Econ Final (All Test Questions)
Consider an economy where the hiring rate is 0.20 and the separation rate is 0.10. For this economy, if the proliferation of new job posting websites increased the hiring rate to 0.40, how much would the natural rate of unemployment decrease by? A) 13.3% B) 10% C) 8% D) 20% E) 33.3%
A) 13.3%
In a small economy, the quantity of money circulating in the economy is $2.5 million. Real GDP for the current year is $5 million, and the average price level is 2. What is the velocity of money? A) 4 B) 2 C) 2.5 D) 5
A) 4
Suppose that GDP growth in 2014 was higher than normal in 2014 due to new methods for energy exploration called "fracking." Identify why the growth rate in real GDP may overstate the effect on welfare. A)Fracking may result in environmental degradation. B)Fracking does not properly account for the value of leisure time. C)Oil and gas produced by fracking is an example of non-priced production. D)International comparisons of data are made difficult by technological advances. E)All the above are correct.
A) Fracking may result in environmental degradation.
If a country's saving preference decreased from 15% to 10% of disposable income and it was operating at its steady state before the change, we would expect to see which of the following? I.a decrease in capital stock II.a decrease in real GDP III.an increase in real GDP IV.an increase in capital stock A)I and II only B)II and III only C)III and IV only D)I and III only
A) I and II only
Just before the end of the last century, there was widespread concern that financial stability might be threatened because computers were not coded to recognize the change of the century. In response to this event, often referred to as Y2K, the Federal Reserve A) conducted open market sales to decrease the amount of "money" and stabilize the economy B) conducted open market sales to decrease the amount of "money" and stabilize the economy C) targeted a higher Federal Funds rate in order to reduce interbank loans D) decreased long term interest more than short term interest rates E) answers A and C are correct
A) conducted open market sales to decrease the amount of "money" and stabilize the economy
The quantity theory of money: A) describes the general relationship between money, velocity, real output, and prices. B) presents the critical roles of money demand in regulating the level of prices. C) derives the optimal quantity of inflation. D) explains the equilibrium between money supply and money demand.
A) describes the general relationship between money, velocity, real output, and prices.
The short-term unemployment caused by the ordinary difficulties of matching employee to employer is called: A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) seasonal unemployment.
A) frictional unemployment.
Crowding out occurs when: A) higher government spending leads to less private spending B) personal consumption increases due to a decrease in savings C) overall output is crowded out by lower government spending D) increases in government spending lead to increases in taxes
A) higher government spending leads to less private spending
Because of a forecasted recession, banks begin to raise their reserve ratios from 10% to 20%. However, the Fed responds by dropping interest rates on excess reserves. What is the Fed trying to incentivize? A) increased lending by banks since holding on to reserves is less profitable B) increase personal savings C) it is trying to trick the public into thinking the money supply will fall D) none of the above
A) increased lending by banks since holding on to reserves is less profitable
Typically, if an employer can fire an employee for any reason, other things being equal: A) it will be easier for job seekers to find employment. B) it will be more difficult for job seekers to find employment. C) the long-term unemployment rate will be higher. D) labor markets will be less flexible and dynamic.
A) it will be easier for job seekers to find employment
The position of the Solow Growth curve (or the LRAS) shows the economy's: A) potential growth rate given by the real factors of production. B) long-run inflation rate. C) expected inflation rate. D) rate of money growth plus velocity growth.
A) potential growth rate given by the real factors of production.
A series of wild fires hitting the West Coast of the United States is an example of a: A) real shock. B) geographic distress. C) GDP deflator. D) productivity neutralizing event.
A) real shock.
An increase in spending growth causes a _____ the dynamic aggregate demand curve. A) rightward shift of B) leftward shift of C) movement up along D) movement down along
A) rightward shift of
The multiplier effect is the: A) subsequent consumer spending that increases AD from expansionary fiscal policy B) subsequent consumer spending that increases AD from contractionary fiscal policy C) increase in GDP from an increase in the money supply and decrease in taxes D) increase in GDP from increased consumer savings and private investment
A) subsequent consumer spending that increases AD from expansionary fiscal policy
The Federal Reserve can influence the economy in the short-run by shifting: A) the AD curve B) the SRAS curve C) the LRAS curve D) the AD, SRAS, and LRAS curves
A) the AD curve
Fiscal policy is ineffective when: A) the effect of crowding out is strong B) the multiplier effect is large C) it is an election year
A) the effect of crowding out is strong
Following the terrorist attacks of September 11, 2001, the Federal Reserve increased: A) the monetary base B) tax deductions for taxpayers C) open market sales of bonds D) interest rates
A) the monetary base
Consider an economy where the current unemployment rate is eight percent (8%). If the long-run separation rate is 0.05 and the long-run hiring rate is 0.45, we would expect that in the long-run A) the unemployment rate would increase to its higher steady-state value. B) the unemployment rate would decrease to its higher steady-state value. C) the unemployment rate would decrease because it is in the cyclical phase of unemployment. D) the unemployment rate would tend back to eight percent (8%). E) There is not enough information to answer this question.
A) the unemployment rate would increase to its higher steady-state value.
From 1948 to 2003 the United States experienced an average growth rate of real GDP of 3.5%. Guatemala had an average growth rate of real GDP of 3.6% from 1993 - 2003. Can you say that Guatemala's standard of living grew more than the United States' standard of living from 1993 to 2003? A)No, because we do not know the population growth rates of either country or the real GDP growth rateof the United States during 1993-2003 B)No, because we do not know the real GDP growth rate of the United States during 1993 C)Yes, clearly 3.6% is greater than 3.5% D)Yes, since the only variable that matters for economic well-being is real GDP.
A)No, because we do not know the population growth rates of either country or the real GDP growth rate of the United States during 1993-2003.
Every day we rely on the work of millions of other people to provide us with food, clothing, and shelter.People work for our benefit because: A)They benefit by doing so. B)Institutions require them to do so. C)People think at the margin. D)Trade-offs are everywhere.
A)They benefit by doing so.
In the Solow model, if the first unit of capital increases output by one unit, then the second unit of capital will cause total output to A)increase, but by less than one unit. B)double. C)remain the same as with one unit of capital. D)increase exponentially.
A)increase, but by less than one unit.
When people choose to recycle and buy appliances that conserve on energy, they are acting in _______ , and ________ . A)the social interest; Their self-interest B)their public interest; not the social interest C)tuture interests ;outside of their social benefits and costs D)their self - interest; not the social interest
A)the social interest; Their self-interest
Institutions and incentives are ____________ causes and factors of productions are ________ causes of wealth of nations. A)ultimate; proximate B)proximate; ultimate C)ultimate;primary D)proximate; direct
A)ultimate; proximate
The average reserve ratio is 10%. In this case, what is the money multiplier? A) 1 B) 10 C) 100 D) 1,000
B) 10
A country has 50 million people, 30 million of whom are adults (over the age of 16, not in the military, and not is prison). Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. How many people in this country are in the labor force? A) 15 million B) 20 million C) 25 million D) 30 million
B) 20 million
Which of these types of laws affect young, minority, and unemployed workers most negatively? A) employment-at-will B) employment protection C) constructive discharge D) fair labor
B) employment protection
The goal of an open market purchase by the Federal Reserve is to A) increase bank reserves and reduce the money supply B) increase bank reserves and increase the money supply C) reduce bank reserves and reduce the money supply D) reduce bank reserves and increase the money supply E) none of the above
B) increase bank reserves and increase the money supply
According to the quantity theory of money, an increase in the money supply will cause the price level to: A) remain relatively constant since money is neutral. B) increase by about the same percentage as the money supply. C) increase by a greater percentage than the money supply. D) increase by a smaller percentage than the money supply.
B) increase by about the same percentage as the money supply.
In the New Keynesian model, an unexpected increase in the growth rate of the money supply: A) decreases both the inflation and real growth rates in the short run B) increases both the inflation and real growth rates in the short run C) decreases both the inflation and real growth rates in the long run D) increases both the inflation and real growth rates in the long run
B) increases both the inflation and real growth rates in the short run
According to the quantity theory of money, if aggregate spending in an economy increases by 3% and real GDP increases by 1%, we also know that there is: A) a recession. B) inflation. C) a positive supply shock. D) a war. Figure
B) inflation.
One of the reasons structural unemployment may be a bigger problem in Europe than in the United States is: A) technological differences. B) labor market regulations. C) oil prices. D) drug use.
B) labor market regulations.
Sticky wages and prices are incorporated in the New Keynesian model by the: A) long-run aggregate supply curve B) short-run aggregate supply curve C) aggregate demand curve D) both the aggregate demand and short-run aggregate supply curves
B) short-run aggregate supply curve
The Federal Reserve conducts open market operations in order to target A) the real value of savings deposits B) the Federal Funds rate OR the quantity of reserves C) the Federal Funds rate AND the quantity of reserves D) answer A and C are correct E) none of the above
B) the Federal Funds rate OR the quantity of reserves
Sydney buys a used car from Lemon Drop Used Cars in 2015 for $3,000. Francis, a salesperson at Lemon Drop, receives $200 in commission for selling the car to Sydney. How much does this transaction contribute to 2015 GDP? A)$50 B)$200 C)$3,200 D)$3,000 E)Nothing. The car is used.
B)$200
Suppose you currently have $600 worth of music on your computer, and each year you invest $300 dollars worth in FLAC music files. Either because the songs go out of fashion or they somehow get damaged each year you lose 5 percent (0.05) of your music catalog; that is, the depreciation rate is 5 percent (0.05). What is the steady - state value of your music catalog? A)$900 B)$6,000 C)$6,900 D)$5,100 E)$18,000
B)$6,000
According to the Penn World tables, real per capita GDP in China in 1988 was approximately $2,000 and by the year 2002 real per capita income in China was approximately $4,000. Over this time period the growth rate of per capita GDP was approximately A)3 percent B)5 percent C)7 percent D)10 percent E)There is not enough information to calculate the average growth rate.
B)5 percent
The result from the question above is called A)Conditional Convergence B)Diminishing Marginal Product C)Private Property Rights D)None of the above
B)Diminishing Marginal Product
If a country's saving preference increased from 20 percent to 25 percent of disposable income and it was operating at its steady state before the change, we would expect to see which of the following? I.an increase in the per capita capital stock II.a decrease in real GDP per capita III.an increase in real population growth rate IV.an increase in capital stock A)I and III only B)I and IV only C)III and IV only D)II and III only
B)I and IV only
Why does South Korea have a higher level of real GDP, more physical capital and more human capital than North Korea? I.South Korea has better natural resources than North Korea. II.Economic incentives for economic growth are better installed in South Korea. III.Historically South Korea's culture is different than North Korea. A)I only B)II only C)III only D)I and II only E)I, II and III.
B)II only
Which of the following is not one of the growth facts listed in the text? A)There are wide disparities in real GDP per capita across countries. B)The amount of physical capital is the primary determinant of real GDP per capita. C)All countries were once poor. D)There have been growth miracles and growth disasters.
B)The amount of physical capital is the primary determinant of real GDP per capita.
If real GDP per capita in the United States is currently $50,000 and grows at 1 percent per year, how many years will it take to reach $200,000? A)approximately 210 years B)approximately 140 years C)approximately 70 years D)approximately 10 years
B)approximately 140 years
In terms of convergence, the cross-country data tend to provide more support for convergence. A)absolute B)conditional C)monotone D)None of the answers are correct.
B)conditional
Considering the incentives for the private market to conduct research and development, we expect that the amount of research and development conducted by the private sector would be __________ the efficient level because of the ______________ property of new knowledge. A)equal to; rivalrous B)less than; nonrivalrous C)more than; rivalrous D)more than; nonrivalrous
B)less than : nonrivalrous
The sale of sugar will contribute to GDP when A)the buyer is Dunkin Doughnuts B)the buyer is a mother baking cookies for her children. C)the buyer is a ice cream parlor. D)the buyer is a grocery store chain. E)All of the above.
B)the buyer is a mother baking cookies for her children.
A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. What is th is country's unemployment rate? A) 10% B) 16.7% C) 25% D) 40%
C) 25%
Consider an economy where the hiring rate is 0.20 and the separation rate is 0.10. For this economy, the natural rate of unemployment is A) 10% B) 25% C) 33.3% D) 50% E) 66.6%
C) 33.3%
In class and in the text, we provided several reasons why the unemployment rate may not fully characterize the health of the labor market. Which of the following is NOT one of the reasons discussed in class and in the text? A) It does not measure how well people are matched to the jobs they do. B) It does not count discouraged workers. C) It does not correctly define the adult population. D) It counts part-time workers who would like to work full time as employed. E) All of the above are reasons for the unemployment rate to be an incomplete indicator of the health of the labor market.
C) It does not correctly define the adult population.
Because of a forecasted recession, banks begin to raise their reserve ratios from 10% to 20%. Assuming all else stays the same, what effect will this have on M1? A) M1 will remain unchanged B) M1 will increase by an amount determined by congress C) M1 will decrease D) There is not enough information to answer this question
C) M1 will decrease
It is likely that the internet and job posting website like Indeed, Monster, and LinkedIn have I. decreased the hiring rate. II. increased the separation rate. III. lowered the natural rate of unemployment. A) Only I is correct. B) Only II is correct. C) Only III is correct. D) Only I and III are correct. E) I, II, and II are correct.
C) Only III is correct.
Which of the following statements about the employment-at-will doctrine is TRUE? A) The doctrine helps raise labor hiring and firing costs, leading to lower unemployment rates. B) The doctrine helps raise labor hiring and firing costs, leading to higher unemployment rates. C) The doctrine helps lower labor hiring and firing costs, leading to lower unemployment rates. D) The doctrine helps lower labor hiring and firing costs, leading to higher unemployment rates.
C) The doctrine helps lower labor hiring and firing costs, leading to lower unemployment rates.
Which of the following individuals can be counted as unemployed? A) a woman who works only part time B) a temp worker, who is currently responding to job advertisements from the newspaper C) a person who was recently laid off from an auto manufacturing plant in Detroit D) a husband who stays at home to raise his two children
C) a person who was recently laid off from an auto manufacturing plant in Detroit
If the Federal Reserve wishes to avoid short-run increases int he unemployment rate, the correct response to a negative AD shock would be: A) an increase in government spending growth B) a tax cut C) an increase in money supply growth D) a lower goal for information
C) an increase in money supply growth
Unlike the Federal Reserve, the European Central Bank's (ECBs) primary mandate is to promote price stability. In response to a negative technology shock, like the one that associated with the Great Recession, we would expect the ECB to A) decrease the growth rate of the money supply and push real GDP growth higher B) increase the growth rate of the money supply and push real GDP growth higher C) decrease the growth rate of the money supply and push real GDP growth lower D) increase the growth rate of the money supply and push real GDP growth lower E) none of the above
C) decrease the growth rate of the money supply and push real GDP growth lower
Consider an economy where the hiring rate is 0.20 and the separation rate is 0.10. In this economy, we would expect the average length of unemployment to be A) one-third of a month. B) two-thirds of a month. C) five months. D) 26 weeks. E) ten months.
C) five months.
Monetary policy is: A) equally effective in dealing with real shocks and aggregate demand shocks B) more effective in dealing with real shocks than with aggregate demand shocks C) less effective in dealing with real shocks than with aggregate demand shocks D) totally ineffective in dealing with real shocks and aggregate demand shocks
C) less effective in dealing with real shocks than with aggregate demand shocks
A monetary contraction (reduction in the money supply) is most successful when it is credible, namely when: A) disinflation supersedes inflation B) the effect of fiscal policy is weakening C) market participants expect the central bank to carry through with its tough communicated policy stance D) market participants are uncertain about the current state of the economy
C) market participants expect the central bank to carry through with its tough communicated policy stance
The term business fluctuations refers to: A) the different stages of a product cycle. B) changes in the prices of goods and services over time. C) movement in real GD P around its long-term trend. D) the trend in real GDP over a long period of time.
C) movement in real GDP around its long-term trend.
The Fisher effect is the tendency of: A) real interest rates to rise with expected inflation rates. B) real interest rates to rise with unexpected inflation rates. C) nominal interest rates to rise with expected inflation rates. D) nominal interest rates to rise with unexpected inflation rates.
C) nominal interest rates to rise with expected inflation rates.
The reserve ratio (RR) is the A) amount the money supply expands with each dollar increase in reserves B) overnight lending rate from one major bank to another C) ratio of reserves to deposits D) ratio of reserves to bonds E) none of the above
C) ratio of reserves to deposits
In the real business cycle model, where prices are fully flexible, the decline in oil prices in the late 1980s caused A) both real growth and inflation to increase B) both real growth and inflation to decrease C) real growth to increase and inflation to decrease D) real growth to decrease and inflation to increase E) real growth to increase and inflation to fluctuate
C) real growth to increase and inflation to decrease
In the real business cycle model, where prices are fully flexible, the Internet revolution of the 1990s caused: A) both real growth and inflation to increase. B) both real growth and inflation to decrease. C) real growth to increase and inflation to decrease. D) real growth to decrease and inflation to increase.
C) real growth to increase and inflation to decrease.
When the expected rate of inflation is higher than the actual rate of inflation, wealth is: A) redistributed at random. B) not redistributed at all. C) redistributed from borrowers to lenders. D) redistributed from lenders to borrowers.
C) redistributed from borrowers to lenders.
Consider a central bank that follows the Taylor rule and suppose the economy was in a recession that was caused by a shift in the AD curve. We would expect the central bank to A) keep Federal Funds rate constant B) reduce taxes for the top income bracket C) target a lower Federal Funds rate D) sell more bonds in the open market E) none of the above
C) target a lower Federal Funds rate
An open market operation occurs when A) banks loan funds to each other B) banks increase the reserve ratio C) the Federal Reserve buys or sells government bonds D) the Federal Reserve enforces regulations on the banking industry E) none of the above
C) the Federal Reserve buys or sells government bonds
The reason economists focus on measuring GDP is because A)economists are mostly concerned about profits. B)GDP is the easiest thing to "count up" countries. C)GDP is highly correlated with other measures of well - being. D)no reason was provided in the book or in class. E)None of the above answers are correct.
C)GDP is highly correlated with other measures of well - being.
Consider an industrialized country where the growth rate of real GDP is -1 percent per year. However, the growth rate of real GDP per capita is positive. What is the most likely reason this is occurring? A)The country's population is growing faster than the growth of real GDP. B)The country's government is hoarding large amounts of the country's production. C)The country's population is growing slower than the growth of real GDP. D)The country's governm ent spending is growing faster than the private sector's spending.
C)The country's population is growing slower than the growth of real GDP.
Which of the following would be included in GDP for the United States? A)A U. S. professor taking a year off to teach at the London School of Economics B)A tire manufacturer making and selling tires to Ford to be used in their new cars C)The production of Hondas, a Japanese car company, producing cars in the Marietta, Ohio D)A young college student purchasing stock in Google.
C)The production of Hondas, a Japanese car company, producing cars in the Marietta, Ohio
Which of the following illustrates the principle of free riding? A)a real estate agent who is consistently late to appointments B)a student who uses scholarship money to pay all college tuition and fees C)a member of a club who refuses to do fund - raising for club activities D)Each of these is an example of free riding.
C)a member of a club who refuses to do fund - raising for club activities
GDP is the market value of all A)final goods and services produced by the permanent residents of a nation. B)final and intermediate goods and services produced in a nation. C)final goods and services produced within a country in a year. D)final and household goods produced within a country in a year.
C)final goods and services produced within a country in a year.
Throughout human history we know that A)all countries were able to establish periods of high levels of real GDP per capita. B)most countries were only able to establish a few decades of high levels of real GDP per capita. C)not until the early 19th century were a few countries able to establish sustained long-run economic growth. D)all countries will eventually return to very low lev els of real GDP per capita. E)None of the above.
C)not until the early 19th century were a few countries able to establish sustained long - run economic growth.
Using the simple money multiplier assume that a bank keeps one-eighth (1/8) of their deposits in the form of reserves and Alex deposits $8,000 in her bank. How much will the money supply (M1) increase? A) $1,000 B) $8,000 C) $16,000 D) $64,000 E) there is not enough information to answer this question
D) $64,000
The Federal Reserve's dual mandate refers to the Fed's main objectives I. to maintain price stability II. maintain balanced budgets III. to oversee the Treasury IV. to maintain economic growth consistent with full-employment A) I and II only are correct B) I and III only are correct C) I, II, and III, only are correct D) I and IV only are correct E) III and IV only are correct
D) I and IV only are correct
Consider a New Keynesian model where some prices are slow to adjust in the short-run. If there is an increase in stock market performance and consumers feel wealthier, we would likely see: I. An increase in consumer spending and the aggregate demand to shift out to the right II. An increase in the growth rate of real GDP in the short run III. A reduction in inflation in the short run A) Only answer I is correct B) Only answer II is correct C) Only answer III is correct D) Only answers I and II are correct E) Only answers II and III are correct
D) Only answers I and II are correct
Consider a New Keynesian model where some prices are slow to adjust in the short-run: If there is an increase in stock market and consumers feel wealthier, we would likely see: I. An increase in consumer spending and the aggregate demand to shift out to the right. II. An increase in the growth rate of real GDP in the short run. III. A reduction in inflation in the short run A) Only answer I is correct. B) Only answers II is correct. C) Only answers III is correct. D) Only answers I and II are correct. E) Only answers II and III are correct.
D) Only answers I and II are correct.
The Taylor rule provides a description of how the Federal Reserve adjusts the targeted Federal funds rate to changing economic conditions. In particular, The Federal Reserve will target a lower Federal funds rate. I. When M2 growth differs from the Federal Reserve's forecast II. When real GDP growth is below the long-run trend for real GDP growth III. When inflation is below the Federal Reserve's target inflation rate A) Only answer I is correct B) Only answer II is correct C) Only answers I and II are correct D) Only answers II and III are correct E) Only answers I and III are correct
D) Only answers II and III are correct
Which of the following is the best measure of a country's standard of living? A)nominal GDP. B)real GDP. C)nominal GDP per capita. D)real GDP per capita.
D) Real GDP per capita.
Why is monetary policy not fully effective in combating a negative supply shock? A) The Fed has no tools hat stimulate an economy after a negative supply shock B) When countering a negative supply shock, Fed action will cause deflation C) When countering a negative supply shock to reduce inflation, Fed action will raise employment D) When countering a negative supply shock to reduce unemployment, Fed action will raise inflation
D) When countering a negative supply shock to reduce unemployment, Fed action will raise inflation
Why is monetary policy not fully effective in combating a negative supply shock? A) The Fed has no tools that stimulate an economy after a negative supply shock B) When countering a negative supply shock, Fed action will cause deflation C) when countering a negative supply shock to reduce inflation, Fed action will raise employment D) When countering a negative supply shock to reduce unemployment, Fed action will raise inflation
D) When countering a negative supply shock to reduce unemployment, Fed action will raise inflation
Beginning on October, 6, 1979, the Federal Reserve, guided by Chair Paul Volcker, changed its operating procedure with its main goal to reduce inflation. The Fed was able to reduce inflation in the early 1980s by more than 10 percentage points, causing: A) unemployment to decrease B) housing prices to soar and interest rates to remain high C) GDP growth to rise to 6% and consumer confidence to grow D) a severe recession to take place E) none of the above
D) a severe recession to take place
Which shock can the Fed deal with most effectively? A) a major oil shock B) a shock to the LRAS curve C) a shock that shifts the SRAS curve D) a shock to AD
D) a shock to AD
Inflation is: A) the average number of times a dollar is spent on final goods and services in a year. B) when people mistake changes in nominal prices for changes in real prices. C) a decrease in the average level of prices. D) an increase in the average level of prices.
D) an increase in the average level of prices.
In the New Keynesian model where some prices are slow to adjust to economic shocks, which of the following would result from a positive productivity shock (positive real shock)? A) an increase in the rate of the inflation B) a shift to the right of the aggregate demand curve C) a shift to the left of the long-run aggregate supply curve D) an increase in the economy's long-run potential growth rate E) none of the above
D) an increase in the economy's long-run potential growth rate
In the real business cycle model where prices are perfectly flexible, we would expect a negative real shock, such as a severe countrywide drought, to result in: A) a decrease in the inflation rate and an increase in the growth rate of output. B) a decrease in the inflation rate and a decrease in the growth rate of output. C) an increase in the inflation rate and an increase in the growth rate of output. D) an increase in the inflation rate and a decrease in the growth rate of output.
D) an increase in the inflation rate and a decrease in the growth rate of output.
All of the following are examples of a positive AD shock EXCEPT A) a faster-than-expected growth rate of the money supply B) an increase in consumer spending due to increased optimism C) an unexpected increase in the growth rate of government spending D) an unexpected increase in productivity growth E) all of the examples are positive shocks that shift the AD curve
D) an unexpected increase in productivity growth
When we examine data for many countries over time, higher money growth has consistently been associated with: A) deflation. B) disinflation. C) hyperinflation. D) higher inflation
D) higher inflation
In the New Keynesian and Real Business cycle models, what variables are measured on the vertical and horizontal axes? A) price and quantity B) prices and unemployment C) inflation and unemployment D) inflation and real GDP growth E) none of the above
D) inflation and real GDP growth
In the New Keynesian model where some prices are slow to adjust, what happens to the economy in the short run when consumer spending decreases? A) inflation is higher, and the real growth rate is higher B) inflation is higher, and the real growth rate is lower C) inflation is lower, and the real growth rate is higher D) inflations is lower, and the real growth rate is lower
D) inflations is lower, and the real growth rate is lower
When economists state that "money is neutral," they mean that the: A) overall price level has no effect on consumers; only relative prices do. B) overall price level has no effect on people's inflation expectations. C) money supply does not affect inflation or nominal GDP. D) money supply does not affect real GDP or unemployment.
D) money supply does not affect real GDP or unemployment.
A permanent increase in the growth rate of the money supply will increase the growth rate of real GDP in the long run in A) the Real Business Cycle model B) the New Keynesian model C) bother the Real Business Cycle model and the New Keynesian model D) neither the Real Business Cycle model nor the New Keynesian model E) Phillips curve model with sticky prices and flexibility wages
D) neither the Real Business Cycle model nor the New Keynesian model
A worker repairing CD and DVD players was laid off because most of his customers have started using Netflix, Apple TV and other streaming services. This worker is now: A) a discouraged worker. B) frictionally unemployed. C) cyclically unemployed. D) structurally unemployed.
D) structurally unemployed.
According to the Solow model, an increase in the fraction of output that is saved will increase ________ in the long run. A)investment. B)output. C)per capita GDP. D)All of the answers are correct.
D)All of the answers are correct.
What are the components of the National Spending Approach to calculatingGDP? A)consumption expenditures, transfer payments and government investment B)private investment, sale of new and used goods, net exports, and transfer payments C)wages, rent, investment, and profit D)consumption of goods an d services, investment goods, government purchases, and net exports
D)consumption of goods and services, investment goods, government purchases, and net exports
Consider a New Keynesian model where some prices are slow to adjust in the short-run: If there is a temporary increase in consumer pessimism, we would likely see: I. An decrease in consumer spending and the aggregate demand to shift out to the left. II. An increase in the growth rate of real GDP in the short run. III. A reduction in inflation in the short run A) Only answer I is correct. B) Only answers II is correct. C) Only answers III is correct. D) Only answers I and II are correct. E) Only answers I and III are correct.
E) Only answers I and III are correct.
In response to a slowing economy, the Federal reserve may want _______ the interest rate on reserves in order to _______ the growth rate of the transactions money (M1 and/or M2) and shift the AD curve _______. A) increase, decrease, back (to the left) B) increase, increase, back (to the left) C) decrease, decrease, out (to the right) D) increase, decrease, out (to the right) E) decrease, increase, out (to the right)
E) decrease, increase, out (to the right)
The institutions of economic growth include A)property rights. B)a dependable legal system. C)competitive and open markets. D)Honest governments E)All the answers are correct.
E)All the answers are correct.
When it comes to the safety of pharmaceutical drugs: A)The government should spare no expense in determining whether drugs are safe. B)The government can save more lives by making sure there are no negative effects from the drugs by making sure companies spend many years of testing for harmful side effects. C)Economics tells us profits are more important than safety. D)Profit driven pharmaceutical drug companies have no incentive to produce safe drugs. E)The government's lengthy testing of new drugs to ensure that they are safe may cost some people their lives.
E)The government's lengthy testing of new drugs to ensure that they are safe may cost some people their lives.
True or False? The Federal Reserve has the power to target both the Federal Funds Rate and the quantity of reserves (and thus monetary aggregates) at the same time.
False
