unit 4, 5 and 6 macro

From year 1 to year 2, the nominal GDP grew 3% to 103, and money velocity increased by 10% to 99. By how much did the money supply change from year 1 to year 2? (Remember, a positive number represents an increase and a negative one a decrease. Also note that this question is asking for the change, not the rate of change.)

-0.07

Consider only the short run. The economy was operating at point A at end of year 1. The inflation rate was 33.33% from year 1 to year 2. Suppose you know that aggregate demand remained the same throughout this period, what is the change in aggregate supply?

-12

Consider the government of Country E, suppose in 2018, its tax revenue was $35 billion dollars and its expenditure $40 billion dollars. What is the amount of its budget surplus in 2018?

-5

Based on the information above, what is Y minus X?

-6.30 (check phone for graph)

From year 1 to year 2, the nominal GDP grew 3% to 103, and money velocity increased by 10% to 99. By how much did the money supply change from year 1 to year 2? (Remember, a positive number represents an increase and a negative one a decrease.)

0.03

From year 1 to year 2, real GDP grew by 3% to 3828, and the inflation rate was 7.1%. At the end of year 2, CPI stood at 133. Assuming a constant money supply, what's the rate of change in money velocity from year 1 to year 2? Round your answer to 2 decimal places.

10.31

If the reserve ratio is 10 percent, to create $12000 new money, we need $________ of additional reserves.

1200

Suppose the last year, the amount of employment in the economy was at its natural level. From the last year to this year, the economy experienced an inflation rate of 1.75%. If you know that the real GDP this year is 11,900 billions, what is the real GDP last year? (Assume that the aggregate demand curve stayed the same throughout the two years.)

12000

Given that the CPI in year 1 is 120, the inflation rate from year 1 to year 2 is 3%, and the CPI in year 3 is 140. What is the inflation rate from year 2 to year 3?

13.27%

Suppose you are to pay $850 today for a bond with a $1000 face value that matures one year from now. What is the interest rate (as percentage) you are getting by purchasing this bond?

17.65%

Hyperinflation is generally defined as an inflation rate in excess of ________% per year.

200

The table shows the consolidated balance sheet of all the commercial banks in an economy. Values not listed and items that are left empty are unknown to you. These values may or may not be zero. Assume that the reserve ratio does not change unless specifically stated below, and that the required reserve ratio is 10%. What is the maximum amount of deposit that can be generated if an additional reserve of $200 is added to the system?

2000 (check phone for graph)

Compared with the wage of a typical worker 45 years ago, the wage today is 400% higher. Over the same time period, the overall price level of the economy increased by 375%. What is the growth rate of the purchasing power of a typical worker's wage over this period of time?

25%

In 2018, the Government of the Federated Republic of Coconut Islands had a budget surplus of $20 million dollars. Suppose that in the same year, the total amount of government expenditures was $324 millions. What was the government's tax revenues in that year? Round your answer to 2 decimal places.

344.00

Consider only the short run. In the economy depicted in the figure above, point A represents the state of the economy at the end of year 1. During the course of year 2, the central bank bought government bonds, and the magnitude of the effect of this policy change on aggregate demand is 30. Suppose the economy was in equilibrium at the end of year 2, what is the inflation rate from year 1 to year 2?

40

If in year 2000, the amount of money supply is 2 billion dollars and the nominal GDP is 10 billion dollars. What is the velocity of money for 2000?

5

Consider a simultaneous shift of both the demand curve and the supply curve. Before the shift, the market equilibrium is at a point where the price is 6 and the quantity is 25. Also, before the shift, with each additional unit increase in price, the quantity supplied increases by 5 and the quantity demanded decreases by 5. Now, due to a change in some government policy, the demand decreases by 10 at all price levels. At the same time, the supply also decreased in such a way that when the price level is 8, the quantity supplied is 15. What is the new market equilibrium price after this simultaneous shift?

7

Last year, the economy saw a 2% increase in real GDP from 100 billion dollars the year before. Over the same period of time, the overall price level, as measured by the GDP deflator, increased by 5% to 105. If the money supply has been 50 billions of dollars over the last two years, what was the rate of change in money velocity from the year before the last to the last year?

7.1%

An hour of computer time in your college's computer time costs $5 this year but only $4 last year. You decide to use this information to construct a price index with this year being the base year. What would this price index be for the last year?

80

The figures above represent different markets. The labels and the direction of shift of the curves are intentionally omitted. You need to determine which market each figure represents according to the information available to you in the figure. The possibilities are: the the final goods and services market, the money market, the bond market, the currency market. A market may be represented by more than one figures where each shows the change in the market due to a different event. Before you attempt to answer the question, you might want to take a few seconds to look at each figure and determine the market it represents and the possible changes it depicts. Suppose the supply of the dollar decreases and the demand of the dollar increase. Which point leads us to the exchange rate after these changes? (Your answer should be one upper case letter among those in the above figures.)

A

Which of the following statements are correct? Select all that apply.

A Gini coefficient of 0.5 shows that there is no income inequality. The Lorenz curve, by construction, cannot be above the 45-degree line. Correct answer^ The lower the Gini coefficient, the lower the income of poor people. The slop of the Lorenz curve is called the Gini coefficient.

Which of the following are consistent with the demographics of poverty in the US in 2010? Select all that apply.

A high school diploma is an almost sure ticket out of poverty. Children under 18 are more likely to be poor than middle-aged persons. Correct answer^ People who work full time are more likely to be poor than those who do not work full time jobs. Compared with all other areas, cities tend to have lower poverty rates.

According to the model of job search and the theory of reservation wage, which of the following statements are correct? Select all that apply.

A job search ends when the best offer received equals the workers reservation wage. Correct answer^ The best job offer keeps getting better as a worker keeps search for new jobs. Correct answer^ Reservation wage increases with the duration of job search. The best job offer received by a worker may pay a better wage if job information costs less. Correct answer^

Which of the following is least likely to be frictional unemployment?

A worker with 10 years experience assembling tape recorders is unemployed because nobody buys tape recorders anymore.

Which of the following statements are correct? Select all that apply.

After the turn of the century, family income mobility increased dramatically due to new technologies. In a capitalist society, inequality will eventually corrects itself and disappear. In the US, the value of education beyond high school has been diminishing since the 1970s. In the US, income inequality increased significantly in the late 1900s. Correct answer^

What are the long-run effects of an investment tax credit? Select all that apply.

An increase in aggregate demand Correct answer^ The aggregate supply curve shifts to the right. A lower unemployment rate A higher overall price level Correct answer^

What is the most likely result in the long run when the aggregate supply curve shifts to the right?

An increase in real GDP

Which of the following statements are correct? Select all that apply.

An individual would accept a wage if it is above the reservation wage. Correct answer^ An unemployed worker would accept any wage in order to get a job. Wages below the reservation wage will not be accepted by even an unemployed worker. Correct answer^ Jobs offered to unemployed workers do not pay higher than the reservation wage.

Which of the following is not a goal of monetary policy?

Budget balancedness

Which of the following are among the top four sources of US state and local government tax revenues? Select all that apply.

Custom duties Estate taxes Social insurance taxes Property taxes Correct answer^

Which type of unemployment below is not a part of an economy's natural rate of unemployment?

Cyclical unemployment

Which of the following statements are correct? Select all that apply.

Depends on his/her preference, an unemployed worker may or may not be seeking work. A part unemployment is caused by managerial and technological changes. Correct answer^ The reservation wage is the wage offered by a firm, which, if accepted, gives a worker first priority when a job opening becomes available. Structural unemployment happens in an economy when, in total, there are more workers looking for a job than there are positions available.

Which of the following situations are unlikely to be discrimination? Select all that apply.

Doing the same job at the local church, the worker who believes in god is paid more than the one who doesnâ t. For the same analyst position, a young female is rejected and a young male with the same credential is accepted. An Asian American barista and an African American barista working in the same Starbucks are paid differently. A male programmer and a female nurse working in the same hospital are paid differently. Correct answer^

Which of the following statements are correct? Select all that apply.

Economic development may increase or decrease the rate of population growth. Correct answer^ The prediction of Malthus about overpopulation was never realized. Correct answer^ The Malthusian Trap states that population will grow too much and many will suffer from a lack of food. Correct answer^ To produce more food, all we need is to put more people into the agriculture industry.

Which of the following is most likely to be correct?

Employers and employees adapt their price expectations according to the general price level they experience.

Consider the market of personal computers. Suppose there is an increase in the cost of electricity to both buyers and sellers. What effect could it have?

Equilibrium price decreases.

The efficiency-wage theory implies that ________

Firms offer a real wage above the market equilibrium level.

Suppose you observe an increase in aggregate demand and a decrease in the price level in the long run. Which of the following are likely to have also happened during the same period? Select all that apply.

Households with a below national median income are exempt from income tax. Correct answer^ Scientists discover a cheap new energy source. Correct answer^ Due to hacking threats, computers are no longer allowed to be used in businesses and government agencies. The US government bans all forms of exports except the ones that are essential to national security.

Suppose we hold money velocity constant, which of the following statements is true according to the quantity theory of money?

If the Fed doubles money supply, nominal GDP doubles

Which of the following statements are correct? Select all that apply.

In recent years, higher education has become an important pathway away from self-perpetuating poverty. Correct answer^ In developed economies today, skilled labor is worth much more than unskilled labor. Correct answer^ The problem of income inequality has become increasingly severe in the US in recent decades. Correct answer^ A feature of a free market economy is that markets guarantee the gradual elimination of income inequality.

Which of the following is true about aggregate supply?

In the short run, aggregate supply curve is upward sloping

Which statement below is correct about the Lorenz curve?

It is always upward sloping

Which statement below about economic development is correct?

It is impossible to compare the income of different countries because different countries use different currencies. In recent history, most countries are free from economic deprivation and poverty. History tells us that every country eventually develops and becomes a high-income country. To compare the income of different countries, the same currency needs to be used to measure income. Correct answer^

Which of the following is true about the multiplier?

It is usually bigger than 1. It is the ratio of change in real GDP to the initial change in aggregate demand. It can be used to calculate the effect on AD due to an increase in government spending. All of the above. Correct answer^

Which of the following statements is correct about the crowding out effect?

It reduces the effectiveness of expansionary fiscal policy. All of the above are correct. Correct answer^ It happens when private investments reduce due to increasing public debt. It does not happen if the fiscal policy does not increase budget deficit.

Which of the following is correct?

It takes a long time to make fiscal policies

The figures above represent different markets. The labels and the direction of shift of the curves are intentionally omitted. You need to determine which market each figure represents according to the information available to you in the figure. The possibilities are: the the final goods and services market, the money market, the bond market, the currency market. A market may be represented by more than one figures where each shows the change in the market due to a different event. Before you attempt to answer the question, you might want to take a few seconds to look at each figure and determine the market it represents and the possible changes it depicts. Suppose currently, there is a recessionary gap in the economy. Which point corresponds to the current interest rate?

L

The ratio between the ________ and the 45 degree line and the total area under the 45 degree line is called the Gini coefficient.

Lorenz curve

The figures above represent different markets. The labels and the direction of shift of the curves are intentionally omitted. You need to determine which market each figure represents according to the information available to you in the figure. The possibilities are: the the final goods and services market, the money market, the bond market, the currency market. A market may be represented by more than one figures where each shows the change in the market due to a different event. Before you attempt to answer the question, you might want to take a few seconds to look at each figure and determine the market it represents and the possible changes it depicts. Which point represents the equilibrium in the money market after the Fed makes an open market purchase of government bonds? (Your answer should be one upper case letter among those in the above figures.)

M

Which of the following are consistent with the demographics of poverty in the US in 2010?

Middle-aged persons are less likely to be poor than persons 18 years old or younger Correct answer^ College graduates and those with higher levels of education are unlikely to be poor. Correct answer^ A high school diploma almost guarantees a pathway out of poverty. Female-headed housholds with no male adult wage earners are much more likely to live in poverty. Correct answer^

Which of the following statements is correct?

Monetary policy, once implemented, is immediately effective. Monetary policy takes a long time to be implemented. Monetary policy decisions can be made very quickly. Correct answer^ The Fed usually foresees macroeconomic problems.

What happens when the Fed carries out an contractionary monetary policy?

Net exports decreases

From the equation of exchange, we know that a change in the money supply changes nominal GDP when we assume that

None of the above is correct. real GDP stays the same. price level stays the same. money velocity stays the same. Correct answer^

To promote economic development, the government should ________.

None of the above promotes economic development.

To promote economic development, the government should ________.

None of the above promotes economic development. Correct answer^ print money domestically rather than borrowing money from foreigners borrow as much as possible from foreigners never owe any money to foreigners

In the figure, point E1 represents the state of the economy in year 1; point E2 represents the state of the economy in year 2, and so on. Based on the graph, we can tell that from year 1 to year 2, the economy went through the ________ phase.

Phillips

Which of the following is a fiscal policy that may reduce unemployment?

Purchase a new batch of F-35 fighter jets

Which of the following can be determined by money market equilibrium?

Real GDP Expectations The price level The interest rate Correct answer^

Which statement below is correct?

Regardless of how much money a family makes, it is always possible that the family is poor. Correct answer^ Everyone with income above the poverty line is considered rich. Poverty as a concept cannot be clearly defined because it is about how people feel about themselves. In rich countries such as the US, there cannot be many poor people

Which of the following situation can be described using the term stagflation?

Rising inflation and unemployment

Which of the following is an example of contractionary monetary policy?

The Federal Reserve decreases the amount of money supply.

Which of the following statements is incorrect?

The LRPC shifts when there is a change in inflation expectations. Correct answer^ The SRPC shifts during a stagflation. The LRPC shifts when there is a change in structural unemployment. The SRPC does not shift in the short run

Which of the following statements are correct? Select all that apply.

The US income tax system generates more revenue when GDP is growing. Correct answer^ As national income decreases, households pay less in income taxes and therefore have more money to spend on consumption, resulting in an increase in aggregate demand. Automatic stabilizers reinforce shocks to and shifts of GDP. Since automatic stabilizers, by design, reduce GDP when it is growing, they are poor policy tools and should be eliminated.

Which of the following statements is incorrect?

The aggregate demand curve is downward-sloping. The aggregate demand curve shows the relationship between the quantity of aggregate demand and the price level. Aggregate demand is the total quantity of goods and services demanded. All of these statements are correct. Correct answer^

Which of the following statements are correct? Select all that apply.

The best approach to comparing the incomes of two countries is to convert the GDP of both into US dollars using the current exchange rate. Severe inequality and high unemployment are problems unique to rich countries For most parts of human history, most people are in poverty. Correct answer^ A country may be considered a developing country regardless of its stage of development.

Which of the following statements is the least accurate?

The degree of inequality cannot be measured because it is a subjective concept.

Which statement below is correct about the long run and the short run?

The economy is in the long run when wages and prices are sticky. In the short run, employment will be at its natural level. In the long run, employment will be at its natural level. Correct answer^ The economy is in the short run when wages and prices are flexible.

Which of the following statements are correct? Select all that apply.

The high-incomes countries today all experienced but eventually grew out of the Malthusian Trap. New technologies in agriculture failed to increase production enough to support the world's population. According to Malthus, the world population will eventually grow above the level that the world's food production could support. Correct answer^ Increase in income will inevitably boost population growth as increasing incomes means decreasing relative cost of raising a child.

Which of the following statements are correct? Select all that apply.

The level of income inequality in an economy can be measured by its Gini coefficient. Correct answer^ A Gini coefficient of 2 shows that there is no income inequality. The the Lorenz curve reflects the optimal income distribution. The Gini coefficient can never be lower than 0. Correct answer^

Which of the following statements correctly defines the multiplier?

The multiplier is the ratio of the change in the quantity of real GDP demanded at each price level to the initial change in one or more components of aggregate demand that produced it.

Which of the following statements are correct? Select all that apply.

The reservation wage is the wage offered by a firm to workers willing to commit to accepting the offer, instead of waiting for better offers. If there are open positions in an economy, there would not be any unemployment other than frictional unemployment. By definition, an unemployed worker must be actively looking for a job. Correct answer^ Frictional unemployment is due to the time it takes to match workers and jobs. Correct answer^

Which of the following statements are correct about automatic stabilizers? Select all that apply.

The system according to which import tariffs are calculated is an example of an automatic stabilizer. Automatic stabilizers reinforce the shocks to GDP from other sources. Automatic stabilizers are called automatic since they do not need to be specifically "activated" by policy makers during an economic crisis. Correct answer^ Automatic stabilizers reduce the speed at which output level changes. Correct answer^

When can we call a government's budget balanced? Select all that apply.

The transfer payment equals zero. The budget deficit equals zero. Correct answer^ The national debt equals zero. The budget surplus equals zero. Correct answer^

Which of the following statements are correct? Select all that apply.

Today, several high-income countries rely excessively on agriculture. Historically, most people lived in poverty. Correct answer^ To compare the income of economies using different currencies, a good way is to base the comparison on purchasing powers rather than exchange rates. Correct answer^ The NBER identified all the rich and poor countries in the world based on their per capita real GDP.

Which of the following is an example of an automatic stabilizer?

Transfer payment Both the above Correct answer^ A progressive income tax system None of the above

In the short run, according to the Phillips curve, there is ________ relationship between inflation and unemployment.

a negative

Which of the following is not a shared characteristic among successful economies?

a strong military

If Congress increased the tax rate on interest income, investment

and saving would decrease

If Congress increased the tax rate on interest income, investment ________

and saving would decrease.

In assuming that people pursue their self-interest, economists are

assuming that people pursue satisfaction that cannot be simply measured by money.

To promote economic development, the government should ________.

balance the need for free trade and the need for protecting domestic industries

A ________ is a promise by the issuer to pay the owner one or a series of payments on some specific date(s).

bond

In the long run, an economy's inflation rate is determined almost solely by

both the rate of money growth and the rate of real GDP growth

An economy going through repeated patterns of expansions followed by contraction then expansion again is said to be going through ________.

business cycles

A Lorenz curve shows the ________ received by individuals or groups.

cumulative shares of income

A decrease in government spending ________

decreases the interest rate and so investment spending increases.

The demand curve is a graphical representation of a ________.

demand schedule

The short-run Phillips curve is

downward sloping

The short-run Phillips curve is ________

downward sloping

According to what you learned in this course, in the long run, employment may not reaches its natural level if ________ theory is true. (Fill in the blank with the name of the theory.)

efficiency wage

A movement to the left along a given short-run Phillips curve could be caused by ________

expansionary monetary policy, but not a reduction in the natural rate of unemployment.

By the standard of the federal government, a household is considered poor if the householdâ s annual income ________.

falls below the poverty line

Automatic stabilizers are key elements of

fiscal policies

In macroeconomic analysis, when prices and wages are ________, we say the economy is in the long run.

flexible

According to the dependency theory, developing nations are poor because they depend too much on ________.

high-income nations

The time between the enactment of a policy and the time the policy starts to cause changes in economic activities is known as the ________.

impact lag

The strategy of substituting most imports with domestically-produced counterparts is known as ________.

import substitution

People with income at the bottom of the ________ are considered poor according to the relative income test.

income distribution

The Human Development Index includes all of the following dimensions except ________.

income inequality

In the short run, an increase in government purchases, ________

increases real GDP

In a supply/demand diagram depicting the market for money, the vertical axis represents the ________.

interest rate

In the money market, the adjustments of the ________ makes the quantity of money demanded equal to the quantity of money supplied.

interest rate

The long run Phillips curve ________.

is a vertical line. All of the above are correct. Correct answer^ suggests that unemployment will always be at its natural level. shows no relationship between inflation and unemployment

Income distribution ________.

is often highly unequal in low-income countries

Frictional unemployment occurs because

it takes time for people seeking jobs and employers seeking workers to find each other.

A decrease in supply can be visualized on the graph by shifting the supply curve to the

left

Most of the times when an economy grows normally, it is good to have

low unemployment and low inflation

There are two possible outcomes about the economy next year. We will have outcome A if there is a small increase in AD. We will have outcome B if there is a large increase in AD. Comparing the two outcomes, inflation in outcome A is ________ than that in outcome B; unemployment in outcome A is ________ than that in outcome B.

lower; higher

People in low-income countries often suffer from ________.

malnutrition limited access to health-care facilities All of the above. Correct answer^ HIV/AIDS

As real GDP falls, ________

money demand falls, so the interest rate falls

In the long run, the relative values of ________ determines how fast the over price level changes.

money growth and economic growth

Suppose that money velocity is stable in the long run and that the real GDP stays unchanged, the equation of exchange then implies that in the long run, inflation rate roughly equals the rate of growth in ________. (Fill in the blank with two words.)

money supply

In the long run, the inflation rate is determined by ________.

money supply growth rate

According to the equation of exchange, money supply times money velocity equals

nominal GDP

Government provisioned goods and services for the poor, such as food or medical services, job training, or subsidized child care, are known as ________.

noncash assistance

The major components of PCE price index are ________. Select all that apply.

nondurable goods Correct answer^ durable goods Correct answer^ services Correct answer^ foreign goods

When analyzing the economy in the short run, it is reasonable to assume that

none of the above is likely to stay constant

We cannot say an expectation is rational if ________?

not all the information is used to form the expectation.

A developing country is one that is ________.

not among the high-income nations of the world

For the purpose of macroeconomic analysis, an economy is considered to be in the short run when prices and wages are ________.

not flexible

Discrimination occurs when ________.

people with similar economic characteristics experience different economic outcomes because of their noneconomic characteristics

In 1798, Thomas Robert Malthus published his Essay on the Principle of Population. It suggests that ________.

population growth will inevitably collide with diminishing returns

The percentage of the population that falls below the ________ is called the poverty rate.

poverty line

The most important even that happens during a stagflation is that the ________ of the economic agents change.

price expectations

Transfer payments are such that the recipients must

provide goods in exchange for the payments. None of the above is correct. Correct answer^ perform services in exchange for the payments. repay the money they received at a later date

Which of the following options are likely to be used by policymakers in response to a recessionary gap? Select all that apply.

purchase bonds from the secondary market Correct answer^ reduce income taxes Correct answer^ reduce social security benefits increase the federal funds rate

In the long run, an increase in the money supply growth rate ________

raises expected inflation so the short-run Phillips curve shifts right

In the long run, as the aggregate demand curve shift to the right,

real GDP stays the same

In the long run, as the aggregate demand curve shift to the right, ________

real GDP stays the same

According to the wealth effect, when there is a change in the price level, ________ changes and consumption changes as a result.

real wealth

The time between a problem arises in the economy and when policymakers realize the problem is known as the ________.

recognition lag

From the 1970s to the 1990s, the US economy moved from the stagflation phase to the ________ phase.

recovery

The figure above depicts the situation in Country C over the last 5 years, in which E1 corresponds to the economic condition experienced by Country C in year 1. E2 corresponds to the condition in year 2, and so on. From year 4 to year 5, Country C went through a ________ phase.

recovery (look at phone for graph)

Which program below is least likely to reduce poverty?

renewable energy tax credit

Demographic transition is a process in which population growth ________.

rises with a fall in death rates and then falls with a reduction in birth rates

An increase in inflation expectations causes the short-run Phillips curve to

shift to the right

The ________ Phillips curve depicts a situation most consistent with the Phillips phase.

short-run

Structural unemployment occurs because

structural shifts in the economy eliminate certain jobs from declining sectors.

In the short run,

the aggregate supply curve is upward sloping

Generally speaking, a multiplier is calculated as ________ divided by its cause â ________.

the amount of shift of the aggregate demand curve; the initial change in some component(s) of aggregate demand

The Federal Reserve sets a specific target for

the federal funds rate

Which of the following is not usually considered a source of discrimination against a worker?

the government

Money velocity is

the number of times an average dollar is spent on final goods and services

Money velocity is ________.

the number of times an average dollar is spent on final goods and services

money velocity is

the number of times an average dollar is spent on final goods and services

Poverty rate is ________.

the percentage of the population that falls below the poverty line

According to the equation of exchange, rapid increases in money supply almost always lead to rapid increases in

the price level

According to the equation of exchange, if real GDP and money supply stays the same,

the rate of inflation equals the rate of change in money velocity

According to the equation of exchange, if real GDP and money supply stays the same, ________

the rate of inflation equals the rate of change in money velocity.

In the long run, the unemployment rate is determined by ________.

the rates of frictional and structural unemployment

It takes a long time to collect, analyze, and publish economic data. As a result,

there is a delay between the time an economic problem occurs and the time the monetary authority deals with it

When a government provides obligation-free aid to an individual, the government is said to be making a ________.

transfer payment

The short-run Phillips curve shows that when inflation increases

unemployment decreases