econ 320
Assume that apples cost $.50 in 2002 and $1 in 2009. Whereas oranges cost $1 in 2002 and $.50 in 2009. if 10 apples and 5 oranges were purchased in 2002 and 5 apples and 10 oranges were purchases in 22009, the CPI for 2009, using 2002 as the base year is
1.25
If nominal exchange rate falls 10%, domestic price level rises 4%, foreign price level rises 6%, real exchange rate falls _______.
12%
If the currency-deposit ratio equals .5 and the reserve-deposit and the reserve-deposit ratio = .1 then the money multiplier equals
2.5
if 5 swiss francs trade for 1$, the US price level equals $1 per good, and the swiss price level equals 2 francs per good, then the real exchange rate between swiss & US goods is ____ swiss goods per US goods.
2.5
If 7 million workers are unemployed, 143 are employed, and the adult population equals 200 million, then the unemployment rate equals
4.7
According to the quantity theory of a 5% increase in money growth increases inflation by _____%. According to the Fisher equation, a 5% increase in the rate of inflation increases the nominal interest rate by _____.
5, 5
Chain weighted measures of real GDP make use of prices from
A continuously changing base year.
The US dollar exchange rate (units of foreign currency per US dollar) for currencies of countries with high inflation relative to the US has tended to _____. and the US dollar exchange rate (units of foreign currency per US dollar) for currencies of countries with low inflation rates relative to the US has tended to ______.
Appreciate, depreciate
Inflation Tax means
As the price level rises, the real value of money held by the public decreases.
What is not an affect of expected inflation?
Causing lower real wages
In the neoclassical model with fixed income, if there is a decrease in taxes with no change in government spending, then public saving _______ and private saving _______.
Decreases, increases.
In a fractional-reserve banking system, banks creates money because
Each dollar of reserves generates may dollars of demand deposits
In the case of unions, the conflict of interest between different groups of workers results in insiders wanting ____ while outsiders want _______.
High wages, more hirings
Assume 2 economies are identical in every way except that one has a higher saving rate. According to the solow growth model, in the steady-state, the country with the higher saving rate will have ____ level of output per person and ____ rate of growth per worker as/than the country with the lower saving rate.
Higher, the same
Which of the following is a flow variable?
Income
if the government of a small open economy wishes to reduce a trade dedicit, which policy action will be successful in achieving this goal?
Increasing taxes.
Which is the best example for structural unemployment?
Kirby is seeking a job as a divine pilot, but the high union wages in the industry have limited the number of jobs available.
Assume that a small open economy gets involved in a global war in which it's government purchases increase and the rest of the world government purchases also increase. Then, for a small country, net exports ____.
May increase, decrease, or stay the same.
Open market operations change the _______, changes in the interest rate paid on reserves change the ________; and changes in the discount rate change the __________.
Monetary base, money multiplier, monetary base
In the solow growth model, for any give n capital stock the ____ determines how much output the economy produces and the _______ determines the allocation of output between consumption and investment.
Production function, saving rate.
Compared to typical open market operations, when pursuing quantitative easing, Fed purchases tended to be ______ securities.
Riskier and long term
To prevent banks from using excess reserves to make loans that would increase the money supply, the Fed could conduct open market ____ and _____ the interest rate paid on bank reserves.
Sales, raise
According to the purchasing power parity, if the dollar price of oil is higher in NY than in London. arbitrageurs will ____ oil in New York, and ______ oil in London to drive ______ the price of oil in New York.
Sell, buy, down
An assumption of ________ is more plausible for studying the short-run behavior of the economy, while an assumption of the ____ is more plausible for studying the long-run equilibrium behavior of the economy.
Sticky prices, flexible prices.
According to the quantity theory of money, ultimate control over the rate of inflation in the U.S is exercised by
The Fed
Which of the following is not a proposed explanation for the fact that Americans on average work 20% more hours than the typical resident of western europe?
The underground economy is larger in America than in Europe.
Assume that a war reduces the initial value labor force but does not directly affect it's capital stock. Then the immediate impact would be that
Total output falls, but output per worker rises.
In the model of the steady state unemployment rate with fixed labor force, the rate of job findings equals the % of the ______ who find a job each month, while the rate of job separation equals the % of the ____ who lose their job each month.
Unemployed, employed
The property of diminishing marginal product means that after a point, when additional quantities of
a factor is added (when another factor remains fixed), the marginal product of that factor diminishes.
Suppose an economy is initially in a steady state with capital per worker exceeding the golden rule level. If the saving rate falls to a rate consistent with the golden rule, then in the transition to the new steady state, consumption per worker will
always exceed the initial value
the adoption of an investment tax in the small open economy is likely to lead to
an increase in domestic investment but no change in domestic saving in the small economy.
An appreciation of the real exchange rate in a small open economy could be the result of
an increase in government spending
an increase in the trade deficit of a small open economy could be the result of
an increase in government spending
When the Fed makes an open market sale it
decreases the monetary base
People use money as a store of value when they
hold money for to transfer purchasing power into the future.
An example of an imputed value in the GDP is the
housing services enjoyed by homeowners
Assume 2 economies are identical except one has higher population growth rate. According to the solow growth model, in the steady state, the country with the higher population growth rate will have a _______ level of output per person and _____ rate of growth of output per worker as/than the country with the lower population growth rate.
lower, the same
In a small open economy, starting from a position of balances trade, if the government increases the income tax, this causes a tendency toward a trade ______ and __________ net capital outflow.
surplus, positive
if increased immigration raises the labor force, the neoclassical theory of distribution predict
the real wage will fall and the real rental price of capital will rise.
If a war destroys a large portion of a country's capital stock but the saving rate is unchanged, the solow model predicts that output will grow and that the new steady state will approach
the same level of output per person as before.
Efficiency wage theories suggest that a firm may pay workers more than market clearing wage for all reasons except
to reduce the firm's wage bill.
All are reasons for frictional unemployment except
unemployed workers accepting the first job they receive.
The recent reduced demand for unskilled workers relative to skilled workers has led to ____ for unskilled workers in Europe compare to _____ for unskilled workers in the US.
unemployed, employed
Assume that some large foreign countries decide to subsidize investment by instituting an investment tax credit, then a small country's real exchange rate
will fall and Net Exports increase.
According to the neoclassical theory of distribution, in an economy described by a cobb-douglas production function, workers should experience high experience of real wage growth when
average labor productivity is growing rapidly
one possible benefit of moderate inflation is
better functioning labor markets
according to the neoclassical theory of distribution, if firms are competitive and subject to constant returns to scale, total income in the economy is distributed
between the labor and capital used in production according to their marginal productivities.
If the Fed announces that it will raise the money supply in the future but does not change the money supply today
both the nominal interest rate and the current price level will increase.
In the case of an unanticipated inflation...
creditors with an unindexed contract are hurt because they get less than they expected in real terms.
in a small open economy, if the world real interest rate is above the rate at which national saving equals domestic investment, then there will be a trade _______ and _________ net capital outflow.
deficit, positive
when exports exceed imports, all the following are true except
domestic investment exceeds domestic saving
The public policy implication of Golin and Katz's analysis of growing income inequality is that reversing this trend will require that more of society's resources be put in to
education
in an economic model
exogenous variables affect endogenous variables
All of the following are measures of GDP except the total:
expenditures of all business in the economy
most hyperinflations end with __________ reforms that eliminate the need for _______________.
fiscal, seigniorage
The golden rule of the steady state capital stock
implies a choice of a particular saving rate
Starting from a steady state situation, if the saving rate increases, the rate of growth capital per worker will
increase until the new steady state is reached .
if the real exchange rate depreciates from 1 japanese good per US good, then US exports _______ and imports ______.
increase, decrease
in a small open economy, if the world interest rate falls, then domestic investment will _______ and the real exchange rate will ______ holding all else constant.
increase, increase
A competitive, profit maximizing firm, hires labor until the
price of output multiplied by the marginal capital of labor equals the wage. (P x MCL = Wage)
In the solow growth model, the economy ends up with a steady state level of capital
regardless of the starting level of capital
A competitive firm is
small in comparison to the market in which it trades
When the demand for money parameter K, is large, the velocity of money is ________ and money is changing hands _______.
small, infrequently.
