ECON FINAL
Which of the following is an example of structural unemployment?
Autoworkers lose jobs due to globalization and must retrain to find new jobs
Currently, the unemployment rate is:
Between 6% & 8%
How does an increase in the price level affect the quantity of real GDP supplied in the long run?
Changes in the price level do not affect the level of GDP in the long run.
When we introduced employment in week two and we referenced Tweets by two US Politicians. Who were they?
Donald Trump & Bernie Sanders
What actions can Congress and the president take to move the economy back to potential GDP?
Increase government spending or decrease taxes
Which of the following is not a limitation to fiscal policy we spoke about this week?
Term Limits
Which committee sets the position of monetary policy?
The Federal Open Market Committee
Fiscal policy is conducted by:
The federal government controls fiscal policy.
Along the downward-sloping catch-up line, a country near the top of the line is
a poor country growing rapidly.
As the interest rate increases,
consumption, investment, and net exports decrease; aggregate demand decreases.
Monetary policy _______ are willing to sacrifice higher unemployment for lower levels of inflation.
hawks
Monetary policy _______ would shift aggregate demand to the left when an economy is experiencing stagflation.
hawks
Microeconomics is the study of
how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.
Even after it is decided to take on monetary policy, the FOMC will need to meet and hash out exactly what needs to be done, and that takes time. Because of this, we see a ______ when it comes to monetary policy.
implementation lag
The financial account records
only net capital flows.
Which of the following will cause interest rates to rise?
open market sales
How would an increase in interest rates affect investment?
real investment spending declines
Economic growth will
slow down or stop if more capital per hour is used because of diminishing returns to capital.
In calculating GDP, which levels of government spending are included in government purchases?
spending by federal, state, and local governments
Which of the following does the aggregate expenditure macroeconomic model seek to explain?
the business cycle
The chairman of the Federal Reserve referenced the policy objectives of the Fed. What is another name for this?
the dual mandate
Gross domestic product is best defined as
the market value of all final goods and services produced in a country during a period of time, typically one year.
The seven members of the Board of Governors of the Federal Reserve are appointed by
the president
Real exchange rate is
the price of domestic goods in terms of foreign goods.
Which of the following sets a floor on the federal funds rate?
the reverse repo rate
If the Fed believes the inflation rate is about to increase, it should
use a contractionary monetary policy to increase the interest rate and shift AD to the left.
The wealth effect refers to the fact that
when the price level falls, the real value of household wealth rises, and so will consumption.
Which of the following transactions is not counted in GDP?
A consumer prepares meals for his family
Which of the following is not an explanation for why firms keep inventories?
Because goods are produced in quantities that match the exact amounts consumers want to purchase at a given time
The _________ is the most well-known publisher for data on prices.
Bureau of Labor Statistics (BLS)
The discussion this week about the deficit and debts were centered around an infographic released by the:
Congressional Budget Office (CBO)
What are the four major components of expenditures in GDP?
Consumption, Investment, Government Purchases, and Net Exports
If you are having an issue with MyEconLab or Packback, you should first:
Contact Pearson or Packback directly. Those websites are located on Troubleshooting Technology page on Canvas.
Consider the demand for Russian rubles in exchange for British pounds. Which of the following will not increase the foreign currency demand for the ruble?
Currency traders who believe that the value of the ruble in the future will be less than its value today.
Cyclical unemployment
Cyclical unemployment is the component of overall unemployment that results directly from cycles of economic upturn and downturn.
Which of the following is an example of cyclical unemployment?
During a recession, aircraft assembles are laid off but expect to be recalled as the economy improves
In the circular flow of expenditure and income, why must the total value of production in an economy equal the total value of income?
Every penny spent on a good or service must end up as someone's income.
What are the four main determinants of investment?
Expectations of future profitability, interest rates, taxes and cash flow.
An increase in the discount rate makes it easier for banks to borrow from the Fed.
False
Before the 2007 financial crises, we would say that the banking system has ample reserves.
False
Crowding out makes it easier to estimate the actual multiplier effect.
False
If the Fed raises the required reserve ratio, liquid assets become scarcer and interest rates fall.
False
Inflation focuses on individual prices and not the price level as a whole.
False
Member banks cannot receive interest on reserves as they are unable to hold deposits at the Fed.
False
When reading about endogenous growth theory you will likely run into physical capital being referred to as ideas and knowledge capital being referred to as objects.
False
When the government starts running a larger deficit—which it does when it increases spending or decreases taxes (expansionary policy)—the supply curve shifts to the right and the interest rate increases.
False
What does the acronym FRED stand for?
Federal Reserve Economic Database
One definition of fiscal policy is:
Fiscal policy can be described as changes in government spending and taxes to achieve macroeconomic policy objectives.
frictional unemployment
Frictional unemployment is the result of voluntary employment transitions within an economy. Frictional unemployment naturally occurs, even in a growing, stable economy. Workers choosing to leave their jobs in search of new ones and workers entering the workforce for the first time constitute frictional unemployment.
Why is GDP an imperfect measurement of total production in the economy?
GDP does not include household production or production from the underground economy.
Which of the following is considered to be a problem in using GDP as a measure of national well-being?
GDP does not include the value of leisure time
Even if GDP included these types of production, why would it still be an imperfect measure of economic well-being?
GDP is not adjusted for pollution and it does not account for unequal income distribution, GDP is not adjusted for crime or other social problems, The value of leisure is not included in GDP.
What happens if we measure GDP by adding up the value of every good and service produced in the economy?
GDP is overestimated because of double counting.
The term "crowding out" refers to a situation where:
Government spending increases interest rates and decreases private investment.
Which of the following is a way in which governments can directly promote savings and investment?
Governments can create tax incentives for both businesses and individuals.
GDP is an imperfect measure of economic well-being because it fails to measure what types of production?
Household production and the underground economy.
Which of the following is not a lag in fiscal policy we spoke about this week?
Information
When aggregate expenditure is equal to GDP,
Inventories are unchanged, the economy is at economic equilibrium
Who is the current chairman of the Federal Reserve?
Jerome Powell
If the Fed thinks there needs to be more economic activity, they will want to:
Lower interes rates
Which of the following best explains what is actually happening to real per capita GDPs of countries?
Lower-income industrial countries are catching up with higher-income industrial countries.
If you think of the aggregate expenditure function as a line on the 45°-line diagram, the slope would be
MPC
The Fed buys bonds. This is an example of
Not a fiscal policy
The shoreline in New Jersey gets destroyed by a hurricane. The federal government increases spending to help rebuild. This is an example of
Not a fiscal policy
Which of the following is the correct formula for calculating the unemployment rate?
Number of employed/Labor force *100
When we talk about economic growth (increases in real GDP per capita), we can break it down into two sources: inputs and productivity. Which of the follow statements is true?
One way to increase productivity is to improve allocative efficiency.
What are the names of your professor, James Tierney's, two rescue dogs?
Penny & Dakota
How does real GDP deal with the problem inflation causes with nominal GDP?
Real GDP uses the prices of goods and services in the base year to calculate the value of goods in all other years, Real GDP separates price changes from quantity changes, By keeping prices constant, we know that changes in real GDP represent changes in the quantity of output produced.
Stagflation occurs when the price level _____ and output _____.
Rises, falls
A technological change will cause thelong-run aggregate supply curve to
Shift to the right
When interest rates fall, the aggregate expenditure function:
Shifts up
Which of the following best explains how and why the economy will adjust back to long-run equilibrium?
Short-run aggregate supply will increase (shift rightward) as the recession makes firms and workers willing to accept lower wages and prices.
Which celebrity did your professor, James Tierney, meet in the New Orleans Airport?
Snoop Dogg
structural unemployment
Structural unemployment is a form of involuntary unemployment caused by a mismatch between the skills that workers in the economy can offer, and the skills demanded of workers by employers.
Bob Wesley believes that structural unemployment should be eliminated in order for an economy to be healthy. In making this argument, which of the following relevant issues is he ignoring?
Structural unemployment will exist in an economy that is innovative.
Suppose that Sally J. Society recently lost her job as an underwater welder. In looking for a new job, she discovers that the only available jobs are for economists and that there are no openings for underwater welders because the trade is now obsolete. If Sally J. Society decides to return to school to earn an Economics degree, what is the best classification of her unemployment status?
Structurally unemployed
Refer to the diagram to the right. Currency speculators believe that the value of the Euro will increase relative to the dollar. Assuming all else remains constant, how would this be represented?
Supply would increase, demand would decrease and the economy moves from C to B to A.
For a country such as France which of the following statements is always true?
The balance of payments is zero.
What is the difference between the federal budget deficit and federal government debt?
The federal budget deficit is the year-to-year short fall in tax revenues relative to government spending (T < G + TR), financed through government bonds. The federal government debt is the accumulation of all past deficits.
A way to achieve more economic growth is by increasing the knowledge capital of firms. Suppose policymakers wanted to assist in this increase. Which of the following policies would not help?
The government could reduce corporate tax rates for service and retail companies.
Which of the following is not a limitation to monetary policy mentioned in the lesson?
The information lag
The BLS collects price statistics from traditional full-price retail stores, which do not reflect the prices some consumers pay by shopping at discount stores or on the Internet. This is a description of which bias?
The outlet bias
What will be the effect of an increase in business taxes on the quantity of investment by firms and the economy's capital stock in the future?
The quantity of investment will decrease and the economy's future capital stock will decrease.
recognition lag
The time it takes for policy makers to recognize the existence of a boom or a slump.
How would it affect the unemployment rate if the Bureau of Labor Statistics counted as unemployed both (1) discouraged workers and (2) people who work part-time but would prefer to work full-time?
The unemployment rate would increase.
Before the Great Recession, almost all monetary policy in the U.S. was done through open market operations.
True
Crowding out is only when we see an increase in government purchases, not when we see a decrease.
True
Crowding out, with respect to fiscal policy, is when an increase in government purchases results in a decline in private expenditures.
True
Expansionary monetary policy results in lower interest rates.
True
If inflation is unexpectedly high, borrowers will benefit and lenders will be harmed.
True
Interest on reserves applies to both required reserves (IORR) and excess reserves (IOER).
True
Lower interest rates will increase economic activity.
True
Open market purchases will add liquid assets to the system and cause interest rates to fall.
True
The unemployment rate never reaches 0%
True
When interest rates rise, the dollar will become stronger (appreciate).
True
When incomes rise faster in the United States than in other countries,
U.S. net exports will fall.
Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next?
When nominal GDP increases from year to year, the increase is due partly to changes in prices and partly to changes in quantities.
In the aggregate expenditure model, when is planned investment greater than actual investment
When there is an unplanned decrease in inventories.
Which equation represents the relationship between GDP and the four major expenditure components?
Y= C+ I+G+NX
Suppose that the inflation rate turns out to be much lower than most people expected. In that case
a borrower will lose from the situation while a lender will gain
Which of the following factors does not cause the aggregate demand curve to shift?
a change in the price level
The international-trade effect refers to the fact that an increase in the price level will result in
a decrease in exports and an increase in imports.
Which of the following is an example of an expansionary fiscal policy?
a decrease in taxes
A recession occurs when an economy experiences a period in which there is
a decrease in total production.
Suppose that you are available to go to work but have not looked for a job for at least the last four weeks because you believe that there aren't any jobs available. You would be counted as
a discouraged worker.
If the government cuts taxes in order to increase aggregate demand, the action is called
a discretionary fiscal policy.
Payroll taxes were temporary cut by Congress and the president. This is an example of
a discretionary fiscal policy.
When a local restaurant accepts your $20 bill when you purchase a to-go order of pasta, the $20 bill serves as:
a medium of exchange
Your university gives you an education each year in exchange for money in the future through student loans. This illustrates which function of money?
a standard of deferred payment
If whole avocados were used as a society's money, which of the following functions would be the hardest to satisfy?
a store of value
The statement, "A burrito at the student center on campus is only $5!" represents money's function as
a unit of account
Which of the following events would cause an increase in short−run aggregate supply?
am improvements in technology
The revenue the federal government collects from the individual income tax declines during a recession. This is an example of
an automatic stabilizer.
Total unemployment insurance increases during an recession. This is an example of
an automatic stabilizer.
The multiplier effect is the process by which:
an increase in autonomous expenditure leads to a larger increase in real GDP.
Which of the following events would cause a decrease in aggregate demand?
an increase in taxes
Which of the following events would cause an increase in long−run aggregate supply?
an increase in the capital stock
Government spending and taxes that change without actions by the government are called
automatic stabilizers.
Some economies are able to maintain high growth rates despite diminishing returns to capital by using
better or enhanced technology, along with accumulating capital; these economies are growing because technology, unlike capital, is subject to increasing returns.
How can government policies shift the aggregate demand curve to the right?
by increasing government purchases
Which of the following is true about the Federal Reserve and its ability to prevent recessions? The Federal Reserve
cannot realistically fine tune the economy, but seeks to keep recessions shorter and milder than they would otherwise be.
An average of the prices of the goods and services purchased by a typical family is the:
consumer price index (CPI).
Unemployment data comes out the following month and is revised twice. GDP data takes several months to come out and also goes through revisions. Because of this, we see a ______ when it comes to monetary policy.
data lag
An increase in the interest rate should
decrease consumption spending.
Holding all else constant, a federal government budget deficit will
decrease the supply of loanable funds and increase the equilibrium real interest rate.
The LRAS curve is
determined by the number of workers, the amount of capital, and the available technology.
Monetary policy _______ are willing to sacrifice higher inflation for lower levels of unemployment.
doves
Monetary policy _______ would shift aggregate demand to the right when an economy is experiencing stagflation.
doves
The base interest rate in the US is called the:
federal funds rate
The new growth theory states that
firms will add to an economy's stock of knowledge capital by engaging in research and development or by contributing to technological change.
The interest rate effect refers to the fact that a higher price level results in
higher interest rates and lower investment.
If inflation in the United States is lower than inflation in other countries, then U.S. exports ________ and U.S. imports ________, which _________ net exports.
increase; decrease; increases
When households increase their consumption in anticipation of future tax decreases, all of the following hold, except that
investment increase
Which of the following would be most likely to induce the Federal Reserve to conduct expansionary monetary policy? A significant decrease in
investment spending
The rule of 70
is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to double.
The real interest rate
is equal to the nominal interest rate minus the inflation rate.
The unemployment rate that includes discouraged workers and people working part-time who would prefer full-time jobs
is higher than the official unemployment rate, and the difference between the two grows larger in recessions
Which of the following will cause interest rates to fall?
lowering the discount rate, lowering the required reserve ratio
The difference between microeconomics and macroeconomics is
microeconomics studies smaller parts of the economy such as markets and individuals, while macroeconomics studies the economy as a whole.
information lag
most data that policymakers need are not available until at least one quarter after the fact
The current account records
net exports, net investment income, and net transfers.
The government increases gasoline mileage requirement for new cars to try and help with the environment. This is an example of
not a fiscal policy
Imagine a 45°-line (Keynesian cross) diagram in which the upward-sloping aggregate expenditure curve intersects the 45°-line at point A. In the graph, a point where inventories are falling would be plotted
on the AE line to the left of point A.
If the GDP deflator in 2012 has a value of 98.0, then
prices have decreased 2 percent between the base year and 2012.
When the economy returns to long-run equilibrium again,
real GDP, the unemployment rate, and the price level will be the same as the initial equilibrium values prior to the increase in the price of oil.
Sometimes, the inflation rate may be stable and the unemployment rate may be going up just slightly. It's tough to know if the economy is in a recession or not. This is an example of the:
recognition lag.
Higher interest rates will:
shift the aggregate demand curve to the left.
Expansionary monetary policy will:
shift the aggregate demand curve to the right.
The type of unemployment most likely to result in hardship for the people who are unemployed is
structural because this type of unemployment requires retraining to acquire new job skills.
Monetary policy in the US is conducted by:
the Federal Reserve.
The new growth theory differs from the growth theory developed by Robert Solow, since
the Solow growth theory focuses on technological change and the quantity of capital available to workers whereas the new growth theory states that accumulation of knowledge capital is a key determinant of economic growth.
The balance of payments is equal to
the current account plus the financial account.
Macroeconomics is the study of
the economy as a whole, including topics such as inflation, unemployment, and economic growth.
the part of the balance of payments that records purchases of assets a country has made abroad and foreign purchases of assets in the country is called
the financial accounts
Which of the following sets a ceiling on the federal funds rate?
the interest paid on reserves
In determining whether to borrow funds, firms compare the rate of return they expect to make on an investment with
the interest rate they must pay to borrow the necessary funds.
The difference between the nominal interest rate and the real interest rate is
the nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest rate minus the inflation rate.
The federal funds rate is:
the overnight interest rate banks pay to borrow funds from each other.
Which of the following is included in the economist's definition of investment?
the purchase of new machines, factories, or houses
Changes in the CPI overstate the true inflation rate due to four "biases." If apple prices rise rapidly during the month while orange prices fall, consumers will reduce their apple purchases and increase their orange purchases. Which of the four biases is concerned with this consumer behavior?
the substitution bias
Data lag
the time it takes for policy makers to obtain data indicating what is happening in the economy
implementation lag
the time it takes to put the desired policy into effect once economists and policy makers recognize that the economy is in a boom or a slump
Which of the following factors determines the supply of loanable funds?
the willingness of households and governments to save
f the price level increases, then
there will be a movement up along a stationary aggregate demand curve.
Why do few economists argue that it would be a good idea to balance the federal budget every year?
to keep a balanced budget during a recession, taxes would have to increase and government expenditures would have to decrease, which would further reduce aggregate demand and deepen the recession.
The business cycle exists because
total production experiences periods of increases and periods of decreases.
Transfer payments are not included in GDP calculations because
transfer payments are simply transfers of income from one group to another and not a purchase of a new good or service.
When the economy is experiencing an expansion automatic stabilizers will cause:
transfer payments to decrease and tax revenues to increase.
When the economy is experiencing a recession automatic stabilizers will cause:
transfer payments to increase and tax revenues to decrease.
Member banks receive interest on reserves as they are able to hold deposits at the Fed.
true
The reverse repurchasing rate is around because of primary dealers who are unable to hold deoposits at the Fed.
true
The aggregate expenditures line will be
upward sloping with a flatter slope than the 45°-line.
If the Fed believes the economy is about to fall into recession, it should
use an expansionary monetary policy to lower the interest rate and shift AD to the right.
The LRAS is
vertical because in the long run, changes in the price level do not affect potential GDP, as potential GDP depends on the size of the labor force, capital stock, and technology.
The macroeconomic equilibrium will be
where the AE line intersects the 45°-line.
The three types of unemployment are
frictional, structural, and cyclical unemploment.
When the Fed takes action, if there are _______ reserves in the system, interest rates will ______.
less; rise