Econ 101 midterm

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The average duration of unemployment in 2000 was 66 weeks and in 2016 it was 1111 weeks. The difference between the duration of unemployment in 2016 and 2000 was most likely the result of​ _______.

the business cycle

The core inflation rate is​ ______.

the annual percentage change in the Personal Consumption Expenditure Price Index excluding the prices of food and energy

When the price level rises but the money wage rate remains​ unchanged, unemployment​ ______ and the quantity of real GDP supplied​ ______.

decreases; increases

Choose the statement about money that is correct.

Money acts as a unit of account comma which is an agreed measure for stating the prices of goods and services.

Which of the following are examples of monetary policy that decrease aggregate​ demand?

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

The central banks of​ ______ practice inflation targeting.

The United​ Kingdom, Canada,​ Australia, New​ Zealand, Sweden, and the Euro countries

You observe that inventories are taking an unplanned dive. You predict that there will be​ ______.

an expansion

Since the midminus−​1970s, the average U.S. tariff rate is

less than 5 percent.

Aggregate supply is the relationship between the quantity of​ _____ supplied and the​ _____ when all other influences on production plans remain the same.

real​ GDP; price level

When aggregate demand unexpectedly​ increases, ______.

the natural unemployment rate does not change

A​ bank's liquid assets consist of​ ______.

its​ short-term Treasury bills and overnight loans to other banks

An increase in expected future income​ ______.

shifts the consumption function upward

The​ Fed's "dual​ mandate" is to achieve​ _______.

stable prices and maximum employment

The natural rate hypothesis is the proposition that when the inflation rate​ changes, ______. Eventually​ ______.

the unemployment rate changes​ temporarily; the unemployment rate returns to the natural unemployment rate

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

Induced taxes​ ______ during a recession. ​Needs-tested spending​ ______ during a recession.

​decrease; increase

​Supply-side effects consist of the effects of​ _____ policy on​ _____ and​ _____.

​fiscal; potential​ GDP; the economic growth rate

If the Fed purchases the government securities on the open​ market, the quantity of money​ ______ because​ _______.

​increases; bank reserves increase

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

An economy follows​ Okun's Law. The natural unemployment rate is 6 percent and potential GDP is​ $11 trillion. When the actual unemployment rate is 88 ​percent, real GDP is​ ______.

10.6 trillion

The Fed regards price stability as being achieved when the core inflation rate is​ _______.

2 percent a year

According to Peter Howitt of Brown​ University, if inflation is lowered from 3 percent a year to​ zero, then in 30 years the accumulated value of all additional output produced would be worth​ ______ percent of current GDP.

85

Which of the events in the table raise the real wage rate and which of the events lower the real wage​ rate?

A rise in the real wage rate is a result of​ events 3 and 4 A fall in the real wage rate is a result of​ event 5

The magnitude of the tax multiplier is equal to​ _____

MPC times the government expenditure multiplier

During the past 70​ years, the peak average tariff rate in the United States stemmed from the

Smootminus−Hawley Tariff Act in the early 1930s.

The money multiplier is 5.55.5 and the currency drain ratio is 0.10.1. What is the desired reserve​ ratio?

The desired reserve ratio is 0.1

The currency drain ratio is 0.5 and the desired reserve ratio is 0.1 What is the money​ multiplier?

The money multiplier is 2.5

The benefits from the new​ auto-emission standards include​ _______.

a reduction in carbon​ emissions, which brings a decrease in the contribution of human activity to global​ warming, and cleaner​ air, which contributes to improved health

When investment​ increases, _______

aggregate demand increases and income increases. The increase in income induces an increase in consumption expenditure so aggregate demand increases by more than the initial increase in investment

The costs of inflation do not include​ _______.

an increase in saving and investment

​Inflation-targeting central banks​ _____.

announce a target inflation​ rate, and publish an inflation report that explains how and why the central bank believes its current policy actions will achieve its ultimate goals

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

​Korea's production function lies​ _____ the U.S. production function because in Korea​ _______ than in the United States.

below; an hour of labor produces less

If a nation can produce a good or service at the lowest opportunity​ cost, then it

can sell the product at a lower price than other nations.

Foodland​ _______ produce 30 pizzas and 30 loaves of bread a day. This output is​_______.

can; efficient

the fundamental force that generates international trade isminus

comparative advantage

​Cost-push inflation is an inflation that begins with an increase in​ _____.

cost

The fiscal stimulus that returns the economy to full employment from a below​ full-employment equilibrium​ _______.

could be an increase in government expenditure and an equal increase in taxes

In 2009 comma the Japanese economy was below full employment.In 2009, the Japanese economy was below full employment. A policy to restore full employmentrestore full employment might​ ______. This policy would create inflationinflation if​ ______

cutcut ​taxes, increaseincrease government​expenditures, or increaseincrease the quantity of money the demand stimulation was so strong that it moved real GDP about potential GDP

National debt is the amount of government​ _____ -​ _____ that has arisen from past​ _____.

debt​ outstanding; debt; budget deficits

Induced taxes and​ needs-tested spending​ _______ the multiplier effects of changes in autonomous expenditure

decrease

The stock market boom​ _______ saving and​ _______ the quantity of loanable funds demanded.

decreased; decreased

Comparative advantage is based on

differences in opportunity costs between two countries.

An increase in the income tax rate is an example of​ ______.

discretionary fiscal policy

An unexpected increase in aggregate demand​ _______.

does not shift the​ long-run Phillips curve

Of the​ following, which group is hurt by a​ tariff?

domestic consumers of the good

A rational expectation is a forecast that results from the use of all the relevant data and​ ____

economic science

A discretionary monetary policy is a monetary policy that is based on an expert assessment of the current​ _____.

economic situation

The table provides some data on wealth and saving. The change in wealth​ _______.

exceed saving every year

The nominal interest rate​ _______.

falls

If the United States starts to import a good that had previously been produced in the United​ States, the market price of the good in the United States

falls.

The natural unemployment rate is not zero because natural unemployment includes​ _______.

frictional and structural unemployment

The quantity of money demanded is the amount of money that households and firms choose to​ _____.

hold

As more people in India have access to higher education​ ______ and in the long run​ ______.

human capital​ increases; both potential GDP and aggregate supply increase

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

increases, increases

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

increases; decreases

The demand for dollars increases if the U.S. interest rate differential​ ______ or the expected future exchange rate​ ______.

increases; rises

An economy at full employment experiences an unexpected reduction in the inflation​ rate, which​ ______.

initially increases the unemployment rate above the natural unemployment rate

Nominal GDP targeting is a monetary policy rule that adjusts the​ _____ rate to achieve a target growth rate for nominal GDP.

interest

If aggregate planned expenditure is less than real​ GDP, then​ _______

inventories​ increase, and as real GDP decreases a movement down along the AE curve occurs

An economy is at full employment. If it experiences an unexpected reduction in the inflation​ rate, the inflation reduction​ ______. If the Fed announces an inflation reduction policy and is successful in lowering the expected inflation​ rate, the inflation reduction​ ______.

is accompanied by recession and unemployment moving above the natural unemployment​ rate; results in a lower inflation rate with no accompanying loss of output or increase in unemployment

The means to achieving the goals of the dual mandate are​ _______.

maintaining the​ long-run growth of the monetary and credit aggregates commensurate with the​ economy's long-run potential to increase production.

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

makes the multiplier larger

The objectives of U.S. monetary policy are to achieve​ ______.

maximum employment and stable prices

The trend money growth rate​ ______.

minus the trend real GDP growth rate determines the trend inflation rate

Initially, the economy is at​ full-employment when aggregate demand increases. The increase in aggregate demand creates a​ _______ the​ short-run aggregate supply curve and​ a_______ the​ short-run Phillips curve.

movement up​ along; movement up along

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​ ______. Choose the correct statement.

net​ lender; creditor​ nation; The United States is a net borrower. China and Saudi Arabia are net lenders.

The demand for money is the relationship between the quantity of money demanded and the​ _______ when all other influences on the amount of money that people wish to hold remain the same.

nominal interest rate

The supply of money is the relationship between the quantity of money supplied and the​ _____.

nominal interest rate

In the long​ run, money market equilibrium determines the​ _______.

price level

The quantity theory of money is the proposition that when​ ______, an increase in the quantity of money brings​ ______ percentage increase in the price level.

real GDP equals potential​ GDP; an equal

When the price level and the money wage rate rise by the same​ percentage, unemployment​ _______

remains the same

A fallfall in the price level​ _______.

shifts the AE curve upwardupward and brings a movement downdown along the AD curve

To calculate the​ multiplier, we divide​ ______ by​ ______.

the change in equilibrium​ expenditure; the change in autonomous expenditure

The marginal propensity to import is equal to​ _______.

the change in imports divided by the change in real​ GDP, other things remaining the same

The inflation rate is 1.5 percent a​ year, the unemployment rate is 4​ percent, and the economy is at full employment. ​Unexpectedly, the Fed increases the money growth rate to raise the inflation rate to 3 percent a year. In the short​ run, ______.

the inflation rate rises and the unemployment rate falls

The quantity of U.S. dollars that traders plan to buy in the foreign exchange market in a given period of time is independent of​ ______.

the price of gold

An open market operation is​ ______.

the purchase or sale of government securities by the Federal Reserve System in the open market

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

If the Fed changes the quantity of​ money, the immediate effects are on​ ______ and the​ long-run effects are on​ ______.

the​ short-term nominal interest​ rate; the price level and the inflation rate

The quantity of U.S. dollars that traders plan to sell in the foreign exchange market in a given period of time is independent of​ ______.

world demand for US exports

Suppose the world price of widgets is​ $5 each. If a widget −importing country imposed a​ $2 per widget​ tariff, what price would that​ country's consumers pay for​widgets?

​$7

After​ 1960, the unemployment rate reached its highest level in​ ______.

​1981-1982 and​ 2008-2009

Cindy takes a summer job and earns an​ after-tax income of ​$3,500. Her living expenses during the summer were ​$2500 What was​ Cindy's saving during the summer and the​ change, if​ any, in her​ wealth?

​Cindy's saving during the summer is ​$1000. The change in​ Cindy's wealth is ​$1000

The​ ______ passes the budget acts in​ ______.

​Congress; September

|An economy is in a below​ full-employment equilibrium. Fiscal stimulus that returns the economy to full employment​ ______ aggregate demand and real​ GDP, and the price level​ ______.

​increases; rises

Inflation targeting is a​ _____ policy strategy in which the​ _____ makes a public commitment to achieving an explicit​ _____ target and to explaining how its policy actions will achieve that target

​monetary; central​ bank; inflation

The federal funds rate is the interest rate at which banks can borrow and lend​ _____ in the​ _____ market.

​reserves; federal funds

Imposing a tariff on a good leads to a​ ________ in the price of the product and​ ________ in imports.

​rise; a decrease

The unemployment rate was below average in​ ______.

1960's

Between 1949 and​ 2016, the average unemployment rate was​ _______. The unemployment rate was​ _______ average in​ 1973-1975, 1981-1982,​ 1990-1991, and​ 2008-2009.

5.8%; above

​Obama's revision of​ auto-emission and​ fuel-economy standards will require automakers to boost fuel economy to 35.5 miles per gallon by​ 2016, notching up​ 5% each year from​ 2012, to limit the amount of carbon dioxide cars can emit. ​Source: USA Today​, May​ 18, 2009 What costs associated with the new​ miles-per-gallon requirements arise from decisions made in​ self-interest and in the social​ interest?

All costs associated with the new​ auto-emission standards arise from President​ Obama's decision, which is made in the social interest.

Obama will drive up​ miles-per-gallon requirements ​Obama's revision of​ auto-emission and​ fuel-economy standards will require automakers to boost fuel economy to 35.5 miles per gallon by​ 2016, notching up​ 5% each year from​ 2012, to limit the amount of carbon dioxide cars can emit. ​Source: USA Today​, May​ 18, 2009 What are two benefits of the new​ miles-per-gallon requirements? Are these benefits in​ someone's self-interest or in the social​ interest?

Benefits from the new​ miles-per-gallon requirements include​ a decrease in gasoline​ used, so carbon emissions will be lowered. Choose the statement that is incorrect. Lower carbon emissions are in the social interest but not the​ self-interest of consumers.

The real price of a stamp in current dollars is calculated by multiplying the price of a stamp by the​ _______ and dividing by the​ _______.

CPI in the current​ year; CPI in the year the stamp was purchased

An economy produces only two final​ goods: fish and berries. The table shows the quantities produced and the prices of these final goods in 2016 and 2017. The base year is 2016. By what percentage did real GDP change in​ 2017?

In​ 2017, real GDP changed by 70.5 percent.

Each of the following news items involves a what​, how​, or for whom question. 1.​ Today, most stores use computers to keep their inventory​ records, whereas 20 years ago most stores used paper records. 2.​ Health-care professionals and drug companies recommend that Medicaid drug rebates be made available to everyone in need. 3. An increase in the gas tax pays for​ low-cost public transit.

Item​ #1 answers that​ ______. . what goods and services are produced are inventory​ records, and how the goods and services are produced is by using computers instead of paper #2: what goods and services are produced are cheaper​ drugs, and for whom the goods and services are produced is for everyone in need #3: what goods and services are produced is​ low-cost public​ transit, and for whom goods and services are produced is the people who use public transit

The headlines listed below appeared in The Wall Street Journal. Classify each headline as a signal that the news article is about a microeconomic topic or a macroeconomic topic.

Macroeconomic Job Gains Calm Slump Worries Microeconomic Washington​ Post's Profit Falls Microeconomic ​Overcapacity, Fuel Costs Hit Shipping Macroeconomic U.S. Budget Deficit Expands

The following list gives examples of incentives that government policies use to influence behavior. A. Scholarships for academic excellence at state universitiesScholarships for academic excellence at state universities B. Heavier fines for speeding in school zonesHeavier fines for speeding in school zones C. Longer prison sentencesLonger prison sentences D. Upper A congressional medal of honorA congressional medal of honor Complete the table by classifying each item in the list as a​ "carrot" incentive or a​ "stick" incentive, and as a​ "monetary" incentive or​ "non-monetary" incentive.

Monetary: Carrot A Stick: B Non-monetary: Carrot: D Stick: C

The base year is 2012. Real GDP in 2012 was​ $15 trillion. The GDP price index in 2015 was​ 105, and real GDP in 2015 was​ $16 trillion. Calculate nominal GDP in 2012 and in 2015 and the percentage increase in nominal GDP from 2012 to 2015.

Nominal GDP in 2012 is ​$15 trillion. Nominal GDP in 2015 is ​$16.8 trillion. The percentage increase in nominal GDP between 2012 and 2015 is 12 percent

he table shows an​ economy's total production and the prices of the final goods it produced in 2016 and 2017. Calculate nominal GDP in 2016 and nominal GDP in 2017.

Nominal GDP in 2016 is ​$250 Nominal GDP in 2017 is ​$1,130

Pete is a student who spends 10 percent of his expenditure on books and​supplies, 30 percent on​ tuition, 30 percent on​ rent, 10 percent on food and​ drink, 10 percent on​ transportation, and the rest on clothing. The price index for each item was 100 in 2006. The table shows the price indexes in 2016

Pete is a student who spends 10 percent of his expenditure on books and​supplies, 30 percent on​ tuition, 30 percent on​ rent, 10 percent on food and​ drink, 10 percent on​ transportation, and the rest on clothing. The price index for each item was 100 in 2006. The table shows the price indexes in 2016

The table shows an​ economy's total production and the prices of the final goods it produced in 2016 and 2017. The base year is 2016. Calculate real GDP in 2016 and real GDP in 2017.

Real GDP in 2016 is ​$300 Real GDP in 2017 is ​$540

The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2016. The average household spent ​$6060 on juice and ​$3030 on cloth in 2016 when the price of juice was ​$22 a bottle and the price of cloth was ​$55 a yard. In the current​ year, 2017, juice is ​$44 a bottle and cloth is ​$66 a yard. Calculate the CPI and the inflation rate in 2017

The CPI in 2017 is 173.3 place. The inflation rate in 2017 is 73.3 percent

Given the definitions of saving and​ wealth, how can the change in wealth differ from​ saving?

The change in wealth includes changes in the prices of assets owned and saving excludes these items

The table sets out information about the economy of Nautica. What is the quantity of labor​ employed, potential​ GDP, the real wage​ rate, and total labor​ income?

The quantity of labor employed is 30 hours a day. Potential GDP is ​$240 a year. The real wage rate is ​$. .60 an hour. Total labor income is ​$18 a day.

Last​ month, the interest rate on a money fund averaged​ 0.08% a year and on​ 5-year CDs it was​ 2.6% a year. The inflation rate was​ 0.1% a year. ​Source: USA​ Today, August​ 12, 2009 Calculate the real interest rate on each of these financial assets.

The real interest rate on a money fund is negative −.02 percent a year. The real interest rate on a​ 5-year CD is 2.5 percent a year.

What is the real wage​ rate, the quantity of labor​ employed, potential​ GDP, and​unemployment? Does the unemployment arise from job search or job​ rationing? Is the unemployment​ cyclical? Explain.

The real wage rate is . .80 an hour and the quantity of labor employed is 20 hours a day. Potential GDP is ​$240 a year. Unemployment is 20hours a day. The unemployment arises from job rationing. The unemployment​ is not cyclical because​ it is created by the minimum wage and not by the phase of the business cycle.

Businesses damaged by flooding from Tropical Storm Irene are under pressure to rebuild and reopen this week as​ Vermont's peak​ leaf-peeping season begins. Not everyone is cheering.​ Vermont's recovery​ hasn't reached every​ road, and the rebuilding work will persist long after the maple leaves fall.

The tropical storm flooded and damaged many​ businesses, which have not yet reopened. The effect of the storm ​ decreased employment in Vermont. When businesses​ closed, Vermont's production function​ shifted downward and a movement along the production function​ did occur. As a result of the​ storm, Vermont's potential GDP​ decreased

The table gives information about the labor force in the economy of Sandy Island.

The unemployment rate in AprilApril 2016 is 11.711.7 percent. ​>>> Answer to 1 decimal place. The number of people unemployed at the end of MayMay 2016 is 18501850. The number of people employed at the end of MayMay 2016 is 1503015030. The unemployment rate at the end of MayMay 2016 is 10.910.9 percent.

The table gives information reported by the Bureau of Labor Statistics for the second quarter ofthe second quarter of 20082008. What is the unemployment​ rate? What is the labor force participation​ rate?

The unemployment rate is 5.3 percent. The labor force participation rate is 66.1 percent.

The BLS survey reported the numbers in the table for a small community of 300 people. Calculate the unemployment rate and the labor force participation rate in this community.

The unemployment rate is 9.8 percent. The labor force participation rate is 86.4 percent.

Last​ month, the interest rate on a money fund averaged​ 0.08% a year and on​ 5-year CDs it was​ 2.6% a year. The inflation rate was​ 0.1% a year. USA​ Today, August​ 12, 2009 To maintain these real interest rates in the coming​ months, how will these nominal rates change if the inflation rate increases to 0.2 percent a​ year?

To maintain these real interest rates in the coming​ months, the nominal interest rate will​ increase on both assets by .1 percent if the inflation rate increases to 0.2 percent a year.

Is the​ $208 million that electricity producers will spend to comply with the new rules part of the opportunity cost of producing​ electricity?

Yes, because​ $208 million of other goods and services must be forgone to produce electricity and comply with the law.

All costs associated with the new​ miles-per-gallon requirements​ _________.

arise from President​ Obama's decision, which is made in the social interest

A negative saving rate occurs if​ ______.

consumption expenditure exceeds disposable income

If the wage initially offered by employers was equal to the market equilibrium​wage, the minimum wage​ _______. If the wage initially wanted by the labor unions was equal to the market equilibrium​wage, the minimum wage​ _______.

creates​ unemployment; has no effect on the quantity of labor employed

The unemployment rate fluctuates around the natural unemployment rate because​ _______ during a recession and​ ___________ during an expansion.

cyclical unemployment​ increases; decreases

As the market moves to its new​ equilibrium, the quantity supplied​ _______ and the quantity demanded​ _______.

decreases; increases

The cancellation of orders​ _______ the quantity demanded of steel​ ______ and the quantity supplied of steel​ ______.

does not change; decreases

A negative saving rate might be something to worry about because​ ______. U.S. saving might be increased by​ ______.

eventually households must repay their​ borrowing; decreasing taxes on interest income

Foodland​ ______. The opportunity cost of producing an additional pizza is​______.

faces a​ tradeoff; 0.5 loaf of bread

The equilibrium price of steel ____

falls

If the price of a personal computer falls to $ 50the price of a personal computer falls to $50​, the marginal cost ofcost of buying a new computerbuying a new computer will​ ______, so the incentive to buy a new computerbuy a new computer will​ _________.

fall​; strengthen

Does the decision to make a blockbuster movie mean that some other more desirable activities get fewer resources than they​ deserve? If you respond that​ ______, then your response is a​ ______ statement.

giving an activity fewer resources than it deserves cannot be​ measured; normative

What was​ Sophie's gross​ investment, net​ investment, and​ depreciation?

gross investment during 2016 was 5000 net investment during 2016 was 1000 depreciation during 2016 was 4000

How does the unemployment of marginally attached workers influence the duration of unemployment in 2016 compared with that in​ 2000? Counting marginally attached workers as being unemployed would​ _______ the duration of unemployment in 2016 over that in 2000.

increase

Rain falls on wheat parade The price of wheat has fallen from​ $9 a bushel to​ $7 a bushel in the past seven months as rain and snow fell on the southern states. ​Source: The Wall Street Journal​, February​ 12, 2013 Explain the effect of the fall in the wheat price on the market for cereal. In the market for​ cereal, the fall in the wheat price​ _________ , which​ _______ the market price.

increases the supply of cereal; lowers

New home sales appear in the​ ______ category of the U.S. National Income and Product Accounts. New home sales​ _______.

investment; increase GDP and the surge in new home sales this year make the increase in GDP greater than the previous year

Korea has a lower real wage rate per hour and greater hours per worker per week than the United States because​ Korea's labor is​ ______ productive and​ Korea's supply of labor​ (per worker) is​ ______ than the United States.

less; greater

During the global financial crisis of​ 2007-2008, ______ the demand for loanable funds and​ ______ the supply of loanable funds.

lower profit expectations​ decreased; an increase in default risk decreased

Box-Office Mojo calculates real​ box-office receipts by multiplying the movie revenue by the​ _______ and dividing by the​ _______.

movie ticket price in the current​ year; movie ticket price in the year the movie revenue was earned

The real variable that​ Box-Office Mojo is calculating is in terms of​ _______. The real value of the stamp is calculated in terms of​ _______.

movie tickets​ sold; the goods and services bought by the average urban consumer

Imagine that you are given​ $1,000 to spend and told that you must spend it all buying items from a Sears catalog. But you do have a choice of catalog. You may select from the 1903 catalog or from Sears.com today. You will pay the prices quoted in the catalog that you choose. The​ ______ bias in the CPI is relevant to your choice of catalog.

new goods bias and the quality change

​India, with the​ world's largest population of poor​ people, also paradoxically created millionaires at the fastest pace in the world. Millionaires increased by 22.7 percent to​123,000. In​ contrast, the number of Indians living on less than a dollar a day is 350 million and those living on less than​ $2 a day is 700 million. In other​ words, there are​ 7,000 very poor Indians for every millionaire. ​Source: The Times of India​, June​ 25, 2008 How is the personal distribution of income in India​ changing?

personal distribution of income is becoming more unequal

What is the effect on the equilibrium price and equilibrium quantity of theater ticketstheater tickets if theater ticketstheater tickets becomebecome moremore popular and a largera largertheater is builttheater is built​? The equilibrium price of theater ticketstheater tickets ​______ and the equilibrium quantity​ ______.

rises, falls, or remains the same; increases

During​ Valentine's week, the equilibrium price of a box of chocolates​ ______ and the equilibrium quantity​ ______.

rises; increases because demand increases by more than supply decreases

The labor force participation rate in the United States​ _______.

shows an upward trend between 1960 and​ 1999, and a downward trend that began in 2000

During the recession of the late​ 2000s, many homeowners defaulted on their home loans. As a​ result, banks made it harder to people to borrow. In the market for​ homes, ______.

the demand for homes decreased. With no change in the supply of​homes, the price of homes fell

We can be confident that the market for college education is competitive and that an increase in demand rather than the greed of college administrators is the reason for the ongoing rise in tuition for all of the following reasons except ​ _______.

the law of demand does not hold

The income gap has widened in China. In​ 2014, the pay of workers in the coastal regions increased by 9.7 percent while that of workers in the inland regions grew by 9 percent. ​Source: South China Morning Post​, May​ 28, 2015 Explain how the distribution of personal income in China can be getting more unequal even though the poorest are getting richer.

the richest 20 percent of families are getting richer faster than the poorest 20 percent of​ families, so the richest 20 percent of families have an increasing percentage of​ China's total income

The Center for Economic and Policy Research in​ Washington, D.C., claims that the IMF​ didn't allow developing countries that were looking for loans to expand their deficits sufficiently. Would these countries have weathered the global recession better if they had obtained larger loans from the​ IMF? If these countries had obtained larger loans from the IMF​ ______.

they could have undertaken larger​ stimulus, which might have improved their performance during the recession

The information in the news clip indicates that the​ 2008-2009 recession​ ______ expected to end in the second half of 2013. A recession ends when​ ______.

was​ not; the growth rate of real GDP is positive

Based on this​ information, which country was in a recession at the beginning of​ 2013? what features of the information provided led you to your​ conclusion? Based on the information​ given, _______ was in a recession at the beginning of 2013 because​ _______.

​France; real GDP decreased for two successive quarters

The table gives data on the economy of Iberia. Calculate​ Iberia's GDP.

​Iberia's GDP is ​$93 billion.

Representatives Waxman of California and Markey of Massachusetts proposed a law to limit greenhouse gas emissions from electricity generation and require electricity producers to generate a minimum percentage of power using renewable​ fuels, with some rights to emit to be auctioned. The Congressional Budget Office estimated that the government would receive​ $846 billion from auctions and would spend​ $821 billion on incentive programs and compensation for higher energy prices. Electricity producers would spend​ $208 million a year to comply with the new rules.​ (Think of these dollar amounts as​ dollars' worth of other goods and​ services.) Will the​ Waxman-Markey law achieve production​ efficiency?

​Unlikely, because mandating which specific technology to use prevents producers from choosing the most efficient technology.

​"As moremore people buy bicyclesbicycles​, the demand for bicycle helmetsbicycle helmets increasesincreases and the price of a helmeta helmet decreasesdecreases​, which decreasesdecreases the supply of bicycle helmetsbicycle helmets​." This statement is​ ______ because​ ______.

​false; an increasean increase in demand for bicycle helmetsbicycle helmets does not decreasedecrease the price of a bicycle helmeta bicycle helmet and a decreasea decrease in the price of a bicycle helmeta bicycle helmet does not decreasedecrease the supply of bicycle helmets

Classify each of the following items as a final good or an intermediate​ good, and identify whether it is a component of consumption​ expenditure, investment, or government expenditure on goods and​ services: Item 1. New battle ship bought by the U.S. navyNew battle ship bought by the U.S. navy. Item 2. New coffee machines bought by StarbucksNew coffee machines bought by Starbucks. Item 3. Upper A textbook bought by a studentA textbook bought by a student. Item 4. Packing boxes bought by Amazon.comPacking boxes bought by Amazon.com.

1: final good that is gov expenditure 2: final good that is investment 3: final good that is consumption expenditure 4: an intermediate good

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

decreases; increases

Aggregate demand increasesincreases if the exchange rate​ ______ or foreign income ​______.

decreases; increases

Which of the events in the table increase potential GDP and which decrease potential​ GDP?

An increase in potential GDP results from​ events 4 and 5. A decrease in potential GDP results from​ events 1 and 3.

Which of the events in the table increase the equilibrium quantity of labor and which decrease the equilibrium quantity of​ labor?

An increase in the equilibrium quantity of labor is a result of​ events 4 and 5. A decrease in the equilibrium quantity of labor is a result of​ event 3

Suppose migration into the United States increases the working dash agemigration into the United States increases the working-age populationpopulation.

As a​ result, there is​ no shift in the U.S. production function. There is​ no change in the U.S. demand for labor and​ an increase in the U.S. supply of labor.

The global economy has seen a fall in the number of landlines and rapid growth in the number of smartphones. In the United​ States, 41 percent of households have no landline and 90 percent have a smartphone. In​ Africa, 33 percent have a smartphone. Describe the changes in what​, how​, and for whom telecommunication services are produced in the global economy.

As the number of smartphone users​ increases, the global economy is producing all of the following except more​ low-tech toys Telecommunication services in the global economy are increasingly produced using wireless means Telecommunication services are being produced or consumers in developing economies such as Africa and also for consumers in advanced economies such as the United States

In the African nation of​ Senegal, to enroll in school a child needs a birth certificate that costs​ $25. This price is several​ week's income for many families. Explain how this requirement is likely to affect the growth of human capital in Senegal

Because of this requirement we would expect to see slow growth of human capital in Senegal and particularly slow growth in the human capital of girls and women

Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. Explain where these activities appear in the National Income and Product Accounts of the United States.

Choose the correct statement about the plane wings. The wings appear as imports in the expenditure approach to measuring U.S. GDP. If​ U.S.-owned factors of production are used in​ production, their income appears as net factor income from abroad and is part of U.S. GNP. Choose the correct statement about the production of cars by Toyota in Kentucky. The incomes earned by car producers are part of​ wages, interest,​ rent, and profit in the income approach to calculating U.S. GDP.

Representatives Waxman of California and Markey of Massachusetts proposed a law to limit greenhouse gas emissions from electricity generation and require electricity producers to generate a minimum percentage of power using renewable​ fuels, with some rights to emit to be auctioned. The Congressional Budget Office estimated that the government would receive​ $846 billion from auctions and would spend​ $821 billion on incentive programs and compensation for higher energy prices. Electricity producers would spend​ $208 million a year to comply with the new rules.​ (Think of these dollar amounts as​ dollars' worth of other goods and​ services.) Is the​ $821 billion that the government would spend on incentive programs and compensation for higher energy prices part of the opportunity cost of producing​electricity?

Expenditure on incentive programs​ _______ part of the opportunity cost of producing electricity. Compensation for higher energy​ prices________ part of the opportunity cost of producing electricity. is; is not

Suppose a Canadian dollar bank deposit in Toronto earns 33 percent a year and a U.S. dollar bank deposit in Chicago earns 44 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 depreciate by 11 percent a year.

The table gives data on the economy of Iberia. Calculate​ Iberia's imports of goods and service

Iberia's imports of goods and services equal ​$38 billion.

In JuneJune 2011​, traveler's checks in circulation traveler's checks in circulation were ​$55 ​billion; checkable deposits owned by individuals and businesses checkable deposits owned by individuals and businesses were $ 977 ​billion; Upper M 1M1 was $ 1 comma 947 ​billion; money market funds and other deposits money market funds and other deposits were $ 694 ​billion; Upper M 2M was $9,111​; and savings deposits savings deposits were $ 5 comma 629$5,629 billion. Calculate currency held by individuals and businessescurrency held by individuals and businesses in JuneJune 20112011. Calculate small time depositssmall time deposits in JuneJune 20112011.

In JuneJune 2011 currency held by individuals and businessescurrency held by individuals and businesses waswas ​$965 billion. Small time depositsSmall time deposits in JuneJune 20112011 werewere ​$841 billion.

​India, with the​ world's largest population of poor​ people, also paradoxically created millionaires at the fastest pace in the world. Millionaires increased by 22.7 percent to​123,000. In​ contrast, the number of Indians living on less than a dollar a day is 350 million and those living on less than​ $2 a day is 700 million. In other​ words, there are​ 7,000 very poor Indians for every millionaire. ​Source: The Times of India​, June​ 25, 2008 Why might incomes of​ $1 a day and​ $2 a day underestimate the value of the goods and services that these households actually​ consume?

Most households living on​ $1 or​ $2 a day produce and consume much of their own food and clothing.

The​ ______ proposes a budget to​ ______.

President; Congress each February

Choose the correct statements. 1. The foreign exchange market is the market in which the currency of one country is exchanged for the currency anotherThe foreign exchange market is the market in which the currency of one country is exchanged for the currency another 2. In a growing economy comma the exchange rate is always risingIn a growing economy, the exchange rate is always rising 3. Upper A fall in the exchange rate is called a devaluation of the dollarA fall in the exchange rate is called a devaluation of the dollar 4. Upper A rise in the exchange rate is called an appreciation of the dollar

Statements 1 and 4 are correct.

​Sue's opportunity cost of producing a cap is . 1.1 jackets and​ Tessa's opportunity cost of producing a cap is . 05.05 jackets. ​______ has a comparative advantage in producing caps. If Sue and Tessa specialize in producing the good in which they have a comparative​ advantage, ______.

Tessa; both Sue and Tessa gain

In 1932, the average wage rate was ​$0.55 an hour and in 2002 the average wage rate was ​$14.95 an hour. The CPI in 1932 was 13.7 and in 20022002 it was 183.3

The 2002 nominal wage rate that is equivalent to ​$0.55 an hour in 1932 is ​$7.36 an hour. The real wage rate in 1932 is ​$4.01 The real wage rate in 2002is ​$8.16. Which gives the higher real wage​ rate: ​$0.55 an hour in 1932 or ​$14.95 an hour in 2002​? $14.95 in 2002

Choose the statement about the Fed that is correct.

The FOMC meets approximately every six weeks to review the state of the economy.

Does inflation targeting achieve lower inflation​ rates? Choose the correct statement.

The United Kingdom and New Zealand have missed their inflation targets but the other inflation targeters have achieved theirs.

Consider the​ long-run Phillips​ curve, and then choose the correct statement.

The inflation rate can take on any value at full employment.

The figure shows the​ short-run and​ long-run Phillips curves. The current inflation rate is 5 percent a year. The Fed announces that it will slow the money growth rate so that inflation will fall to 2.5 percent a year. If no one believes the Fed and expected inflation remains at 5 percent a​ year, explain the effect of the​ Fed's action on inflation and unemployment next year.

The inflation rate will fall and the unemployment rate will increase in a movement down the​ short-run Phillips curve.

In an economy without taxes and​ imports, an increase in investment of​ $50 billion increases equilibrium expenditure by ​$250250 billion. What are the values of the multiplier and the slope of the AE​ curve?

The multiplier is 5.0 and the slope of the AE curve is 0.8

What to do with​ $50,000 now A good​ strategy: Put about​ two-thirds of the money into bonds of developed nations and the rest into riskier​ emerging- market bonds. ​Source: CNNMoney.com What is the opportunity cost of holding​ money? If lots of people put their money into​ bonds, how will the demand for money and the interest rate​ change?

The opportunity cost of holding money is​ ______. the interest rate forgone on an alternative asset When lots of people followed this advice and put their money into​ bonds, the demand for money​ _____ and the interest rate on bonds​ _____. ​decreases; falls

The base year is 2012. Real GDP in 2012 was​ $15 trillion. The GDP price index in 2015 was​ 105, and real GDP in 2015 was​ $16 trillion. What was the percentage increase in production from 2012 to​ 2015, and by what percentage did the price level rise from 2012 to​ 2015?

The percentage increase in production from 2012 to 2015 is 6.7 percent. The percentage rise in the price level from 2012 to 2015 is 5 percent.

Consider potential GDP and then choose the statement that is correct.

The potential GDP line is vertical because potential GDP is independent of the price level

Consider aggregate supply and then choose the statement that is correct.

The quantity of real GDP supplied equals potential GDP at the price level at which the real wage rate is at its​ full-employment equilibrium level.

Consider the short run and the long run and then choose the statement that is correct.

The real interest rate is independent of the inflation rate in the long run.

Sally has a credit card balance of2,000. The credit card company charges a nominal interest rate of 14 percent a year on unpaid balances. The inflation rate is 6 percent a year. Calculate the real interest rate that Sally pays the credit card company.

The real interest rate that Sally pays the credit card company is 8 percent a year.

Choose the statement that is correct.

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

The table shows the amounts held as the various components of M1 and M2. Calculate the value of M1 and M2. Savings deposits 400 Checking deposits 125 Small time deposits 200 Money market funds and other deposits 200 Currency and​ traveler's checks70

The value of M1 is ​$195195 billion. The value of M2 is ​$995995 billion.

Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. Explain where these activities appear in the National Income and Product Accounts of Japan.

The value of the wings appear as Japanese exports in the expenditure approach to measuring​ Japan's GDP and​ Japan's GNP.

The quantity of moneyThe quantity of money is $4 billion and GDP is $20 billion. What is the velocity of circulationthe velocity of circulation​?

The velocity of circulationThe velocity of circulation is 5

Choose the correct statement.

When both government expenditure and taxes decrease by​ $1, aggregate demand decreases.

Use the diagram of the circular flow model on the right to indicate to which real or money flow each item belongs. chapt 2 hw #6

When you buy your​ groceries, the money flow is P and the real flow is S. When General Motors pays its workers wagesGeneral Motors pays its workers wages​, the money flow is Q and the real flow is R. When Southwest rents some aircraftSouthwest rents some aircraft​, the money flow is Q and the real flow is R.

The following headlines are examples of economics being used as a tool to make a decision. 1. Laws tightened to limit urban sprawl as housing market keeps boomingLaws tightened to limit urban sprawl as housing market keeps booming. 2. Supermarkets hire seniors to cut labor costSupermarkets hire seniors to cut labor cost. 3. High wages and low pensions keep seniors at workHigh wages and low pensions keep seniors at work. Statement​ #1 is an example of​ ______ using economics to make a decision. Statement​ #2 is an example of​ ______ using economics to make a decision. Statement​ #3 is an example of​ ______ using economics to make a decision.

a gov; business; persons

One of the major reasons why the United States exports jet airplanes is because Boeing faces​ ________ opportunity cost than firms in other nations in the production of such aircraft.

a lower

The table sets out an​ economy's aggregate demand and aggregate supply schedules. The macroeconomic equilibrium occurs at a price level of 110110 and real GDP of ​$800800 billion. If potential GDP is​ $600 billion, the economy is​ _______. In the long​ run, ______.

above full employment and has an inflationary gap aggregate supply​ decreases, the price level​ rises, and real GDP decreases to potential GDP

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 where the AE curve intersects the 45degrees° line is equilibrium expenditure.

Between 2014 and​ 2015, traders expected the U.S. dollar to​ ______ against the euro and it​ ______. Between 2001 and​ 2008, traders expected the U.S. dollar to​ ______ against the euro and it​ ______.

appreciate; did appreciate ​depreciate; did depreciate

Where do sales and inventories of existing homes appear in the circular flow of expenditure and​ income? Explain how an increase in sales of existing homes and a low inventory of existing homes affects real GDP. Sales and inventories of existing homes​ ______ in the circular flow of expenditure and income and​ ______ GDP.

are not part of current​ expenditure, so they do not​ appear; do not influence

An increase in taxes when the economy is above full employment ​ ______ aggregate demand and real​ GDP, and the price level​ ______.

decreases; falls

With the new​ technology, the opportunity cost of producing a chicken​ _____ because​ _____ soybeans must be forgone to produce a chicken.

decreases; fewer

A rise in the money wage rate when the economy is at potential GDP​ ______.

decreases aggregate supply because a rise in the money wage rate increases​ costs, so firms employ fewer workers

Between 1960 and​ 2016, the labor force participation rate of men​ ______, and that of women​ ______.

decreases in most years; increased in most years

CBO expects higher​ long-term deficits The Congressional Budget Office​ (CBO) says the national debt is on an upward path and will hit 122 percent of GDP in 2040. Healthcare programs and Social Security benefits are the large drivers of spending over the coming decades. ​Source: The Wall Street Journal​, July​ 12, 2016 If the government decided to slow the growth of debt by cutting transfer payments and raising taxes by the same​ amount, how would this fiscal policy influence the budget deficit and real​ GDP? Cutting transfer payments and raising taxes by the same amount​ _______. The​ supply-side effect of an increase in taxes​ _______ employment and​ _______ real GDP.

decreases the budget​ deficit, decreases aggregate​ demand, and decreases real GDP ​decreases; decreases

The cancellation of orders​ ______ the demand for steel and​ ______ the supply of steel.

decreases; does not change

Still on the​ job, but at half the pay In past​ recessions, firms have cut their labor costs by laying off workers. During this​ recession, many firms and state governments have trimmed labor costs by cutting pay or shortening the​ workweek, rather than laying off workers. ​Source: The New York Times​, October​ 13, 2009 What effect might the strategy of cutting pay or the workweek rather than laying off workers have on the depth of the recession and the unemployment​ rate? In comparison to laying off​ workers, cutting pay and shortening the workweek​ ______ the unemployment rate and makes the recession​ ______.

decreases; less deep

The Fed decreases the quantity of money. In the short​ run, the quantity of money demanded​ ______ and the nominal interest rate​ ______.

decreases; rises

Why do you think the IMF required countries with large​ deficits, like those in Easter​ Europe, to cut spending rather than increase​ it? The IMF required countries with large​ deficits, like those in Eastern​ Europe, to cut spending rather than increase it because high government deficits​ ______ in these​countries, which​ ______.

increase default​ risk; decreases the supply of loanable funds and raises the real interest rate

What is the effect on the equilibrium price and equilibrium quantity of theater ticketstheater tickets if the price of an orchestra ticketan orchestra ticket decreasesdecreases and the wage rate paid to actorsactors decreasesdecreases​? The equilibrium price of a theater ticketa theater ticket ​______ and the equilibrium quantity​ ______.

falls; increases, decreases or remains the same

The velocity of circulation is the average number of times in a year that each dollar of money gets used to buy​ ______. The formula used to measure the velocity of​ circulation, V​, is​ ______, where P is the price​ level, Y is real​ GDP, and M is the quantity of money.

final goods and​ services; V​ = ​(Ptimes ×​Y)divided by ÷M

The spread of ATMs and the increased use of debit cards​ ______ money. Everything else remaining the​ same, the nominal interest rate​ ______.

increase the demand​ for; rises

In the wake of worsening relations with​ China, some Americans called for an increase in tariffs on Chinese products coming into America. If higher tariffs are imposed on clothing produced in​ China, the price of clothing in America would

increase.

Explain how an increase in government expenditure will change the​ government's budget balance and the loanable funds market. An increase in government expenditure​ _______.

increases an existing government budget​ deficit, which increases the demand for loanable funds and the real interest rate rises

U.S. consumer confidence edges up The​ Reuters/University of Michigan Surveys of Consumers reported a rise in September of consumer confidence that exceeded​ economists' expectations and a rise in expected inflation to 3.7 percent from 3.5 percent a year. Such a rise should be a concern to the Federal​ Reserve, which has been pumping money into the economy in an attempt to contain the recession and spur a recovery. ​Source: The New York Times​, September​ 16, 2011 If the Fed is concerned about inflation and unexpectedly slows money​ growth, explain how unemployment will change in the short run and in the long run. If the Fed is concerned about inflation and unexpectedly slows money​ growth, unemployment​ ______ the natural unemployment rate in the short run. In the long​ run, unemployment​ ______ the natural unemployment rate.

increases​ above; returns to

Currency​ _________.

inside the banks is not money because it​ isn't available as a means of payment

The unemployment rate statistic of​ 15.2% understates the unemployment problem in Michigan because​ _______.

it does not include marginally attached and discouraged workers and​ part-time workers who want​ full-time jobs

A real business cycle is a cycle that results from fluctuations in the pace of growth of​ _____ and​ _____.

labor​ productivity; potential GDP

The largest asset of commercial banks are​ _______.

loans

​Brazil's inflation ​Brazil's inflation rate was 9.28 percent in the past twelve months. food and beverage prices rose more than one percent per month. ​Source: Bloomberg, May​ 6, 2016 Explain the effect of a rise in the price level on​ Brazil's equilibrium expenditure. A rise in the price level​ _______ and equilibrium expenditure​ _______.

shifts the AE curve​ downward; decreases

Is this increased unemployment​ frictional, structural, or​ cyclical? Explain. The increased unemployment rate in Michigan is​ _____.

structural that arises due to changes in international​ competition, and cyclical due to a downturn in the U.S. economy

The​ ________ of chocolates is eliminated as the price of a box of chocolates​_______.

surplus; falls

The Federal Reserve Act makes​ ______ responsible for the conduct of monetary policy.

the Board of Governors of the Federal Reserve System and the Federal Open Market Committee

The agreement between the United​ States, Mexico, and Canada that sought to lower trade barriers is known as

the North American Free Trade Agreement.

The U.S. saving rate increased from minus−0.1 percent in 2011 to 2.0 percent in 2012 to 2.4 percent in​ 2013, to 2.9 percent in​ 2014, and to 3.0 percent in 2015. The U.S. saving rate might have increased because​ ______. The increase in the saving rate will​ ______ the supply of loanable funds.

the stock market crash and financial market turmoil decreased wealth and expected future​ income; increase

Fiscal policy is​ ______.

the use of the federal budget to achieve macroeconomic objectives

Your school has decided to increase the intake of new students next year. In reaching its​ decision, would the school use the​ "economic way of​ thinking" and make its decision at the​ margin? Your school would use the​ "economic way of​ thinking" and make its decision at the margin by checking that ​ ____________________..

the​ school's net benefit from an additional student was positive

The tables show the quantities of the goods that Harry bought and the prices he paid during two consecutive weeks. ​Harry's CPI market basket contains the goods he bought in Week 1. Calculate​ Harry's CPI in Week 2. What was his inflation rate in Week​ 2?

​Harry's CPI in Week 2 is 128.1 ​Harry's inflation rate in Week 2 is 28.1 percent

Representatives Waxman of California and Markey of Massachusetts proposed a law to limit greenhouse gas emissions from electricity generation and require electricity producers to generate a minimum percentage of power using renewable​ fuels, with some rights to emit to be auctioned. The Congressional Budget Office estimated that the government would receive​ $846 billion from auctions and would spend​ $821 billion on incentive programs and compensation for higher energy prices. Electricity producers would spend​ $208 million a year to comply with the new rules.​ (Think of these dollar amounts as​ dollars' worth of other goods and​ services.) Is the​ $846 billion that electricity producers pay for the right to emit greenhouse gasses part of the opportunity cost of producing​ electricity?

​Yes, because it is part of the opportunity cost of cutting greenhouse gas emissions

When the nominal interest rate​ rises, the opportunity cost of holding money​ ______ and the quantity of money demanded​ ______.

​rises; decreases


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