Econ Final
Assume that a household has access to credit. Which off the following is likely to have a significant effect on long-run consumption?
an unexpected promotion to a senior position
in an economy where the MPC is .7, the proportional tax rate is .25 and the marginal propensity to import is .2, the multiplier will be
1.48; 1/(1- .7(.75)) + .2
which of the following statements is correct?
employment rate = employed/population of working age
suppose that we begin again at A and that this is a full-employment level of output. an increase in aggregate demand in these circumstances will most likely cause
a rise in the general level of the prices
which of the following statements about the wage setting curve is correct
at each point on the wage-setting curve, the workers are choosing their best response effort level given the real wage and unemployment rate
which of the following statements is correct
depreciation is a flow variable
which of the following statements is correct regarding disposable income?
disposable income is the maximum amount of expenditure possible without having to borrow or sell possessions
the weakness of the original Phillips curve is that it ignored
expectations
Which of the following statements are correct regarding the principal-agent problem?
one solution for the principal-agent problem in loans is for the borrower to provide equity; the principal-agent problem leads to credit rationing in the loans market
unemployment is a stock. the size of that stock will increase if
the rate of job destruction is 2% per year and the rate of job creation is 1% per year
according to the world bank, real per capita income in the US increased from 57,640 in 2015 to 58030 in 2016. what was the approximate annual growth rate
.7%
according to the revised version of the phillips curve, if the rate of inflation last year was 3 percent and the bargaining gap this year and next year is 1 percent, then inflation this year and next will be
4% then 5%
which of the following statements regarding Adam Smith are correct?
Adam Smith claimed that coordination among large number of economic actors, often unknown to each other, might spontaneously arise without any person or institution consciously attempting to create or maintain it.
Which of the following statements is correct regarding measuring of GDP?
GDP can be measured either as the total spending on domestically produced goods and services, or the total value added in domestic production, or the sum off all incomes received from domestic production
Mr Bond has wealth of £500,000. He has a market income of £40,000 per year, on which he is taxed 30%. Mr Bond's wealth includes some equipment, which depreciates by £5,000 every year. Based on this information, which of the following statements is correct?
If Mr Bond decides to spend 60% of his net income on consumption and the rest on investment, then his investment is £9,200.
The following is a table of the British pound (GBP) exchange rate against the dollar (USD) and euro: USD/GBP -1.5698 -1.5131 euro/GBP -1.2622 -1.4256 In this table, the exchange rates are defined as the number of USD or euro per GBP. Based on this information, which of the following statements are correct?
USD appreciated against GBP over the year; exports of british goods were cheaper in the US in November 2015 than a year before
imagine an economy that grows at a constant rate for the 21st century. A plot of the level of GDP over time will fit
a convex line on a linear scale, and a straight upward-sloping line on a ratio scale
which o the following would increase GDP?
a decline in imports, holding all other components of GDP constant
Which of the following increases the multiplier?
a fall in the marginal propensity to import
cuts in public expenditure do not guarantee a reduction in the government's deficit because
aggregate demand will fall, reducing government revenue
people are more productive when they specialize due to
all of the above (difference in ability, learning by doing, economies of scale)
interest rates can influence the macroeconomy by influencing
all of the above (households decisions to borrow and spend, businesses decisions to invest in new projects, the attractiveness of holding equities)
which of the following is likely to lead to a fall in the level of investment spending
an official forecast of a downturn in the economy
it is often said that independent central banks are more likely to run a successful monetary policy than governments because their commitment to low inflation is more credible than government promises. one reason for this is that
central banks are less subject to political pressures than governments
when the federal reserve wants to change the money supply, it most commonly
conducts open market operations
imagine that the rate of inflation has been 10 percent per year for a number of years. the central bank then introduces a tight monetary policy and the rate of inflation comes down to 5 percent per year. this reduction is an example of
disinflation
which of the following might help to minimize the costs of adapting to new technology
government retraining schemes
figure 9.8 depicts the market's demand curve and the firm's isoprofit curves. based on this information, which of the following statements is correct?
if the firm finds itself producing at point C, it can increase its profit by selling more units at a lower price
temporary change in income affects the current consumption of credit-constrained households more than unconstrained households because
if the household cannot borrow, its current consumption is limited by its current income
the paradox of thrift refers to the fact that
if we all save more, aggregate income will fall
which of the following statements is correct regarding the model of the labor market
in the short and medium run models the amount of capital is fixed, while in the long run model the amount of capital can vary
deflation refers to a situation where prices are generally falling. why is deflation generally undesirable?
it might lead to a reduction in aggregate demand as firms and households wait for prices to fall further
Looking at the figure, which country's unemployment rate shows the least sensitivity to the rate of GDP growth? By how much does a one percent increase in growth reduce the unemployment rate in that country?
japan; 0.029 percent (check notes for graph)
in periods of rapid inflation, which of the following groups tend to lose out
lenders
the introduction of a new labor saving technology results in
lower wage share of output and higher income inequality in the short run
the federal reserve does all except which of the following
make loans to individuals
13.6
makes no f*ckin sense
the consumer price index
measures the general level of prices that consumers pay for goods and services
which of the following statements is correct
money allows purchasing power to be transferred between consumers
which of the following statements is correct?
money allows purchasing power to be transferred between consumers
when employment is at level C, the real wage lies below the profit curve. assume inflation is zero. in a competitive system, firms will begin to ___ prices and start a process of ______
reduce; deflation
which of the following is correct regarding the multiplier?
reverse causation can be a problem when estimating the multiplier empirically; if firms anticipate that the government's fiscal policy will be effective, then the multiplier will be higher
a fall in the world price of commodities will
shift the price setting curve up and the phillips curve down
which of the following statements regarding the multiplier is correct
taxation and imports are leakages from the circular flow of income, which reduces the size of the multiplier
figure 14.2 depicts a consumption function of an economy, where C is the aggregate consumption spending and Y is the current income of the economy. based on this information, which of the following statements is correct?
the MPC is normally less than 1 as some households are able to smooth their consumption
which of the following would increase GDP?
a decline in imports, holding all other components of GDP constant; an increase in government spending
since 2008, we have gotten used to the idea that the size and behavior of the financial system can be a major source of economic instability. how can the existence of a developed financial system help to limit fluctuations in the economy
a developed financial system can help households to smooth their consumption over time
in an imaginary economy, GDP falls from $100 billion to $95 billion while output per worker rises from $5000 to $5020. in this economy there has been
a fall in production and an increase in productivity
which of the following statements is correct?
a fiscal stimulus can be implemented by raising spending to directly increase demand, or by cutting taxes to increase private sector demand
which of the following cases would the wage-setting curve shift up?
a more generous unemployment insurance scheme
an overseas bank announces that it is introducing a new type of savings account paying a 3 percent fixed rate of interest for deposits of one year duration. this 3 percent is
a nominal rate of interest
in which of the following cases would the gini coefficient increase, keeping all other factors unchanged?
a rise in the unemployment rate; a rise in the workers productivity while the real wage is unchanged
figure 14.9 depicts possible investment projects for firms A and B. based on this information, which of the following statements is correct?
an expected rise in energy prices leads to a fall in the expected profit rates, resulting in fewer projects being profitable at a given interest rate. this results in reduced investment
which of the following statements about the wage-setting curve is correct?
at each point on the wage-setting curve, the workers are choosing their best response effort level given the real wage and unemployment rate.
which of the following statements about the price-setting curve is correct
at points below the price-setting curve, the firms are setting prices too high compared to their profit-maximizing level
which of the following statements about the price-setting curve is correct?
at points below the price-setting curve, the firms are setting prices too high compared to their profit-maximizing level
if the federal reserve increases the reserve requirement, then
banks are required to hold a greater amount in reserves, and they have less money available to lend out
if the federal reserve lowers the discount rate it charges to banks, then
banks will increase their borrowing of reserves from the fed and thus increase money supply
why is investment spending likely to be more volatile than consumption spending
because a large part of consumption spending is on items that cannot be postponed
the federal reserve helps prevent bank runs bby
both by providing deposit insurance and by operating as banks lender of last resort
the federal reserve helps prevent bank runs by
both by providing deposit insurance and by operating as banks lender of last resort
the wage-setting curve shows that at relatively low levels of unemployment, economy-wide real wages will be relatively
high
economic activity is subject to fluctuations. thinking about the US economy since the 1800s, which of the following statements is correct?
in the early nineteenth century the effects of weather on a large agricultural sector were a major source of economic fluctuations but during the twentieth century these have been replaced by fluctuations in industrial investment
which of the following variables has not followed the hockey stick trajectory?
income inequality
When measured over time, the nominal value of many variables in economics grows more rapidly than their corresponding real values. Why might this be?
inflation
the beveridge curve will shift downward iff
information about job vacancies improves
Figure 9.16 depicts the model of a labour market where there are 90 million workers. The current labour market equilibrium is at A. Now consider the case where the total labour supply is increased to 100 million. Based on this information, which of the following statements are correct regarding the adjustment process in the labour market?
initially, unemployment doubles; the wage-setting curve shifts downwards
which of the following is not a way to estimate GDP?
interest rates
compared with investment spending, government spending is relatively stable. why might this be?
much of government spending is independent of the state of the economy
which of the following statements is correct?
net income is the maximum amount that you can consume and leave your wealth unchanged
in the short run, successive additions to capital produce smaller and smaller increases to output. in the long run, however, GDP continues to rise. this is because
new capital equipment incorporates the latest technological developments
capitalism is an economic system based on
private property, markets, and firms
the relationship between the unemployment rate and the job vacancy rate is known as
the beveridge curve
the widespread introduction of new technology into an economy takes time. the length of time between first appearance and general acceptance is known as
the diffusion gap
figure 9.11 depicts the labor market model. consider now a reduction in the degree of competition faced by the firms. which of the following statements is correct regarding the effects of reduced competition?
the equilibrium real wage falls
the figure below depicts the labor market model. consider a reduction in the degree of competition faced by the firms. which of the following statements is correct regarding the effects of reduced competition
the equilibrium real wage falls
the future below depicts the labor market model. Consider a reduction in the degree of competition faced by the firms. Which of the following statements is correct regarding the effects of reduced competition?
the equilibrium wage falls
the figure depicts a labor market. Now consider an inflow of half a million immigrant workers who are all looking for employment. Which of the following statements is correct?
the firms marginal cost of production is temporarily reduced
Figure 13.9a plots the growth rate of real GDP, as well as the growth rates of the agricultural, industrial, and service sectors between 1550 and 1700 in Britain.
the growth rate of the industrial sector was more volatile than that of the service sector; the agricultural sector largely drove fluctuations in GDP
potential solutions to the principal-agent problem in the credit market include
the lender requiring the borrower to put some of her wealth into the project; the borrower setting aside some collateral
in the expression for aggregate consumption, C = C0 + C1Y, the term C1 is known as
the marginal propensity to consume
The following diagram depicts the change in the aggregate goods market equilibrium when there is a €2 billion increase in investment. The economy's marginal propensity to consume is 0.5. Based on this information, which of the following statements is correct?
the multiplier is 2; 1/(1-.5) = 2
figure 1.2 shows the distribution of income across and within countries in 2014. The height of each bar represents the annual income of the population (for each decile), measured in 2005 US$, while the width of each country's bar represents its population. The red countries were the poorest countries in 1980, while the green countries were the richest in 1980.
the poorest decile in the US earns more than the richest decile in some poor countries
the historical process which led to requiring fewer inputs to produce the same output is referred to as
the technological revolution
which of the following is correct regarding household wealth?
the total broad wealth equals material wealth plus expected future earnings
what does US GDP per capita measure?
the total output of the US economy, divided by the country's population
a household's net worth is best described as
the total value of assets minus the total value of its liabilities
the figure shows the wage-setting curve and the real wage w*. Based on this figure, which of the following statements is correct?
the unemployment rate is 5% (look at graph)
suppose that everyone who had been looking for a job for more than six months gave up in despair and stopped looking for a job. what would happen to the unemployment rate
the unemployment rate would decrease
which of the following is a distinctive characteristic of inclusive unions
they set their wage demands in accordance with the productivity of labor
which of the following statements regarding fiscal policy is correct
unemployment benefits and a proportional tax system are both automatic stabilizers
In the figure above, the data for Spain suggests that Okun's Law can be written as y = -0.3597x + 1.741
unemployment increases by 1.02 percentage points
which of the following best describes the short-run relationship between inflation and unemployment
unemployment rises; inflation falls
which of the following statements regarding labor unions and wage bargaining is correct
unions may choose to restrain their use of bargaining power and will not ask for a wage lower than the firms profit-maximizing level
which of the following statements regarding labor unions and wage bargaining is correct?
unions may choose to restrain their use of bargaining power and will not ask for a wage lower than the firms profit-maximizing level
in the context of aggregate demand, which of the following constitutes investment
upgrading your firm's IT equipment
figure 15.9 depicts the diagrams of the labor market model and the phillips curve that incorporates inflation expectations. based on this information, which of the following statements is correct?
upward shifts of the phillips curve represent a rising inflation rate for a given unemployment rate
which of the following statements is correct regarding monetary policy?
when interest rates go down, asset prices go up
the price-setting curve shows how output per worker is split between
workers and firm owners
the following diagram depicts the model of the labor market. suppose there is an increase in workers bargaining power that causes inflation. which of the following statements are correct?
workers bargaining power can increase due to an increase in unemployment benefits, resulting in a rise in the wage-setting curve; after the initial increase in the workers bargaining power, the firms adjust the wages and prices, creating inflation. neither curve shifts.