Econ Final Review Test 3
Consider a payment of $250, which will be made three years in the future. The interest rate is 2 percent. The present value of this payment is >>> Answer to 2 decimal places.
$235.58
Tom took out a $5,000 loan to buy a boat at an interest rate of 8 percent a year. He plans to repay the loan after 2 years. How much will he have to pay? Tom will have to pay
$5832
Suppose an increase in the monetary base of $300,000 increases the quantity of money by $600,000. Calculate the money multiplier. The money multiplier is
2
he table gives information about the commercial banks in Zap. If banks have no unplanned reserves, what is the banks' desired reserve ratio? The desired reserve ratio is percent.
4
The graph shows the demand for money curve and the supply of money curve. The Fed decreases the quantity of real money supplied to $2.0 trillion. Draw a new MS curve that shows the effect of the Fed's action. Label it. Draw a point at the new equilibrium quantity of money and interest rate. Before the Fed decreases the quantity of money, the equilibrium interest rate is percent a year. After the Fed decreases the quantity of money, at an interest rate of 6 percent a year, people want to hold _______ money than the quantity supplied, so they _______ bonds. A. less; buy B. more; buy C. more; sell D. less; sell The price of a bond _______ and the interest rate _______. A. falls; rises B. falls; falls C. rises; falls D. rises; rises
6,c,a
Describe three types of short-run macroeconomic equilibrium. A macroeconomic equilibrium in which real GDP exceeds potential GDP is _____ equilibrium. And one in which real GDP is less than potential GDP is _____ equilibrium. A. an above full-employment; a below full-employment B. a below full-employment; an inflationary C. an above full-employment; a recessionary D. a below full-employment; an above full-employment The graph shows an economy's long-run aggregate supply curve. The economy is at a full-employment equilibrium. Draw an aggregate demand curve and a short-run aggregate supply curve. Label them. Draw a point at the short-run equilibrium.
A, check graoh
In the figure, if the interest rate is 4 percent, people A. buy stocks, because stocks are more liquid than currency. B. sell bonds so as to convert them into money. C. buy bonds so as to have a better store of value. D. petition the Fed to tighten the quantity of money.
B
The crowding out effect refers to A. government spending crowding out private spending. B. government investment crowding out private investment. Your answer is correct. C. private investment crowding out government saving. D. private saving crowding out government saving.
B
If potential GDP increases, what happens to aggregate supply? When potential GDP increases, ______. A. long-run aggregate supply and short-run aggregate supply increase. A movement upward occurs along the LAS curve and along the SAS curve B. long-run aggregate supply and short-run aggregate supply increase. The LAS and the SAS curve shift rightward C. long-run aggregate supply increases but short-run aggregate supply does not change. The LAS curve shifts rightward and a movement occurs along the SAS curve D. we don't know what the effect is on long-run aggregate supply or short-run aggregate supply The graph gives a long-run aggregate supply curve and a short-run aggregate supply curve. Potential GDP increases and the full-employment price level remains constant. Draw the new long-run aggregate supply curve and the new short-run aggregate supply curve. Label the curves. Draw a point that shows the new value of potential GDP at the full-employment price level.
B, check graph
What are the official measures of money? Are all the measures really money? The two main official measures of money in the United States today are ______. The two main official measures of money in the United States ______ really money. A. M2 and M3; are not B. M1 and M2; are not C. M1 and M2; are D. currency and M2; are The table shows the amounts held as the various components of M1 and M2. The value of M1 is billion. The value of M2 is billion.
C, 275, 1145
Draw a short-run aggregate supply curve. Label it. As we move up along the short-run aggregate supply curve, ______. A. the money wage rate, the prices of other resources, and potential GDP remain constant B. potential GDP increases C. the real wage rate, the prices of other resources, and potential GDP remain constant D. the money wage rate and the prices of other resources change by the same percentage
Check graph, A
The graph shows an economy's long-run aggregate supply curve. Draw an aggregate demand curve and a short-run aggregate supply curve such that when the economy is in long-run equilibrium, the price level is 110. Label the curves. Draw a point at the long-run macroeconomic equilibrium. In the long-run macroeconomic equilibrium, ______. A. potential GDP and aggregate demand determine the price level, and the money wage rate adjusts so that the SAS curve intersects the LAS curve at the long-run equilibrium price level B. potential GDP and short-run aggregate supply determine the price level C. the AD and SAS curves determine the price level and technology advances so that the LAS curve intersects the AD curve at the equilibrium price level D. real GDP is always increasing
Check graph, A
If the nominal interest rate is 8 percent and inflation is 3 percent, what is the real interest rate? 11 percent B. 3 percent C. 8 percent D. 5 percent
D
When the Fed sells government securities to a bank, how are the Fed's assets affected? A. The amount of the Fed's government securities increases. B. The amount of reserves held at the Fed increases. C. The amount of reserves held at the Fed decreases. D. The amount of the Fed's government securities decreases.
D
Which of the following is NOT one of the Fed's monetary policy tools? A. last resort loans B. the required reserve ratio C. buying and selling U.S. government securities D. the income tax rate
D
f households expect an increase in their future incomes, they will save A. and consume less today B. more and consume less today C. and consume more today D. less and consume more today
D
he graph shows the loanable funds market when there is neither a government budget surplus nor a government budget deficit. Draw a point at the equilibrium quantity of loanable funds and the equilibrium real interest rate. Label it 1. Now suppose that the government has a budget surplus of $1 trillion. Draw a curve that shows the effect of this surplus in the loanable funds market. Label it. Draw a point at the new equilibrium real interest rate and quantity of investment. Label it 2. Draw a point to show private saving when the government budget surplus is $1 trillion. Label it 3.
check graph
Draw an aggregate demand curve in an economy with an above full-employment equilibrium. Label it AD. Draw a point at the above full-employment equilibrium. Draw a horizontal arrow at the equilibrium price level that shows the output gap. The output gap in the graph is ______ because ______. A. an inflationary gap; potential GDP is less than real GDP B. an above full-employment gap; the unemployment rate is less than the natural rate C. a recessionary gap; potential GDP is less than real GDP D. an inflationary gap; the only way for the economy to return to full employment is for the price level to rise
check graph, A
A new technology is developed that increases firms' expected profits. Draw a curve that shows the effect of this event. Draw a point at the new equilibrium quantity of loanable funds and the new equilibrium real interest rate. When a shortage or a surplus arises in the loanable funds market _______. A. the nominal interest rate is pulled to the new equilibrium level B. the supply of loanable funds changes to return the economy to its original real interest rate C. the real interest rate is pulled to the new equilibrium level D. the demand for loanable funds changes to return the economy to its original real interest rate
check graph, C
Draw the long-run aggregate supply curve when potential GDP is $17.0 trillion. Label it. As we move up along the long-run aggregate supply curve, ______. A. the prices of goods and services remain constant B. the money wage rate remains constant C. the prices of goods and services increase and the money wage rate decreases D. the real wage rate remains constant
check graph, D
The graph shows an aggregate demand curve. Draw a curve that shows the effect on aggregate demand of an increase in expected future income. Label it. An increase in expected future income _______. An increase in the expected future inflation rate _______. A. increases aggregate demand today; increases aggregate demand today B. decreases aggregate demand today but increases aggregate demand in the future; decreases aggregate demand today but increases aggregate demand in the future C. increases aggregate demand today; has no influence on aggregate demand today or in the future D. increases aggregate demand in the future but has no influence on aggregate demand today; increases aggregate demand in the future but has no influence on aggregate demand today An increase in expected future profits _______. A. increases aggregate demand in the future but has no influence on aggregate demand today B. has no influence on aggregate demand today or in the future C. increases aggregate demand today This is the correct answer. D. decreases aggregate demand today but increases aggregate demand in the future
check graph,A,D
The graph shows the loanable funds market when there is neither a government budget surplus nor a government budget deficit. Draw a point at the equilibrium quantity of loanable funds and the equilibrium real interest rate. Label it 1. Now suppose that the government has a budget deficit of $1 trillion. Draw a curve that shows the effect of this deficit in the loanable funds market. Label it. Draw a point at the new equilibrium real interest rate and quantity of saving. Label it 2. Draw a point to show investment when the government budget deficit is $1 trillion. Label it 3.
check test
