econ
This year pizza hut makes a total investment of 1.3 billion in new stores. its depreciation in this year is $300 million. pizza huts gross investment is ________ and its net investment it ____________
$1.3 billion;$1.0 billion
In January 2010, Tim's Gyms owned machines valued at $1 million. During the year, the market value of the equipment fell by 30%. During 2010, Tim spent $200,000 on new machines. Tim's net investment totaled
$100,000 (1 million x .30 - 200,000)
the slope of the consumption function is
1
the expenditure multiplier equals
1(1-slope of AE curve)
The expenditure approach to measuring GDP.
GDP = C + I + G + Xn
The income approach to measuring GDP.
GDP = W + I + R + P
The calculation of the final goods and services sold in an economy would NOT include
General Motors' purchases of tires for new automobiles
Our economist says that raising taxes on gas would be in the social interest. What does that economist mean?
Higher taxes on gas would benefit society as a whole
classical growth theory
I II and III
neoclassical growth theory
I II and III
the federal open market committee
is the main policy-making organ of the federal reserve
the long run aggregate supply (LAS) curve
is vertical
a banks required reserves are calculated by multiplying
its deposits by the required reserve ratio
moving along the aggregate production function, what is NOT held constant
labor
employment and total potential GDP increase if the
labor supply curve shifts rightward and the labor demand curve does not shift
in the keynesian model of aggregate expenditure, real GDP is determined by the
level of aggregate demand
The branch of economics that deals with the analysis of the whole economy is called
macroeconomics
GDP
measures the value of the aggregate production of goods and services in a country during a given time period
Which of the following is NOT an investment in human capital?
a student purchases a laptop computer
working age population
ages 16+ (not in jail, hospital, etc.)
at equilibrium expenditure
aggregate planned expenditure equals real GDP
which of the following is consistent with the law of demand
an increase in the price of a soda causes a decrease in the quantity of soda demanded
which of the following shifts the aggregate demand curve rightward
an increase in the quantity of money
A point outside a production possibilities frontier indicates
ann output combination that society cannot attain given its current current level of resources and technology
the majority of money is created when
banks make loans
they keynesian model of aggregate expenditure assumes that
both individuals firms prices and the price level are fixed
A person has a comparable advantage in an activity whenever he or she
can perform the activity at a lower opportunity cost than anyone else
reserves are
cash in a banks vault plus its deposits at federal reserve banks
the MPC is equal to
changeC/ChangeYD
Fiscal Policy
changes in government spending or taxation to promote full employment, price-level stability, and economic growth
suppose people buy more of good 1 when the price of good 2 falls. these goods are
complements
disposable income is divided into
consumption and saving
the AD curve shows the sum o
consumption expenditure, investment, government expenditures on goods and services, and net exports
a rise in the real interest rate
creates a movement upward along the demand for loanable funds curve
Components of M1 Money Supply
currency (coins and paper money) and travelers checks plus checking deposits (all deposits in commercial banks and "thrift" or savings that can be withdrawn) owned by individuals and businesses
in the United States today, money consists of
currency and deposits at banks
M1
currency+travelers checks+checking deposits at savings and loans
if the economy's capital stock decreases over time
depreciation exceeds gross investment
federal reserve policy tools include all of the following EXCEPT
desired reserve ratios
rule of 70
estimate how long it will take the level of any variable to double
the interest rate banks charge other banks for overnight loans is
federal funds rate
NOT and asset of the federal reserve
federal reserve notes
if a nation's population grows
growth in real GDP per person will be less than the growth of real GDP
the aggregate demand curve
has a negative slope
the aggregate expenditure curve shows
how planned aggregate expenditure and real GDP are related
historical record of united states since 1910
mostly positive economic growth, though the great depression caused actual GDP to dip well below potential GDP
A reduction in the amount of unemployment
moves the economy's point of production closer to the production possibilities frontier
Real income=
nominal income/CPI x 100
credit cards are
not money because they represent a loan of money to the user
unemployed
not working but looking for a job
The loss of the highest valued alternative defines the concept of
opportunity cost
Fundamental economic problems basically arise from
our wants exceeding our scarce resources
Personal disposable income=
personal income-income taxes
in the very short run, the components of aggregate planned expenditure that depend on the level of real GDP are
planned consumption and expenditure and planned imports
the slope of the aggregate expenditure curve equals the change in
planned expenditure divided by the change in real GDP
in the very short term, in the keynesian model, which of the following is fixed and does not change when GDP changes
planned investment
Which of the following statements regarding the production possibilities frontier is true
points inside the frontier are attainable
a consumption function shows a
positive(direct) relationship between consumption expenditure and disposable income
the long run aggregate supply curve is vertical because
potential GDP is independent of the price level
The economic level at which the economy can no longer produce additional amounts of a good without lowering the production level of another product.
production efficiency
in the figure above, at the point where AD equals SAS
real GDP exceeds potential GDP
economic expansion
real GDP increases, unemployment decreases
in the long run
real GDP is equal to potential GDP
the federal reserve system
regulates and conducts nations finances
according to the intertemporal substitution effect, when the price level increases, the interest rate
rises and the quality of the real GDP demand decreases
when disposable income is 0, consumption is $2000. then
savings= -$2000
the fed buys $100 million of government securities from bank A. what is the effect on the federal reserves balance sheet
securities increase by $100 million and reserves of bank A increase by $100 million
when a depository institution pools risk, it
spreads loans losses across many depositors so that no one depositor faces a high degree of risk
the monetary base is
sum of federal reserve notes, coins, and depository institutions' deposits at the federal reserve
the discount rate is the interest rate
that the fed charges on its last resort loans
which of the following institutions in NOT a depository institution?
the US treasury
equilibrium expenditure occurs where
the agregate expenditure curve crosses the 45 degree line
what is the marginal propensity to consume
the change in consumption expenditure divided by the change in disposable income
because of the choices people make in the pursuit of profit, new growth theory argues that
the economy can enjoy persisting economic growth
which of the following will occur if the fed buys $10 million of securities from the university national bank
the fed will pay by increasing the university national banks deposit account with the fed by $10 million
NOT part of the structure of the federal reserve system
the federal government
an open market operation involves
the federal reserves purchase or sale of securities
NOT one of fed's monetary policy tools
the income tax rate
1-MPC equals
the marginal propensity to save
Labor force
the number of people employed and the unemployed
the term "capital" as used in macroeconomics, refers to
the plant, equipment, buildings, and inventories of raw materials and semi-finished goods.
the sum of the components of aggregate expenditure that vary with real GDP is called
induced expenditures
Production efficiency occurs when production
is on the production possibilities frontier
gross investment
the purchase of new capital
The law of demand states that changes in
the quantity demanded of a good are inversely related to changes in its price
the quantity theory of money predicts how changes in
the quantity of money affect the price level
changes in all of the following shift the supply curve of loanable funds except
the real interest rate
a rise in the price level changes aggregate demand because
the real value of peoples wealth decreases and so they decrease their consumption
The circular flow diagram shows that
the total amount of income generated by the economy equals the total purchases of final goods and services
The production possibilities frontier is the boundary between
those combinations of goods and services that can be produced and those that cannot
the equation of exchange states that the price level is equal to
velocity of circulation multiplied by the quantity of money divided by real GDP
full employment
when unemployment rate equals the natural unemployment rate
M2
M1+savings deposits, mutual funds, and time deposits
which of the following is true?
MPS+MPC=1
Real GDP
Nominal GDP/GDP Deflator x 100
National Income
Personal Income-income received but not earned+income earned but not received
if demand pull inflation occurs when the economy is already at potential GDP, then following the initial increase in aggregate demand, the
SAS curve shifts leftward
in the figure above, as the economy adjusts towards equilibrium, the
SAS curve will shift leftward
Calculating nominal GDP
The quantity of various goods produced in a nation times their current prices, added together.
years to double GDP per capita=
70/ percent growth rate
In January 2010, Tim's Gyms owned machines valued at $1 million. During the year, the market value of the equipment fell by 30%. During 2010, Tim spent $200,000 on new machines. Tim's gross investment totaled
$200,000
if bank A holds $200 in reserves, deposits are $1000, and the desired ratio is 15 percent, how much are excess reserves
$50
unemployment rate formula
(unemployment/labor force) x 100
GDP
- the market value of the final goods and services produced within a country. GDP= C + Ig + G + Xn Personal Consumption Expeditures ( C) Gross Private Domestic Investment (Ig) Government Purchases (G) Net Exports (Xn)
when bank deposits increase from $1 million to $2 million, banks required reserves increase from $100,000 ti $200,000. the required reserve ratio is
.10
when disposable income increases from 6 trillion to 6.5 trillion, consumption expenditure increase from 5.5 trillion to 5.9 trillion. the MPC equals
0.2
if the marginal propensity to save is .6, then the marginal propensity to consume is
0.4
the real interest rate
=nominal interest-inflation rate
if the MPC is .9 and there are no income taxes or imports, the multiplier for a change in autonomous expenditure equals
10
in the figure above, when the economy is in s long run equilibrium, the price level will be
120
if required reserves are $150 and deposits are $1000, what is the required reserve ratio?
15%
if nominal GDP is 12 trillion, the price level is 120, and the quantity of money is 4 trillion, what is the velocity of circulation
3
if there are no taxes or imports and MOC =.67, the multiplier is
3
GDP deflator
A price index used to adjust nominal GDP to arrive at real GDP. Called the 'deflator' because nominal GDP will usually over-state the value of a nation's output if there has been inflation.
in the above figure, suppose that the economy is at point A when foreign countries begin
B; money wage rates
inflation rate=
CPI year 2- CPI year 1/CPI year 1
on the feds balance sheet, assets include
US securities and loans
cyclical unemployment occurs when
a business cycle recession decreases employment
a money market mutual fund is
a depository institution that sells shares and buys securities such as US treasury bills
which of the following does NOT describe a function of money?
a hedge against inflation
When an economist talks of scarcity, the economist is referring to the
inability of society to satisfy all human wants because of limited resources
autonomous consumption is that portion of consumption expenditure that is not influenced by
income
disposable income is
income minus taxes plus transfer payments
demand pull inflation is an inflation that results from and initial
increase in aggregate demand
if the slope of the AE curve increases, the multiplier
increases
