Intro Into Macroeconomics Wk 9-12

Refer to the diagram. The break-even level of income is

$150

If nominal GDP is $850 billion and, on the average, each dollar is spent five times per year, then the amount of money demanded for transactions purposes will be

$170 billion.

Refer to the table. Money supply M1 for this economy is

$210.

Refer to the diagram, where Tis tax revenues and Gis government expenditures. All figures are in billions of dollars. If the full-employment GDP is $400 billion, while the actual GDP is $300 billion, the actual budget deficit is

$30 billion.

(Consider This) Credit cards are defined as money because they facilitate transactions.

False

A $20 bill is a

Federal Reserve Note

Refer to the consumption schedule shown in the graph. At income level 3, the amount of consumption is represented by the line segment

GH

In a fractional reserve banking system, the portion of checkable deposits that are backed by reserves are

both A and B.

The short-run aggregate supply curve is flatter at outputs below the full-employment output. This is because below full-employment, there are

both A and B.

The amount by which federal tax revenues exceed federal government expenditures during a particular year is the

budget surplus

If the MPC is 0.70 and investment increases by $3 billion, the equilibrium GDP will

increase by $10 billion.

The table gives information about the relationship between input quantities and real domestic output in a hypothetical economy. Suppose that the price of each input increased from $5 to $6. The per-unit cost of production in the economy would

rise by 20 percent, and the aggregate supply curve would shift to the left.

Built-in stability means that

with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus, while a decline in income will result in a deficit or a lower budget surplus.

If disposable income increases by $50 billion and there is an MPS of 0.20, the increase in saving will be

$10 billion

The accompanying table gives budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. The budget deficit in year 3 is

$100 billion

(Advanced analysis) Refer to the given consumption schedules. Di signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. When plotted on a graph, the vertical intercept of the consumption schedule in economy (3) is ___ and the slope is ___

$12; 0.5

A few years ago, you bought a bond with no expiration and a fixed annual interest payment of $500 at a price of $7,500. If the interest rate in the economy is now 10.0 percent a year and you want to sell the bond, the maximum price that you can get for it is

$5,000.

The Federal Reserve System was established by the Federal Reserve Act of

1913.

In the diagram, the economy's immediate-short-run aggregate supply curve is shown by line

3.

The accompanying table gives budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. If year 1 is the first year of this nation's existence and year 4 is the present year, the public debt as a percentage of GDP in year 4 is

3.9 percent.

Assume a machine that has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,600. The expected rate of return on this machine is

30 percent

The figure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the highest marginal prosperity to consume?

4

In 2021, about ___ percent of the U.S. public debt was held by the U.S. government and Federal Reserve.

42

A bond with no expiration date has a face value of $10,000 and pays a fixed 10 percent interest. If the market price of the bond rises to $11,000, the annual yield approximately equals

9 percent

Refer to the diagrams, in which ADy and ASy are the "before" curves and AD and AS are the "after" curves. Other things equal, a decline in net exports caused by a change in incomes abroad is depicted by

A.

The public debt is the

Accumulation of all past deficits minus all past surpluses

Refer to the diagrams, in which ADy and ASy are the "before" curves and AD and AS are the "after" curves. Other things equal, an increase in investment spending is depicted by

C.

Without a change in discretionary fiscal policy, we would expect that if the economy goes into recession, then the

Cyclically-adjusted deficit would stay the same while the actual deficit would increase

Refer to the consumption schedule shown in the graph. Disposable income equals consumption at point

D.

If the MPS in an economy is 0.25, government could shift the aggregate demand curve rightward by $60 billion by

Increasing government spending by $15 billion.

How does rising household wealth along with rising real interest rates affect the consumption schedule?

It is indeterminate whether the consumption schedule will shift up, down, or not shift at all.

The economy experiences an increase in the price level and an increase in real domestic output. Which of the following is a likely explanation?

Net exports have increased.

Given the expected rate of return on all possible investment opportunities in the economy,

an increase in the real rate of interest will reduce the level of investment.

Debit card balances are part of money supply M1, but credit card balances are not.

True

The Federal Reserve System is independent of Congress and the president and does not have to follow orders from either Congress or the president.

True

The total amount of debt owed by the federal government is represented by the total value of the outstanding

U.S. government securities.

The multiplier effect indicates that

a change in spending will change aggregate income by a larger amount.

The paper money, or currency, in the United States essentially represents

a debt of the Federal Reserve System.

Proponents of the notion of a 'political business cycle" suggest that

a possible cause of economic fluctuations is the use of fiscal policy by policymakers for political purposes and goals.

Refer to the data for a fictional economy. The changes in the budget conditions between Year 1 and 2 best reflect

a recession.

The short-run begins :

after the immediate short run ends

In the United States, the money supply (M1) includes

coins, paper money, checkable deposits, and savings deposits.

Suppose the federal government had budget surpluses of $266 billion in year 1 and $326 billion in year 2 but had budget deficits of $166 billion in year 3 and $45 billion in year 4. Also assume that it used its budget surpluses to pay down prior years of the public debt. At the end of these four years, the federal government's public debt would have

decreased by $381 billion.

The aggregate demand curve is

downward-sloping because of the interest-rate, real-balances, and foreign purchases effects.

The cyclically-adjusted surplus as a percentage of GDP is 1 percent in Year 1. This surplus becomes a deficit of 2 percent of GDP in Year 2. It can be concluded that from Year 1 to Year 2,

fiscal policy turned more expansionary.

In the accompanying table for a particular country, C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and Mis imports. All figures are in billions of dollars. A decline in the international value of the dollar would

increase the values in column X, decrease the values in column M, and increase aggregate demand.

When deriving the aggregate demand (AD) curve from the aggregate-expenditures model, an increase in U.S. product prices would cause ah increase in

interest rates and lower investment expenditures.

Refer to the given consumption schedules. Di signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. At an income level of $40 billion, the average propensity to consume

is highest in economy (3).

United States currency has value primarily because it

is relatively scarce, is legal tender, and is generally acceptable in exchange for goods and services.

The aggregate supply curve (short-run) is upsloping because

per-unit production costs rise as the economy moves toward and beyond its full-employment real output.

Assume a machine that has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300. If the firm finds it can borrow funds at an interest rate of 10 percent, the firm should

purchase the machine because the expected rate of return exceeds the interest rate.

If businesses feel more optimistic about the state of the economy, then this change is likely to

shift the investment demand curve to the right.

The accompanying graph depicts an economy in the

short-run

The asset demand for money is most closely related to money functioning as a

store of value.

The equilibrium rate of interest in the market for money is determined by the intersection of the

supply-of-money curve and the total-demand-for-money curve.

Refer to the graph. Which of the following factors does not explain a movement along the AD curve?

the expenditure multiplier effect

If the price level increases in the United States relative to foreign countries, then American consumers will purchase more foreign goods and fewer U.S. goods. This statement describes

the foreign purchases effect.

The aggregate-expenditures model and the aggregate demand curve can be reconciled because, other things equal, in the aggregate-expenditures model,

the level of aggregate expenditures and therefore the level of real GDP vary inversely with the price level.

(Last Word) "Toppling Dominoes" (adopted from Art Buchwald's article "Squaring the Economics Circle") is a humorous description of

the multiplier effect

The cyclically-adjusted budget refers to

the size of the federal government's budgetary surplus or deficit when the economy is operating at full employment.