ECON 2105 Final

Total factor productivity captures the factors that influence the overall effectiveness of inputs.

True

Increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output demanded. - right; increase - right; decrease - left; increase - left; decrease

right; increase

A breakthrough in solar energy research that halves the cost of electricity will - cause the aggregate supply curve to become vertical. - shift the aggregate supply curve to the left. - have no effect on the aggregate supply curve. - shift the aggregate supply curve to the right.

shift the aggregate supply curve to the right.

If the economy shown in the figure begins on AD1 and SRAS1, what will happen in the short run and long run if the government begins a sustained period of increased spending? (https://gyazo.com/b307d2f6a67f7b590734fa65ba736f9a) - The economy moves from point D to C to A. - The economy moves from point C to A to B. - The economy moves from point D to C to E. - The economy moves from point C to E to B.

The economy moves from point C to E to B.

Order saving mechanisms from most liquid to least liquid - corporate bond - house - checking account - cash in your pocket - savings account

- cash - checking - savings - corporate bond - house

If an economy is growing at 10%, how long will it take for $1000 to turn into $4000? - 21 years - 14 years - 28 years - 7 years

14 years

According to the table, what is the labor force of this economy? (https://gyazo.com/e4e5cb1daf9da392e31dad314b87449a) - 300 - 50 - 350 - 500

350

Within the circular flow diagram, the arrows pointing counterclockwise represent flows of real items

False

If an employer uses an escalator clause to determine an employee's raise each year in an inflationary environment, the employer is more likely than the employee to want to use the personal consumption expenditures price index in this clause.

True

Knowing the marginal propensity to consume makes it possible to calculate the marginal propensity to save

True

The catch-up effect is the idea that up to a certain point, developing countries can achieve greater productivity for each unit of capital invested because they have the advantage of using technologies already developed by other countries.

True

Which event will shift the aggregate demand curve to the right? - decrease in taxes - increase in household debt - catastrophic hurricane hits the northeastern United States - decrease in military spending

decrease in taxes

Changes in taxes first cause changes in _____, and thus the government tax multiplier is _____ than the government spending multiplier. - aggregate spending; smaller - disposable income; smaller - aggregate spending; larger - disposable income; larger

disposable income; smaller

Bond prices and their yields are _____ because the bond's face value and _____are fixed, forcing its _____ to change in response to changing market conditions. - positively related; sales price; coupon payment - negatively related; sales price; coupon payment - negatively related; coupon payment; sales price - positively related; coupon payment; sales price

negatively related; coupon payment; sales price

Which of these would likely cause the market for loanable funds to change as shown in the following figure? (https://gyazo.com/d6b9dd068627077876c4e82b909f1490) - increased regulations placed on businesses - improved business expectations about future profits - increased incentives for individuals to save - a decrease in average incomes

a decrease in average incomes

Which statement regarding discretionary and mandatory spending is correct? - Mandatory spending may act as an automatic stabilizing force in the macro economy. - Mandatory spending programs include national defense, income security, and education. - Discretionary spending is authorized by permanent laws. - Discretionary spending has steadily grown as a percentage of the federal budget since the 1960s.

Mandatory spending may act as an automatic stabilizing force in the macro economy.

What component of GDP includes college tuition? - durable goods - services - private domestic investment - nondurable goods

services

If the economy shown in the figure begins on AD1 and SRAS1, what will happen in the short run and long run if the price of oil rises significantly? (https://gyazo.com/1516d6e063bc25854cd2793dc678fada) - The economy will move from point C to A to B. - The economy will move from point D to C to E. - The economy will move from point D to C to B. - The economy will move from point C to E to B.

The economy will move from point C to A to B.

Money leakages make it more difficult to use monetary policy to pull the economy out of a recession.

True

Thomas Malthus believed that geometric growth of the population and the arithmetic growth of the food supply would never be altered

True

To convert a nominal value to a real value in dollar terms, the base year index must be set at 100

True

When interest rates on short-term bonds exceed those on long-term bonds, a recession is likely to occur

True

The U.S. economy is currently experiencing high unemployment and low inflation. To lessen the unemployment problem, the Federal Reserve could - lower the discount rate, thereby enabling banks to increase liquidity, lend more money, decrease the money supply, stimulate spending, and create jobs. - buy bonds through open market operations, thereby enabling banks to lend more money, increase the money supply, stimulate spending, and create jobs. - sell bonds through open market operations, thereby enabling banks to lend more money, increase the money supply, stimulate spending, and create jobs. - raise the reserve requirement, thereby enabling banks to lend more money, increase the money supply, stimulate spending, and create jobs.

buy bonds through open market operations, thereby enabling banks to lend more money, increase the money supply, stimulate spending, and create jobs.

Which list represents monetary policy actions that are consistent with one another? - buy government bonds, lower reserve requirements, lower the discount rate - sell government bonds, lower reserve requirements, raise the discount rate - buy government bonds, raise reserve requirements, raise the discount rate - sell government bonds, raise reserve requirements, lower the discount rate

buy government bonds, lower reserve requirements, lower the discount rate

The graph depicts an economy originally in equilibrium at point e. Assume that the government uses expansionary fiscal policy. Which statement is TRUE? (https://gyazo.com/50e9d896136428e70ee8f2e780907531) - The movement from point a to point b is due to workers and suppliers adjusting their expectations to higher price levels. - The movement from point a to point b is due to increased consumer spending brought about by increased government spending and/or lower taxes. - The movement from point e to point a is due to decreased consumer spending brought about by increased government spending and/or lower taxes. - The movement from point e to point a is due to workers and suppliers adjusting their expectations to lower price levels.

The movement from point a to point b is due to workers and suppliers adjusting their expectations to higher price levels.

If your goal was to have the largest amount of money in your bank account as possible in two years, which option would you choose? (Assume that the beginning deposit and all interest earnings remain in the account for the full two years.) - a beginning deposit of $950, earning 5% per year - a beginning deposit of $930, earning 8% per year - a beginning deposit of $1,000, earning 4% per year - a beginning deposit of $1,010, earning 3% per year

a beginning deposit of $930, earning 8% per year

Which of these would NOT shift the investment demand schedule? - a change in expectations - a change in operating costs - a change in technology - a change in interest rates

a change in interest rates

The main idea of a circular flow diagram is that every dollar spent in an economy becomes a dollar of income to someone

True

Suppose a government finances its expansionary fiscal policy by borrowing from the public. Joseph is concerned that this will increase the demand for loanable funds, drive up interest rates, and leave less loanable money available for consumers and businesses. Joseph is concerned about the _____ effect. - crowding-out - opposite expansionary - boomerang - ricochet

crowding-out

In the figure, equilibrium savings equals _____ when investment is at AE = C + I0, and _____ when investment is at AE = C + I1. (https://gyazo.com/4955bd5477d161c1f539ad9606e15088) - $100; $200 - $50; $150 - $0; $0 - -$50; -$200

$100; $200

A bank has excess reserves of $4,000 and demand deposits of $40,000; the reserve requirement is 20%. Its current level of total reserves is _____. If the reserve requirement is increased to 25%, the new level of excess reserves would be _____. - $25,000; $3,000 - $30,000; $5,000 - $15,000; $4,000 - $12,000; $2,000

$12,000; $2,000

A sheep ranch produces $30 worth of wool. A suit manufacturer produces $60 worth of suits. A retail outlet sells a suit to a customer for $180. The change in GDP would be - $270 - $30 - $0 - $180

$180

When a perpetual bond with a face value of $1,000 is issued, general interest rates are 3%, so the annual interest payment is _____. After the bond is issued, market interest rates rise to 4%, which forces the price of the bond to _____ to _____. - $30; rise; $750 - $30; fall; $750 - $3; fall; $75 - $3; rise; $750

$30; fall; $750

If the national debt is $55 million and this year's deficit is $5 million, what would the new national debt be? - $275 million - $60 million - $11 million - $50 million

$60 million

Based on the information provided in the graph, at an income level of $300, savings equals _____, the MPC equals _____, and the APC equals _____. (https://gyazo.com/53200b3a540557ef6f722e930d5b11a4) - -$80; 0.6; 1.27 - $80; 0.6; -0.27 - $300; 0.4; 0.5 - -$120; 0.4; -0.7

-$80; 0.6; 1.27

Based on the information provided in the graph, when income equals $1,000, the average propensity to save equals (https://gyazo.com/44a60e7809bb8467c0496568f4d74feb) - 0.6 - 0.2 - 0.4 - 0.5

0.2

Suppose the town of Treeville has a population of 200, of which 120 are in the labor force. Of those in the labor force, 100 are employed and 20 are unemployed. The unemployment rate in Treeville is - 10% - 60% - 20% - 17%

17%

In the figure, suppose investment has increased from AE = C + I0 to AE = C + I1. The multiplier equals (https://gyazo.com/75aabc85b7fafa84cc3ff27fe89131e9) - 0.6 - 0.4 - 2.5 - 5

2.5

A bond has a face value of $1,000 and an annual interest payment of $44. What is its coupon rate, and what is its yield if it is sold for $1,100 in the secondary market? - 4.4% and 10%, respectively - 44% and 4.4%, respectively - 4.0% and 4.4%, respectively - 4.4% and 4.0%, respectively

4.4% and 4.0%, respectively

If the reserve requirement is 25%, then the potential money multiplier is _____ and the actual money multiplier is _____. - 25; greater than 25 - 250; greater than 250 - 25; less than 25 - 4; equal to or less than 4

4; equal to or less than 4

If a one-year bond with a face value of $1,000 is sold for $950, what is the bond's approximate yield? - 1.05% - 5.26% - 9.5% - 95%

5.26%

Last year, the consumer price index was 115 while the consumer price index for this year is 125. The rate of inflation is - 10.8% - 9.2% - 8% - 8.7%

8.7%

If the economy starts below full employment, an expansionary fiscal policy will shift the aggregate demand curve from _____ to _____, and equilibrium will move from point _____ to _____. (https://gyazo.com/cf9354627725230d81020ae669ba7caa) - AD0; AD1; b; a - AD1; AD0; a; b - AD0; AD1; a; b - AD1; AD0; b; a

AD0; AD1; a; b

In the following PPF, between which two points would long-run growth be represented? (https://gyazo.com/56ad852d7d518c5d0af70cdc3179063f) - B to C - A to B - A to C - C to D

C to D

__ unemployment is the result of changes in the business cycle - seasonal - structural - cyclical - frictional

Cyclical

Which statement(s) is/are TRUE regarding the paradox of thrift? I. People intend to save less but their actions actually lead to an increase in savings. II. For the paradox of thrift to occur, investment must be positively related to income. III. The increased savings of households leads to more consumption, income, and output, increasing investment and aggregate savings. - II and III only - I and II only - I, II, and III - II only

II only

Which statement is an example of an open market operation? - A bank loans out all but 5% of its funds to hold in storage. - The central bank lowers the interest rate from 5% to 3% on the loans it gives to commercial banks. - Naftali runs a bazaar in Baghdad selling odds and ends type trinkets to tourists. - The central bank sells bonds to the public via the commercial banking system.

The central bank sells bonds to the public via the commercial banking system.

In which situation is a country least likely to be producing on its production possibilities curve? - There are large legal penalties for breaking a contract - Land is dry and has low productivity in farming - Average education level is of the 4th grade - There are legal disputes over the ownership of 15% of the factory buildings in the country

There are legal disputes over the ownership of 15% of the factory buildings in the country

Business cycles are alternating increases and decreases in macroeconomic activity

True

Determinants of aggregate demand include the components of GDP: consumption, investment, government spending, and net exports

True

Each regional Federal Reserve branch helps compile information about the economic conditions in its home region

True

If foreign countries abandoned the use of the dollar as their only form of legal currency, the U.S. money multiplier would likely increase.

True

Which event would not be included in total factor productivity measurements? - a severe military conflict that restricts daily movements of labor and capital - an earthquake that disrupts a country's production for several weeks - an unexpected breakthrough in GPS technology that enhances transportation - a large investment in physical capital that makes labor more productive

a large investment in physical capital that makes labor more productive

Which is not a financial intermediary in the market for loanable funds? - credit unions - mutual funds - a school - an insurance company

a school

An economy is expected to produce higher profits for business owners at the same time that the country's stock market surges. What changes can be expected in the country's market for loanable funds? - an increase in demand and a decrease in supply - increases in both demand and supply - decreases in both demand and supply - a decrease in demand and an increase in supply

an increase in demand and a decrease in supply

The demand for loanable funds is downward sloping because - as interest rates fall, the value of the money supply drops. - higher interest rates are equivalent to higher returns on business projects. - higher interest rates encourage firms to borrow more. - as interest rates fall, businesses find more projects to be profitable and thus want to borrow more.

as interest rates fall, businesses find more projects to be profitable and thus want to borrow more.

What are the determinants of short-run aggregate supply?- changes in education, taxes, and business and inflationary expectations - changes in input prices, taxes, and business and inflationary expectations - changes in government spending, taxes, and business and inflationary expectations - changes in input prices, taxes, and technology

changes in input prices, taxes, and business and inflationary expectations

If the economy shown in the figure begins at point C, an increase in consumer confidence leads to what changes in the short run? (https://gyazo.com/c9ba016124a3838f06a74c5239291dc6) - a decline in tax revenue - cost-push inflation - demand-pull inflation - an increase in unemployment

demand-pull inflation

Assume the reserve requirement is 25% and the Federal Open Market Committee buys $4 million of U.S. government bonds from the public. As a result of this transaction, the supply of money is - directly reduced by $4 million and has the potential to be reduced by another $12 million. - directly increased by $4 million and has the potential to be increased by another $8 million. - not directly affected but has the potential to be increased by a total of $12 million. - directly increased by $4 million and has the potential to be increased by another $12 million.

directly increased by $4 million and has the potential to be increased by another $12 million.

Suppose 3 years ago a nation's inflation rate was 8%, 2 years ago it was 5%, and last year it was 2%. This nation is undergoing - hyperinflation - disinflation - deflation - a drop in price level

disinflation

Gross domestic product is a measure of - production by owners of labor and capital only - household production - economy's total output - total weight of all goods produced

economy's total output

A passive job search: - entails talking to friends about jobs - includes contacting a private employment agency - entails the scheduling of job interviews - participating in productive activities like sending out resumes

entails talking to friends about jobs

Assume taxes increase by $200 and the marginal propensity to consume is 0.75. Equilibrium income would be likely to - fall by $600. - remain the same. - rise by $800. - by $800.

fall by $600.

In the national income and product and product accounts system, the two main approaches to measuring the size of the economy are - government and private - production and consumption - income and ependitures - imports and exports

income and expenditures

In the simple circular flow model - goods and services are equal to consumer spending - saving is equal to consumer spending - factor payments are equal to goods and services - income is equal to spending

income is equal to spending

If Kelly transfers $500 from her savings account to her checking account, M1 will [increase/decrease/remain the same] and M2 will [increase/decrease/remain the same].

increase, remain the same

Unanticipated __ is detrimental to economic growth - Neither inflation nor deflation is detrimental to economic growth. - inflation - deflation - inflation or deflation

inflation or deflation

If the marginal propensity to consume is 0.6; full employment income is $500; and the current equilibrium is $750, a(n) _____ gap exists, such that a(n) _____ in spending equal to _____ is needed to close the gap. - inflationary; decrease; $250 - recessionary; increase; $100 - recessionary; increase; $250 - inflationary; decrease; $100

inflationary; decrease; $100

Cost-push inflation occurs because of a shift to the - left of the short-run aggregate supply curve - right of the short-run aggregate supply curve - right of the aggregate demand curve - left of the aggregate demand curve

left of the short-run aggregate supply curve

Bonds are considered to be _____ than stocks because _____. - less risky; bondholders earn dividends and stockholders do not - riskier; stockholders are less affected by a firm's bankruptcy - riskier; stockholders earn dividends and bondholders do not - less risky; bondholders are less affected by a firm's bankruptcy

less risky; bondholders are less affected by a firm's bankruptcy

The __ is the change in consumption associated with a change in income - average propensity to consume - marginal propensity to consume - marginal propensity to save - average propensity to save

marginal propensity to consume

A production function says output per worker = A x f(L/L, K/L, H/L, N/L) and tells us all of these EXCEPT __ will lead to a better standard of living. - increases in capital - more human capital - more natural resources - more people

more people

Assume the economy is currently experiencing aggregate expenditures greater than aggregate income. The economy will move toward equilibrium as businesses begin to produce _____, leading to _____ employment and _____ income. - less; more; more - less; less; less - more; more; more - more; less; less

more; more; more

A bond's price and yield - must sum to 1000 - move in the same direction - move in opposite directions - are usually equal in value

move in opposite directions

When Main Street Bank buys new automatic teller machines, the quantity of __ in the economy increases - land and natural resources - labor - physical capital - entrepreneurial ability, technology, and ideas

physical capital

One argument against using taxation to pay off the public debt is that it will redistribute wealth from - poorer bondholders to richer people who do not own bonds. - poorer people who do not own bonds to richer bondholders. - richer bondholders to poorer people who do not own bonds. - richer bondholders to richer people who do not own bonds.

poorer people who do not own bonds to richer bondholders.

A simple circular flow diagram shows that the factors of production are - purchased by businesses - owned by the government - purchased by households - traded in the market for goods and services

purchased by businesses

If the marginal propensity to consume is 0.6, full employment income is $1000, and the current equilibrium is $750, a(n) __ gap exists, such that a(n) __ in spending equal to __ is needed to close the gap. - recessionary; increase; $100 - inflationary; decrease; $100 - inflationary; decrease; $250 - recessionary; increase; $250

recessionary; increase; $100

Assume the MPC is 0.75, full employment is considered to be at a GDP level of $500 billion, and the GDP is $600 billion. What should the government do to achieve full employment? - increase spending by $25 billion - reduce spending by $100 billion - reduce spending by $25 billion - increase spending by $10 billion

reduce spending by $25 billion

What is a difference between the typical structure of a retirement savings account (401(k)) and an individual retirement arrangement (IRA)? - IRA contributions are typically made with pretax income while 401(k) contributions are made with post tax income. - Employers often match 401(k) contributions, but they do not match IRA contributions. - IRAs typically earn interest, but 401(k) accounts typically earn dividends. - Taxes are due on withdrawals from an IRA but not on withdrawals from a 401(k) account.

Employers often match 401(k) contributions, but they do not match IRA contributions.

Nobel prize winner economist - David Card - Abhijeet Banerjee - Esther Duflo - John Keynes

Esther Duflo

Compared with stocks, bonds tend to reward investors with a higher average return on investment over the long run.

False

_____ government spending, _____ transfer payments, and _____ taxes are all examples of expansionary fiscal policy. - Increasing; increasing; lowering - Reducing; increasing; raising - Reducing; increasing; lowering - Increasing; reducing; raising

Increasing; increasing; lowering

A rise in real GDP is associated with increased employment.

True

The graph depicts an economy originally in equilibrium at point e. Assume that the government uses expansionary fiscal policy. The movement from point a to point b is due to (https://gyazo.com/50d6e62885156741de3e7af151685496) - workers and suppliers adjusting their expectations to lower price levels. - workers and suppliers adjusting their expectations to higher price levels. - decreased consumer spending brought about by increased government spending and/or lower taxes. - increased consumer spending brought about by increased government spending and/or lower taxes.

workers and suppliers adjusting their expectations to higher price levels.

A bank has $50,000 in deposits from its checking account customers and loans of $49,000. Of the $49,000 loaned out, $43,000 remains in the checking accounts of the loan recipients. The bank has $50,000 cash on hand, and the reserve requirement is 25%. The reserve ratio for this bank is _____, and it _____ meeting its reserve requirement. - 20%; is - 53.76%; is - 0.002%; is not - 186%; is not

53.76%; is

Assume that Macroland starts in long-run equilibrium and then faces a reduction in government spending. What chain of events will lead to a new long-run equilibrium? - Short-run aggregate supply falls causing unemployment; with less output, investment falls, leading to a reduction in long-run aggregate supply and a new long-run equilibrium with lower output and higher prices. - Aggregate demand falls causing unemployment; unemployed workers eventually accept lower wages, increasing short-run aggregate supply and leading to a new long-run equilibrium with lower prices and the original output. - Short-run aggregate supply falls; then aggregate demand falls, leading to a new long-run equilibrium with lower prices and lower output. - Aggregate demand falls causing prices to fall; at lower prices, aggregate demand then rises back to its original level, leading to a return to the original price and output levels.

Aggregate demand falls causing unemployment; unemployed workers eventually accept lower wages, increasing short-run aggregate supply and leading to a new long-run equilibrium with lower prices and the original output.

Which assumption is not a problem related to using the consumer price index (CPI) to accurately state the rate of inflation? - CPI does not deal with producer prices - CPI does not include new products - CPI does not account for quality changes - CPI assumes that people do not substitute goods

CPI does not deal with producer prices

Which change is likely to increase wages the most in a country? - Capital-to-labor ratio rises by 2% - Labor force grows by 2% - Drainage of swampy land allows 2% more land to be farmed - Since the growth rate is 2% in all listed situations, wages would increase equally in all of them

Capital-to-labor ratio rises by 2%

Which statement is not correct? - Discouraged workers are considered part of the leisure class and not part of the labor force - Discouraged workers have stopped actively seeking work - Discouraged workers are considered unemployed - Discouraged workers are not classified as unemployed

Discouraged workers are considered unemployed

Esteban's annual salary is $80,000, of which he saved $20,000. When he received his bonus of $10,000, he spent $8,000 on home renovations and saved the remaining $2,000. Which statement is TRUE? - Esteban's average propensity to consume increased. - Esteban's average propensity to consume cannot be calculated. - Esteban's average propensity to consume decreased. - Esteban's average propensity to consume stayed the same.

Esteban's average propensity to consume increased.

Consumer price index measures private as well as public goods

False

According to the table, which country will have the lowest real GDP per capita in 23.67 years? (https://gyazo.com/4bd7ddb6916200b71272a169a7777ac6) - Macia - Nomia - Ecoland - Coland

Nomia

Which situation indicates that the total output in a country has grown the most when the starting output is the same in all situations? - Output per worker grows by 4% while the labor force grows by 12%. - Output per worker grows by 11% while the labor force remains constant. - Output per worker grows by 10% while the labor force grows by 10%. - Output per worker remains constant while the labor force grows by 11%.

Output per worker grows by 10% while the labor force grows by 10%.

Which of these provides an accurate description regarding the slope of the short-run aggregate supply curve? - The negative slope of the short-run aggregate supply curve is steeper the more flexible prices are or flatter the more rigid prices are. - The positive slope of the short-run aggregate supply curve is steeper the more flexible prices are or flatter the more rigid prices are. - The positive slope of the short-run aggregate supply curve is flatter the more flexible prices are or steeper the more rigid prices are. - The negative slope of the short-run aggregate supply curve is flatter the more flexible prices are or steeper the more rigid prices are.

The positive slope of the short-run aggregate supply curve is steeper the more flexible prices are or flatter the more rigid prices are.

Under which condition would the Fed be most likely to engage in its role as the lender of last resort? - when record amounts of student loans are paid back before interest rates rise - if a lack of confidence in the financial system causes savers to withdraw money from banks - when a stock market crash causes people to sell their stocks and purchase bank CDs instead - when throngs of borrowers apply for loans as the housing market picks up

if a lack of confidence in the financial system causes savers to withdraw money from banks

In September 2013, the Federal Open Market Committee said it would wait for more evidence that progress had been made on the economic recovery before it cut back on open market purchases. The Bureau of Economic Analysis did not release its advanced estimate of the third quarter's GDP growth until a month after the quarter ended. The second estimate was released two months after the quarter ended, and a third revised estimate was released about three months after the quarter ended. This wait for accurate data to be collected is known as the _____ lag. - recognition - decision - information - implementation

information