ECON 2101 Final
Payroll taxes are 6.2%, and Medicare taxes are 2.9%. If your employer owes you $665, approximately how much will you get after these deductions?
$604.49
Payroll taxes are 6.2%, and Medicare taxes are 2.9%. Your employer owes you $665. How much will your work cost your employer?
$725.52
Payroll taxes are 6.2%, and Medicare taxes are 2.9%. Your employer owes you $850. How much will your work cost your employer?
$927.35
Okun's Law
1 percent more unemployment results in 2 percent less output
The Federal Reserve's lender-of-last-resort function has been curtailed over time by the:
Dodd-Frank Act
Which economic indicator tells you about the future expected profits of businesses
S&P 500
The Affordable Care Act is an example of:
discretionary spending
what indicator tells you how fast wages and benefits are rising
employment cost index
A budget deficit occurs when
government spending exceeds government revenue.
On which of the following is there a tax incentive in the United States?
health insurance purchased through employers, rental value on owner-occupied housing, your mortgage
contractionary monetary policy causes a
left shift of the aggregate demand curve
If inflation is 0%, and a firm wants to lower real wages by 1%, it will need to:
lower nominal wages by 1%
the four stages of the business cycle are
peak, recession, trough, and expansion
what kind of data adjustment removes the effect of sales spikes due to the holiday season
seasonally adjusted data
when the government increases spending, a multiplier effect will
shift the AD curve further to the right than the effect of the spending
The Philippines government provides retirement benefits, unemployment benefits, maternity leave benefits, death and funeral benefits, and other benefits. These are examples of:
social insurance
in the AD-AS framework, price and quantity are represented by _______ respectively
the GDP deflator and the real GDP
The government's debt is:
the accumulation of all the deficits
Aggregate Demand
the amount of goods and services in the economy that will be purchased at all possible price levels
which economic indicator tells you how fast wages and benefits are rising
the employment cost index
What was the Fed's inflation target in 2019?
2%.
when government expenditure rises by $180 million and the initial increase in government expenditure was $60 million, then the multiplier is
3
worries about the stock market caused consumer confidence to fall, what was the effect on aggregate demand
AD decreased, shift left
minimum wages rise sharply in the economy, whats the effect on the AD-AS framework
AS decreases, shift left
Which indicator is a cross-check on GDP
Real GDP
Which of the following services are provided by local government?
bus services
Aggregate Expenditure is the sum of
consumption, planned investment, government expenditure, and net exports
the Great Moderation refers to the
decreased volatility of the U.S. economy
In order to boost output, the federal government engages in _____ fiscal policy, which _____ government spending and _____ taxes.
expansionary; raises; lowers
expansionary monetary policy _________ consumption, investment, and net exports; ___________ aggregate expenditures; and ___________ aggregate demand
increases, boots, raises
S&P 500
index that shows the price changes of 500 different stocks
What will probably rise when the economy is in a recession
initial unemployment claimes
describe the business cycle
it is the fluctuation of GDP around the potential output
Suppose that the Federal Reserve has a 2% target on inflation. If actual inflation is 1%, then the Fed will want the new real interest rate to be:
lower than the neutral interest rate
Fiscal policy is increased in its effectiveness through:
the multiplier effect
an economy's potential output level is
the output that is possible when all resources are fully employed
when prices rise in the united states what is the effect on consumption and aggregate expenditure
the real value of wealth decreases, leading to a decrease in consumption and a decrease in aggregate expenditure
an example of a leading indicator is
the stock market
what is a narrow indicator
the stock price for JPMorgan Chase & Co
aggregate output
the total quantity of goods and services produced in an economy in a given period
Fiscal policy works best when it is:
timely, targeted, and temporary
when interest rises what is the effect on net exports and aggregate expenditures
Inflows of foreign savings cause the dollar to appreciate, and this reduces exports and increases imports, leading to a fall in net exports and a fall in aggregate expenditure
the higher the GDP deflator in an economy the
lower the real wealth in the economy, more expensive the country's exports
If the output gap is negative, then relative to the neutral interest rate, the Federal Reserve will _____ the real interest rate to drive _____ consumption and investment.
lower; up
A bank run occurs when:
many people want to withdraw their savings from a bank at the same time, and the bank does not have enough cash on hand
With a progressive tax, those with _____ income tend to pay a _____.
more; higher share of their income in taxes
a rise in prices leads to a
movement up and to the left, along the same aggregate demand curve
if you forecasted that the output gap will decline from 0% to -3% the unemployment rate will
raise by 1.5%
If the output gap is positive, the Federal Reserve will _____ the real interest rate to _____.
raise; cool inflationary pressures
If the actual inflation rate is greater than the target inflation rate, then relative to the neutral interest rate, the Federal Reserve will _____ the real interest rate to drive _____ consumption and investment.
raise; dowN
What is a broad indicator
real gross domestic income
If inflation is 4% and a firm gives its workers a 1.5% nominal wage raise, then:
real wages have fallen by 2.5%
If the output gap is positive, then the Federal Reserve will use its floor framework to _____ the federal funds rate, influence short- and long-term interest rates _____, and _____ total spending in the economy.
raise; upward; decrease
According to Okun's rule of thumb, for every 1% fall in the actual output below potential output the unemployment rate
raises by 0.5%
Suppose the economy is in a recession, you would expect to see the unemployment rate:
rise above the equilibrium employment rate
if an economy has a positive output gap of 1.5% this means
GDP is 1.5% above potential GDP
Which of the following is a reason to worry about government debt?
High and rising debt slows economic growth
You are sitting at your desk in your new job as the Chair of the Federal Reserve Bank of the United States. The interest rate where potential GDP meets real GDP is 2%, the inflation rate is 1%, and the output gap is -1%. What is the appropriate new nominal federal funds rate that you should set for the economy?
1.5%
You are the Chair of the Federal Reserve Bank of the United States. The neutral rate of interest is 2%, the inflation rate is 1%, and the output gap is -0.5%. Using the Fed's rule of thumb, what is the appropriate new nominal federal funds rate that you should set for the economy?
2%
Which of the following did the New Deal create?
unemployment benefits
Why is the discount rate the upper bound for the federal funds rate?
It is set higher than the federal funds rate
Why don't most tax expenditures help much if your federal tax bill is zero?
Most tax breaks reduce taxable income, but reducing taxable income below zero does not reduce the tax bill
output gap equation
Output Gap = ((actual aggregate output - potential output) / potential output) x 100
What is the floor framework that the Federal Reserve uses to influence the federal funds rate?
The Fed's approach of setting other interest rates to put a lower bound on how low the federal funds rate can go
You are the manager of a local bank. Due to unstable financial conditions, savers are worried that your bank may fail. When they show up in large numbers to withdraw their savings, you find that you do not have enough cash to meet the obligations. Where can you turn for a loan if no other bank will lend to you?
The discount window
You have saved $747. Where should you go if you want to open a checking account?
a commercial bank
A debt crisis occurs when:
a government cannot repay its loans
what will fall when the economy is expanding
applications for unemployment benefits
Suppose that the Kenyan government engages in expansionary fiscal policy. Ceteris paribus, which of the graphs shows the correct effect in the AD-AS framework?
increased AD, shift right
the stock market rises consistently and reaches a record high. Ceteris paribus, which of the graphs shows the correct effect on the AD-AS framework
increased AD, shift to the right
Suppose a high-income person, a middle-income person, and a low-income person all purchase identical houses that are financed by similar mortgages. Who spends the most on tax-preferred goods?
the high-income person
Suppose a high-income person, a middle-income person, and a low-income person purchase identical houses that are financed by similar mortgages. Who gets the largest tax benefit?
the high-income person
The Federal Reserve was created after:
a series of bank runs and bankruptcies
Monetary policy is defined as the:
adjustment of interest rates to influence economic conditions
What is a reserve requirement?
the minimum amount of reserves that each bank must hold