Macroeconomics Test #1-4

M2

All of M1 + less immediate (liquid) forms of money to include savings, money market mutual funds, and small denomination time deposits.

What is the effect of the following events on the demand for Xbox One games and the quantity of Xbox One games demanded, other things remaining the same? The events are... A. The price of an Xbox one falls B. The expected future price of an Xbox one game falls C. The prices of PS4 and Wii Upper U fall D. Upper , a new game console comes onto the marker, which is a close substitute for Xbox one

Event A: increases the demand for Xbox one games Event B: decreases the demand for Xbox one games Event C: decreases the demand for Xbox one games Event D: decreases the demand for Xbox one games

" As fewer people buy bicycles, the demand for bicycle helmets will decrease and the price of a helmet will increase. The rise in the price of a bicycle helmet will increase the supply of bicycle helmets" This statement is __________ because ___________.

False; a decrease in the demand for bribe helmets doesn't increase the price of a helmet and an increase in the price of a helmet doesn't increase the supply of a bike helmet.

_________________ economists believe that active help from fiscal and monetary policy is needed to insure that the economy is operating at full employment.

Keynesian

allocative efficiency

MB=MC

_________ has a comparative advantage in producing caps. If Sue and Tessa each specialize in producing the good in which they have a comparative advantage and trade 1 jacket for 15 caps, ___________.

Tessa; both Sue and Tessa gain

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

An increase in potential GDP increases​ ______.

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

The income earned by the people who sell the services of the factor of production ____________ is called ______________

capital ; interest

which of the following exchange rate policies uses a target exchange rate, but allows the target to change?

crawling peg

M1

currency, traveler's checks, checking deposits and other checkable deposits

suppose that the money multiplier is 4.If the monetary base decreases by $2 million, the quantity of money will

decrease by 8 million

an increase in the currency drain ......

decreases the size of the money multiplier

the required reserve ratio is the minimum percentage of _____________ that _________ are required to hold as reserves.

deposits; depository institutions

a decrease in the demand for ski trips brings a ____________ in the price of a ski trip and __________ in the quantity of ski trips supplied.

fall; decrease

which of the following is not a monetary policy tool?

federal funds rate

which of the following is not an asset of the federal reserve?

federal reserve notes

In a goods markets ___________________ and in factor markets _______________.

firms sell to households ; households sell to firms

The law of supply states that other things remaining the same, the ________ the price of a good, the __________.

higher; greater is the quantity supplies

The law of demand states that other thing s remaining the same, the __________ price of a good, the _____________

higher; smaller is the quantity demanded

Opportunity cost means the ___________

highest value alternative forgone

Correct or Incorrect: an increase in disposable income leads to a decrease in aggregate demand

incorrect

as the expected profit from holding dollars _____________, the quantity of _____________________.

increase, dollars demanded increases

as the value of U.S exports___________, the quantity of ____________ demanded increases

increases ; dollars

suppose that the exchange rate falls from 80 yen per US dollar to 70 per U.S dollar. What is the effect of this change on the quantity of U.S dollars that people plan to buy in the foreign exchange market?

increases and a movement down along the demand curve for the US dollar occurs

the demand for money

increases as real GDP increases

an increase in banks reserves with no change in deposits ________ the banks reserve ration and __________ the money multiplier.

increases; decreases

the resources that are used to produce goods and services - _____________ are factors of production

land, labor, capital, entrepreneurship

other things remaining the same,

larger the value of US imports the greater is the quantity of US dollars supplied to the foreign exchange market

the _______________ the exchange rate, the ____________ are foreign produced goods and hence the smaller the quantity of dollars supplied

lower; more expensive

macro or micro: The unemployment rate for the entire economy

macroeconomics

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 _____________.

net borrower; debtor nation *currently the US is both

net exports

net taxes-savings

a decrease in the money wage rate increases________ and an increase in the full-employment quantity of labor increases ______________.

only the SAS; both the SAS and the LAS

the short-run aggregate supply curve is upward sloping because in the short run the

price level changes but the money wage rate does not

if the economy is in short run equilibrium then__________

real GDP can be greater than, less than, or equal to potential GDP

Producers of printers expect the price of a factor of production used to produce a printer to rise and the number of firms producing and selling printers to decrease. You predict that the price of a printer will _______ and the quantity of printers bought will ______________.

rise ; decrease

When a California farmer decides to harvest lettuce by the use of machines instead of by migrant workers, the farmer is asking the "____________" question.

"how"

when firms in an economy start producing more computers and fewer televisions, they are answering the "_______" question.

"what"

if saving is $850 billion, investment is $500 billion, gov't expenditure on goods and services is $600 billion and net exports is $100 billion, then calculate private sector balance

$350 billion (saving-investment)

In one hour, Sue can produce 40 caps or 4 jackets and Tessa can produce 80 caps or 4 jackets. Sue's opportunity cost of producing a cap is _____ jackets and Tessa's opportunity cost of producing a cap is ____ jackets.

0.1 ; 0.05 (4/40 & 4/80)

if the U.S interest rate is 1.5 percent, Canada's interest rate is 1 percent, the U.S inflation rate is 1.2 percent and Canada's inflation rate is 0.70 percent, the calculate the US interest rate differential

0.5%

suppose the exchange rate is 90 yen per US dollar and the united states wants to keep the exchange rate of 90 yen per US dollar. If the demand for US dollars increases, the Fed_________

sells dollars to lower the exchange rate

Economic growth can be pictured in a production possibilities frontier diagram by ______________.

shifting the production possibilities frontier outward

an increase in the amount of human capital ______ the short-run aggregate supply curve and ________ the long run aggregate supply curve.

shifts; shifts

A supply curve that illustrates the law of supply ____________.

shows that the quantity supplies increase as the price rises.

A demand curve that illustrates the law of demand ____________________

shows the quantity demanded increases as the price falls

If the price is above the equilibrium price then there is a _______________.

surplus and the market forces will operate to lower price

if you have $5000 in wealth and the price level decreases by 20 percent, then ________________

the 5000 will buy more goods and services

the U.S interest rate differential arises when _______________.

the US interest rate rises and the foreign interest rate falls

for a commercial bank, the term "reserves" refers to

the cash in its vaults and its deposits at the Federal Reserve

Suppose that yesterday, the U.S dollar was trading on the foreign exchange market at 0.75 euros per U.S dollar and today the U.S dollar is trading at 0.80 euros per U.S dollar. Which of the two currencies (the dollar or the euro) has appreciated and which has depreciated today?

the dollar appreciated and the euro depreciated

for movements along the short-run aggregate supply curve,

the money wage is constant, the real wage rate changes, and the potential GDP remains constant

For movements along the long-run aggregate supply curve...

the price level and the money wage rate change by the same percentage

as we move up along the long-run aggregate supply curve

the real wage rate remains constant

Human capital is .......

the skill and knowledge of works

the monetary base is

the sum of federal reserve notes, coins, and depository institutions deposits at the Federal Reserve

which of the following decreases the supply of restaurant meals?

waiters get a pay raise

Pasta and pizza are substitutes. If the price of pasta decreases, the demand for pizza will __________.

Decrease, and the demand curve for pizza will shift leftward

It is expected that the price of a bushel of wheat will increase in one month. This belief will result in _____________.

a decrease in current supply of wheat

When the prices of U.S produced goods rise and the price of foreign-produced goods do not change, the result is

a decrease in exports

other things equal, along the aggregate demand curve, a higher price level is associated with

a decrease in the quantity of real GDP demanded

Suppose consumers decrease their consumption expenditure because they worry about what their income will be in the future. There is .....

a leftward shift of the aggregate demand curve

What kind of statement is this..... " A 10% increase in income leads to a 4% increase in the consumption of beef"

a positive statement

In the macroeconomic short tun

actual real GDP may be less than or more than potential GDP

government sector balance

an amount equal to net taxes minus government expenditure on goods and services

private sector balance

an amount equal to saving minus investment

A firm is

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

the quantity theory of money states that in the long run

an increase in the quantity of money result in an equal percentage increase in the price level

short-run macroeconomic equilibrium occurs

at the intersection of the short-run aggregate supply curve and the aggregate demand curve