econ final

If a person withdraws $500 from his/her savings account and puts it in his/her checking account, then M1 will ________ and M2 will ________. A)increase; not change B)increase; decrease C)not change; not change D)not change; decrease E)not change; increase

A

According to the figure above, at what point is aggregate expenditure greater than GDP? A)J B)K C)L D)none of the above

A

Banks can make additional loans when required reserves are A)less than total reserves. B)less than total deposits. C)greater than total reserves. D)less than total loans.

A

Ceteris paribus, an increase in the labor force would be represented by a movement from A)SRAS1 to SRAS2. B)SRAS2 to SRAS1. C)point A to point B. D)point B to point A.

A

Consider the hypothetical information in the table above for potential real GDP, real GDP, and the price level in 2016 and in 2017 if Congress and the president do not use fiscal policy. If Congress and the president want to keep real GDP at its potential level in 2017, they should A)decrease income taxes. B)decrease government purchases. C)decrease the money supply. D)increase the level of interest rates.

A

During a business cycle expansion, total production ________ and total employment ________. A)increases; increases B)increases; decreases C)decreases; decreases D)decreases; increases

A

Economies where goods and services are traded directly for other goods and services are called________ economies. A)barter B)trade C)seigniorage D)direct

A

Given the economy is at point A in year 1, what will happen to the unemployment rate in year 2? A)It will rise. B)It will remain constant. C)It will fall. D)not enough information to answer the question

A

If firms are more optimistic that future profits will rise and remain strong for the next few years, then A)investment spending will rise. B)investment spending will rise and then fall. C)investment spending will fall. D)investment spending will remain unaffected.

A

In the figure above suppose the economy is initially at point A. The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the Federal Reserve? A)an open market purchase of Treasury bills B)an increase in the required reserve ratio C)a decrease in income taxes D)an open market sale of Treasury bills

A

In the figure above, the movement from point A to point B in the money market would be caused by A)an open market sale of Treasury securities by the Federal Reserve. B)a decrease in the required reserve ratio by the Federal Reserve. C)an increase in the price level. D)a decrease in real GDP.

A

In the final seasons of Friends, the cast earned $1 million per episode. If Courtney Cox earned $1 million per episode in September of 2003, what comparable amount would Mandy Moore have to be paid per episode of This Is Us in September of 2016? The CPI is 241.428 in 2016 and 185.2 in 2003. A)$1,303,607 B)$1,293,607 C)$56,228,000 D)$767,103

A

Macroeconomics, as opposed to microeconomics, includes the study of what determines the A)average price levels of goods and services in the economy. B)wages paid to employees by Dell. C)price charged for laptop computers by Dell. D)quantity of Dell employees.

A

Refer to Figure 15-1. In the figure above, the money demand curve would move from Money demand 1 to Money demand 2 if A)the price level increased. B)real GDP decreased. C)the Federal Reserve sold Treasury securities. D)the interest rate decreased.

A

Suppose Warren Buffet withdraws $1 million from his checking account at Chase Bank. If the required reserve ratio is 20 percent, what is the maximum change in deposits in the banking system? A)-$5 million B)-$4 million C)-$200,000 D)$1 million E)$5 million

A

Suppose the economy is in short-run equilibrium above potential GDP and wages and prices are rising. If contractionary policy is used to move the economy back to long run equilibrium, this would be depicted as a movement from ________ using the static AD-AS model in the figure above. A)C to B B)D to C C)A to E D)E to A E)B to A

A

Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2016, then the value of your grandfather's salary in 2016 dollars is approximately A)$84,775. B)$63,830. C)$37,200. D)$26,280.

A

The size of the underground economy would tend to increase if the government of a country A)increased income tax rates. B)decreased government regulations on businesses. C)legalized marijuana. D)legalized prostitution.

A

Which of the following will cause a direct increase in consumption spending? A)an increase in disposable income B)an increase in planned investment C)a decrease in net export spending D)an increase in government spending

A

Which of the following would be considered a fiscal policy action? A)A tax cut is designed to stimulate spending during a recession. B)Tax incentives are offered to encourage the purchase of fuel efficient cars. C)Spending on the war in Afghanistan is increased to promote homeland security. D)The Fed increases the money supply.

A

Which of the following would be the best measure of the cost of living? A)consumer price index B)GDP deflator C)real GDP per person D)real GDP

A

An increase in the discount rate ________ bank reserves and ________ the money supply if banks respond appropriately to the change in the rate. A)decreases; increases B)decreases; decreases C)increases; increases D)increases; decreases

B

Ceteris paribus, an increase in interest rates would be represented by a movement from A)AD1 to AD2. B)AD2 to AD1. C)point A to point B. D)point B to point A.

B

Ceteris paribus, an increase in personal income taxes would be represented by a movement from A)AD1 to AD2. B)AD2to AD1. C)point A to point B. D)point B to point A.

B

Ceteris paribus, an increase in the expected future price level would be represented by a movement from A)SRAS1 to SRAS2. B)SRAS2 to SRAS1. C)point A to point B. D)point B to point A.

B

Expansionary fiscal policy involves A)decreasing the money supply and increasing interest rates. B)increasing government purchases or decreasing taxes. C)increasing taxes or decreasing government purchases. D)increasing the money supply and decreasing interest rates.

B

Fiscal policy refers to changes in A)the money supply and interest rates that are intended to achieve macroeconomic policy objectives. B)federal taxes and purchases that are intended to achieve macroeconomic policy objectives. C)state and local taxes and purchases that are intended to achieve macroeconomic policy objectives. D)federal taxes and purchases that are intended to fund the war on terrorism.

B

Given the economy is at point A in year 1, what will happen to the price level in year 2? A)It will fall. B)It will rise. C)It will remain constant. D)not enough information to answer the question

B

Gross domestic product understates the total production of final goods and services because of the omission of A)intermediate goods. B)household production. C)inflation. D)exports.

B

If the U.S. economy is currently at point N, which of the following could cause it to move to point K? A)Government expenditures increase. B)Households expect future income to decline. C)Household wealth rises. D)The firm's cash flow rises as profits rise.

B

In 2014, which component of GDP had a negative value? A)investment B)net exports C)government spending D)consumption

B

Refer to Figure 15-13. In the figure above, if the economy in Year 1 is at point A and is expected in Year 2 to be at point B, then the appropriate monetary policy by the Federal Reserve would be to A)lower interest rates. B)raise interest rates. C)raise income taxes. D)lower income taxes.

B

Refer to Figure 15-14. In the figure above, suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B. Which of the following policies could the Federal Reserve use to move the economy to point C? A)decrease income taxes B)buy Treasury bills C)sell Treasury bills D)increase the required-reserve ratio

B

Silver is an example of a A)fiat money. B)commodity money. C)barter money. D)representative money.

B

The formula for aggregate expenditure is A)AE=C+I+G. B)AE=C+I+G+NX. C)AE=C+I+G-NX. D)AE=C+I+depreciation -NX.

B

The interest rate that banks charge other banks for overnight loans is the A)Treasury bill rate. B)federal funds rate. C)discount rate. D)prime rate.

B

The leader of the monetarist school and major proponent of a monetary growth rule was A)Alan Greenspan. B)Milton Friedman. C)Ben Bernanke. D)Paul Volcker.

B

The purchase of a new house is included in A)government purchases. B)investment expenditures. C)net exports. D)consumption expenditures.

B

The quantity equation states that A)the money supply (M) divided by the velocity of money(V) equals the price level (P)divided by real output(Y), i.e., M/V=P/Y. B)M×V=P×Y. C)M-V=P-Y. D)M+V=P+Y.

B

The quantity theory of money predicts that, in the long run, inflation results from the A)money supply growing at a lower rate than real GDP. B)money supply growing at a faster rate than real GDP. C)velocity of money growing at a faster rate than real GDP. D)velocity of money growing at a lower rate than real GDP.

B

What is nominal GDP in 2016 when 2011 is the base year? A)$28,885 B)$11,790 C)$11,200 D)$10,275

B

Which of the following goods is directly counted in GDP? A)the bread that Subway purchases for its sandwiches B)a 12-inch Subway sandwich purchased by a student C)the lettuce that Subway purchases for its sandwiches D)the plastic bags that Subway purchases to wrap its sandwiches

B

Which of the following is a reason why we should consider the federal national debt a problem? A)The federal government is in danger of defaulting on its debt. B)If the debt drives up interest rates, crowding out will occur. C)If the debt was incurred to finance research and development, crowding out will occur. D)If the debt was incurred to finance improvements in infrastructure, crowding out will occur.

B

According to the text, economists consider full employment to occur when A)the sum of frictional unemployment and structural unemployment equals zero. B)everyone who wants a job has a job. C)the unemployment rate consists of only frictional and structural unemployment. D)frictional unemployment equals zero.

C

An increase in government purchases will increase aggregate demand because A)consumption expenditures are a component of aggregate demand. B)the decline in the price level will increase demand. C)government expenditures are a component of aggregate demand. D)the decline in the interest rate will increase demand.

C

Automatic stabilizers refer to A)changes in the money supply and interest rates that are intended to achieve macroeconomic policy objectives. B)changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives. C)government spending and taxes that automatically increase or decrease along with the business cycle. D)the money supply and interest rates that automatically increase or decrease along with the business cycle.

C

In recent years, a monetary growth rule has fallen out of favor because A)the growth rate of M1 has become more stable. B)it is believed that active monetary policy destabilizes the economy and makes the business cycle worse. C)the close relationship between movements in M1 and movements in real GDP has become weaker. D)the growth rate of GDP has been highly unstable.

C

In the figure above, LRAS1 and SRAS1 denote LRAS and SRAS in year 1, while LRAS2 and SRAS2 denote LRAS and SRAS in year 2. Given the economy is at point A in year 1, what is the growth rate in potential GDP in year 2? A)8% B)9.1% C)10% D)12%

C

Scarcity refers to the situation in which A)a country's population is larger than its resource base. B)a nation's poverty level increases faster than its population. C)unlimited wants exceed limited resources. D)unlimited resources exceed limited wants.

C

Suppose a transaction changes a bank's balance sheet as indicated in the T-account, and the required reserve ratio is 10 percent. As a result of the transaction, the bank has excess reserves of A)$0. B)$400. C)$3,600. D)$4,000.

C

Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would A)decrease the number of persons in the labor force. B)increase the measured unemployment rate. C)increase the measured labor force participation rate. D)decrease the number of persons in the working-age population.

C

Suppose the economy is at point A. If investment spending increases in the economy, where will the eventual long-run equilibrium be? A)A B)B C)C D)D

C

Suppose the economy is in short-run equilibrium above potential GDP and no policy is pursued. Using the static AD-AS model in the figure above, this would be depicted as a movement from A)E to A. B)A to E. C)C to D. D)C to B. E)D to C.

C

The Bureau of Labor Statistics would categorize a retiree who is not working as A)unemployed. B)employed. C)out of the labor force. D)a discouraged worker.

C

The Federal Reserve plays a larger role than Congress and the president in stabilizing the economy because A)changes in interest rates have their full effect on the economy in a short period of time, whereas changes in government spending and taxes have their full effect over a long period of time. B)the Federal Reserve can immediately recognize when real GDP is below or above potential GDP. C)the Federal Reserve can more quickly change monetary policy than the president and the Congress can change fiscal policy. D)changes in interest rates have a considerably larger effect on the economy than changes in government purchases or taxes.

C

The Federal Reserve was established in 1913 to A)prevent inflation by decreasing the money supply. B)stimulate the economy by increasing bank reserves. C)stop bank panics by acting as a lender of last resort. D)prevent bad loans by requiring banks to hold reserves.

C

The M1 measure of the money supply equals A)paper money plus coins in circulation. B)currency plus checking account balances plus traveler's checks plus savings account balances. C)currency plus checking account balances plus traveler's checks. D)currency plus checking account balances.

C

The Philippines and Vietnam have roughly the same size population. Suppose the GDP of the Philippines is $1,000 billion and the GDP of Vietnam is $10,000 billion. You should conclude A)a typical person in Vietnam is less than 10 times as well off as the typical person in the Philippines. B)a typical person in Vietnam is more than 10 times as well off as the typical person in the Philippines. C)it is not possible to make a good comparison of the economic well being of a typical individual in the 2 countries without additional information. D)a typical person in Vietnam is 10 times as well off as the typical person in the Philippines.

C

The aggregate expenditure model focuses on the relationship between ________ and ________ in the short run, assuming ________ is constant. A)total production; total income; real GDP B)total income; real GDP; the price level C)total spending; real GDP; the price level D)total spending; real GDP; total income

C

The increase in government spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion is an example of A)discretionary monetary policy. B)discretionary fiscal policy. C)automatic stabilizers. D)automatic monetary policy.

C

The long-run aggregate supply curve will shift to the right if A)net exports decrease. B)there is a decrease in population. C)the economy experiences technological change. D)the economy experiences high levels of inflation.

C

The nominal interest rate equals the real interest rate ________ the inflation rate. A)divided by B)minus C)plus D)times

C

The quantity theory of money was derived from the quantity equation by asserting that A)the money supply was fixed. B)the velocity of money was zero. C)the velocity of money was fixed. D)real output was fixed.

C

The three main monetary policy tools used by the Federal Reserve to manage the money supply are A)open market operations, the exchange rate of the dollar against foreign currencies, and government purchases. B)interest rates, tax rates, and government spending. C)open market operations, discount policy, and reserve requirements. D)tax rates, government purchases, and government transfer payments.

C

To calculate GDP by the expenditure method, one must add A)wages, rents, interest, and profits. B)labor, natural resources, entrepreneurship, and capital. C)consumption spending, investment spending, government spending, and net exports. D)consumption spending, investment spending, government spending, and exports.

C

U.S. net export spending rises when A)the value of the U.S. dollar increases relative to other currencies. B)the price level in the United States rises relative to the price level in other countries. C)the growth rate of U.S. GDP is slower than the growth rate of GDP in other countries. D)the inflation rate is higher in the United States relative to other countries.

C

What is the GDP deflator in 2016 if 2011 is the base year? A)187 B)87 C)115 D)120

C

Which of the following is a true statement about the multiplier? A)The smaller the MPC, the larger the multiplier. B)The multiplier effect does not occur when autonomous expenditure decreases. C)The multiplier rises as the MPC rises. D)The multiplier is a value between zero and one.

C

Which of the following is an example of discretionary fiscal policy? A)a decrease in food stamps issued during an expansion or boom B)an increase in income tax receipts with rising income during an expansion C)the tax cuts passed by Congress in 2001 to combat the recession D)an increase in unemployment insurance payments during a recession

C

Which of the following is not directly counted in GDP? A)government purchases B)consumer goods C)intermediate goods D)investment expenditures

C

A recession tends to cause the federal budget deficit to ________ because tax revenues ________and government spending on transfer payments ________. A)decrease; fall; rises B)decrease; rise; falls C)increase; rise; falls D)increase; fall; rises

D

Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals A)$2,200. B)$1,600. C)$1,400. D)$1,200.

D

Dollar bills in the modern economy serve as money because A)they can be redeemed for gold by the central bank. B)they are backed by the gold stored in Fort Knox. C)they have value as a commodity independent of their use as money. D)people have confidence that others will accept them as money.

D

Fiscal policy is determined by A)the president and the Federal Reserve. B)the Federal Reserve. C)Congress and the Federal Reserve. D)Congress and the president.

D

If a person takes $100 from his/her piggy bank at home and puts it in his/her savings account, then M1 will ________ and M2 will ________. A)increase; decrease B)not change; increase C)increase; increase D)decrease; not change E)decrease; increase

D

If the GDP deflator rises from 185 to 190, what is the rate of inflation between the two years? A)270% B)50% C)5% D)2.7%

D

If the economy is at point L, what will happen? A)Inventories have risen above their desired level, and firms increase production. B)Inventories have fallen below their desired level, and firms decrease production. C)Inventories have fallen below their desired level, and firms increase production. D)Inventories have risen above their desired level, and firms decrease production.

D

If whole tomatoes were money, which of the following functions of money would be the hardest for tomatoes to satisfy? A)unit of account B)medium of exchange C)certificate of gold D)store of value

D

In economics, money is defined as A)the total value of one's assets in current prices. B)the total value of one's assets minus the total value of one's debts, in current prices. C)the total amount of salary, interest, and rental income earned during a year. D)any asset people generally accept in exchange for goods and services.

D

Macroeconomics, as opposed to microeconomics, includes the study of what determines the level of A)output of a specific firm. B)output of a specific industry. C)employment in a specific industry. D)employment in the economy.

D

On the 45-degree line diagram, the 45-degree line shows points where A)real aggregate expenditure equals C+I. B)real aggregate output equals the quantity produced. C)real income equals real GDP. D)real aggregate expenditure equals real GDP.

D

Refer to Table 15-3. Consider the hypothetical information in the table above for potential real GDP, real GDP, and the price level in 2016 and in 2017 if the Federal Reserve does not use monetary policy. If the Fed wants to keep real GDP at its potential level in 2017, it should A)decrease the required reserve ratio. B)decrease income taxes. C)buy Treasury securities. D)sell Treasury securities.

D

Suppose in 2016, you purchase a house built in 2003. Which of the following would be included in the gross domestic product for 2016? A)the value of the house in 2016 B)the value of the house in 2016 minus depreciation C)the value of the house in 2003 D)the value of the services of the real estate agent

D

The Fed can increase the federal funds rate by A)buying Treasury bills, which decreases bank reserves. B)selling Treasury bills, which increases bank reserves. C)buying Treasury bills, which increases bank reserves. D)selling Treasury bills, which decreases bank reserves.

D

The advice to "keep searching, there are plenty of jobs around here for which you are qualified," would be most appropriate for which of the following types of unemployment? A)structural unemployment B)cyclical unemployment C)seasonal unemployment D)frictional unemployment

D

The basic aggregate demand and aggregate supply curve model helps explain A)output fluctuations in an individual market. B)long-term growth. C)price fluctuations in an individual market. D)short-term fluctuations in real GDP and the price level.

D

The deflation of the 1930s impacted the U.S. economy because it led some consumers to ________ and because it ________. A)demand higher wages in anticipation of prices eventually rising again; increased manufacturing since firms could afford to hire more labor B)borrow more money since money was now cheap; reduced the amount of money consumers would have to pay back on their outstanding loans C)increase purchases to take advantage of the falling prices; increased the burden on lenders D)postpone purchases while they waited for prices to fall even lower; increased the burden on borrowers

D

The goals of monetary policy tend to be interrelated. For example, when the Fed pursues the goal of ________, it also can achieve the goal of ________ simultaneously. A)economic growth; a low current account deficit B)stability of financial markets; a low current account deficit C)high employment; lowering government spending D)high employment; economic growth

D

The major assets on a bank's balance sheet are its A)loans, and checking and savings account deposits. B)checking and savings account deposits. C)reserves, loans, and checking account deposits. D)reserves, loans, and holdings of securities. E)reserves, checking and savings account deposits.

D

The major shortcoming of a barter economy is A)that goods and services are not traded. B)the requirement of specialization and exchange. C)that money loses value from inflation. D)the requirement of a double coincidence of wants.

D

The purchase by a foreign government of an airplane produced in the United States is included in U.S. A)government purchases. B)investment expenditures. C)consumption expenditures. D)net exports.

D

Under the monetary growth rule proposed by the monetarists, the money supply would grow each year at a constant rate equal to the long-run rate of growth of A)employment. B)inflation. C)interest rates. D)real GDP.

D

What is real GDP in 2016, using 2011 as the base year? A)$28,885 B)$11,790 C)$11,200 D)$10,275

D

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness? A)unemployed persons falsely report themselves to be actively looking for a job B)inflation C)people employed in the underground economy D)discouraged workers

D

Which of the following could cause nominal GDP to decrease, but real GDP to increase? A)The price level rises and the quantity of final goods and services produced rises. B)The price level rises and the quantity of final goods and services produced falls. C)The price level falls and the quantity of final goods and services produced falls. D)The price level falls and the quantity of final goods and services produced rises.

D

Which of the following is true about the Federal Reserve and its ability to prevent recessions? The Federal Reserve A)cannot realistically fine tune the economy and has little to no effect on the magnitude and length of recessions. B)can fine tune the economy and realistically hope to keep the economy from experiencing recessions. C)does not try to eliminate recessions, but instead focuses on preventing inflation. D)cannot realistically fine tune the economy, but seeks to keep recessions shorter and milder than they would otherwise be.

D

Which of the following statements about the Social Security, Medicare, and Medicaid programs is true? A)Some economists have argued for increasing benefits to help with these programs' funding problems. B)Spending on these three programs will rise from 9.7% of GDP currently to 10.2% of GDP by 2050. C)Some economists have argued for decreasing taxes to help with these programs' funding problems. D)Costs are being driven up by the fact that Americans are living longer and medical costs are rising substantially.

D

Refer to Figure 16-5. In the dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is expected to go to point B in year 2, Congress and the president would most likely A)decrease government spending. B)lower interest rates. C)increase oil prices. D)increase taxes. E)increase government spending.

E

Suppose the economy is in short-run equilibrium above potential GDP, the unemployment rate is very low, and wages and prices are rising. Using the static AD-AS model in the figure above, if the Fed does nothing this would be depicted as a movement from A)A to B. B)C to B. C)B to C. D)A to E. E)C to D.

E

The largest liability on the balance sheet of most banks is its A)deposits with the Federal Reserve. B)holdings of securities. C)loans. D)vault cash. E)checking account and savings account deposits of its customers.

E