Econ Final

Which of the following is a normative statement? "Women's labor force participation rate has increased during the past 100 years." "The federal minimum wage is higher today than it was in 1990." "The best way to encourage growth in the economy is through government spending."

"The best way to encourage growth in the economy is through government spending."

Assets: Reserves $250 Loans 750 Liabilities: Deposits $1,000 If required reserve ratio is ten percent and Figure #1 represents the banking system as a whole (not just a single bank), by how much will the money supply increase if all banks keep lending until there are no excess reserves

$1,500

Suppose the banking system does NOT hold excess reserves and the reserve ratio is 25%. If Tyler deposits $500 cash into his checking account, the banking system can increase the money supply by:

$1,500

The small country of Arran has population of 200 thousand and its current GDP is $560 million. Consumer prices have been increasing 8 percent lately due to an influx of tourist to its island. The current CPI for the country is 152. Its current real GDP per capita is:

$1,842

Assets: Reserves $250 Loans 750 Liabilities: Deposits $1,000 Based on Figure #1 and a required reserve ratio of ten percent, what is the most that this bank can lend in additional loans?

$150

Assume that the GDP of the United States is approximately 300 million. What is per capita GDP?

$70,000

When Kay Rowland was hired by IBM a few years back, her salary was $70,000. Today, it is $85,000. Kay is aware of some inflation during those years and wanted to know what $70,000 would be in today's dollars. She found that the CPI for the year she was hired was 230 and is now 275. A salary of $70,000 back then is equivalent to what salary today?

$83,696

The reserve requirement is 10%, and Mary Lou deposits the $1,000 check she received from her grandfather in her checking account. Assuming banks do NOT want to hold any excess reserves, what is the maximum expansion in the money supply possible?

$9,000

The reserve requirement is 10%, and Mary Lou deposits the $1,000 check she received from her grandfather in her checking account. The bank does NOT want to hold excess reserves. The bank does NOT want to hold excess reserves. How much money can the bank lend based on the $1,000 deposit?

$900

Given a MPC of 50 percent, how much would equilibrium GDP change if business investment decreased $10 billion due to rising interest rates?

-$20 billion

If consumer spending increased $400 and savings increased $100 when disposable income increased by $500, what is the marginal propensity to consume?

.8

If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its unemployment rate is:

10%

If the cost of a market basket is $300 in year 1 and $360 in year 2, the price index for year 2 using year 1 as the base is:

120

The consumer price index in 1976 was 72.6. In 1980 it was 84.2. What was the rate of inflation from 2002 to 2003?

16%

Suppose that the nominal rate of interest is 7% and the inflation rate is 3%. The real rate of interest is:

4%

Suppose the reserve ratio is 15%; the money multiplier is:

4.

Given a marginal propensity to consume of 80 percent, calculate the value of the multiplier. What does the multiplier equal?

5

If the consumer price index is 235 in 2010 and 252 in 2011, the inflation rate between 2010 and 2011 about:

7.23%

Which of the following actions would allow banks to lend out more money?

A decrease in the discount rate

During a recession, if a government uses an expansionary fiscal policy to increase GDP, the:

AD curve will shift to the right

The cost of unemployment includes all below except:

All the above are costs of unemployment.

Which of the following is NOT true about bank runs?

Bank runs only happen to small banks with few financial assets.

France and England both produce wine and cloth with constant opportunity costs. France can produce 150 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine. England can produce 50 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine. Using this information, we can conclude that:

England has a comparative advantage in cloth production.

The formula for calculating a future value (FV) given a present value (PV) that is increasing at a rate (growth or interest) of r for n years is:

FV = PV(n)^r

Decisions about monetary policy are made by:

Federal Open Market Committee

In the basic equation of national income accounting, the government directly controls _____ and influences ______.

G; C and I

What is the equation for happiness?

Happiness = Income/Wants

All but one of the following apply to Ben Bernanke. Which one does not?

His research originated the modern field called economics of happiness.

Suppose that BB&T bank wishes to make a 6% rate of return on a one-year loan but expects inflation over the course of the loan to be roughly 3%. Which of the following is TRUE?

If the bank charges 9% and the inflation rate is more than 3%, then the bank will have earned a lower rate of return than expected.

Which is not a source of comparative advantage?

In general, France has absolute advantage in production of all goods and services when compared to Italy.

The current Chair of the Board of Governors is:

Jay Powell

If you transfer $1,000 from your checking account to your savings account:

M1 decreases by $1,000, but M2 doesn't change.

The basic equation of exchange is:

MV = PQ

It is sometimes argued that nation should not depend too heavily on other countries for supplies of certain key products. This argument is commonly known as the _______________.

National Interest Argument

Joe must choose between two job offers he recently received--one located in Charleston paying $52,000 and the other in New York City paying $67,000. Assuming there are no other considerations than pick the one that offers the highest real income, which should he choose? Price Index (measuring cost of living) for Charleston is 245 and for NYC is 305.

New York City

__________________ are ways that a nation can draw up regulations, inspections, and paperwork to make it more costly or difficult to import products.

Nontariff barriers

Suppose the MPC = 0.75 and the government cuts taxes by $100 billion. Which of the following will be the likely effect?

Real GDP will increase by $300 billion.

The reserve requirement is 10%, and Mary Lou deposits the $1,000 check she received from her grandfather in her checking account. The bank does NOT want to hold excess reserves. Which of the following is an accurate description of the bank's balance sheet immediately after the deposit?

Reserves increase by $1,000, and demand deposits increase by $1,000.

Neoclassical economists believe that:

Say's Law is valid.

Which one of the following transactions will be included in the official measurement of GDP?

Sean bought a new truck

John Maynard Keynes wrote ____ _____.

The General Theory in 1936.

Which of the following situations is likely to lead to an increase in discouraged workers?

The availability of jobs falls.

From a neoclassical view, which of the following is a true statement?

The economy cannot sustain production above its potential GDP in the long run.

Using real GDP per capita to compare standards of living between countries if problematic for all of the following reasons except:

The measure does not adjust for changes in the prices of what gets produced.

Suppose that there are no excess reserves in the banking system and the current amount of demand deposits is equal to $100,000. If the monetary authorities lower the required reserve ratio from 10% to 5%, which of the following will likely follow?

The money -creating potential of the banking system will rise.

Which of the following would be expected if the tariff on foreign-produced automobiles were increased?

The supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise.

What is a positive economic statement?

There has been an increase in the rate of inflation.

Which of the following best describes the Keynesian perspective?

When aggregate demand is insufficient for the economy to reach potential, expansionary fiscal policy is appropriate.

The organization that oversees global trade negotiations and settles trade disputes among its members is the:

World Trade Organization

Countries that engage in trade will tend to specialize in goods in which they have _____ and will _____ those goods.

a comparative advantage; export

Which of the following is the best example of a quota?

a limit imposed on the number of men's suits that can be imported from a foreign country

An example of an automatic stabilizer that works when the economy contracts is:

a rise in government transfers as more people receive unemployment insurance benefits.

Economies with high growth rates tend to be those that have:

a stable government that protects property rights.

The main tariff difference between a tariff and a quota is:

a tariff generates tax revenue for the government, while a quota generates increased revenue for the license-holder.

A tariff differs from a quota in that a tariff is:

a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

All of the following are roles of money EXCEPT:

a transactional intermediary.

GDP can be calculated by any of the following three ways except:

adding up the market value of all final goods and services produced both domestically and by domestically owned foreign operations.

Consumption, investment, government spending, exports, and imports are:

all components of AD.

To compare the GDP of two different countries with different currencies, it is necessary to use _________________________.

an exchange rate.

Stagflation may result from:

an increase in the price of oil

If the government legislates policies that block imports of solar panels and gives domestic manufacturers a $5 billion dollar tax subsidy, the benefits to the U.S. solar panel manufacturing and distribution industry will be very visible. The bearers of the cost of the tax subsidy:

are more anonymous

The discount rate is the interest rate the Federal Reserve charges on loans to:

banks

US GDP per capita is currently $65,000. If it were to grow at 3% annually, what would it be in 20 years?

between $100,000 and $125,000

The largest component of U.S GDP is value added in:

business production.

Which of the follow is an appropriate monetary policy of the Fed to combat a recession?

buy government bonds

Unanticipated inflation does all of the following EXCEPT:

cause disinflation

The Federal Reserve System is the _______ for the United States

central bank

Money that has value apart from its use as money is:

commodity money.

As international trade increases, it contributes to a shift in jobs away from industries where that economy does not have a(n) __________ advantage and toward industries where it has a(n) ___________ advantage.

comparative; comparative

Monetary policy affects aggregate demand through changes in:

consumer and investment spending.

Fiscal policy that decreases aggregate demand is:

contractionary

In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _______________________ which guaranteed that their wages would keep up with inflation.

cost of living adjustments.

Given the consumption function C = .75(GDP-Tx+Tr) + 35, which one of the following fiscal policies would close a recessionary gap of $300 billion?

cut taxes by $100 billion

If Japan levies tariffs on U.S. goods entering Japan, this will tend to:

damage U.S. producers and benefit Japanese producers.

In the Keynesian range of the aggregate supply curve, decreases in aggregate demand will cause:

decrease in real GDP, but no change in the price level.

Given a reserve ratio of ten percent, if the Federal Reserve sold $4 billion of US government bonds on the open market, the money supply would _____ by a maximum of _______.

decrease it by $40 billion

A reduction in government transfers ________, therefore shifting the aggregate demand curve to the ________.

decreases disposable income and consumption; left

Contractionary monetary policy:

decreases the money supply, increases interest rates, and decreases consumption and investment.

An inflationary gap gradually:

decreases the short-run aggregate supply

Which of the following sequences describe how a contractionary monetary policy used to fight inflation impacts the economy?

decreasing the money supply raises interest rates which decreases investment spending and aggregate demand which decreases nominal GDP.

Among the liabilities of banks are:

deposits.

The official unemployment rate ignores:

discouraged workers

If the economy were in a deep recession, neoclassical economists would recommend:

doing nothing.

The infant industry argument for protectionism suggests that an industry must be protected in the early stages of its development so that:

domestic producers can attain the economies of scale to allow them to compete in world markets.

Canada, Mexico, and the United States have:

eliminated many trade barriers among themselves

Assume that laws have been passed that require the federal government to run a balanced budget. During a recession, the government will want to implement _____________________, but may be unable to do so because such a policy would ____________________________.

expansionary fiscal policy; lead to a budget deficit

If a country's price for wood furniture in the absence of trade is lower than the price with trade, the country will likely:

export wooden furniture

Goods that are produced domestically but does abroad are:

exports

If the _____ differ(s) between two countries, this suggests the possibility for mutually advantageous trade.

factor endowments

If a nation imports a good when the economy is opened to trade, the domestic price of the good will _____ and domestic consumption will _____.

fall; rise

If real GDP rises while nominal GDP falls, then prices on average have:

fallen.

In general, expansions are characterized by:

falling unemployment

Money that the government has ordered to be accepted as money is:

fiat money.

GDP is the total dollar value of all:

final goods and services produced in the economy in a given period.

Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?

fiscal policies

Which of the following is a distinguishing characteristic of the neoclassical view?

flexibility of wages and prices over time.

In the long run, nominal wages are:

flexible because contracts and informal agreements are renegotiated in the long run.

Structural unemployment can be caused by all of the following EXCEPT:

fluctuations in the business cycle

Which of the following government policies would be supported by neoclassical macroeconomic assumptions?

focus on long-term growth and on controlling inflation.

The reserve ratio is the:

fraction of deposits that banks hold in their vaults plus their deposits at the Federal Reserve.

Unemployment that is due to the time workers spend in job search is _____ unemployment.

frictional

Fanchon recently moved to Greensboro, as her husband, Trevor, has a new job as an business consultant with A.B. Williams & Associates. Fanchon is an experienced CPA who is interviewing with several firms in Greensboro. Fanchon is:

frictionally unemployed.

Which of the following is not a short-run impact of imposing quotas on the American industries they seek to protect?

government tax revenues increase

Import protections are often imposed because:

groups representing import-competing industries are more cohesive than consumers.

Which of the following will NOT increase labor's productivity?

growth in production

Nominal GDP:

has not been adjusted for changes in prices over time.

The text lists three primary goals of macroeconomic policy. Which one below is NOT one of those listed?

high productivity rate.

Long-run economic growth is:

higher in countries with a strong rule of law and political stability.

If the economy is at full employment, expansionary fiscal policy is most likely to lead to:

higher inflation rates

Economic growth is likely to entail:

higher saving.

Economies with high growth rates tend to be those that increase their:

human capital.

An import quota or tariff on French wine that raises the prices for wine will probably:

hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices.

All of the following are government policies to promote economic growth EXCEPT:

implementing a monetary policy that increases inflation.

Goods and services purchased from abroad are ________, while goods and services sold abroad are ________.

imports; exports

Money is neutral:

in the long run since it cannot alter the real aggregate output

The long run in macroeconomic analysis is a period:

in which nominal wages and other prices are flexible.

Disposable income equals:

income plus government transfers minus taxes

domestic producers can attain the economies of scale to allow them to compete in world markets.

increase

If the current GDP of our economy is $20 trillion but potential GDP is $22 trillion, which of the following discretionary fiscal policies would close the output gap, assuming MPC is eighty percent?

increase government transfer payments by $500 billion.

As a result of a decrease in the value of the dollar in relation to other currencies, U.S. imports decrease and exports increase. Consequently, there is a(n):

increase in aggregate demand.

Given the consumption function C = .6(GDP-Tx+Tr) + 20, which one of the following fiscal policies would close an inflationary gap of $750 billion?

increase taxes by $500 billion

If the Federal Reserve wants to lower interest rates, it can:

increase the money supply by buying US government securities.

If the price level decreases, real income will:

increase.

Import tariffs generally ________ the output of domestic producers of the affected products and also _________ the output of domestic exporters.

increase; decrease

An expansionary fiscal policy either _______ government spending or _______ taxes.

increases; decreases

Contractionary fiscal policy includes:

increasing taxes

Stagflation is a combination of _____ unemployment and _____ inflation.

increasing; increasing

Scarcity exists when:

individuals can have more of one good but only by giving up something else.

If the executives of the U.S. silicon-chip industry lobby Congress for protection from imports on the grounds that theirs is a new industry that needs time to develop technological efficiency, they are using the:

infant industry argument

Real GDP is the same as ____ GDP.

inflation-adjusted

Which of the following is NOT one of the main features designed to protect depositors and the economy against bank runs?

interest rate ceilings

The demand for money is:

inversely related to the interest rate.

An increase in efficiency suggests that an economy:

is able to get more output from a given amount of inputs.

Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers. This statement:

is essentially correct

A typical neoclassical aggregate supply (AS) curve ______________ and a typical neoclassical Phillips curve __________________.

is vertical; is vertical

When a nation's economy grows:

its production possibility frontier shifts outward.

Discretionary fiscal policy may fail to stabilize the economy or may even make the economy less stable because of:

lags in deciding on and implementing a policy change.

When short-run aggregate supply decreases, it means that the short-run aggregate supply curve shifts to the _____ and the quantity of aggregate output that producers are willing to supply _____.

left; decreases

An intermediate good would be:

lumber used to build a house

A simplified representation that is used to study a real situation is called a(n):

model

The double coincidence of wants problem can be solved by:

money

The _______ multiplier is equal to _______ .

money; 1 divided by the required reserve ratio

Assume an economy is operating at some point on its production possibilities curve, which shows civilian and military goods. If the output of military goods is increased, the output of civilian goods:

must be decreased.

According to the text, productivity is driven by all of the following EXCEPT:

natural resources

The short-run aggregate supply curve will shift to the left if:

no effect on the quantity of aggregate output.

Assets: Reserves $250 Loans 750 Liabilities: Deposits $1,000 Based on Figure #1 and a required reserve ratio of ten percent, this bank has excess reserves of:

none of the above

Discretionary fiscal policy refers to:

none of the above

The economy is in a recession and the government wants to increase output. If the multiplier equals 3 and the government increases spending by 250, how much will output increase by?

none of the above

The government has a budget deficit if:

none of the above

If autonomous spending increased by $20 billion given MPC=.8, other things being equal, equilibrium GDP would:

none of the above.

Inflation can be measured by the:

none of the above.

The Federal Reserve Bank of the United States is:

not exactly part of the U.S. government but not really a private institution either.

To be officially unemployed, a person must:

not have a job and must have looked for work in the past four weeks.

To change the money supply, the Federal Reserve most frequently uses:

open-market operations.

If nominal GDP increases from one year to the next, _____ must have risen.

output or prices or both.

The scarcity problem:

persists because economic wants exceed available productive resources.

Keynesian economics focuses on explaining why recessions and depressions occur, as well as offering a ______________________ for minimizing their effects.

policy prescription

The neoclassical perspective on macroeconomics emphasizes that in the long run, the economy seems to rebound back to its _____________ and its ____________________.

potential GDP; natural rate of unemployment

When a market begins to engage in international trade:

producers in the exporting industry may be better off.

Among the factors that are important for economic growth are:

property rights

Probably the most important feature of deposit insurance is that it:

protects the economy against bank runs.

Assume that average prices are increasing rapidly and that the Federal Reserve wants to use monetary policy to curb the inflation. Which of the following are appropriate?

raise the reserve ratio

The most likely effects of tariffs and/or quotas are to ________ prices and to ________ consumption of the protected goods in the importing country.

raise; lower

The theory of _____________________ holds that people will use all information available to them to form the most accurate possible expectations about the future.

rational expectations

The best available common measure of a nation's standard of living is:

real GDP per capita.

Other things being equal, what will happen (increase, decrease, or be unchanged) to real GDP, CPI, and unemployment in the long-run if government purchases increase to provide needed infrastructure improvements?

real GDP will be unchanged, CPI will increase, and unemployment will be unchanged

Other things being equal, what will happen (increase, decrease, or remain unchanged) to real GDP, CPI, and unemployment in the short-run if government purchases increase to provide needed infrastructure improvements?

real GDP will increase, CPI will increase, and unemployment will decrease

The inflation-adjusted measure of aggregate output typically used by economists is called:

real gross domestic product.

When the economy is producing output below potential, it has a(n):

recessionary gap.

The fact that tax receipts fall during a recession:

reduces the adverse effect of the initial fall in aggregate demand.

If government tax policy requires Peter to pay $15,000 in tax on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

regressive

When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________.

regressive

If the price level and nominal GDP both doubled, then real GDP would:

remain unchanged.

Technological progress is advanced through:

research and development

The three main monetary policy tools are:

reserve requirements, the discount rate, and open-market purchases.

If a nation exports a good when the economy is opened to trade, the domestic price of the good will ________ and domestic consumption will ________.

rise; fall

A survey reveals that on a small island initially 1,000 people have jobs, 250 people are not working but are looking for jobs, and 450 people are neither working nor looking for work. Suppose that 150 of the 450 people who weren't looking for work now begin looking for work. There are now 400 people looking for work and 1,000 people working. The unemployment rate:

rises to 28.6%

Economists say that long-run economic growth is almost entirely due to:

rising productivity

All of the following are sources of federal tax revenue EXCEPT:

sales tax

The sources of funds for investment spending are:

savings by households, government, and foreigners.

An appropriate policy to close an inflationary gap, the Fed should:

sell US government securities.

Technological improvements will:

shift the ppf outward.

Assuming that prices remain constant, suppose that consumer assets and wealth lose value. The aggregate demand curve will undergo a:

shift to the left

A decrease in aggregate demand is seen as a(n) _____ the aggregate demand curve.

shift to the left in

Suppose that political instability in the Middle East interrupts the supply of oil. The _____ curve shifts _____, output _____, and prices _____.

short-run aggregate supply; left; decreases; increase

A country can achieve some combination of goods outside its production possibilities curve by:

specializing and engaging in international trade.

Which of the following is not correct? A typical production possibilities curve:

specifies how much of each product society should produce.

Matt, who is 62 years old and has been a textile worker for 36 years, is unemployed because the textile mill in his town closed and moved to China. Matt is _____ unemployed.

structurally

One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, is:

substitution bias.

A tax on imports of foreign goods is called:

tariff

An example of a tariff is a:

tax of 10% of the value of each Honda automobile imported from Japan.

In drawing the production possibilities curve we assume that:

technology is fixed.

In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. From this information, we know that:

the Netherlands has a comparative advantage in raising beef.

The movement of the economy from peak to trough and trough to peak is called:

the business cycle

On a production possibility frontier, opportunity cost is:

the decrease in the output of one good when the output of the other good is increased.

The Federal Reserve controls:

the discount rate, the monetary base, and the reserve ratio.

Suppose that an economy is in an inflationary gap in the short run. In the long run:

the economy's self-correcting mechanism will restore GDP to its potential level.

Human capital is:

the improvement in labor made possible by education and knowledge that is embodied in the workforce.

The convergence hypothesis helps explain why:

the income of high-income and lower-income countries get closer.

the economy factors of production are not equally suitable for producing different types of goods. This principle generates:

the law of increasing opportunity cost.

In the Keynesian range of the short-run aggregate supply curve:

the price level remains constant as real GDP changes

In calculating a price index, for a given market basket of goods:

the quantities stay constant and the prices may change.

If Japan does not have a comparative advantage in producing rice, the consequences of adopting a Japanese policy reducing or eliminating imports of rice into the country would include:

the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall.

Gross Domestic Product is NOT:

the total production of all final and intermediate goods & services.

Opportunity cost is:

the value of the best alternative forgone in making any choice.

Macroeconomics deals with:

the working of the entire economy or large sectors of it.

The natural rate of employment is achieved when:

there is no cyclical unemployment

Workers today are more productive than workers in the past because:

they now have more physical capital embodying better technology.

Which of the following is an example of an intermediate good?

tires General Motors purchased from Goodyear for new electric cars.

In order to help insulate the Board of Governors from political pressure, members are appointed:

to staggard 14 year terms designed to have only one opening every two years.

GDP is the:

total market value of all final goods and services produced in one year

Bevo has a part-time job and would prefer to have a full-time job but has been unable to find one. Bevo is classified as:

underemployed

During a recession:

unemployment increases and the growth rate of real GDP decreases

Which of the following would NOT be a part of GDP?

used car sales

The models that economists construct:

usually make simplifying assumptions.

An example of investment spending is the purchase of a:

welding robot by Tesla.

Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:

whatever she would have purchased with the $10,000 plus whatever she would have earned had she not been in college.

The best measure of the opportunity cost of any choice is:

whatever you have given up to make that choice, even if no monetary costs are involved.

Free trade between countries:

will allow for greater levels of consumption than without trade.

International trade is fundamentally a ________________________.

win-win situation

Economists claim that the unemployment rate can understate the true level of unemployment because all of the following are not counted EXCEPT:

workers without jobs who who are actively seeking employment.