

new​ classical; new Keynesian

DSM13 Most economists would __________ a balanced federal budget mandate.

not be in favor of

mt2. Jobs​ Report: Hiring​ Up, Unemployment Down- If the only change that occurred was that all the newly hired people had been unemployed in​ October, then the labor force would​ ______ and unemployment would​ _______. If the only change that occurred was that people gave up job​ searching, then the labor force would ​ _______ and unemployment would​ _______.

not have​ changed; have decreased have​ decreased; have decreased

Nominal interest rate

number of dollars that a borrower pays and a lender receives in interest in a year expressed as a percentage of the number of dollars borrowed and lent

money price

number of dollars that must be given up in exchange for a good or service

10. The economy is in long-run equilibrium when the short-run aggregate supply and the aggregate demand curve intersect at a point:

on the long-run aggregate supply curve

9. When the dollar appreciates against the yen, __________.

one dollar will buy more yen

PT5. If the CPI rises from 120 to​ 126, then​ ______.

on​ average, the price paid by urban consumers for a fixed basket of consumer goods and services rises by 5 percent

DSM8. The Fed conducts monetary policy primarily through __________.

open market operations

mt2. To increase the money​ supply, the Fed may conduct

open market sales or decrease the discount rate

T91. The private sector balance and the government sector balance tend to move in​ ______. Net exports respond​ ______.

opposite​ directions; to the sum of the government sector and private sector balances

P9. The U.S. dollar exchange rate fluctuates in part because a change in the U.S. interest rate differential changes the demand for U.S. dollars and the supply of U.S. dollars in​ ______ and a change in the expected future exchange rate changes the demand for U.S. dollars and the supply of U.S. dollars in​ ______.

opposite​ directions; opposite directions

law of supply

other things remaining the same; the higher the price of a good, the greater is the quantity supplied of it. the lower the price of a good, the smaller the quantity supplied of it. direct relationship

PT7. When the real interest rate rises​, the​ ______ because the​ ______ is the opportunity cost of loanable funds.

quantity of loanable funds demanded decreasesdecreases​; real interest rate

desired reserve ratio

ratio of reserves to deposits that banks plan to hold

Real GDP per person

real GDP divided by the population real GDP / population

P10. When​ _____ there is a​ full-employment equilibrium

real GDP equals potential GDP

hw4. The relationship between real GDP and potential GDP is that

real GDP fluctuates about potential GDP.

P10. Aggregate demand is the relationship between the quantity of​ _____ demanded and the​ _____ when all other influences on expenditure plans remain the same.

real​ GDP; price level

demand for loanable funds

relationship between the quantity of loanable funds demanded and the real interest rate when all other influences on borrowing plans remain the same

dumping

sale by a foreign firm of exports at a lower price than the cost of production

PT6. An increase in labor productivity​ ______.

shifts the demand for labor curve rightward and the production function upward

PT6. An increase in the population​ ______.

shifts the supply of labor curve rightward and create a movement along the production function

hw6. An increase in the population​ ______.

shifts the supply of labor curve rightward and creates a movement along the production function

10. Keynes maintained that the economy could remain long-term at levels of output below the full-employment level of output due to:

sticky wages.

microeconomics

study of the choices that individuals and businesses make, the way these choices interact in markets, and the influence of governments

PQ13. The relationship between the​ _____ is called the Laffer Curve.

tax rate and the amount of tax revenue collected

core inflation rate

the Fed's operational guide is the rate of increase in the core PCE deflator, which is the PCE deflator excluding food and fuel prices

net investment

the amount by which the value of capital increases - gross investment minus depreciation

autonomous tax multiplier

the change in equilibrium expenditure and real GDP that results from a change in autonomous taxes divided by the change in autonomous taxes

financial capital

the funds that firms use to buy physical capital and that households use to buy a home or to invest in human capital

required reserve ratio

the minimum percentage of deposits that depository institutions are required to hold as reserves

relative price

the ratio of the price of one good or service to the price of another good or service opportunity cost

P121. Along the​ long-run Phillips​ curve, _______.

the unemployment rate is constant at the natural unemployment rate

DSM5. The natural rate of unemployment is the __________.

unemployment rate an economy will experience when real GDP equals potential GDP

DSM6. If a country's real GDP is growing at a rate of 5 percent per year, how long will it take for the real GDP to double?

14 years

PT5. Item Millions Labor force 155 Employment 142 ​Working-age population 243 The table gives information reported by the Bureau of Labor Statistics for May, 2012. What is the unemployment​ rate? The unemployment rate is ____ percent.

8.4

PT5. Labor Market Data ​Working-age population 239.6 million Labor force 153.6 million UnemployedUnemployed 13.7 million The table gives information about the U.S. labor market in 2011. What is the unemployment​ rate? The unemployment rate is ____ percent.

8.9

mt2. Labor Market Data Working dash age populationWorking-age population 235.8 million Labor forceLabor force 154.1 million UnemployedUnemployed 14.3 million The table gives information about the U.S. labor market in 2009. What is the number of people not in the labor force​?

81.7

P9. The U.S. price level is 120​, the Japanese price level is 97.4​, and the real exchange rate is 103.6 Japanese real GDP per unit of U.S. real GDP. What is the nominal exchange​ rate?

84.09 yen per dollar

T92. Item Billions of dollars Imports of goods and services 950 Foreign investment in Plutonia 1,200 Exports of goods and services 1,500 Plutonian investments abroad 350 Net interest income 11 Net transfers −60 Statistical discrepancy −10 The table gives some information about international transactions in the country of Plutonia. What is the capital and financial account​ balance?

840

PQ13. At the end of 2008​, the government of Greece's debt was €199.0 billion. In 2009​, the government spent €120.0 billion and ended the year with a debt of €230.0 billion. How much did the government receive in tax revenue in 2009​?

89.0

10. Which of these factors will shift the short-run aggregate supply to the left?

A decrease in the size of the labor force

DSM4. Which of the following goods and services would be excluded from personal consumption expenditures in the Bureau of Economic Analysis (BEA) statistics?

A new house

DSM5. Which of these persons is officially unemployed?

A non-working individual who has looked for a job in the past week

PT7. Over​ time, on average the demand for loanable funds​ ______, so the real interest rate​ ______.

and the supply of loanable funds increase at a similar pace; has no trend.

12. In the real business cycle model, which of these best explains an increase in real GDP above the full-employment level?

A positive technology shock

T112. An economy has a consumption function of C​ = 10​ + 0.8Y​, investment of​ 6, government expenditure of​ 10, exports of​ 10, and an import function of M​ = 0.1Y. What is the equation of the aggregate expenditure​ curve?

AE= 36 + 0.7Y

T111. The equation of the aggregate expenditure curve is given by​ _______.

AE= A + [b(1-t)-m]Y

12. Choose the statement about the​ long-run Phillips curve that is incorrect.

An unexpected increase in aggregate demand shifts the​ long-run Phillips curve rightward.

P12. An inflation that starts because​ _____ is called ​demand-pull inflation.

aggregate demand increases

12. Deflation occurs when​ _______.

aggregate demand increases at a persistently slower rate than aggregate supply

mt1. Jeb makes the following four statements about peanuts. Which statement best describes his quantity demanded in the peanut​ market?

At a price of​ $1 per​ pack, I plan to buy 2 packs of peanuts per week.

hw4. ​______ good is an item that is bought by its final user during a specified time period. ​______ good is an item that is produced by one​ firm, bought by another​ firm, and used as a component of a final good or service.

A​ final; An intermediate

PQ13. Choose the correct statements. a. The purpose of the American Recovery and Reinvestment Act of 2009 was to lower interest rates and increase b. The increase in total unemployment benefits triggered by the massive rise in the unemployment rate through 2009 is an example of discretionary fiscal policy. c. A fiscal policy action initiated by an act of Congress is called discretionary fiscal policy. d. Fiscal stimulus is the use of fiscal policy to increase production and employment.

C and D

P12. The figure shows the aggregate​ demand, short-run aggregate​ supply, and​ long-run aggregate supply curves for the economy of Tomorrowland. The economy is currently at point A. A​ cost-push rise in the price level will initially move the economy to point​ ______ and to point​ ______.

C when the money prices of raw materials​ rise; D when aggregate demand increases

hw3. All of the following will change the demand for DVD players except​ _______. An increase in the price of a DVD player ​_______.

a change in the price of a DVD player decreases the quantity of DVD players demanded and results in a movement up along the demand curve for a DVD player

loanable funds market

aggregate of all the individual markets in which households, firms, governments, banks, and other financial institutions borrow and lend

PT7. Choose the correct statement.

Commercial banks are financial institutions that accept​ deposits, provide payment​ services, and make loans to firms and households.

hw7. Choose the correct statement.

Commercial banks are financial institutions that accept​ deposits, provide payment​ services, and make loans to firms and households.

P9. Imports of goods and services 1,250 Foreign investment in NordlandNordland 1,300 Exports of goods and services 1,250 Nordland's investment abroad 550 Net interest income 88 Net transfers −20 Statistical discrepancy −10 The table gives some information about Nordland's international transactions. Calculate the current account​ balance, the capital and financial account​ balance, and the official settlements account balance. Nordland's Official Reserves are ____ This nation is a _____

Current Account Balance: -12billion Capital and Financial Account Balance: 740 billion Official Settlements: -728 bilion Increasing Net borrower

mt1. If Dani and Emily devote equal amounts of time and effort to making​ pretzels, Dani produces more units than Emily. This information tells us that

Dani has an absolute advantage in producing pretzels

hw8. U.S. Bank Earnings up​ 21% as Loan Losses​ Decline, FDIC Says- A​ bank's attempts to pursue profit can sometimes lead to bank failure because​ _______. FDIC insurance helps to minimize bank failures and bring more stability to the banking system because​ _______.

a combination of all of the above depositors know that money they have deposited with a bank will be repaid

tradeoff

a constraint that involves giving up one thing to get something else

debtor nation

a country that during its entire history has borrowed more from the rest of the world than its lent to the rest of the world countries that owe more

net lender

a country that's lending more to the rest of the world than it's borrowing from it lending country

mt1. Marginal benefit curves generally slope

Downward, but not because of increasing opportunity cost

T122. The figure shows the aggregate​ demand, short-run aggregate​ supply, and​ long-run aggregate supply curves for the economy of Tomorrowland. The economy is currently at point A. A​ demand-pull rise in the price level will initially move the economy to point​ _______ and to point​ _______.

E when aggregate demand increases; D when the money wage rate rises.

DSM7. If increases in government budget deficits cause investment spending to fall it is known as __________.

crowding out

mt1. If it costs Hobie​ $900 to produce 5 lamps and​ $1,200 to produce 6​ lamps, then the difference of​ $300 is the marginal cost of producing the 5th lamp.

False

DSM13 Which of the following statements about U.S. government receipts is correct?

Federal receipts have ranged between 15 and 20 percent of gross domestic product for the past few decades.

PQ13. ______—the use of the federal budget to achieve macroeconomic objectives such as full​ employment, sustained economic​ growth, and price level stabilitylong dash—is made by​ ______ on an annual timeline.

Fiscal policy​ is; the President and Congress

long run Phillips curve

a curve that shows the relationship between inflation and unemployment when the actual inflation rate equals expected inflation rate actual = expected

hw6. U.S. Workers​ World's Most Productive-The article defines productivity as​ ______. Real GDP per person is​ ______.

GDP divided by the number of people​ employed; real GDP divided by the population

DSM6. Which of these terms refers to the accumulated knowledge and skills workers acquire from education and training, or with life experiences?

Human capital

hw4. Which of the following is TRUE regarding real​ GDP? I. Real GDP is the value of the total production of the​ country's farms,​ factories, shops, and offices. II. Real GDP rises whenever inflation occurs. III. Real GDP does not measure all that is produced.

I and III

mt1. Which of the following statements describes a change in the quantity supplied and which describes a change in supply​? I Farms are selling less chicken because the price of turkey has increased. II Farms are selling less chicken because the price of chicken has fallen. III Farms are selling more chicken because the price of chicken has risen. IV Farms are selling more chicken because the cost of chicken feed has fallen.

I and IV are changes in supply and II and III are changes in quantity supplied

hw7. Choose the statement that is incorrect.

If a financial​ institution's net worth is​ positive, the institution must be solvent and liquid.

DSM6. Which of these government policies can help economic growth?

Improving the quality of education

marginal benefit curve

a curve that shows the relationship between the marginal benefit of a good and the quantity of that good consumed

DSM13 Which of these would be a fiscal policy the government might want to use if the economy is operating at too high a level of output?

Increasing income tax rates

demand curve

a curve that shows the relationship between the quantity demanded of a good and its price when all other influences on consumers' planned purchases remain the same

supply curve

a curve that shows the relationship between the quantity supplied of a good and its price when all other influences on producers' planned sales remain the same

DSM4. Which of the following are not counted as final goods and used in the GDP calculation?

Intermediate goods

PT6. An increase in labor productivity results in all of the following except ​______.

a decrease in potential GDP per hour labor because of diminishing returns.

DSM4. Which of these is not a shortcoming of GDP as a measure of standard of living?

It only counts final goods and services and not intermediate goods.

mt1. The opportunity cost to produce 1 pretzel for James is 2 cookies. For​ Carolline, the opportunity cost to produce 1 pretzel is 3 cookies. From this​ information, we know that

James has a comparative advantage in pretzel production.

T122. Deflation in Japan arose because​ _______.

Japan's money stock did not grow fast enough to accommodate the growth of potential GDP and a trend rise in velocity.

mt1. Boeing Bets the House- The components of the 787 Dreamliner that Boeing produces in Japan are part of​ ______ GDP. The aircraft that are assembled in the United States and sold to All Nippon Airways are part of​ ______ GDP.

Japan's; U.S

P10. Based on this news​ clip, Barack Obama most likely follows the​ ______ school of thought and John McCain most likely follows the​ ______ school of thought.

Keynesian or new​ Keynesian; classical or new classical

10. __________ advocates active government intervention via fiscal policy when the economy is in recession.

Keynesian theory

P12. In​ ______ cycle​ theory, fluctuations in investment driven by fluctuations in business confidence are the main source of fluctuations in aggregate demand. In​ ______ cycle​ theory, fluctuations in both investment and consumption​ expenditure, driven by fluctuations in the growth rate of the quantity of​ money, are the main source of fluctuations in aggregate demand. In​ ______ cycle​ theory, the rational expectation of the price​ level, which is determined by potential GDP and expected aggregate​ demand, determines the money wage rate and the position of the SAS curve. In​ ______ cycle​ theory, past rational expectations of the current price level influence the money wage rate and the position of the SAS curve.

Keynesian; monetarist new Classical; new Keynesian

mt3. In​ ______ cycle​ theory, fluctuations in investment driven by fluctuations in business confidence are the main source of fluctuations in aggregate demand. In​ ______ cycle​ theory, fluctuations in both investment and consumption​ expenditure, driven by fluctuations in the growth rate of the quantity of​ money, are the main source of fluctuations in aggregate demand. In​ ______ cycle​ theory, the rational expectation of the price​ level, which is determined by potential GDP and expected aggregate​ demand, determines the money wage rate and the position of the SAS curve. In​ ______ cycle​ theory, past rational expectations of the current price level influence the money wage rate and the position of the SAS curve.

Keynesian; monetarist new​ classical; new Keynesian

10. Draw the​ long-run aggregate supply curve when potential GDP is ​$13.5 trillion. Label it.

LAS completely horizontal at 13.5 trillion

PT5. Once a​ month, the Bureau of​ ______ Statistics calculates the Consumer Price​ Index, which is a measure of the​ ______ consumers for a fixed basket of consumer goods and services.

Labor; average of the prices paid by urban

P131. The relationship between the tax rate and the amount of tax revenue collected is called the​ ______ curve. This curve shows that​ ______.

Laffer curve; tax cuts increase tax revenue

mt3. Which of the following statements about the monetarist view of the macroeconomy is ​incorrect?

Left​ alone, the economy rarely operates at full employment.

hw3. We know that there have been shifts of both the demand curve for and the supply curve of a good. We also know that one end result of the changes in this market was that the equilibrium price of the good fell. Given this​ information, which combination of supply and demand changes could NOT have possibly​ occurred?

a decrease in supply and an increase in demand

hw8. Choose the statement that is incorrect.

Liquid assets have a higher interest rate than securities.

mt2. Choose the statement that is incorrect.

Liquid assets have a higher interest rate than securities.

hw2. Kelly is an​ architect, and she is trying to decide whether to hire​ Mike, a​ draftsman, to assist with her work. Kelly could hire Mike at​ $20 per​ hour, but it would take him three times as long to complete a task as it takes Kelly. Kelly is able to earn​ $90 per hour and has more architectural jobs than she is able to handle. Which of the following is​ true?

Mike should be hired at the​ $20 per hour wage rate.

DSM8. The actions the Federal Reserve takes to manage the money supply and interest rates in order to pursue economic objectives are called __________.

Monetary policy

PT7. Choose the statement that is incorrect.

Most economists believe that the Ricardo-Barro Effect holds in the loanable funds market

hw3. A change in _____ ​(one word) causes movement along a demand curve and a change in _____ ​(two words). Changes in what six things cause a shift of the demand​ curve? (Look at the PP slide with the​ bubbles.)

Price; Quantity demanded preferences,related goods,future prices,income,future income,population

P11. An economy has a fixed price​ level, no​ imports, and no income taxes. An increase in autonomous expenditure of ​$2 trillion increases equilibrium expenditure by ​$20 trillion. Calculate the multiplier and the marginal propensity to consume. The marginal propensity to consume is ____. If an income tax is introduced in this​ economy, the multiplier​ _______.

Multiplier: 10 0.90 decreases

P11. An economy has a fixed price​ level, no​ imports, and no income taxes. MPC is 0.8​, and real GDP is ​$250 billion. Businesses increase investment by ​$10 billion. Calculate the multiplier and the change in real GDP.

Multiplier: 5 Change in Real GDP: 50 billion

P11. An economy has a fixed price​ level, no​ imports, and no income taxes. MPC is 0.5​, and real GDP is ​$150 billion. Businesses increase investment by ​$10 billion. Calculate the new level of real GDP and explain why real GDP increases by more than ​$10 billion. Real GDP increases by more than ​$10 billion because the increase in investment​ _______.

New level of Real GDP: 170 induces an increase in consumption expenditure

DSM3. In a market system, which of the following provides the information that individuals need to make decisions about resource allocation?

Prices

DSM8. When we say that money serves as a unit of account, we mean that:

Prices are quoted in terms of money.

mt1. Norway and the U.S. each produce computers and cheese according to the following​ schedule: Computers Cheese United States ​10,000 ​20,000 Norway ​12,000 ​8,000 1. Which country has the absolute advantage in​ computers? 2. Which country has the absolute advantage in​ cheese? 3. Which country has the comparative advantage in​ computers? 4. Which country has the comparative advantage in​ cheese? 5. Comparative advantage is based on what kind of economic​ costs? 6. Which of the following statements best reflects this​ situation? 7. Who would be most likely to recommend to these two nations that they engage in​ trade? 8. In what product should Norway​ specialize? 9. In what product should the United States​ specialize? 10. What is the lowest acceptable price for​ computers? ​11, What is the highest acceptable price for​ computers? 12. What is the lowest acceptable price for​ cheese? 13. What is the highest acceptable price for​ cheese?

Norway United States Norway United States Opportunity Costs Regardless of whether a country has one or two of the absolute​ advantages, both countries can benefit from trade. Almost all economists Norway should produce​ 12,000 computers. The US should produce​ 20,000 cheese. 2/3 cheese 2 cheese 1/2 computer 3/2 computers

federal budget

annual statement of the outlays and receipts of the US government, together with laws and regulations that approve and support those outlays and receipts

mt2. The Current Population Survey reported the following situations in July​ 2014: • Sarah works 10 hours a week at​ McDonald's. She is available to work more hours but​ hasn't looked for extra work. • Kevin spent the first six months of 2014 actively searching for a job but he​ didn't get hired. He believes there are no​ jobs, so he has given up looking. • Pat quit the job he had for the past two years and is actively looking for a better paying job. He is available to work and is still searching for a job. • Mary is a new graduate who was hired while she was a student to start a job in August. • Johnnie quit his band in​ June, has no job in​ July, and is not looking for work. 1. Who does the BLS classify as being​ unemployed, a​ part-time worker, an employed​ person, a discouraged​ worker, and not in the labor​ force? Explain your classification. ​______ are​ unemployed, ______ is a​ part-time worker,​ _____ is a discouraged​ worker, and​ _____ is not in the labor force. 2. How will the labor force change if the following events​ occur? 1. Sarah starts a second job 2. Pat finds a good job and is hired. 3. Mary takes a job at​ McDonald's while she waits to start her new job. 3. How will the unemployment rate change if Sarah quits and starts to search for a​ full-time job? The unemployment rate will​ _____ if Sarah quits and starts to search for a​ full-time job. 4. How will the labor force participation rate change if Kevin starts creating football apps in his garage and they turn out to be very​ popular? The labor force participation will​ _____ Kevin starts creating football apps in his garage and they turn out to be very popular.

Pat and​ Mary; Sarah;​ Kevin; Johnie Events​ 1, 2, and 3 will not change the labor force. rise rise

DSM6. The role of technological progress in determining economic growth can be described by which statement?

Per capita output will rise when we discover new and more effective uses of capital and labor.

DSM13 Which of these are the largest sources of federal government revenues?

Personal income taxes and Social Security taxes

P112. Equilibrium expenditure is the level of aggregate expenditure that occurs when​ ______. Choose the correct statement

aggregate planned expenditure equals real GDP The level of aggregate expenditure that occurs the AE curve intersects the 45 degree line is equilibrium expenditure.

market

any arrangement that enables buyers and sellers to get information and to do business with each other

hw2. When most economists wake up in the​ morning, their first decision is whether or not to hit the snooze alarm. What statement best represents their thought process as a rational decision​ maker? ​ (How does an economist approach analyzing a situation like​ this?)

The marginal benefit of sleeping 10 more minutes is greater than the marginal benefit of 10 more minutes of work

money

any commodity or token thats generally acceptable as a means of payment

E. Private Sector Balance

Priv Sector Balance= savings - investment

12. According to the ____ theory of business cycles, a change in the monetary growth rate has no effect on real GDP.

Real Business Cycle

E. Real Exchange Rate

Real Exchange Rate= (Exchange Rate x U.S. Price Level) / Foreign Price Level

P12. Debate on Causes of Joblessness Grows- ​______ cycle theory would say that the rise in unemployment is not cyclical but is a change in the natural unemployment rate.

Real business

DSM4. Which phase of the business cycle is characterized by decreasing levels of real GDP?

Recession

PQ13. Fiscal Stimulus for Growth- Increased government spending on infrastructure results in all of the following except ​_______. Increased government spending on infrastructure​ ______. If the government of China froze its current spending and instead cut​ taxes, investment would​ ______ and jobs would​ ______.

a decrease in the real interest rate increases or decreases the number of jobs but we​ don't know for sure ​increase; increase

hw2. Choose the correct statements. 1. We measure the marginal benefit from a good or service by the most that people are willing to pay for an additional unit of it. 2. The marginal benefit from a good or service is the benefit received from consuming one more unit of it. 3. We measure the marginal benefit from a good or service by the least that people are willing to pay for all the units they consume. 4. We measure the marginal benefit from a good or service by the most that people are willing to pay for all the units they consume.

Statements 1 and 2 are correct.

hw3. Choose the correct statements about competitive markets. 1. A competitive market has many buyers. 2. All competitive markets are physical places where buyers and sellers meet. 3. A competitive market is a market for services but not for goods. 4. A competitive market has many sellers.

Statements 1 and 4 are correct

P132. Choose the correct statements. 1. A government budget deficit increases government debt. 2. In 2014, the Euro area had the largest deficit in the world, expressed as a percentage of GDP. 3. Since 2002, U.S. government debt has been decreasing. 4. Upper A persistent budget deficit feeds itself.

Statements 1 and 4 are correct.

PT5. Choose the statements concerning neoclassical growth theory that are true. 1. As incomes increase both the birth rate and the death rate decrease. 2. Technological change results from the choices people make in the pursuit of profit. 3. Neoclassical growth theory implies that growth rates and income levels per person around the globe will diverge. 4. Neoclassical growth theory is the proposition that real GDP per person grows because technological change induces a level of saving and investment that makes capital per hour of labor grow.

Statements 1 and 4 are correct.

DSM5. Suppose you are available for work but have not looked for a job for at least the last four weeks because you believe that no jobs are available. You would then be counted as __________.

a discouraged worker

hw2. What kind of efficiency are we achieving when we are producing at a point of the PPF that we prefer above all other​ points:

allocative

direct relationship

a relationship between two variables that move in the same direction ---> --->

negative relationship

a relationship between variables that move in opposite directions

inverse relationship

a relationship between variables that move in opposite directions --> <--

mt2. Suppose the United States goes from a​ free-trade policy to a​ no-trade policy with other countries. Which of the following is a result of this new​ policy?

The U.S. no longer consumes outside its production possibilities frontier

P10. Which of the following statements illustrate fiscal policy​?

The US government has proposed a hike in the corporate tax rate.

import quota

a restriction that limits the maximum quantity of a good that may be imported in a given period

incentive

a reward that encourages an action or a penalty that discourages an action

PT5. Choose the statement that is incorrect.

The bias in the CPI decreases government outlays

PT7. How can the change in U.S. wealth differ from U.S.​ saving?

The change in wealth includes changes in the prices of assets owned and saving excludes these items.

hw7. How can the change in U.S. wealth differ from U.S.​ saving?

The change in wealth includes changes in the prices of assets owned and saving excludes these items.

PT5. Choose the statement about growth in labor productivity that is incorrect.

The demand for labor​ increases, the production function does not​ change, but a movement occurs along the production function.

DSM7. If technological change increases the profitability of new investment to firms, which of these will occur?

The demand for loanable funds will increase.

P131. Choose the statement that is incorrect.

The demand-side effect of a tax cut are likely to be larger than an equivalent increase in government expenditure.

cost push inflation

an inflation that results from an initial increase in costs

10. If firms reduce investment spending and the economy enters a recession, which of these contributes to the adjustment that causes the economy to return to its long-run equilibrium?

The eventual agreement by workers to accept lower wages

hw6. When labor productivity​ increases, there is​ _____ the production function and​ _____ in potential GDP.

an upward shift​ of; an increase

mt1. Consider the following statements about factors that influence the standard of​ living, and choose the statement that is incorrect.

The omission of household production from GDP means that GDP overestimates total production

hw8. Choose the statement about the Fed that is incorrect.

The policy decisions of the Federal Open Market Committee are implemented each month by a different Federal Reserve Bank.

PT6. Choose the statement that is incorrect.

The presence of a banking system in Britain in the middle 1700s started the Industrial Revolution.

mt2. Choose the statement that is incorrect.

The presence of a banking system in Britain in the middle 1700s started the Industrial Revolution.

10. The aggregate demand curve shows the relationship between:

The price level and the quantity of real GDP demanded

10. Choose the correct statement.

The quantity of real GDP demanded is the sum of the real consumption​ expenditure, investment, government​ expenditure, and exports minus imports.

P101. Choose the correct statement.

The quantity of real GDP demanded is the sum of the real consumption​ expenditure, investment, government​ expenditure, and exports minus imports.

DSM7. How would a reduction in income tax rates affect the loanable funds market?

The supply of loanable funds would increase.

hw3. The graph illustrates the market for tea. The market equilibrium is at point A. After one or more​ changes, the market equilibrium moves to point B (to the right of equilibrium). You predict that the market for tea was most likely influenced by​ _______.

a rise in household income and a rise in the number of plantations

T91. Choose the statement about flexible exchange rates that is incorrect

The world economy has operated a flexible exchange rate since WWII

P9. Choose the statement that is incorrect.

The​ "Mexican peso is gaining on the​ greenback" because the demand for pesos is increasing at a slower pace than the supply of pesos is increasing.

12. Cost-push inflation might start with:

a rise in money wage rates

hw3. Which of the following​ --- by itself​ --- causes a decrease in demand for a certain​ good?

a rise in the price of some item that is a complement of the good

rule of 70

a rule that states that the number of years it takes for the level of any variable to double is approx 70 divided by the annual percentage growth rate of the variable 70 / yearly % growth rate of the variable

mt3. Choose the statement that is incorrect.

Trends around which the exchange rate fluctuates are impossible to predict.

mt1. Toyota and Honda Shift Production to North America- The decision by Toyota and Honda to build more cars in the United States influences the factor incomes that make up U.S. GDP by increasing​ ______.

U.S. compensation of employees and other factor incomes

P9. The real exchange rate is the relative price of​ _____ to​ _____.

U.S.-produced goods and​ services; foreign-produced goods and services

DSM5. What is the impact of unanticipated inflation?

Unanticipated inflation creates arbitrary redistributions of income.

change in supply

a change in SELLERS' plans that occurs when some influence on those plans other than the price of the good changes. It's illustrated by a SHIFT of the supply curve

P121. Choose the correct statement about the U.S.​ short-run Phillips curve.

We can interpret US inflation and unemployment data in terms of a shifting short-run Phillips curve, which sometimes shifts upward and sometimes shifts downward.

DSM5. Which one of these groups is most hurt by unanticipated inflation?

Wealthy people who hold cash in their wall safes

mt1. Trade−offs force society to make choices when answering what three fundamental​ questions?

What goods and services to​ produce; how will these goods and services be​ produced; and who receives​ them?

change in the quantity supplied

a change in SELLERS' plans that occurs when the price of a good changes but all other influences on sellers' plans remain unchanged. Illustrated by movement ALONG the supply curve

P12. The quantity theory of money tells us that​ _______.

a change in the money growth rate brings an equal change in the inflation rate

P9. With the strengthening of the yen against the U.S. dollar in​ 2012, Japan's central bank did not take any action. A Japanese politician called on the central bank to take actions to weaken the​ yen, saying it will help exporters in the short run and have no​ long-run effects. ​Japan's current exchange rate policy is​ ______. The politician wants a​ ______ in the short run. This policy would have no effect on the exchange rate in the long run because in the long run​ ______.

a flexible exchange rate crawling​ peg; the price level and the nominal exchange rate are determined together

normal good

a good for which demand increases as income increases D^ as I^

substitute

a good that can be used in place of another good

allocative efficiency

a situation in which goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit. we cannot produce more of any good without giving up some of another good that we value more highly

interest rate parity

a situation in which the rates of return on assets in different currencies are equal

PQ13. The tax multiplier is the effect of a change in taxes on​ _____.

aggregate demand

mt1. What does the term​ "marginal" mean in​ economics?

an additional or extra

government sector balance

an amount equal to net taxes minus government expenditure on goods and services net taxes - govt expenditure on goods and services

private sector balance

an amount equal to saving minus investment saving - investment

P9. Mexican goods might become more expensive to U.S. consumers because​ ______.

an appreciation of the Mexican peso against the U.S. dollar means that the U.S. dollar depreciates against the Mexican peso

PT6. During the 100 years from 1914 to​ 2014, real GDP per person in the United States grew at​ ______.

an average of 2 percent a year

PT5. In the United​ States, the CPI basket consists of items that​ ______ . ​______ has the greatest weight in the CPI basket.

an average urban household​ buys; Housing

hw5. In the United​ States, the CPI basket consists of items that​ ______ . ​______ has the greatest weight in the CPI basket.

an average urban household​ buys; Housing

crawling peg

an exchange rate that follows a path determined by a decision of the government or the central bank and is achieved in a similar way to a fixed exchange rate

P102. The graph shows a business cycle. Draw a vertical arrow that​ shows: ​1) a recessionary gap. Label it 1. ​2) an inflationary gap. Label it 2. Draw a point that shows the economy at full employment. At arrow 1 in the​ graph, the economy is in​ ______ full- employment equilibrium and the intersection of the AD and SAS curves is to the​ ______ of the LAS curve. At arrow​ 2, the economy is in​ ______ full-employment equilibrium and the intersection of the AD and SAS curves is to the​ ______ of the LAS curve.

a​ below; left an​ above; right

hw3. With the period of low rainfall​ extending, dairies raise their expected price of​ low-fat milk next year. The supply of​ low-fat milk​ ______ today. With advice from​ health-care experts, dairy farmers decide to switch from producing​ full-cream milk to growing vegetables. The supply of​ low-fat milk​ ______. A new technology lowers the cost of producing ice cream. The supply of​ low-fat milk ______.

does not change; decreases increases

P10. If the price level and the money wage rate rise by the same​ percentage, the quantity of real GDP supplied​ ______ and there is a movement up along the​ ______ aggregate supply curve.

does not​ change; long-run

PT6. Year Real GDP ​ (trillions of yen​) Population ​(billions) 2009 455,000 650 2010 511,567 683 The table provides some data on real GDP and the population of Eastiana in 2009 and 2010. If the growth rates of 2010 are maintained in future​ years, real GDP per person in Eastiana will​ ______.

double by 2020

hw3. ​"As fewer people buy gym memberships​, the demand for running shoes will decrease and the price of a pair of running shoes will increase. The rise in the price of a pair of running shoes will increase the supply of running shoes​." This statement is​ ______ because​ ______.

false; a decrease in demand for running shoes does not increase the price of a pair of running shoes and an increase in the price of a pair of running shoes does not increase the supply of running shoes

T92. Between 2007 and​ 2012, the U.S. exchange rate​ ______ against the Japanese yen because the U.S. interest differential​ _______ ​ ______ against the yen.

fell; decreased and because currency traders expected the dollar to depreciate

P131. Prior to the Great​ Depression, the purpose of the federal budget was to​ ______.

finance federal government programs and activities

hw4. The factor market can best be described as where

firms buy the services of​ labor, land and capital.

discretionary fiscal policy

fiscal action that's initiated by an act of Congress

PQ13. Generational Imbalance is the division of​ _____ between the current and future​ generations, assuming that the current generation will enjoy the existing levels of taxes and benefits.

fiscal imbalance

hw5. A typical family on Sandy Island consumes only juice and cloth. Last​ year, which was the base​ year, the family spent ​$18 on juice and ​$25 on cloth. In the base​ year, juice was ​$6 a bottle and cloth was ​$5 a length. This​ year, juice is ​$8 a bottle and cloth is ​$8 a length. What is the CPI​ basket? What is the CPI and the inflation rate in the current​ year?

he CPI basket is 3 bottles of juice and 5 lengths of cloth. The CPI in the current year is 148.8. ​>>> Answer to 1 decimal place. The inflation rate in the current year is 48.8 percent.

DSM5. If the minimum wage is set above the market-determined equilibrium wage, the natural unemployment rate will be __________.

higher than it would be without a minimum wage

T91. The law of supply of foreign exchange states that other things remaining the​ same, the​ ______ the exchange​ rate, the​ ______ in the foreign exchange market.

higher; greater quantity of US dollars supplied

PQ13. An economy is experiencing a recessionary gap. The government can​ ______.

increase expenditure or cut taxes to increase aggregate demand

PT8. An increase in real GDP​ ______ the demand for money and financial innovation​ ______.

increases; might increase the demand for some types of deposits and decrease the demand for others

12. The long-run Phillips curve __________.

is vertical at the natural rate of unemployment

hw8. From​ Paper-Clip to​ House, in 14 Trades- Barter​ ______ a means of payment. When trading on​ e-Bay, barter​ _______.

is; is not as efficient as money because barter requires a double coincidence of wants

Open market operations

large interest rate cuts to provide liquidity

P132. The​ _______ lag is the time it takes Congress to pass the laws needed to change taxes or spending.

law-making

DSM7. If the government is attempting to spur investment spending it should adopt policies that are designed to:

lower interest rates

mt2. Between 1960 and​ 2010, the gap between real GDP per person in the United States and real GDP per person in Japan​ ______.

narrowed

hw4. Shares in Ford Motor Company is an example of​ ______ good. A diamond purchased by Harry to give to Sally is an example of​ ______ good. Biscotti bought by Delta Airlines and served to passengers is an example of​ ______ good. The waste basket you bought when you moved into residence is an example of​ ______ good.

neither a final nor an intermediate; a final an intermediate; a final

DSM7. The stated rate of interest on a loan is the __________.

nominal interest rate

P10. Short-run aggregate supply is the relationship between the quantity of​ _____ supplied and the​ _____ when the money wage​ rate, the prices of other​ resources, and potential GDP remain constant.

real​ GDP; price level

DSM5. The history of hyperinflations includes __________.

recent events. Hyperinflations have occurred in recent times as well as the past

mt1. After Hurricane Katrina devastated parts of Mississippi and New Orleans in​ 2005, we can be sure that the production possibilities frontier for that area temporarily

shifted​ inward, toward the origin

Beige Book

the Fed's publication that summarizes all the data that is gathered and that describes the current state of the economy

DSM4. If Americans still worked sixty hour weeks, as they did in 1890, __________.

the GDP would be much higher than it is but the well-being of the typical person would not necessarily be higher

human capital

the knowledge and skill that people obtain from education, on the job training and work experience

hw8. One of the​ Fed's main policy tools is​ ______.

the last resort​ loan, which means that if a bank is short of​ reserves, it can borrow from the Fed

PQ13. Generational accounting is an accounting system that measures​ _____.

the lifetime tax burden and benefits of each generation

rent seeking

the lobbying for special treatment by the government to create economic profit or to divert consumer surplus or producer surplus away from others. pursuit of wealth by capturing economic rent

P121. If the natural unemployment rate increases and the expected inflation rate remains​ constant, then​ ______.

the long-run Phillips curve shifts rightward and the short-run Phillips curve shifts rightward.

mt1. In the​ figure, if 4 million computers are produced per year then the​ ________ should be produced to achieve the allocatively efficient use of resources

the marginal cost of a computer exceeds the marginal benefit of a computer, so fewer computers

PQ13. Under current​ policies, a plausible projection is that U.S. public debt will reach 250 percent of GDP in 30 years and nearly 500 percent in 50 years. A fiscal imbalance is​ ______. The U.S. government could reduce the fiscal imbalance by doing all of the following except ​_______. If the fiscal imbalance is reduced in a way that reduces benefits and hikes taxes that affect the current​ generation, the generational imbalance _____ change.

the present value of the​ government's commitments to pay benefits minus the present value of its tax revenues raising Social Security benefits will

National Saving

the sum of private saving (saving by households and businesses) and government saving private saving + government saving

labor force

the sum of the people who are employed and who are unemployed

T92. The quantity of U.S. dollars demanded in the foreign exchange market depends on all of the following except​ ______.

the supply of US dollars in the foreign exchange market

hw6. The two broad sources of potential GDP growth are growth of​ ______ and growth of​ ______.

the supply of​ labor; labor productivity

hw7. ​G-20 Leaders Look to Shake off Lingering Economic Troubles-The​ "capital" referred to in the news clip is​ ______. The financial institutions that the​ G-20 might require to hold more capital are​ ______. The requirement to hold more capital can make financial institutions safer because by using more of its own funds and less borrowed​ funds, a financial institution​ ______.

the​ institutions' own​ funds; banks and insurance companies decreases its risk of insolvency

12. If the natural unemployment rate increases and the expected inflation rate remains​ constant, then​ ______.

the​ long-run Phillips curve shifts rightward and the​ short-run Phillips curve shifts rightward

12. If the expected inflation rate increases and the natural rate of unemployment remains​ constant, then​ _______.

the​ short-run Phillips curve shifts upward and the​ long-run Phillips curve does not shift

hw7. Physical capital is​ ______. Financial capital is​ ______. Examples of physical capital are​ ______. Examples of financial capital are​ ______.

the​ tools, instruments,​ machines, buildings, and other items that have been produced in the past and that are used today to produce goods and​ services; the funds that firms use to buy physical capital ovens used by Pizza Hut and lawn mowers used by​ Larry's Mowing; bonds issued by​ Wal-Mart and stocks issued by Boeing

10. The wealth effect refers to the fact that:

when the price level falls, the real value of household wealth rises, and so will consumption

T122 A rational expectation​ _______.

will often turn out to be wrong, but no other forecast that could have been made could do it better

P132. The figure shows the labor market when an income tax is imposed. The tax wedge is​ ______.

​$15 an hour

hw2. As we move from point A to point B to point C​, the opportunity cost of producing a pair of cargo pants ​______ because resources​ ______

​increases; are not all equally productive in all activities

deflation

a persistently falling price level

employment to population ratio

percentage of people of working age who have jobs

factors of production

productive resources used to produce goods and services

business cycle

the periodic but irregular up and down movement of total production and other measures of economic activity

DSM8. Suppose that velocity of circulation is 3 and the quantity of money is $500 million. According to the quantity theory of money, GDP equals __________.

$1.5 billion

P111. Y C I G X M ​(trillions of 2009​ dollars) 1.0 1.00 0.40.4 0.60.6 0.300.30 0.300.30 2.0 1.65 0.40.4 0.60.6 0.300.30 0.450.45 3.0 2.30 0.40.4 0.60.6 0.300.30 0.600.60 4.0 2.95 0.40.4 0.60.6 0.300.30 0.750.75 5.0 3.60 0.40.4 0.60.6 0.300.30 0.900.90 6.0 4.25 0.40.4 0.60.6 0.300.30 1.05 The table gives the aggregate expenditure schedule. Equilibrium expenditure is equal to​ _______.

$3 trillion

PT8. In an​ economy, there is ​$175 million in currency held outside​ banks, ​$75 million in​ traveler's checks, ​$225 million in currency held inside the​ banks, ​$100 million in checking​ deposits, ​$400400 million in savings​ deposits, ​$2 comma 0002,000 million in time​ deposits, and ​$1 comma 0001,000 million in money market mutual funds and other deposits. The value of M1 is​ ______ and the value of M2 is​ ______.

$350 million, $3750 million

DSM5. If the CPI was 207 in 2007 and 225 in 2011, what pay raise would someone who earned $50,000 in income in 2007 have to receive in order to keep her purchasing power constant in 2011?

$4,348

DSM4. The U.S. GDP per capita in 2013 was approximately __________.

$50,000

economic growth

expansion of production possibilites

P10. Inflation results when​ ______.

the quantity of money increases rapidly

consumer price index (CPI)

an index that measures the average of the prices paid by urban consumers for a fixed basket of consumer goods and services

efficient

resource use is efficient if it's not possible to make someone else worse off

economics

social science that studies the choices that individuals, businesses, governments and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices

aggregate planned expenditure

sum of planned consumption expenditure, planned investment, planned government expenditure on goods and services, and planned exports minus planned imports

autonomous expenditure

sum of those components of aggregate planned expenditure that are not influenced by real GDP. The sum of investment, government expenditure, exports and the autonomous parts of consumption expenditure and imports

cycle

tendency for a variable to alternate between upward and downward movements

cyclical surplus or deficit

the actual surplus or deficit minus the structural surplus or deficit actual - structural

demand

the entire relationship between the price of the good and the quantity demanded of it when all other influences on buyers plans remain the same. illustrated by demand curve and described by a demand schedule

foreign exchange market

the market in which the currency of one country is exchanged for the currency of another

currency

the notes and coins held by individuals and businesses

P10. Economic growth results when there are increases in​ ______.

capital accumulation

P9. The​ ______ account records​ ______ U.S. investment abroad.

capital and​ financial; foreign investment in the United States minus

DSM7. An increase in the real interest rate will:

cause a movement along the demand curve for loanable funds

Federal Reserve System (The Fed)

central bank of the US, a public authority whose main role is the regulation of banks and money

P111. An increase in investment shifts the AE curve upward by an amount equal to the​ ______, and shifts the AD curve rightward by an amount equal to the​ ______.

change in investment; change in investment times the multiplier

P121. In real business cycle​ theory, all of the following events can be sources of fluctuation in productivity except​ _______.

changes in growth rate of money

PT5. Labor supply growth is influenced by all of the following except​_______.

changes in labor productivity

12. According to real business cycle theory, a major source of fluctuations in economic activity is __________.

changes to technology

social interest

choices that are the best ones for society as a whole

10. A​ ______ macroeconomist believes that the economy is​ self-regulating and always at full employment. A​ ______ macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment.

classical; Keynesian

P101. A​ ______ macroeconomist believes that the economy is​ self-regulating and always at full employment. A​ ______ macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment.

classical; Keynesian

PT6. The gap between real GDP per person in the United States and Hong Kong has​ ______ since 1960. During this​ period, the growth rate of real GDP per person in the United States has been​ ______ than in Hong Kong.

decreased; slower

PQ13. When the government taxes the nominal interest rate minus the inflation rate instead of the nominal interest​ rate, the true tax rate _____

decreases

P10. 1. A deep recession hits the world economy 2. The world oil price rises sharply. 3. U.S. businesses expect future profits to fall. Starting from a position of​ long-run equilibrium, a deep recession​ ______, and a decrease in expected future profits​ ______. Starting from a position of​ long-run equilibrium, a sharp increase in the world oil price​ ______.

decreases real GDP and lowers the price​ level; decreases real GDP and lowers the price level decreases real GPD and raises price level

P9. A fall in the expected future exchange rate​ ______ the demand for U.S. dollars. A decrease in the U.S. demand for imports​ _______ the demand for U.S. dollars.

decreases; does not change

P9. A rise in the expected future exchange rate​ ______ the supply of U.S. dollars. An increase in the world demand for U.S. exports​ ______ the supply of U.S. dollars.

decreases; does not change

mt2. On January​ 1, 2014,​ Sophie's Sunlounge owned 4 tanning beds valued at​ $20,000. During​ 2014, Sophie's bought 3 new beds at a total cost of ​$14,000​, and at the end of the year the market value of all of​ Sophie's beds was ​$25,000. What was​ Sophie's net​ investment? ​Sophie's net investment during 2014 was ​$______.

$5000

hw3. Price ​(dollars per​ download) Quantity demanded Quantity supplied ​(movie downloads per​ day) 1.50 750 450 3.00 700 550 4.50 650 650 6.00 600 750 7.50 550 850 9.00 500 950 Suppose that demand increases by 100 downloads a day and supply decreases by 50 downloads a day. What is the new equilibrium price of a movie download and what is the new equilibrium quantity of movie​ downloads?

$6 700

PQ13. The estimated U.S. fiscal imbalance in 2014 was​ ______. The current generation will pay​ ______ percent and future generations will pay​ ______ percent of the fiscal imbalance.

$68 trillion 83; 17

PT7. On January​ 1, 2014,​ Sophie's Sunlounge owned 4 tanning beds valued at​ $20,000. During​ 2014, Sophie's bought 3 new beds at a total cost of ​$8,000. At the end of the​ year, the market value of all of​ Sophie's beds was ​$26,000. Calculate​ Sophie's gross investment and depreciation during 2014. ​Sophie's gross investment during 2014 was ​_____. ​Sophie's depreciation during 2014 was ​_____.

$8,000 $2,000

DSM5. Suppose the CPI in 2008 was 215.3 and the CPI in 2009 was 214.6, what was the inflation rate between 2008 and 2009?

-0.3 percent

P9. The U.K. pound is trading at 1.50 U.S. dollars per U.K. pound. There is purchasing power parity at this exchange rate. The interest rate in the United States is 1 percent a year and the interest rate in the United Kingdom is 1.5 percent a year. What is the U.S. interest rate​ differential? What is the U.K. pound expected to be worth in terms of U.S. dollars one year from​ now? The U.S. interest rate differential is ______ percent. A year from​ now, the U.K. pound is expected to _____ Which country more likely has the lower inflation​ rate?

-0.5 depreciate by .5 percent United States

T111, The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.25, and the marginal propensity to import is 0.2. The autonomous tax multiplier is​ _______.

-1.33

T91. Government expenditures 750 Net taxes 500 Investment 500 Saving 200 The table gives some items from the national income and product accounts. Calculate the government sector​ balance, the private sector​ balance, and net exports

-250 -300 -550

T92. Item Billions of dollars Government expenditures 400 Net taxes 150 Investment 200 Saving 150 The table gives some items from the national income and product accounts. Calculate the government sector​ balance, the private sector​ balance, and net exports.

-250 -50 -300

P10. Read the news​ clip, then answer the following question. Based on this news​ clip, Paul Krugman most likely follows the​ ______ school of thought and Ben Bernanke most likely follows the​ ______ school of thought.

. Keynesian or new​ Keynesian; Keynesian or new Keynesian

Dairies make​ low-fat milk from​ full-cream milk. In the process of making​ low-fat milk, the dairies produce​ cream, which is made into ice cream. A rise in the wage rate of dairy workers​ ______ the supply of​ low-fat milk. A rise in the price of cream​ ______ the supply of​ low-fat milk. A rise in the price of​ low-fat milk ______ the supply of​ low-fat milk.

. ​decreases; increases does not change

mt3. An economy with no income taxes or imports has a marginal propensity to consume of 0.75. The multiplier in the long run is​ _______.

0

P112. Disposable income Consumption expenditure ​(millions of 2009​ dollars) 0 40 100 100 200 160 300 220 The table gives you information about the economy of Bluejay Island. What is the marginal propensity to​ save?

0.40

P111. Disposable income Consumption expenditure ​(millions of 2009​ dollars) 0 60 100 140 200 220 300 300 The table gives you information about the economy of Bluebird Island. What is the marginal propensity to​ consume?

0.8

9. If the dollar price of a euro is $1.25, then the euro price of the dollar is __________.

0.80 euros

P9. The price level in the Eurozone is 111.2​, the price level in the United States is 109.1​, and the nominal exchange rate is 0.85 euros per U.S. dollar. What is the real exchange rate expressed as Eurozone real GDP per unit of U.S. real​ GDP?

0.83

hw6. 1. The news article reports that China is the second largest economy in the world based on​ ______. 2. Choose the statement that is incorrect. 3. In a standard of living​ comparison, China ranks​ ______ in the world. This rank is​ ______. 4. Choose the statement that is incorrect. 5. Using PPP​ prices, China's ranks as the​ world's number ___ economy in 2010. 6. Using PPP​ prices, China's standard of living in 2010 is _____. 7. Choose the statement that is incorrect.

1. GDP converted to U.S. dollars at the current exchange rate 2. A country with a large population cannot have a high standard of living. 3. ​105th; rising because physical capital and human capital growth and technological change are proceeding rapidly and​ China's real GDP is growing 4. Comparisons of real GDP between countries are most accurate when we use market prices. 5. 1 6. 11000 7. The size of an economy is irrelevant.

hw2. The table below shows the maximum output of wine and cloth that England and Portugal can produce under constant cost conditions. WINE CLOTH ENGLAND 150 140 PORTUGAL 110 70 What is the lowest possible price England will sell cloth​ for? ​(Answer to two places after the​ decimal.) What is the highest possible price Portugal will pay for​ cloth?

1.07 1.57

hw5. 2015-237.8 2016-240.4 2017-245.0 Calculate the inflation rates for the years ended August 2016 and August 2017. The inflation rate in the year ended August 2016 was ___ percent per year. The inflation rate in the year ended August 2017 was ___ percent per year. How did the inflation rate change in the year ended August 2017August 2017​? The inflation rate​ _____ .

1.1 1.9 increased

hw8. Money and the Monetary Base in August 2017 Amount August 2017 ​(billions of​ dollars) M1- 3,564.2 M2-13,649.7 Monetary base-3,115.6 What are the values of the M1 money multiplier and the M2 money multiplier in August 2017​? The M1 money multiplier is ____ The M2 money multiplier is ____

1.1 4.4

P9. The U.S. dollar exchange rate increased from ​$0.89 Canadian in June 2009 to ​$0.96 Canadian in June 2010, and it decreased from 83.8 euro centseuro cents in January 2009 to 76.9 euro cents in January 2010. In January 2009, the value of 100 Euro cents was In January 2010 the value of 100 Euro cents was The Euro ____ the US dollar January 2009 to January 2010

1.19 1.30 Appreciated

hw8. In Canada​, the currency drain ratio is 11 percent of deposits and the reserve ratio is 0.03 percent of deposits. The Canadian money multiplier is ____. In​ Australia, the quantity of M1 is​ $150 billion, the currency drain ratio is 33 percent of deposits and the reserve ratio is 8 percent. The monetary base in Australia is $_____ million

10.06 46.24

T91. Item Billions of dimes Imports of goods and services 200 Exports of goods and services 300 Foreign investment in Nickleodeon 310 ​Nickleodeon's investment abroad 450 DecreaseDecrease in official holdings of foreign currency 40 The table shows the only international transactions that the citizens of​ Nickleodeon, whose currency is the​ dime, conducted in 2010. What is​ Nickleodeon's current account​ balance, capital and financial account​ balance, and official settlements account​ balance?

100 -140 40

T111. An economy has a consumption function of C​ = 15​ + 0.7Y​, investment of​ 8, government expenditure of​ 12, exports of​ 20, and an import function of M​ = 0.2Y. What is equilibrium real​ GDP?

110

DSM8. How many Federal Reserve districts are there?

12

hw5. In 2013 and in​ 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for​ Dexter's CPI is 2013 and 2013 is also the year of the Consumer Expenditure Survey. The CPI in 2014 is​ ______.

131.1

PT5. Labor Market Data Working-age population 212.6 million Labor force 142.6 million Unemployed 5.7 million The table gives information about the U.S. labor market in 2000. What is the number of people employed​? The number of people employed is ____ million.

136.9

hw2. The graph shows​ Brazil's PPF for ethanol and food crops. If Brazil increases production of food crops from 2 tons per day to 3 tons per​ day, the opportunity cost of the additional ton of food crops is _____ barrels of ethanol. If Brazil increases production of ethanol from 40 barrels per day to 54 barrels per​ day, the opportunity cost of the additional 14 barrels of ethanol is ______ of food crops. The opportunity cost of producing an additional ton of food crops is equal to​ ______.

14 1 ton the inverse of the opportunity cost of producing an additional barrel of ethanol

PT5. In 2013 and in​ 2014, consumers in Dexter consumed only books and pens. Books $3 5 $7 6 Pens $8 4 $7 9 The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for​ Dexter's CPI is​ 2013, and 2013 is also the year of the Consumer Expenditure Survey. The inflation rate in 2014 is​ ______ percent.

34.0

mt2. Labor Market Data Number In October 2014 Employed 18,000 Unemployed 3,000 Not in labor force 6,000 During November 2014 Lost jobs and​ didn't look for new jobs 80 Quit jobs and retired 20 Unemployed who were hired 100 Left the labor force 30 Entered the labor force to look for work 30 The table gives information about the labor market in October 2014 in the economy of Sandy Island. What is the unemployment rate and the ​employment-to- population ratio in October ​2014? Calculate the number of people​ unemployed, the number​ employed, and the unemployment rate at the end of November 2014. In October ​2014: The unemployment rate is ____ percent. The ​employment-to-population ratio is _____ percent. At the end of November ​2014: The number of people unemployed is _______. The number of people employed is _________. The unemployment rate is ______ percent.

14.3 66.7 2,900 18,000 13.9

PT5. The CPI in 2013 is 120 and the CPI in 2014 is 138.0. The inflation rate in 2014 is ____. The inflation rate in 2014 ​______.

15.0 percent might be higher, lower, or the same as 2013.

DSM5. If the cost of a market basket of goods in 1992, the base year, is $200, and the cost of the same market basket is $300 in 2008, what is the CPI in 2008?

150

mt1. The figure shows the flows of expenditure and income in Europa. In 2011​, flow A was ​$775 billion​, C was ​$175 billion​, B was ​$388 billion​, and E was $44 billion. Calculate investment. In 20112011​, investment is ​$ _____.

168 billion

PT5. The people who live on Second Life Island consume only juice and cloth. Last​ year, which was the CPI base​ year, the price of juice was ​$3 a​ bottle, the price of cloth was ​$6 a​ length, and the average urban household spent ​$27 on juice and ​$42 on cloth. This​ year, the price of juice is ​$9 a bottle and the price of cloth is ​$7 a length. What is the CPI in the current​ year? The CPI in the current year is ____.

188.4

T111. An economy has a consumption function of C​ = 15​ + 0.7Y​, investment of​ 8, government expenditure of​ 12, exports of​ 20, and an import function of M​ = 0.2Y. What is the multiplier for this​ economy?

2

mt1. Hours Open Total Revenue ​ (dollars) 1 ​ $40 2 65 3 80 4 90 5 95 6 98 Julius runs a small tailor shop in the city of Bloomfield. He is debating whether he should extend his hours of operation. Julius figures that his sales revenue will depend on the number of hours the tailor shop is open as shown in the table to the right. He would have to hire a worker for those hours at a wage rate of​ $18 per hour. Using marginal​ analysis, determine how many hours should Julius extend his​ shop's hours of​ operations?

2 hours

hw6. Suppose that in 2014​ China's real GDP is growing at 10 percent a year and its population is growing at 3.0 percent a year. If these growth rates​ continue, then​ China's real GDP per person in​ ______ will be twice what it is in 2014.

2024

T92. Item Billions of dollars Imports of goods and services 437 Foreign investment in CanadaCanada 62 Exports of goods and services 491 CanadianCanadian investment abroad 88 Net interest income −50 Net transfers 25 Statistical discrepancy −6 The table shows the balance of payments accounts in CanadaCanada in2004. What is CanadaCanada​'s current account​ balance, capital and financial account​ balance, and official settlements account​ balance?

29 -32 3

PT8. Suppose that potential GDP and the velocity of circulation are constant. What is the change in the price level in the long run if the quantity of money increases by 3 percent a​ year? If the quantity of money increases by 3 percent a​ year, in the long run the change in the price level is __ percent a year.

3

hw8. Suppose an increase in the monetary base of ​$100,000 increases the quantity of money by ​$300,000. Calculate the money multiplier. The money multiplier is ___

3

P111. The table gives the elements of planned expenditure. Real GDP Consumption expenditure Investment Government expenditure Exports Imports ​(trillions of 2009​ dollars) 0 0.30.3 0.40.4 0.30.3 0.60.6 0 55 2.12.1 0.40.4 0.30.3 0.60.6 0.40.4 When real GDP is ​$5 ​trillion, what are aggregate planned​ expenditure, autonomous​ expenditure, and induced​ expenditure?

3.0 1.6 1.4

mt3. An economy has a consumption function of C​ = 10​ + 0.8Y​, investment of​ 6, government expenditure of​ 10, exports of​ 10, and an import function of M​ = 0.1Y. What is the multiplier for this​ economy?

3.33

T111. The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.25, and the marginal propensity to import is 0.2. The government raises autonomous taxes and government expenditure by​ $100 million each. The resulting change in equilibrium expenditure is​ _______.

33.3

P111. The graph shows an economy that has no taxes or imports. AD0 is the aggregate demand curve when investment is​ $1.0 ​ trillion, and AD1 is the aggregate demand curve when investment is​ $1.5 trillion. What is the size of the multiplier in the short​ run?

4

P12. Suppose that the velocity of circulation of money is constant and real GDP is growing at a constant 3 percent a year. To achieve an inflation target of 1 percent a​ year, the central bank grows the quantity of money at ____ percent a year. Deflation will be created if the growth rate of the quantity of money is ​ _______.

4 less than 3 percent a year

hw3. The money price of a box of ramen noodles is ​$0.20 and the money price of a tube of toothpaste is ​$0.80. The opportunity cost of a tube of toothpaste is​ _______. The relative price of a tube of toothpaste is an opportunity cost because​ ______.

4.00 boxes of ramen noodles​, which is the relative price of a tube of toothpaste the relative price tells us how many boxes of ramen noodles we must give up to get a tube of toothpaste

mt2. The bank plans to hold ​$55 for every​ $100 in deposits. The bank holds desired reservesdesired reserves of ​$14,000 and actual reservesactual reserves of ​$22,000. What is the​ bank's desired reserve ratio and its excess reservesexcess reserves​?

5 percent $8000

PT7. On January​ 1, 2014,​ Sophie's Sunlounge owned 4 tanning beds valued at​ $20,000. During​ 2014, Sophie's bought 3 new beds at a total cost of ​$10,000​, and at the end of the year the market value of all of​ Sophie's beds was ​$25,000. What was​ Sophie's net​ investment? ​Sophie's net investment during 2014 was ​$_____.

5,000

PT5. 1. 34 million people had​ full-time jobs 2. 13 million people had​ part-time jobs 3. 8 million people were without work but were available for work and had made specific efforts to find a job within the past four weeks or were waiting to be recalled from a layoff or had a new job to start within the next 30 days 4. 6 million​ part-time workers were looking for​ full-time jobs 5. 34 million people of working age did not have jobs and did not want jobs The Population Survey in Blogsville for the past month is given in the​ table: In Blogsville last​ month, ______ million people were in the labor force and​ ______ million people were in the​ working-age population.

55; 89

PT5. Labor Market Data Working-age population 243.3 million Labor force 155.0 million Unemployed 12.5 million The table gives information about the U.S. labor market in 2012. What is the​ employment-to-population ratio? The​ employment-to-population ratio is ___ percent.

58.6

mt2. If the annual interest paid on a​ $500 loan is​ $25, the nominal interest rate is​ _____ percent per year. If the nominal interest rate is 5 percent per year and the inflation rate is 2 percent a​ year, the real interest rate is​ _____ per year.

5;3

hw2. The graph shows the marginal cost of producing cookies and the marginal benefit from cookies in Oakdale. Oakdale achieves allocative efficiency if​ _______.

6 batches of cookies an hour are produced

mt2. Hardworking Americans Should Not Be Living in Poverty- The CPI increased by_____ percent over these three years.

6.6

PT5. Labor force 155 Unemployment 10 Not in labor force 80 The table gives information reported by the Bureau of Labor Statistics for October​, 2008. What is the​ employment-to-population ratio? The​ employment-to-population ratio is ___.

61.7 percent

PT5. Labor Market Data Not in labor force 70.0 million Labor force 142.6 million Employed 136.9 million The table gives information about the U.S. labor market in 2000. What is the labor force participation​ rate? The labor force participation rate is ____ percent.

67.1

PT5. Year Real GDP ​ (trillions of dollarstrillions of dollars​) Population ​(billions) 2007 20,000 100 2008 21,424 103 The table provides some data on real GDP and the population of Atlantis in 2007 and 2008. What was the growth rate of real GDP in Atlantis in 2008​? What was the growth rate of real GDP per person in Atlantis in 2008​? The growth rate of real GDP in AtlantisAtlantis in 2008 is ___ percent. The growth rate of real GDP per person in AtlantisAtlantis in2008 was ___ percent.

7 4

DSM6. According to the rule of 70, if a nation's per capita real GDP doubled during the past 10 years, then its average annual rate of economic growth over that period was approximately __________.

7 percent

DSM7. The best measure of the income households actually have available to spend is:

disposable personal income

9. b. Did the events​ you've described change the demand for U.S.​ dollars, the supply of U.S.​ dollars, or both demand and supply in the foreign exchange​ market? Answer by typing D for​ demand, S for​ supply, or B for both demand and supply Change in world demand for U.S.exports Upper DD Change in U.S.import demand Upper SS Change in U.S. interest rate differential Upper BB Change in expected future exchange rate Upper BB

DD for Demand SS for Supply BB for Both

DSM13 Budget deficits automatically __________ during recessions and __________ during expansions.

increase, decrease

10. Shoppers Stimulate Discount Stores- The​ ______ macroeconomic school of thought justifies the policy discussed in this news clip.

Keynesian

DSM8. Which of these predictions can be made using the growth rates associated with the equation of exchange?

If the money supply grows at a faster rate than real GDP, there will be inflation.

DSM7. Which of these statements about interest rates and inflation is true?

If there is zero inflation, the nominal interest rate is equal to the real interest rate.

12. Choose the statement that is incorrect.

In a​ deflation, the inflation rate is positive but decreasing in consequent years.

P12. Choose the statement that is incorrect.

In a​ deflation, the inflation rate is positive but decreasing in consequent years.

P132. Expansionary fiscal policy when the economy is below full employment​ ______ aggregate demand and real​ GDP, and the price level​ ______.

Increases; rises

PQ13. The source of the fiscal imbalance is​ ______. To meet its​ obligations, the federal government must consider four​ alternatives: ___income taxes. ___Social Security taxes. ____ Social Security benefits. ____ federal government discretionary spending.

Social Security pensions and Medicare benefits Raise Raise Cut Cut

PT5. Choose the statement that is incorrect.

The United States and Great Britain were the only countries who suffered the Great Depression.

complement

a good that is used in conjunction with another good

time series graph

a graph that measures time on the x-axis and the variable or variables in which we are interested on the y-axis

scatter diagram

a graph that plots the value of one variable against the value of another variable for a number of different values of each variable

9. If a country has a deficit in its net exports, it means that this country imports __________.

a greater value of goods and services than it exports

new classical

a macroeconomist who holds the view that business cycle fluctuations are the efficient responses of a well-functioning market economy bombarded by shocks that arise from the uneven pace of technological change technology affects the business cycle, its normal to have these flucuations

10. Monetarism is a school of economic thought that favors:

a monetary growth rule.

inflation rate targeting

a monetary policy strategy in which the central bank makes a public commitment to achieve an explicit inflation rate and to explain how its policy actions will achieve that target

hw6. The effect of the United States returning millions of workers to their countries of origin is​ _____ the U.S. PF and​ _____ in potential GDP.

a movement down​ along; a decrease

P12. Eurozone Unemployment Hits Record High As Inflation Rises Unexpectedly Eurozone unemployment rose to 10.7 percent. At the same​ time, Eurozone inflation unexpectedly rose to 2.7 percent a​ year, up from the previous​ month's 2.6 percent a year. A very high unemployment rate can be accounted for by the Phillips curve model by all of the following except​_______. Choose the statement that is incorrect about the Eurozone economy.

a movement up along the​ long-run Phillips curve if the natural unemployment rate increases A rise in the expected inflation rate shifts the​ short-run Phillips curve rightward.

P9. The United States is​ ______.

a net borrower and a debtor nation

12. Deflation is​ _______.

a persistently falling price level

P12. Deflation is​ _______.

a persistently falling price level

inflation

a persistently rising price level

hw4. All of the following are examples of investment except​ ______.

a person money adding money to his retirement fund

marginally attached worker

a person who currently is neither working nor looking for work but has indicated that he or she wants and is available for a job and has looked for work some time in the recent past

troubled asset relief program

a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector that was signed into law by U.S. President George W. Bush on October 3, 2008

12. The best forecast​ available, which is based on all the relevant information is called​ _______.

a rational expectation

new classical cycle theory

a rational expectations theory of the business cycle in which the rational expectation of the price level, which is determined by potential GDP and expected aggregate demand, determines the money wage rate and the position of the SAS curve

P101. Draw an aggregate demand curve in an economy with a below​ full-employment equilibrium. Label it AD. Draw a point at the below​ full-employment equilibrium. Draw a horizontal arrow at the equilibrium price level that shows the output gap. The output gap in the graph is​ ______ because​ ______.

a recessionary​ gap; potential GDP exceeds real GDP

DSM13 The time between when an economic problem begins and policymakers determine there is a need for fiscal policy is known as:

a recognition lag.

Official settlements account

a record of the change in official reserves, which are the government's holdings of foreign currency

hw5. Classify each of the following into the appropriate category of unemployment. Your choices​ are: Frictional Cyclical Structural Seasonal Not unemployed a. An unemployed auto assembly line worker during a sales slump. b. A snow plow driver during the summer. c. A record player repairman who has not learned the latest laser disk player repair technology. d. A computer programmer who quits his job to look for a job with better benefits. e. A high school dropout with few skills who has been looking for a job unsuccessfully for weeks. f. A person who leaves their job to attend graduate school full time. g. A recent business school graduate looking for her first job. h. A person whose job has been automated out of existence. i. A vendor who sells beer at major league baseball games during the winter months. j. A welder who finds that robots have replaced most of the welding jobs on assembly lines. k. A top salesman for a computer company who quit because he did not like his boss. l. A parent who quit to care for his or her child at home. This person has removed themself from the labor force

a. Cyclical b. Seasonal c. Structural d. Frictional e. Structural f. Not unemployed g. Frictional h. Structural i. Seasonal j. Structural k. Frictional l. Not unemployed

hw5. If inflation is anticipated to be 5 percent per year and actual inflation for that year turns out to be 7​ percent, identify whether each of the following groups would be helped or hurt by​ this, or if the effort is indeterminate. a. People who are living on fixed incomes. b. Banks that have made​ long-term fixed rate loans. c. People who have purchased bonds. d. A person who has purchased real estate with a bank loan. e. A recent college graduate with many loans to pay back. f. People who have purchased stock. g. Governments that have sold bonds. h. Savers with open passbook accounts. i. People who have purchased precious metals. j. Wage earners who are members of a strong union.

a. hurt b. hurt c. hurt d. helped e. helped f. helped g. helped h. hurt i. helped j. indeterminate

hw4. If​ Nike, an American​ corporation, produces sneakers in Thailand this would

add to​ Thailand's GDP but not to U.S. GDP.

mt1. To make total income equal to GDP we​ ______ indirect taxes less subsidies and​ ______ depreciation.

add; add

PQ13. A tax on consumption​ ______.

adds to the tax wedge in the labor market because it raises the prices paid for consumption goods and services and is equivalent to a cut in the real wage rate

DSM3. Economists assume that when there is a change in demand and/or supply, that prices reach a new equilibrium:

after an adjustment period that varies.

12. The mainstream business cycle theories all assert that the main factor leading to business cycles is fluctuations in the growth of

aggregate demand

P101. The business cycle occurs because​ ______.

aggregate demand and​ short-run aggregate supply​ fluctuate, but the money wage rate does not adjust quickly enough to keep real GDP at potential GDP

P112. You observe that unplanned inventories are decreasing. You predict that there will be​ _______.

an expansion

P12. The economy starts out on the curves AD0 and SAS0. Some events then occur that generate an expected inflation. Which of the following events would not cause an expected​ inflation? Starting at point A​, the initial effects of an expected inflation is a movement to point​ ______. As an expected inflation​ proceeds, it follows the path​ ______.

an expected increase in taxes ​E; I

P12. A​ demand-pull inflation begins with​ _______.

an increase in aggregate demand

PQ13. The economy is in a recession and the recessionary gap is large. Discretionary fiscal policy that might occur is​ ______. Automatic fiscal policy that might occur is​ ______. A discretionary fiscal stimulation package that would avoid a budget deficit is a simultaneous and equal​ ______. Discretionary fiscal policy is risky because it is hampered by all of the following lags except​ ______.

an increase in government expenditure and a cut in taxes by a decision of​ Congress; an increase in transfer payments and a fall in taxes increase in government expenditure and an increase in taxes business cycle lag

P101. Examples of fiscal policy that increase aggregate demand include​ ______.

an increase in government​ expenditure, a decrease in​ taxes, and an increase in transfer payments

mt3 Examples of fiscal policy that increase aggregate demand include​ ______.

an increase in government​ expenditure, a decrease in​ taxes, and an increase in transfer payments

mt1. Consider the figure showing supply curves for soft drinks. Suppose the economy is at point a. A movement to point b could be the result of

an increase in technology.

P9. The events in the foreign exchange​ market, everything else remaining the same that could have resulted in this change in the value of the U.S. dollar include​ _______.

an increase in the Japanese interest rate and a decrease in the US interest rate.

P12. The economy starts out on the curves AD0 and SAS0. Some events then occur that generate a​ cost-push inflation. Which of the following events might cause a​ cost-push inflation? Starting at point A​, the initial effect of a​ cost-push inflation is a move to point​ ______. As a​ cost-push inflation spiral​ proceeds, it follows the path​ ______.

an increase in the money wage rate or an increase in the money prices of raw materials ​B; E,​ G, I

hyperinflation

an inflation rate of 50% a month or higher that grinds the economy to a halt and causes a society to collapse

hw7. Over​ time, on average the demand for loanable funds​ ______, so the real interest rate​ ______.

and the supply of loanable funds increase at a similar​ pace; has no trend

hw8. Suppose that Sara withdraws​ $1,000 from her savings account at the Lucky​ S&L, keeps​ $50 in​ cash, and deposits the balance in her checking account at the Bank of Illinois. The immediate change is​ ______ in M1 of​ $1,000 and​ ______ in M2.

an​ increase; no change

9. The theory of purchasing power parity states that __________.

arbitrage equalizes the value of monies

mt3. A Classical macroeconomist believes that the economy is​ self-regulating and always​ _____.

at full employment

P10. A monetarist is a macroeconomist who believes that the economy is​ self-regulating and that it will normally operate​ _____, provided that monetary policy is not erratic and that the pace of​ _____ is kept steady.

at full​ employment; money growth

PQ13. The economy is in a​ recession, the recessionary gap is​ large, and there is a budget deficit. The budget deficit is​ ______. Automatic fiscal policy is​ ______ the output gap. If a discretionary increase in government expenditure​ occurs, the structural deficit​ ______ or the structural surplus​ ______.

at least partly composed of a cyclical​ deficit; decreasing increases; decreases

hw2. The figure shows the production possibilities frontier for a firm that produces pet food. Point A is​ ______ and point B is​ ______. This PPF​ ______ illustrate scarcity because​ ______.

attainable; unattainable ​does; the firm cannot produce points outside the frontier and as the firm moves along the PPF​, it cannot produce more dog biscuits without producing less cat food

DSM13 Taxes and transfer payments that stabilize GDP without requiring explicit actions by policymakers are called __________.

automatic fiscal policy

P131. A fall in real GDP that results in a decrease in personal income tax receipts is an example of​ ______.

automatic fiscal policy

P112. The multiplier is the amount by which a change in​ ______ expenditure is magnified or multiplied to determine​ ______. To calculate the​ multiplier, we divide​ ______ by​ ______.

autonomous expenditure; change in equilibrium expenditure and real GDP the change in equilibrium expenditure; change in autonomous expenditure

P11. The multiplier is the amount by which the change in​ ______ expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP. For every dollar increase in​ ______ expenditure, the multiplier determines the increase in real GDP. The multiplier matters because we can use it to determine by how much we should change autonomous expenditure to​ ______.

autonomous; autonomous increase real GDP by a given amount

PT5. The reference base period for the CPI is​ 1982-1984. In January ​2014, the CPI was 233.9. This number tells us that the​ ______ of the prices paid by urban consumers for a fixed basket of consumer goods and services was​ ______ .

average; 133.9 percent higher in January 2014 than in the average of 1982-1984.

mt2. A central bank is​ ______. The central bank in the United States is the​ ______.

a​ bank's bank and a public authority that regulates a​ nation's depository institutions and conducts monetary​ policy; Federal Reserve System

10. At arrow 1 in the​ graph, the economy is in​ ______ full- employment equilibrium and the intersection of the AD and SAS curves is to the​ ______ of the LAS curve.

a​ below; left

mt2. A problem with using a commodity as money is​ ______.

a​ commodity's value changes over time

DSM13. Supply-side economists point to the Laffer curve as evidence that higher taxes:

can lead to lower overall government revenues.

mt1. A person has a comparative advantage in an activity whenever he or she

can perform the activity at a lower opportunity cost than can anyone else.

hw3. The price of food increased during the past year. The law of demand applies to food because when the price of food​ rises, there is​ ______. The substitution effect influences food purchases because when the price of a certain food​ rises, other things remaining the​ same, ______. Consumers​ ______. The income effect influences food purchases because when the price of a certain food​ rises, other things remaining the​ same, ______. Consumers​ ______.

both a substitution effect and an income effect its relative price​ rises; purchase more of a different food that is less expensive the price rises relative to​ income; cannot afford to buy all the things they previously​ bought, so they normally buy less of the food that has experienced the price rise

DSM3. Market price is determined by _________.

both supply and demand

P9. These events that resulted in this change in the value of the U.S. dollar changed​ _______.

both the demand for dollars and the supply of dollars

hw2. Suppose that the United States and Cuba decide to open up trade. If each country specializes in the good in which it has a comparative​ advantage, ______ will gain from that trade because ​ ______.

both​ countries; consumption possibilities in both Cuba and the United States will lie outside their PPFs

DSM13. If the federal government's expenditures are less than its revenue, there is a __________.

budget surplus

12. If workers and firms have rational expectations and wages and prices adjust quickly, an expansionary monetary policy will result in higher inflation;

but no change in the unemployment rate

10. Inflation expectations​ "become self-fulfilling" because consumers decide to​ _____, which​ ______.

buy more goods and services at​ today's lower​ prices; increases aggregate demand

hw8. If the interest rate is 5​ percent, people will​ ______.

buy​ bonds, bid up their​ price, and the interest rate will fall

hw4. The expenditure approach to measuring GDP sums together​ ______, and the largest component is​ ______.

consumption​ expenditure, investment, government expenditure on goods and​ services, and net​ exports; consumption expenditure

10. Changes in consumption spending play a large role in the business cycle because​ _______ accounts for approximately​ ______ percent of GDP.

consumption​ expenditure; 70

P12. Tight Money​ Won't Slay​ Food, Energy Inflation- Read the news​ clip, then answer the following questions. The news clip refers to​ ______ inflation when it discusses rising production costs. ​"Rising labor​ productivity" can neutralize the effect on the inflation rate of​ "higher input​ costs" because​ ______.

cost-push; it increases​ short-run aggregate supply and​ long-run aggregate supply with no slowdown in aggregate demand growth

DSM7. A decline in investment spending as a result of an increase in government spending and borrowing is known as:

crowding out

P12. Getting a​ Raise: Why​ It's Not Happening- Read the news​ clip, then answer the following questions. An economy experiences​ _______ inflation when​ "wages tend to feed​ inflation."

demand-pull

P9. If a euro deposit in a bank in​ Paris, France, earns interest of 0.7 percent a year and a yen deposit in​ Tokyo, Japan, earns 4.4 percent a​ year, other things remaining the same and adjusted for​ risk, what is the exchange rate expectation of the Japanese​ yen? The Japanese yen exchange rate is expected to ____ against the Euro by ____ percent.

depreciate; 3.7

DSM7. The decline in capital's value over a period of time is known as __________.

depreciation

hw8. The ratio of reserves to deposits that a bank plans to hold is its​ ______. If a bank has​ $10 million in actual reserves and​ $8 million in desired​ reserves, then it has​ ______.

desired reserve​ ratio; excess reserves

mt2. Potential GDP is​ ______.

determined by the​ full-employment quantity of labor

DSM4. As the value of a country's real GDP increases, the country is likely to:

devote more resources to pollution reduction

P132. An increase in the income tax rate is an example of​ ______.

discretionary fiscal policy

DSM13 The American Recovery and Reinvestment Act of 2009 is a clear example of:

discretionary fiscal stimulus.

mt3. The relationship between saving and​ _____, other things remaining the​ same, is called the saving function.

disposable income

P102. A rise in the money wage rate​ ______.

does not change the LAS curve because along the LAS curve a rise in money wage rate is accompanied by an equal percentage change in the price level.

P12. The table shows the aggregate demand and​ short-run aggregate supply schedules of Shell Island in which potential GDP is​ $600 billion. The economy is at​ full-employment. The government of Shell Island announces an increase in spending of​ $50 billion a year and the central bank will increase the quantity of money to pay for the spending. Does the economy go into a​ boom? Will there be​ inflation? The economy​ _____ into a​ boom, real GDP​ _____ billion, and​ _____ arises.

does not​ go; remains at​ $600; inflation

hw6. The Rule of 70 states that the number of years it takes for the level of any variable to​ ______ is approximately​ ______. If real GDP per person doubles in 20​ years, then the annual growth rate of real GDP per person is​ ______ percent a year.

double; 70 divided by the annual percentage growth rate of the variable 3.5

P12. A rational expectation is a forecast that results from the use of all the relevant data and​ _____.

economic science

PT5. An increase in labor productivity increases potential GDP because​ ______.

employment increases and a given amount of employment produces more real GDP

9. Interest rate parity means​ ______.

equal rates of return

mt3. Interest rate parity means​ ______.

equal rates of return

P9. Interest rate parity​, which means​ _____ across​ currencies, means that for risk free​ transactions, there is​ _____ gain from choosing one currency over another.

equal rates of​ return; no

P9. Arbitrage in the foreign exchange market and international loans market achieves all of the following except​ _______.

equal real exchange rate across the major currencies

PT5. When the unemployment rate​ ______ the natural unemployment​ rate, real GDP​ ______ potential GDP.

equals; equals

DSM8. The __________ links the quantity of money, velocity of circulation, price level, and real GDP.

equation of exchange

P11. The government expenditure multiplier equals the change in​ _____ that results from a change in government expenditure divided by the change in government expenditure.

equilibrium expenditure and real GDP

PQ13. The government expenditure multiplier is the effect of a change in government expenditure on goods and services on​ _____.

equilibrium real GDP

mt3. When potential GDP​ _____ real​ GDP, the output gap is called a recessionary gap.

exceeds

P10. An above​ full-employment equilibrium is an equilibrium when real GDP​ _____.

exceeds potential GDP

P131. When an economy is below full employment and the government has a budget​ deficit, that deficit​ ______.

exceeds the structural deficit

PT7. The supply of loanable funds is influenced by all of the following except ​______.

expected profit

P9. In the 1950s and​ 1960s, the United States operated a​ ______. Now the United States operates a​ ______ .

fixed exchange​ rate; flexible exchange rate

P9. Could the change in the exchange rate on June 2 have resulted from the two announcements or must some other influence have changed​ too? If​ so, what might that influence have​ been? On June​ 2, the U.S. dollar depreciated rather than appreciated because a fall in U.S.​ _____ decreased the demand for U.S. dollars or an increase in U.S.​ _____ increased the supply of U.S. dollars

exports; imports

P9. Could the change in the exchange rate on June 2 have resulted from the two announcements or must some other influence have changed​ too? If​ so, what might that influence have​ been? On June​ 2, the U.S. dollar depreciated rather than appreciated because a fall in U.S.​ _____ decreased the demand for U.S. dollars or an increase in U.S.​ _____ increased the supply of U.S. dollars.

exports; imports

P9. Net exports is​ _____ of goods and services minus​ _____ of goods and services.

exports; imports

mt1. Net exports of goods and services is the value of​ _____ of goods and services​ _____ the value of​ _____ of goods and services.

exports; minus; imports

P121. An economy at a​ full-employment equilibrium experiences an increase in aggregate demand. The unemployment rate​ ______ its natural​ rate, and to return to the​ long-run equilibrium, the money wage rate begins to​ ______.

falls below; rise

P9. A country has a higher inflation rate than all other​ countries, and it has slower economic growth. The central bank does not intervene in the foreign exchange market. To preserve purchasing power​ parity, the exchange rate​ ______. If investment from foreigners decreases due to the slow economic​ growth, the current account balance is becoming more​ ______. It is expected that in the future the exchange rate will​ ______. The interest rate differential is​ ______.

falls; positive fall; positive

DSM13 Government policies that increase aggregate demand are called __________.

fiscal stimulus

DSM5. The consumer price index is an index computed using prices of a __________.

fixed basket of goods and services purchased by the typical consumer

9. A __________ is one where the government or central bank determines their exchange rate by intervening in the foreign exchange market.

fixed exchange rate

9. A __________ is where a government or central bank intervenes in currency exchange markets and buy or sell currency in order to keep an exchange rate fixed or on a determined path.

fixed exchange rate or a crawling peg

P9. A crawling peg exchange rate policy is one that​ _______.

follows a path determined by a decision of the government or the central bank and is achieved by central bank intervention in the foreign exchange market

10. A monetary growth rule that might be supported by a monetarist would be a plan:

for the Federal Reserve to increase the quantity of money at a fixed rate and not respond to economic fluctuations.

9. The market in which the currency of one country is exchanged for the currency of another country is the​ ______. The price at which one currency exchanges for another currency is the​ ______.

foreign exchange​ market; exchange rate

T91. The market in which the currency of one country is exchanged for the currency of another country is the​ ______. The price at which one currency exchanges for another currency is the​ ______.

foreign exchange​ market; exchange rate

P9. The capital and financial account is the record of​ _____ minus U.S. investment abroad.

foreign investment in the United States

PT5. The unemployment that arises from normal labor turnover—from people entering and leaving the labor force— and from the ongoing creation and destruction of jobs isand from the ongoing creation and destruction of jobs is ​______ unemployment.

frictional

hw5. Governor Plans to Boost Economy with Ecofriendly Jobs-The main type of unemployment that Governor Kulongoski is using policies to avoid is​ ______. If these policies are​ successful, we would expect to see​ Oregon's natural unemployment rate​ ______.

frictional and structural fall

DSM5. The short-term unemployment that arises from workers, in the process of changing jobs, is called __________.

frictional unemployment

mt1. Refer to the production possibilities frontier in the figure. Which of the following movements requires the largest opportunity​ cost, in terms of good Y​ forgone, per extra unit of good X​?

from point d to point e

DSM13 One of the primary goals of most governments with regard to the economy is:

full employment

DSM7. The financial capital markets exist in order to __________.

funnel household savings to firms

output gap

gap between real GDP and potential GDP

extended deposit insurance

gave depositers greater security, increasing deposits and reserves and liquidity

P132. An accounting system that measures the lifetime tax burden and benefits of each generation is called​ ______.

generational accounting

P131. The division of the fiscal imbalance between the current and future​ generations, assuming that the current generation will enjoy the existing levels of taxes and​ benefits, is the​ ______.

generational imbalance

P11. The balanced budget multiplier equals the change in equilibrium expenditure and real GDP that results from equal changes in​ _____ divided by the change in government expenditure.

government expenditure and​ lump-sum taxes

mt3. In January 2010​, the exchange rate was 91 yen per U.S. dollar. By September 2010​, the exchange rate had fallen to 84 yen per U.S. dollar. Given the information​ above, for a given expected future exchange​ rate, the expected profit from holding U.S. dollars is _______ in September 2010 than in January 2010. The quantity of U.S. dollars demanded is​ ______ in September 2010 than in January 2010. And the quantity of U.S. dollars supplied is​ ______ in January 2010 than in September 2010.

greater, greater; greater

PT6. In neoclassical growth​ theory, ______.

growth will stop if technology stops advancing

mt1. In a world lacking property​ rights, it would be​ ________ to realize the gains from trade and there would be​ ________ specialization.

harder; less

PQ13. Government debt is the total amount that government​ _____.

has borrowed

hw4. In the​ figure, flow B represents​ ________

household purchases of goods and services

hw7. What are the three sources of global investment​ funds? (Separate with a​ comma, no plurals or​ abbreviations.)

household saving,government budget surplus,borrowing from rest of world

DSM7. The flow of funds from __________ into the financial system makes it possible for government and firms to borrow.

households

PT8. A depository institution takes deposits from​ ______ and earns most of its income by​ _______. The deposits of the following three types of depository institutions make up the​ nation's money:​ ______.

households and​ firms; making loans and buying securities that earn a higher interest rate than that paid to depositors commercial banks, thrift institutions, and money market mutual funds

hw6. The aggregate production function is the relationship that tells us​ ______, when all other influences on production remain the same.

how real GDP changes as the quantity of labor changes

DSM5. Unanticipated deflation __________.

hurts borrowers

P12. Getting a​ Raise: Why​ It's Not Happening- Read the news​ clip, then answer the following questions. Choose the statement that is incorrect. Starting from a​ long-run equilibrium,​ _______. ​"Wages typically track​ inflation, soaring higher when prices take​ off." In this​ situation, the economy is experiencing​ _______ inflation.

if the percentage change in the money wage rate equals the percentage change in the unemployment​ rate, the economy remains at full employment. demand-pull

P9. Read the news​ clip, then answer the following question. The news clip states that huge trade deficits​ "seem like a pretty good indication that the dollar was overvalued in global currency markets and needed to come​ down". This statement is​ ______ because​ ______.

inaccurate; the current account balance is determined by the private sector balance and the government sector balance

mt1. The United​ Nations' Human Development Index​ (HDI) is based on real GDP per​ person, life expectancy at​ birth, and indicators of the quality and quantity of education. The HDI might be better than real GDP as a measure of economic welfare because the HDI​ ______. The HDI includes measurements of​ ______, which are not measured in real GDP. If the HDI is expanded to include items such as​ pollution, resource​ depletion, and political freedom​ ______. Other influences on economic welfare that could be included in a comprehensive measure include all of the following except​ ______.

includes real​ GDP, but also includes other factors that influence our standard of​ living; ​health, life​ expectancy, and education it would be difficult to measure the beauty of local scenery

PT8. Suppose the Fed buys​ $50 million of government securities from the Bank of America. The​ Fed's total assets​ ______ and its total liabilities​ ______. The Bank of​ America's total assets​ ______ and its total liabilities​ ______.

increase by​ $50 million; increase by​ $50 million do not change; do not change

T122. Unanticipated deflation does all of the following except​ _______.

increase the velocity of circulation

P9. Explain the effect of the​ Fed's announcement on the demand for and supply of U.S. dollars. The demand for U.S. dollars would​ _____ and the supply of U.S. dollars would​ _____ on June 2.

increase; decrease

PQ13. The economy is at full​ employment, the inflation rate is 2 percent a​ year, and the federal budget deficit is 3.5 percent of GDP. Congress wants to make real GDP grow faster and is debating whether to spend more on infrastructure or to cut income taxes. 1a. What would be the​ short-run effects of new government infrastructure​ expenditure? In the short​ run, new infrastructure expenditure will increase the government budget​ deficit, which​ will_____ the real interest rate and​ _____ private investment. 1b. What would be the​ short-run effects of new infrastructure​ expenditure? In the short​ run, new infrastructure expenditure will ​ _____ aggregate demand and with no change in aggregate supply will create​ _____ gap. 2. What would be the​ long-run effects of new government infrastructure​ expenditure? The​ long-run effects of new infrastructure expenditure are a​ _____ rate and​ _____ in potential GDP. 3. How would lower income taxes change the macroeconomic​ variables? Lower income taxes​ _____ equilibrium employment and​ _____ potential GDP. 4. Which policy would increase the economic growth​ rate? A​ _____ will increase investment​ income, which will increase the rate of capital accumulation and increase the economic growth rate.

increase; decrease some ​increase; an inflationary rise in the money​ wage; an increase increases; increases lower tax rate on interest income

swapped troubled assets for safer assets

increased reserves and liquidity

P10. The Fed increases the quantity of money and all other things remain the same. In the short​ run, aggregate demand​ _______.

increases

P10. Canada trades with the United States. Explain the effect of each of the following events on​ Canada's aggregate demand. The government of Canada cuts income taxes. ​Canada's aggregate demand _____ The United States experiences strong economic growth. ​Canada's aggregate demand ______ Canada sets new environmental standards that require power utilities to upgrade their production facilities. ​Canada's aggregate demand ______.

increases increases increases

10. Starting from a position of​ long-run equilibrium, an increase in government expenditures​ ______ real GDP and​ ______ the price level.

increases real GDP and raises the price level

10. Starting from a position of​ long-run equilibrium, a world expansion​ ______, and an increase in expected future profits​ ______.

increases real GDP and raises the price​ level; increases real GDP and raises the price level

hw7. A government budget deficit​ occurs, which​ ______. The real interest rate​ ______. Private saving _____ and investment _____ .

increases the demand for loanable​ funds; rises increases; decreases

10. Aggregate demand decreases if the exchange rate​ ______ or foreign income ​______.

increases; decreases

P9. An increase in U.S. demand for imports​ ______ the supply of U.S. dollars. A rise in the U.S. interest rate differential​ ______ the supply of U.S. dollars.

increases; decreases

PT5. An increase in the population​ ______ potential GDP and​ ______ potential GDP per hour of labor.

increases; decreases

P12. Real Wages Fail to Match a Rise in Productivity- In real business cycle​ theory, an increase in productivity​ ______ the demand for labor by more than it​ ______ the supply of labor. In the news​ clip, productivity gains exceed pay increases because the demand for labor​ ______ than the​ ______ in the supply of labor.

increases; increases increases by​ less; increase

PT7. A decrease in current income taxes​ ______ the supply of loanable funds today because it​ ______. A decrease in expected future income​ ______.

increases; increases disposable income, which encourages greater saving increases the supply of loanable funds today because households with smaller expected future income will save more today

PQ13. Fiscal Policy Priorities In​ 2008, the Obama administration proposed the following fiscal policy​ actions: ​(1) Increased spending on universal health insurance​ ($65 billion), alternative energy​ ($15 billion), help for homeowners​ ($20 billion), infrastructure​ ($60 billion), a scheme to pay college tuition in exchange for public service​ ($10 billion), and many other projects. ​(2) End​ Bush-era tax cuts on families with incomes greater than​ $250,000, increase payroll taxes on​ high-income earners, increase the tax rate on capital gains to 25​ percent, increase the tax on​ dividends, and end arrangements that enable corporations to lower their taxes. ​ Expenditure on alternative energy and the​ nation's infrastructure​ ______ short-run aggregate supply and​ ______ potential GDP Ending the Bush tax cuts​ ______ short-run aggregate supply and​ ______ potential GDP. Expenditure on college tuition​ ______ short-run aggregate supply and ​ ______ potential GDP. Increasing taxes on business and investment​ ______ short-run aggregate supply and​ ______ potential GDP.

increases; increases; decreases; decreases increases; increases decreases; decreases

P121. In an​ expansion, an increase in the rate of technological change​ _______ investment demand. The real interest rate​ _______.

increases; rises

hw7. A decrease in current income taxes​ ______ the supply of loanable funds today because it​ ______. A decrease in expected future income​ ______.

increases​; increases disposable​ income, which encourages greate saving increases the supply of loanable funds today because households with smaller expected future income will save more today

P102. Aggregate demand increases if expected future​ income, inflation, or profits​ ______. And aggregate demand increases if fiscal policy​ ______ government expenditure. Aggregate demand increases if fiscal policy​ ______ taxes or​ ______ transfer payments. Aggregate demand increases if monetary policy​ ______ the quantity of money and​ ______ interest rates. ggregate demand increases if the exchange rate​ ______ or foreign income ​______.

increase​; increases decrease; increase increases; decreases decreases; increases

DSM6. The only way that the standard of living of the average person in a country can increase is by:

increasing production faster than population growth

P12. Deflation can be ended by​ _______.

increasing the growth rate of the quantity of money

P101. An economy is in a​ long-run equilibrium. An increase in aggregate demand creates​ ______ gap. A rise in the money wage rate decreases​ ______ and returns the economy to a​ full-employment equilibrium.

inflationary; quantity of real GDP demanded.

mt2. In the short​ run, the quantity of real money and real GDP are given and the​ ______ adjusts to achieve equilibrium. In the long​ run, supply and demand in the loanable funds market determines the​ ______. In the long​ run, _______ adjusts to make the quantity of real money supplied equal the quantity demanded.

interest rate; real interest rate the price level

mt2. When the Federal Reserve Bank increases the federal funds​ rate, other

interest rates​ rise, and​ consumption, firms' private investment and net exports decrease.

mt3. When the Federal Reserve Bank increases the federal funds​ rate, other

interest rates​ rise, and​ consumption, firms' private investment and net exports decrease.

hw8. In the short​ run, the quantity of real money and real GDP are given and the​ ______ adjusts to achieve equilibrium. In the long​ run, supply and demand in the loanable funds market determines the​ ______. In the long​ run, _______ adjusts to make the quantity of real money supplied equal the quantity demanded.

interest​ rate; real interest rate the price level

P9. Balance of payments accounts are the accounts in which a nation records its​ _____.

international​ trading, borrowing, and lending

P111. If aggregate planned expenditure exceeds real​ GDP, then​ _______.

inventories decrease, and as real GDP increases, a movement up along the AE curve occurs

P112. If aggregate planned expenditure is less than real​ GDP, then​ _______.

inventories increase, and as real GDP decrease a movement down the AE curve.

P12. From the​ Fed's Minutes- Read the news​ clip, then answer the following question. FOMC members are predicting that the U.S. economy​ ______.

is on a​ short-run Phillips curve to the right of the LRPC and will move leftward up along the SRPC

PT6. According to new growth​ theory, ______ experience diminishing returns.

knowledge is capital that does not

DSM5. The ratio of the labor force to the adult population is known as the:

labor force participation rate

hw8. Suppose the Fed increases the quantity of money. In the long​ run, supply and demand in the​ ______ market determines the real interest rate. The​ ______ adjusts to make the quantity of real money supplied equal to the quantity demanded.

loanable​ funds; price level

hw7. The three main types of markets for financial capital are​ _______.

loan​ markets, bond​ markets, and stock markets

hw4. A​ Half-Year of Job Losses- According to the news​ clip, the main source of increased unemployment might be​ ______, and the main type of increased unemployment is​ ______.

losses in manufacturing and construction​ jobs; cyclical

P9. The exports effect is the result that the lower the exchange​ rate, other things remaining the​ same, the​ ______.

lower are the prices of​ U.S.-produced goods and services to foreigners and the greater is the volume of U.S. exports

9. The imports effect is the result that the higher the exchange​ rate, other things remaining the​ same, the​ ______.

lower are the prices of​ foreign-produced goods and services to Americans and the greater is the volume of U.S. imports

P9. The imports effect is the result that the higher the exchange​ rate, other things remaining the​ same, the​ ______.

lower are the prices of​ foreign-produced goods and services to Americans and the greater is the volume of U.S. imports

DSM7. The __________ the interest rate, the more investment projects firms can profitably undertake, and the __________ the quantity of loanable funds they will demand.

lower, greater

hw8. Money serves as a​ ______.

medium of​ exchange, which means that it is generally accepted in exchange for goods and services

12. A rise in the price of oil:

might trigger a cost-push inflation

hw3. If the price of a taco falls​, a​ ______ the demand curve occurs. If any factor that influences buying plans other than the price​ changes, then a​ ______ the demand curve occurs.

movement down ​along; shift of

hw5. June 02- 179.9 June 03-183.7 June 04-189.7 The table shows three years of CPI data. The bias in these CPI numbers might arise from​ ______. Choose the statement that is incorrect.

new goods​ bias, quality change​ bias, commodity substitution​ bias, and outlet substitution bias The core PCE is a broader measure than the CPI that attempts to overcome biases by placing extra emphasis on food and​ fuel, two goods which are large components of household expenditure.

mt2. The demand for money is the relationship between the quantity of real money demanded and the ________ when all other influences on the amount of money that people wish to hold remain the same. When the nominal interest rate​ rises, the opportunity cost of holding money​ ______ and the quantity of real money demanded​ ______.

nominal interest rate rises; decreases

P9. The official settlements account is the record of the change in U.S.​ _____.

official reserves

hw2. The table shows​ Brazil's production possibilities for ethanol and food crops. Marginal benefit from a good or service is the benefit received from consuming​ ______. It is measured by the most that people are willing to pay for​ ______. Marginal benefit from food crops​ _______.

one more unit of​ it; an additional unit of it cannot be calculated from the table

hw4. In​ 2011, Ozzie purchased a 2008 Ford Escort from his neighbor for his​ son, purchased a 2007​ "one owner" Camry from Larchmont Toyota for his​ wife, bought a 2011 new Ford for​ himself, and sold his 2000 Dodge Caravan to his teenage nephew.​ Which, if​ any, of these transactions will be included in GDP in​ 2011?

only the purchase of the Ford

PQ13. The federal budget is an annual statement of the​ _____ of the government of the United States together with the laws and regulations that approve and support them.

outlays and receipts

hw8. Rapid inflation in Brazil in the early 1990s caused the cruzerio to lose its ability to function as money. Which of the following commodities do you think would most likely have taken the place of the cruzeiro in the Brazilian​ economy?

packs of cigarettes because they are a good medium of exchange

hw5. Unemployment arises for all of the following reasons except​ ______. Some unemployment is unavoidable because​ ______.

people leave the labor force people are making transitions through the stages of life and businesses are making transitions

PT5. Assume that the preconditions for labor productivity growth are in place. The pace of labor productivity growth is influenced by all of the following except​ ______.

population growth

P101.In the​ long-run macroeconomic​ equilibrium, ______.

potential GDP and aggregate demand determine the price level, and the money wage rate adjusts so that the SAS curve intersects the LAS curve at the long-run equilibrium price level.

P10. A recessionary gap eventually emerges even if aggregate demand remains constant because over time​ ______.

potential GDP increases

P101. Economic growth is the persistent increase in​ ______. Economic growth is accompanied by inflation when the​ ______.

potential​ GDP; AD curve shifts rightward at a faster rate than the LAS curve shifts rightward

P121. According to mainstream business cycle​ theory, ______ grows at a steady rate and​ ______ grows at a fluctuating rate.

potential​ GDP; aggregate demand

P131. Fiscal imbalance is the​ ______ value of the​ government's commitments to pay benefits minus the​ ______ value of its tax revenues.

present; present

hw3. Oil soars to new record over​ $135- A shortage in the market for oil implies that​ ______.

price adjustments are being prevented from playing their role as the regulator of buying and selling plans

hw2. Harry produces 9 balloon rides and 2 boat rides an hour. Harry could not produce more balloon rides without producing fewer boat rides. Harry is​ ______ his production possibilities frontier.

producing on

PQ13. Fiscal Stimulus is the use of fiscal policy to increase​ _____.

production and employment

P12. According to RBC​ theory, the main source of economic fluctuations is a decrease in​ ______ The effect of this decrease is ______ in investment demand, ______ in the demand for loanable​ funds, and ______ in the real interest rate. The effect of this decrease is ______ in the demand for labor, ______ in the supply of labor, _____ in employment, and ______ in the real wage rate.

productivity growth decrease; decrease; decrease decrease; decrease; decrease; decrease

hw7. When the real interest rate risesrises​, the​ ______ because the​ ______ is the opportunity cost of loanable funds.

quantity of loanable funds demanded decreases; real interest rate

P101. An increase in the price level when the money wage rate remains unchanged increases​ ______.

quantity of real GDP supplied

DSM8. The theory concerning the link between the money supply and the price level that assumes the velocity of money is constant is called the __________.

quantity theory of money

hw4. In the United​ States, GDP is typically measured

quarterly.

T 122 In real business cycle​ theory, _______ are the main source of economic fluctuations.

random fluctuations in productivity

P10. The defining feature of the Keynesian view of macroeconomics is that the economy is​ ______. Keynesian macroeconomists recommend​ ______.

rarely at full employment policies that actively offset changes in aggregate demand that bring recession

Federal funds rate

rate at which banks and other depository institutions lend money to each other, usually on an overnight basis fed can influence behavior by controlling supply and demand of $

currency drain ratio

ratio of currency to deposits

PT5. By measuring​ ______, we can see that the economy of Singapore has caught up to and surpassed the economy of the United​ States, but that the economies of Central and South America have not.

real GDP per person

P12. The main criticisms of RBC theory include all of the following except​ ______. Defenders of RBC theory claim all of the following except ​_______.

real business cycle theory relies too heavily the role of money in the economy to make its predictions RBC theory is consistent with a negligible intertemporal substitution effect

hw6. The demand for labor is the relationship between the quantity of labor demanded and the​ ______. The supply of labor is the relationship between the quantity of labor supplied and the​ ______. The quantity of labor demanded is the number of labor hours ___ during a given period. The quantity of labor supplied is the number of labor hours _____ during a given period. The ____ wage rate adjusts to bring the labor market to equilibrium.

real wage​ rate; real wage rate hired by all the firms in the economy that all the households in the economy plan to work real

P10. ​Short-run macroeconomic equilibrium occurs when the quantity of​ _____ demanded equals the quantity of​ _____ supplied at the point of intersection of the​ _____ curve and the​ _____ curve.

real​ GDP; real​ GDP; AD​; SAS

PT6. Between 1914 and​ 2014, the average growth rate of real GDP per person in the United States was 2 percent a year. During this​ period, ______ grew at a faster rate than​ ______.

real​ GDP; the population

P102. The table gives the aggregate demand​ schedule, the​ short-run aggregate supply​ schedule, and the​ long-run aggregate supply schedule for an economy. What is the quantity of real GDP at the​ short-run macroeconomic​ equilibrium? The quantity of real GDP at the​ short-run macroeconomic equilibrium is ​$450 billion. The economy has​ ______.

recessionary gap of $50 billion

12. In a demand-pull inflation, the AD curve shifts ____ and the SAS curve shifts ____.

rightward; leftward

PT8. On average in the United​ States, the inflation rate and the money growth rate minus the real GDP growth rate​ ______.

rise and fall together

P12. Stagflation is a combination of a​ ______ in the price level and​ ______ in real GDP. Stagflation occurs when​ _______.

rise; a decrease costs increase

P9. In June 2011​, the exchange rate was 0.69 euros per U.S. dollar. By June 2012​, the exchange rate had risenrisen to 0.79 euros per U.S. dollar. As the exchange rate rises​, prices of​ U.S.-produced goods and services to foreigners​ ______ and the volume of U.S. exports​ ______.

rise; decreases

mt3. As the price level​ rises, interest rates _____ and real wealth ______. People substitute goods in the _____ for goods in the ______. So, as the price level​ rises, there is​ ______.

rise; decreases; future; present; a decrease in the quantity of real GDP demanded

PT5. According to classical growth​ theory, when real GDP per person​ ______, the population grows.

rises above the subsistence level

P12. The table shows the aggregate demand and​ short-run aggregate supply schedules of Shell Island in which potential GDP is​ $600 billion. The economy is at​ full-employment. 1. An unexpected increase in exports increases aggregate demand by​ $50 billion. What happens to the price level and real​ GDP? Has Shell Island experienced inflation or deflation and what type of output gap does it now​ have? The price level​ _____ and real GDP​ _____ billion. Shell island has experienced​ _____ . 2. The price of oil falls unexpectedly and aggregate supply increases by​ $50 billion. What type of output gap​ appears? If the central bank responds to close the output​ gap, does Shell Island experience inflation or​ deflation? ​_____ gap appears and the central bank closes the output​ gap, aggregate demand​ _____ and a​ _____ is created. 3. The government of Shell Island announces an increase in spending of​ $50 billion a year and the central bank will increase the quantity of money to pay for the spending. Does the economy go into a​ boom? Will there be​ inflation? The economy​ _____ into a​ boom, real GDP​ _____ billion, and​ _____ arises.

rises to​ 130; increases to​ $625; a​ one-time change in the price level and has an inflationary gap An​ inflationary; decreases;​ cost-push deflation does not go; remains at $600; inflation

hw3. When the increase in demand is greater than the decrease in​ supply, the equilibrium price​ _____ and the equilibrium quantity​ _____. When the increase in demand is less than the decrease in​ supply, the equilibrium price​ _____ and the equilibrium quantity​ _____. When the increase in demand equals the decrease in​ supply, the equilibrium price​ _____ and the equilibrium quantity​ _____.

rises; increases rises; decreases ​rises; remains unchanged

P12. Recession? Maybe.​ Depression? Get Real. The unemployment rate during the Great Depression peaked at nearly 25 percent in​ 1933, after an initial spike from 3 percent in 1929 to nearly 8.7 percent in 1930. The unemployment rate is just 5​ percent, only up from 4.5 percent a year ago. Also during the Great Depression there was​ deflation, which is not happening today. The inflation and unemployment trends during the Great Depression can be explained by a movement along the​ ______ Phillips curve that​ ______. During​ 2008, the inflation rate increased and the unemployment rate increased. These events​ ______.

short-run; lowers the inflation rate and increases the unemployment rate cannot be explained by a movement along the SRPC because along this curve the inflation rate and unemployment rate move in opposite directions

T92. Suppose a country has a crawling peg exchange rate policy against the U.S. dollar and the equilibrium exchange rate in units of foreign currency per U.S. dollar is above the target rate. To keep the exchange rate pegged at its target​ level, the​ country's central bank must​ ______ U.S. dollars and​ ______ its foreign currency reserves.

sell; decrease

hw3. Each of the following cause either a shift of the supply curve left or right or a movement along the supply curve up or down. Identify the proper​ change, using the words​ "shift left,"​ "shift right,"​ "movement up," or​ "movement down."​ (No apostrophes in your​ answers.) A decrease in the price of a raw material of production. The price of a complement in production falls. The price of a good rises and other influences stay the same. The price of a good is expected to rise in the future. The number of suppliers of a good increases. Advances in technology lower the cost of producing existing products. The weather that year is particularly perfect for agriculture

shift right, shift left movement up shift left shift right shift right shift right

hw6. An increase in labor productivity​ ______.

shifts the demand for labor curve rightward and the production function upward

10. The long-run aggregate supply curve:

shifts to the right as technological change occurs

P12. If the natural unemployment rate​ increases, the​ long-run Phillips curve​ _______ and the​ short-run Phillips curve​ ______. The expected inflation rate _____.

shifts​ rightward; shifts rightward does not change

P12. The U.S.​ short-run Phillips curve​ ______ when the expected inflation rate rises. The U.S.​ short-run Phillips curve​ ______ when the natural unemployment rate increases. The U.S.​ long-run Phillips curve​ ______ when the expected inflation rate rises. The U.S.​ long-run Phillips curve​ ______ when the natural unemployment rate increases.

shifts​ upward; shifts rightward does not​ shift; shifts rightward

10. An unexpected change in the price of oil would cause a shift of the _______ curve.

short-run aggregate supply

10. The aggregate demand and aggregate supply model explains:

short-run fluctuations in real GDP and the price level

PQ13. Senate Approves Obama Tax Cut Plan- A stimulus package centred around a​ one-time consumer tax rebate is likely to have a​ ______ supply-side effect because​ ______.

small; it does not change the tax wedge

DSM13 We would expect the tax multiplier to be __________ in absolute value than the government purchases multiplier.

smaller

DSM2. The principle of increasing opportunity cost states that the more resources devoted to any activity, the __________ the payoff to devoting additional resources to that activity.

smaller

mt3. In RBC​ theory, the lower the real interest​ rate, other things remaining the​ same, the​ ______ today.

smaller is the supply of labor

T122 In RBC​ theory, the lower the real interest​ rate, other things remaining the​ same, the​ ______ today.

smaller the supply of labor

DSM8. If the Federal Reserve increases the money supply at 5% a year, in the long run there will be __________.

something less than 5% annual inflation

DSM5. Unemployment arising from a persistent mismatch between the skills and characteristics of workers and job requirements is called __________.

structural unemployment

PT5. Suppose that the number of jobs in the fishing industry decreases but the number of jobs in the travel industry increases.Suppose that the number of jobs in the fishing industry decreases but the number of jobs in the travel industry increases. Initially, ​______.

structural unemployment increases

hw4. Out of a Job and Out of Luck at 54- Older workers are more prone to experience​ ______ unemployment. During a​ recession, the unemployment rate of older workers​ ______. Choose the statement that is incorrect. Older unemployed workers might become marginally attached workers or discouraged workers during a recession because​ _______.

structural; increases given their long employment​ history, they are eligible for longer periods of unemployment benefits

hw3. ​If, as the price of a hot dog increases​, the quantity of hamburgers that people buy increases, then hot dogs and hamburgers are​ _______.

substitutes

DSM13. The government debt is best measured as the:

sum of past budget deficits minus the sum of past budget surpluses.

hw3. Suppose that there is a substantial fall in the price of apples. Apples are​ (obviously) the major ingredient in apple juice. As a result of this​ event, the market for apple juice changes in this​ way: ​ ________________.

supply increases and price falls

mt2. A government budget surplus​ occurs, which increases the _________ loanable funds. The real interest rate​ ______, household saving​ ______,

supply of falls; decreases and investment increases

hw7. A government budget surplus​ occurs, which increases the ______ loanable funds. The real interest rate​ ______, household saving​ ______,

supply of ​falls; decreases and investment increases

PT7. A government budget surplus​ occurs, which increases the ________ loanable funds. The real interest rate​ ______, household saving​ ______,

supply of falls; decreases and investment increases

10. When the price​ level, the money wage​ rate, and other factor prices rise by the same​ percentage, there is a movement along​ ______. Potential GDP​ ______.

the LAS curve​; does not change

P102. When the price​ level, the money wage​ rate, and other factor prices rise by the same​ percentage, there is a movement along​ ______. Potential GDP​ ______.

the LAS curve​; does not change

P102. When the price level rises but the money wage rate and other factor prices remain the​ same, there is a movement along​ ______. The quantity of real GDP supplied​ ______.

the SAS curve; increases

10. When the price level rises but the money wage rate and other factor prices remain the​ same, there is a movement along​ ______. The quantity of real GDP supplied​ ______.

the SAS​ curve; increases

9. Read the news​ clip, then answer the following question. Mr. Reddy is investing in the U.S. real estate market because​ ______.

the U.S. dollar depreciated and the price of U.S. investment properties to foreign investors like Mr. Reddy decreased

mt3. Indian Entrepreneur Seeks Opportunities- Read the news​ clip, then answer the following question. Mr. Reddy is investing in the U.S. real estate market because​ ______.

the U.S. dollar depreciated and the price of U.S. investment properties to foreign investors like Mr. Reddy decreased

P9. If a U.K. bank deposit earns 4 percent a year and a U.S. bank deposit earns 5 percent a​ year, then people expect that​ ______.

the U.S. dollar will depreciate by 1 percent a year

hw4. GDP Expands 11.4​ percent, Fastest in 13 Years- According to the expenditure approach for calculating​ China's GDP,​ "each one percent drop in the U.S. economy will shave 1.3 percent off​ China's growth" because as the U.S. economy​ shrinks, ______. ​China's ______ and​ China's real GDP decreases.

the United States imports less from​ China; exports decrease

mt1. GDP Expands 11.4​ percent, Fastest in 13 Years- Read the news​ clip, then answer the following questions. According to the expenditure approach for calculating​ China's GDP,​ "each one percent drop in the U.S. economy will shave 1.3 percent off​ China's growth" because as the U.S. economy​ shrinks, ______. ​China's ______ and​ China's real GDP decreases.

the United States imports less from​ China; exports decrease

marginal benefit

the benefit that a person receives from consuming one more unit of a good or service. it's measured as the maximum amount that a person is willing to pay for one more unit of the good or service

production possibilites frontier

the boundary between those combinations of goods and services that can be produced and those combinations that cannot

structural surplus or deficit

the budget balance that would occur if the economy were at full employment and real GDP were equal to potential GDP

DSM4. The cycle of short-term ups and downs in the economy is called:

the business cycle

DSM8. The Federal Reserve System is __________.

the central bank of the United States

11. To calculate the​ multiplier, we divide​ ______ by​ ______.

the change in equilibrium​ expenditure; the change in autonomous expenditure

P112. The marginal propensity to import is equal to​ _______.

the change in imports divided by the change in real GDP, other things remaining the same

slope

the change in the value of the variable measured on the y-axis divided by the change in the value of the variable measured on the x-axis

stagflation

the combination of inflation and recession

9. The part of the balance of payments that records a country's exports and imports of goods and services is __________.

the current account

hw3. Events in the market for a particular good are such that the market​ (equilibrium) price and market​ (equilibrium) quantity of the good move opposite direction​ (i.e., price falls as quantity​ rises, ​ and\or price rises as quantity​ falls). It must therefore be true that​ _________.

the decisive event in the marketplace is a shifting supply curve

P9. In the short​ run, the nominal exchange rate is determined by​ ______. And in the short run​ ______.

the demand for U.S. dollars and the supply of U.S. dollars in the foreign exchange​ market; a change in the nominal exchange rate brings an equivalent change in the real exchange rate

P102. High inflation accompanies economic growth when​ ______.

the quantity of money increases rapidly

Generational imbalance

the division of the fiscal imbalance between the current and future generations, assuming that the current generation will enjoy the existing levels of taxes and benefits

P10. Aggregate demand will increase if​ ______.

the effect of the tax rebates and the change in the foreign exchange rate outweigh the effect of the​ housing, credit, and financial crises

supply

the entire relationship between the price of a good and the quantity supplied of it when all other influences on producers' planned sales remain the same. described by a supply schedule and illustrated by a supply curve

DSM3. Given linear demand curves, if demand and supply both increase but demand increases by a greater amount than supply, then:

the equilibrium price and quantity both increase.

DSM3. Given linear demand curves, if demand and supply increase by identical amounts, then:

the equilibrium price stays the same and the equilibrium quantity rises.

DSM3. Given linear demand curves, if demand increases and supply decreases, then __________.

the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous

P9. The quantity of U.S. dollars supplied in the foreign exchange market depends on many​ factors, the main ones being​ ______.

the exchange​ rate, U.S. demand for​ imports, interest rates in the United States and other​ countries, and the expected future exchange rate

mt3. The quantity of U.S. dollars supplied in the foreign exchange market depends on many​ factors, the main ones being​ ______.

the exchange​ rate, U.S. demand for​ imports, interest rates in the United States and other​ countries, and the expected future exchange rate

9. The quantity of U.S. dollars demanded in the foreign exchange market depends on many​ factors, the main ones being​ ______.

the exchange​ rate, world demand for U.S.​ exports, interest rates in the United States and other​ countries, and the expected future exchange rate

P9. The quantity of U.S. dollars demanded in the foreign exchange market depends on many​ factors, the main ones being​ ______.

the exchange​ rate, world demand for U.S.​ exports, interest rates in the United States and other​ countries, and the expected future exchange rate

hw6. Economic growth is​ _______. Growth rates are calculated in a similar manner for all variables. Real GDP growth rate​ = [(Real GDP in​ ______ yearminus−Real GDP in​ ______ ​year) divided by ÷Real GDP in​ ______ year ​] times ×100.

the expansion of production possibilities current; previous; previous

12. Along the​ short-run Phillips​ curve, ______.

the expected inflation rate and the natural unemployment rate are constant

monetary policy

the fed conducts the nation's monetary policy by changing interest rates and adjusting the quantity of money

mt1. Gross domestic product is​ ______. A bakery uses flour to produce bread. When calculating​ GDP, we include​ ______, because when we add the value of the flour to the value of the loaf of bread to calculate​ GDP, the result is​ ______.

the market value of all the final goods and services produced within a country in a given time period only the value of the bread sold in a​ store; double counting

net worth

the market value of what a financial institution has lent minus the market value of what it has borrowed lent - borrowed

hw2. Veronica has two bowls of soupbowls of soup for lunch. The marginal benefit that Veronica receives from the second bowl of soup is​ _______.

the maximum amount that she is willing to pay for the second bowl of soup

real wage rate

the money (nominal) wage rate / price level quantity of goods and services that an hour of labor earns

DSM8. If real GDP increases:

the money demand curve shifts to the right.

P12. All of the following events except an increase in​ ______ might cause a​ demand-pull inflation. Starting at point A​, the initial effect of a​ demand-pull inflation is a move to point​ ______. As a​ demand-pull inflation spiral​ proceeds, it follows the path​ ______.

the money wage rate C; E,​ H, I

P101. Potential GDP increases for all of the following reasons except​ ______.

the money wage rate decreases

T122. According to mainstream business cycle​ theory, _______.

the money wage rate is sticky and consequently if aggregate demand grows faster than potential​ GDP, an inflationary gap emerges

12. A​ cost-push rise in the price level can arise from an increase in​ _______.

the money wage rate or money prices of raw materials

P121. A​ cost-push rise in the price level can arise from an increase in​ _______.

the money wage rate or money prices of raw materials

P101. As we move up along the​ short-run aggregate supply​ curve, ______.

the money wage rate, the price of other resources, and potential GDP remain constant.

10. As we move up along the​ short-run aggregate supply​ curve, ______.

the money wage​ rate, the prices of other​ resources, and potential GDP remain constant

T.122 When aggregate demand unexpectedly​ increases, ______.

the natural unemployment rate does not change

mt2. When cyclical unemployment increases and other things remain the​ same, ______.

the natural unemployment rate does not change

mt3. When aggregate demand unexpectedly​ increases, ______.

the natural unemployment rate does not change

real interest rate

the nominal interest rate adjusted to remove the effects of inflation on the buying power of money. nominal interest rate - inflation

goods and services

the objects that people value and produce to satisfy human wants

PQ13. Increase in Payroll Taxes Needed for Social Security-Social Security faces a​ $5.3 trillion shortfall over the next 75​ years, but a congressional report says the massive gap could be erased by increasing payroll taxes paid by both employees and employers from 6.2 percent to 7.3 percent and by raising the retirement age to 70. Social Security is facing a​ $5.3 trillion shortfall over the next 75 years because​ ______. Increasing payroll taxes​ ______ government receipts and raising the retirement age to 70​ ______ government​ outlays, which would reduce the shortfall. The suggestions in the news clip _______ the generational imbalance.

the present value of the​ government's commitments to pay benefits exceeds the present value of its Social Security tax revenues ​increases; decreases change

P10. The aggregate demand curve shows the relationship between the quantity of real GDP demanded and​ ______, when everything else remains the same. A movement along the aggregate demand curve occurs if​ _______.

the price level the price level changes and all other factors remain unchanged

PT5. The CPI tells us​ ______.

the price level in a given period expressed as percentage of the price level in the base period, which is by definition equal to 100.

DSM3. All of the following scenarios depict the characteristics of substitutes except:

the price of bacon increases and the demand for eggs decreases.

DSM3. All of the following scenarios depict the characteristics of complements except:

the price of coffee increases and the demand for cream increases.

T92. The quantity of U.S. dollars supplied in the foreign exchange market depends on all of the following except​ ______.

the price of gold

quantity theory of money

the proposition that in the long run, an increase in the quantity of money brings and equal % increase in the price level

investment

the purchase of new plant, equipment, and buildings and additions to inventories

Open market operation (OMO)

the purchase or sale of government securities - U.S. Treasury bills and bonds - by the Fed Reserve System in the loanable funds market

hw8. An open market operation is​ ______.

the purchase or sale of securities by the Federal Reserve System in the loanable funds market

government expenditure multiplier

the quantitative effect of a change in government expenditure on real GDP. calculated as the change in real GDP that results from the change in government expenditure divided by the change in government expenditure

tax multiplier

the quantitative effect of a change in taxes on real GDP. change in real GDP that results from a change in taxes / the change in taxes

hw3. Suppose the price of a bag of chips is 60 cents. To return to​ equilibrium, ______.

the quantity demanded decreases and the quantity supplied increases

P9. At the equilibrium exchange rate​ _______.

the quantity of dollars demanded equals the quantity of dollars supplied

10. As we move up along the​ long-run aggregate supply​ curve, ______.

the real wage rate remains constant

P101. As we move up along the​ long-run aggregate supply​ curve, ______.

the real wage rate remains constant

aggregate production function

the relationship between real GDP and the quantity of labor when all other influences on production remain the same

supply of loanable funds

the relationship between the quantity of loanable funds supplied and the real interest rate when all other influences on lending plans remain the same

long-run aggregate supply

the relationship between the quantity of real GDP supplied and the price level when the money wage rate changes in step with the price level to maintain full employment

short run aggregate supply

the relationship between the quantity of real GDP supplied and the price level when the money wage rate, the prices of other resources and potential GDP remain constant

default risk

the risk that a borrower might not repay a loan

P9. The current account is the record of receipts from​ _____ other​ countries, minus​ _____ other​ countries, plus the net amount of​ _____ received from and paid to other countries.

the sale of goods and services to other​ countries; payments for goods and services bought​ from; interest and transfers

DSM4. The point where economic activity bottoms out in a full business cycle is known as:

the trough

12. Along the​ long-run Phillips​ curve, _______.

the unemployment rate is constant at the natural unemployment rate

mt3. Along the​ long-run Phillips​ curve, _______.

the unemployment rate is constant at the natural unemployment rate

Natural unemployment rate

the unemployment rate when the economy is at full employment - natural unemployment as a percentage of the labor force

structural unemployment

the unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the locations of jobs

10. New classical theorists believe that:

the uneven pace of technological change is the most significant cause of business cycle fluctuations.

wealth

the value of all the things that people own - the market value of their assets - at a point in time

net exports

the value of exports of goods and services minus the value of imports of goods and services value of exports of goods and services - value of imports of goods and services

DSM4. Real GDP is __________.

the value of final goods and services produced in a given year when valued at the prices of a reference base year

hw4. Nominal GDP is​ ______. Real GDP is​ ______.

the value of the final goods and services produced in a given year valued at the prices of that year​; the value of final goods and services produced in a given year when valued at the prices of a reference base year

Labor

the work time and work effort that people devote to producing goods and services

T92. If most prices increase in Japan and other countries but remain constant in the United​ States, ______.

then for purchasing power parity to​ hold, the demand for U.S. dollars increases and the supply of U.S. dollars decreases

mt3 If most prices increase in Japan and other countries but remain constant in the United​ States, ______.

then for purchasing power parity to​ hold, the demand for U.S. dollars increases and the supply of U.S. dollars decreases

DSM8. When the interest rate decreases, __________.

there is movement down a stationary money demand curve

mt1. After you​ graduate, you have decided to accept a position working at the Bureau of Labor Statistics for​ $45,000.00 a year. The two other offers you received were working for Wal−Mart for​ $38,000 and working for Ernst and Young consulting for​ $42,000. Of these two​ offers, you would have preferred the job at Ernst and Young. What is the opportunity cost of accepting the position at the Bureau of Labor​ Statistics?

the​ $42,000 you would have been paid working for Ernst and Young

hw5. The price index with the greatest bias is​ ______ because​ ______.

the​ CPI; it​ isn't based on current period actual expenditure weights

P9. The foreign exchange market is the market in which​ _____ of one country is exchanged for​ _____ of another.

the​ currency; the currency

T92. A change in the expected future exchange rate changes the demand for U.S. dollars​ ______, and a change in the world demand for U.S. exports changes the demand for U.S. dollars​ ______.

today; today

T92. A change in the expected future exchange rate changes the supply of U.S. dollars​ ______, and a change in U.S. demand for imports changes the supply of U.S. dollars​ ______.

today; today

P9. What does the Treasury Department say about​ China's currency? The Treasury Department says that​ China's currency is ________. What type of exchange rate policy does China​ practice? China practices a _____ exchange rate policy. How might it be determined whether the yuan is​ "significantly undervalued"? It might be determined whether the yuan is​ "significantly undervalued" from​ _____ and​ _____.

undervalued crawling peg PPP Prices; change in foreign exchange reserves

P9. The yuan was​ ______ relative to purchasing power parity and the Swiss franc was​ ______ relative to purchasing power parity. The price of a Big Mac in different countries​ _______ provide a valid test of purchasing power parity because​ _______.

undervalued; overvalued does​ not; purchasing power parity is determined by the price level not by individual prices

12. A movement​ ______ along the​ short-run Phillips curve occurs when there is an​ ______ increase in aggregate demand.

up; unexpected

P121. A movement​ ______ along the​ short-run Phillips curve occurs when there is an​ ______ increase in aggregate demand.

up; unexpected

PT5. The CPI basket consists of items that _____ households buy. The CPI places more weight on​ _______ than on​ _______.

urban transportation; medical care

mt1. Allocative efficiency is a situation in which the quantities of goods and services produced are those that people​ _____ - it is not possible to produce more of a good or service​ _____ some of another good that people​ _____.

value most​ highly; without giving​ up; value more highly

P131. The tax wedge is the gap between the​ before-tax and​ after-tax ______.

wage rates

hw2. Allocative efficiency occurs when​ ______.

we are producing at a point on the PPF such that marginal benefit at the quantity produced equals marginal cost

margin

when a choice is made by comparing a little more of something with its cost, the choice is made at the margin

hw2. Harry enjoys tennis but wants a high grade in his economics course. Figure 1 shows​ Harry's PPF. Figure 2 shows​ Harry's marginal benefit curve for tennis. If Harry uses his time to achieve allocative​ efficiency, he plays 7 hours of tennis a week and his economics grade is 65 percent. Harry would be​ ______ off getting a higher grade in economics because​ ______ ​Harry's PPF​ ______and his MB curve​ ______. Harry's efficient time allocation ____.

worse; his marginal benefit from tennis would exceed his marginal cost does not​ change; shifts rightward increases

P9. If saving is​ $850 billion, investment is​ $500 billion, government expenditure on goods and services is​ $700 billion, net exports is​ $50 billion, and net taxes is​ $800 billion, then calculate government sector balance.

​$100 billion

P9. If saving is​ $850 billion, investment is​ $500 billion, government expenditure on goods and services is​ $600 billion, and net exports is​ $100 billion, then calculate private sector balance.

​$350 billion

mt2. In an​ economy, there is ​$75 million in currency held outside​ banks, ​$175 million in​ traveler's checks, ​$225 million in currency held inside the​ banks, ​$100 million in checking​ deposits, ​$600 million in savings​ deposits, ​$1,200 million in time​ deposits, and ​$1,000 million in money market mutual funds and other deposits. The value of M1 is​ ______ and the value of M2 is​ ______.

​$350 ​million; ​$3,150 million

PT5. The personal consumption expenditure deflator is calculated as​ _______.

​(Nominal C divided by Real C​) times ×100

hw6. Over the past 100​ years, the average growth rate of U.S. real GDP per person is 2 percent. Over the past 100​ years, growth was most rapid during the​ ______ and slowest during the​ ______.

​1960s; Great Depression

hw2. When Kim and Liam move from spending 30 minutes of each hour producing pies and 30 minutes producing cakes to specializing in the good in which they have a comparative​ advantage, the total gains from trade are​ ______ pies and​ ______ cakes. If they share the total gains​ equally, Kim gives Liam​ ______ and Liam gives Kim​ ______.

​30; 100 50​ cakes; 15 pies

P121.In​ ______ cycle​ theory, animal spirits are the main source of fluctuations in aggregate demand. In​ ______ cycle​ theory, fluctuations in both investment and consumption​ expenditure, driven by fluctuations in the growth rate of the quantity of​ money, are the main source of fluctuations in aggregate demand.

​Keynesian; monetarist

PQ13. The relationship between the tax rate and the amount of tax revenue collected is called the​ ______ curve. If the United States were on the​ "wrong" side of this​ curve, a decrease in the tax rate would​ ______ tax revenue.

​Laffer; increase

mt2. M2 consists of​ _____ plus​ _____ and​ _____ deposits,​ _____, and other deposits.

​M1; savings​ deposits; small​ time; money market funds

P10. Mexico trades with the United States. When the U.S. economy goes into a recession​, ​______. When Mexico increases the quantity of​ money, Mexico's aggregate demand​ ______. When the price level in Mexico falls, the quantity of real GDP increases

​Mexico's exports to the United States decrease​, ​Mexico's aggregate demand decreases​, and​ Mexico's AD curve shifts leftward increases and its AD curve shifts rightward

11. The multiplier is the amount by which the change in​ ______ expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP. For every dollar increase in​ ______ expenditure, the multiplier determines the increase in real GDP.

​autonomous; autonomous

mt2. The Rule of 70 states that the number of years it takes for the level of any variable to​ ______ is approximately​ ______. If real GDP per person doubles in 20​ years, then the annual growth rate of real GDP per person is​ ______ percent a year.

​double; 70 divided by the annual percentage growth rate of the variable 3.5

P10. A new Classical view is that business cycle fluctuations are the​ _____ responses of a​ well-functioning market economy that is bombarded by shocks that arise from the uneven pace of​ _____.

​efficient; technological change

hw3. Producers of electric guitars expect the population to increase and the number of firms producing and selling electric guitars to increase. You predict that the price of an electric guitar will​ ______ and the quantity of electric guitars bought will​ ______.

​either rise, fall, or remain the same; increase

P10. ​Long-run macroeconomic equilibrium occurs when real GDP​ _____ potential GDP​ - equivalently, when the economy is on its​ _____ curve.

​equals; LAS

hw4. A typical business cycle can be described by the sequence​ ______.

​expansion, peak,​ recession, trough

T91. The law of demand for foreign exchange states that other things remaining the​ same, the​ ______ the exchange​ rate, the smaller is the​ ______ in the foreign exchange market.

​higher; quantity of U.S. dollars demanded

P9. Explain the effect of the​ Fed's announcement on the demand for and supply of U.S. dollars. The demand for U.S. dollars would​ _____ and the supply of U.S. dollars would​ _____ on June 2.

​increase; decrease

9. If speculation like that made by Mr. Reddy becomes​ widespread, the demand for U.S. dollars will​ ______ and the supply of U.S. dollars will​ ______. The U.S. dollar exchange rate will

​increase; decrease rise

PQ13. Taxes and​ needs-tested spending work as automatic fiscal policy to dampen the business cycle because taxes​ ______ during an​ expansion, and​ needs-tested spending​ ______ during a recession.

​increase; increases

PQ13. Economy Needs Treatment-Since​ 2008, U.S. government debt has​ ______ because as a percentage of​ GDP, _______. A​ "credible business​ plan" for the government to adopt is a plan to​ ______.

​increased; outlays increased by more than receipts increased decrease government expenditure

mt3. If an economy experiences a decrease in the money​ supply, short-run unemployment

​increases, and​ short-run output decreases

mt2. If an economy experiences a decrease in the money​ supply, short-run unemployment

​increases, and​ short-run output decreases.

P10. Starting from a​ full-employment equilibrium, an increase in aggregate demand​ ______ real​ GDP, and creates​ ______ gap. In the long​ run, the money wage rate​ ______, short-run aggregate supply​ ______, and the economy returns to a​ full-employment equilibrium. Starting from a​ full-employment equilibrium, a decrease in​ short-run aggregate supply​ ______ the price level and​ ______ real GDP. ______ is increased

​increases; an inflationary rises; decreases ​increases; decreases Stagflation

P10. The fall in the average weekly wage rate​ ______ short-run aggregate supply and​ ______ long-run aggregate supply. The fall in the minimum wage​ ______ short-run aggregate supply and​ ______ long-run aggregate supply.

​increases; does not change increases; increases

hw2. With this new​ technology, the opportunity cost of producing a ton of salmon ​______ and the fish farmfish farm is​ ______ efficient.

​increases; equally

P10. Treasury Secretary Timothy Geithner is reported as having said that the United States can no longer rely on consumer spending to be the growth engine of recovery from recession. Washington needs to plant the seeds for business investment and exports.​ "We can't go back to a situation where​ we're depending on a near​ short-term boost in consumption to carry us​ forward," he said. In the short​ run, an increase in consumer spending​ ______ real GDP and​ ______ the price level. In the short​ run, an increase in business investment​ ______ real GDP and​ ______ the price level. In the short​ run, an increase in exports​ ______ real GDP and​ ______ the price level.

​increases; increases increases; increases ​increases; increases

PT6. An increase in the population​ ______ the equilibrium quantity of​ labor, ______ and potential GDP. An increase in the population _______ the real wage rate.

​increases; increases lowers

P10. The increase in the personal consumption expenditures​ ______ aggregate demand. The increase in exports​ ______ aggregate demand. The increase in investment​ ______ aggregate demand. The decrease in government spending​ _______ aggregate demand.

​increases; increases ​increases; decreases

P10. If the price level rises and the money wage rate remains​ constant, the quantity of real GDP supplied​ ______ and there is a movement up along the​ ______ aggregate supply curve.

​increases; short-run

mt3. If the price level rises and the money wage rate remains​ constant, the quantity of real GDP supplied​ ______ and there is a movement up along the​ ______ aggregate supply curve.

​increases; short-run

PQ13. Stimulus Debate Turns on Rebates- ​$150 billion worth of government spending would have a​ ______ effect on aggregate demand than​ $150 billion worth of tax rebates because​ ______ .

​larger; all of government expenditure is added to aggregate demand but part of the tax rebates is saved

P112. For a given increase in aggregate​ demand, the steeper the slope of the​ short-run aggregate supply​ curve, the​ ______ is the increase in the price level and the​ ______ is the multiplier effect on real GDP in the short run.

​larger; smaller

hw2.In an​ hour, JimJim can catch 4 pounds of pickerel or pick 8 pounds of strawberries. In an​ hour, Sam can catch 4 pounds of pickerel or pick 20 pounds of strawberries. The opportunity cost of catching a pound of pickerel is​ ______ for Jim than for Sam​, and the opportunity cost of picking a pound of strawberries is​ ______ for Jim than for Sam. So​ ______ has a comparative advantage in producing​ ______.

​lower; higher Jim; Pickerel

hw3. An increase in the demand for sports cars together with an increase in the supply of sports cars ​______ create a surplus or a shortage of sports cars at the original price. The price of sports cars ​______.

​might; might​ fall, rise, or not change

mt2. A stock is a certificate of​ _____ and claim to the​ _____ that a firm makes.

​ownership; profits

P12. The new Keynesian cycle theory emphasizes the fact that​ today's money wage rates were negotiated at many past​ dates, which means that​ _____ rational expectations of the​ _____ price level influence the money wage rate and the position of the SAS curve.

​past; current

mt2. A central bank is a banks bank and a​ _____ authority that regulates a​ nation's depository institutions and conducts​ _____ policy, which means that it adjusts the​ _____ and influences​ _____.

​public; monetary; quantity of money in​ circulation; interest​ rates;

P10. A Keynesian macroeconomist believes that left​ alone, the economy would​ _____ operate at full employment and that to achieve and maintain full​ employment, active help from fiscal policy and monetary policy is required. A modern version of the Keynesian​ view, known as the new Keynesian​ view, holds not only that the money wage rate is​ _____ but also that prices of goods and services are​ _____.

​rarely; ​sticky; sticky

P12. Stagflation Is Back.​ Here's How to Beat It- Read the news​ clip, then answer the following question. The analysis of macroeconomic performance in the news clip reflects the​ ______ business cycle theory because it discusses​ ______.

​real; factors that change potential GDP

PQ13. Do Tax Cuts Ever Increase Government​ Revenues?-Republican politicians insist that tax cuts​ "pay for​ themselves," increasing receipts by goosing economic growth. Democrats and virtually all economists say​ they're wrong. A tax cut pays for itself if the economy lies to the​ ______ of the maximum point on the Laffer curve. This statement implies that the absolute value of the tax multiplier is​ ______. Tax cuts will not pay for themselves if​ ______.

​right; greater than 1 the economy lies to the left of the maximum point on the Laffer curve

hw8. When the interest rate rises​, other things remaining the​ same, the opportunity cost of holding money​ ______ and​ ______.

​rises; the quantity of money demanded decreases

hw3. In​ 1998, the price of a barrel of oil was​ $20. In​ 2012, the price of a barrel of oil was​ $106. In​ 1998, the price of a loaf of bread was​ $0.86. In​ 2012, the price of a loaf of bread was​ $2.32. Between 1998 and​ 2012, the relative price of a barrel of oil with respect to a loaf of bread​ _______ and the relative price of a loaf of bread with respect to a barrel of oil​ _______.

​rose; fell

equilibrium price

price at which the quantity demanded equals the quantity supplied Qd = Qs

balanced budget

a government budget in which receipts and outlays are equal

budget surplus

a government's budget balance that's positive - receipts exceed outlays

comparative advantage

a person or country has comparative advantage in an activity if that person or country can perform the activity at a lower opportunity cost than anyone else or any other country

bond

a promise to make specified payments on specified dates

full employment

a situation in which the unemployment rate equals the natural unemployment rate. No cyclical unemployment - all unemployment is frictional and structural

disposable income

aggregate income minus taxes plus transfer payments aggregate income - taxes + transfer payments

fixed exchange rate

an exchange rate where the value is determined by a decision of the government or the central bank and is achieved by central bank intervention in the foreign exchange market to block the unregulated forces of demand and supply

balanced budget multiplier

change in equilibrium expenditure and real GDP that results from equal changes in government expenditure and lump sum taxes divided by the change in government expenditure

absolute advantage

if you are more productive than another person

Federal Open Market Committee (FOMC)

main policymaking organ of the federal reserve system (The Fed)

ceteris paribus

other things being equal - all other relevant things remaining the same

exchange rate

price at which one currency exchanges for another in the foreign exchange market

arbitrage

the practice of seeking to profit by buying in one market and selling for a higher price in another related market

fiscal imbalance

the present value of the government's commitments to pay benefits minus the present value of its tax revenues

council of economic advisers

the president's council whose main work is to monitor the economy and keep the President and the public well informed about the current state of the economy and the best available forecasts of where it's heading

aggregate demand

the relationship between the quantity of real GDP demanded and the price level

crowding out effect

the tendency for a government budget deficit to raise the real interest rate and decrease investment

frictional unemployment

the unemployment that arises from normal labor turnover - from people entering and leaving the labor force and from the ongoing creation and destruction of jobs

fiscal policy

the use of the federal budget, by setting and changing tax rates, making transfer payments and purchasing goods and services, to achieve macroeconomic objectives such as full employment, sustained economic growth and price level stability

classical growth theory

theory of economic growth based on the view that the growth of real GDP per person is temporary and that when it rises above subsistence level, a population explosion eventually brings it back to subsistence level