Macro Econ 2301 Exam 2

Investment is defined as the purchase of ______________ a. financial assets and inventories only b. any financial asset only c. new capital goods and additions to inventories d. additions to inventories only

c. new capital goods and additions to inventories

"In May 2016, M1 was $3,239 billion; M2 was $12,731 billion; checkable deposits owned by individuals and businesses were $1,861 billion; small time deposits were $393 billion; and money market funds and other deposits were $706 billion." The currency held by individuals and businesses and traveler's checks in May 2016 was ______________; and savings deposits totaled ______________. a. $1,378 billion; $8,393 billion b. $8,393 billion; $1,378 billion c. $3,482 billion; $12,731 billion d. $1,776 billion; $1,867 billion

a. $1,378 billion; $8,393 billion

If real GDP is $1,000,000, exports are $200,000, imports are $300,000, and aggregate labor hours are 100,000, labor productivity is ______________ a. $10 per hour b. $2 per hour c. $11 per hour d. $3 per hour

a. $10 per hour

What is the percentage increase in nominal GDP? (use table from previous question) a. 23.5% b. 4.5% c. 2.3% d. 95.5%

a. 23.5%

Which of the following statements about the Federal Reserve Bank is false? a. It is part of the Federal government b. It manipulates the interest rate and the money supply c. It manipulates the interest rate through its manipulation of the money supply d. It's decisions are made independent from any government level (local, state, or federal)

a. It is part of the Federal government

Which of the following is the correct sequence of events when the Fed decides to increase the Discount Rate? a. Money Supply decreases ==> interest rate increases ==> Consumption & Investment decrease ==> AD shifts left ==> price level and production fall b. Money Supply decreases ==> interest rate falls ==> Consumption & Investment increases ==> AD shifts right ==> price level and production go up c. Money Supply increases ==> interest rate falls ==> Consumption & Investment increases ==> AD shifts right ==> price level and production go up d. Money demand increases ==> interest rate increases ==> Consumption & Investment decrease ==> AD shifts left ==> price level and production fall

a. Money Supply decreases ==> interest rate increases ==> Consumption & Investment decrease ==> AD shifts left ==> price level and production fall

Consider potential GDP and then choose the statement that is correct a. The potential GDP line is vertical because potential GDP is independent of the price level b. Along the potential GDP line the money wage rate is constant and the real wage rate rises as the price level rises c. The potential GDP line shows the relationship between potential GDP and the quantity of real GDP supplied d. Potential GDP is illustrated by an upward-sloping curve

a. The potential GDP line is vertical because potential GDP is independent of the price level

The GDP per capita is ______________ a. an index used to measure a country's standard of living b. an index used to measure the actual income of the average person in a country c. is the difference between the nominal GDP and real GDP d. is a reliable price index

a. an index used to measure a country's standard of living

When the Fed buys more and more bonds at the open market, the interest rate ______________, and the people's quantity of money demanded ______________ a. decreases; increases b. decreases; decreases c. increases; increases d. increases: decreases

a. decreases; increases

If the interest rate goes up, ceteris paribus, the price level will ______________ a. fall b. rise c. unaffected d. unknown

a. fall

The labor force is the ______________ a. number of employed people plus the number of unemployed people b. working-age population minus the number of unemployed people c. number of employed people minus the number of unemployed people d. number of employed people in the working-age population

a. number of employed people plus the number of unemployed people

The inflation rate is the ______________ a. percentage change in the price level from one year to the next year b. percentage change in the composition of the CPI market basket from the base year to the next year c. difference between the base period CPI and the current period CPI d. difference between the current period CPI and the base period CPI

a. percentage change in the price level from one year to the next year

An economy produces only fun and food. The table shows the quantities of fun and food produced and the prices of fun and food in 2016 and 2017. The base year is 2016. What is the percentage increase in real GDP in 2017? a. 5% b. 4.5% c. 45% d. 23.5%

b. 4.5%

The Bureau of Labor Statistics reported that in March 2015, the labor force in Michigan was 4,739,000 and employment was 4,467,000. What's the unemployment rate? a. 4.7% b. 5.7% c. 6.2% d. 4.8%

b. 5.7%

If the price index last year was 100 and today it is 167, what is the inflation rate over this period? a. 33% b. 67% c. 167% d. -6.7%

b. 67%

The Discount Rate is ______________ a. a special price level for the employees at the Federal Reserve b. an interest rate that's lower than the general interest rate offered to commercial banks by the Fed c. the interest rate that credit unions charge their customers d. the labor productivity rate when measured agains nominal GDP

b. an interest rate that's lower than the general interest rate offered to commercial banks by the Fed

The expenditure approach to measuring GDP is done by using data only on ______________ a. consumption expenditure, investment, and government expenditures b. consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services c. consumption expenditure d. wages, rent, interest, and profit

b. consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services

The least problematic type of unemployment for society and the government is the ______________ unemployment a. cyclical b. frictional c. structural d. involuntary part-time

b. frictional

When the Mexican government sets new environmental standards that require factories to upgrade their production facilities, investment in Mexico increases and Mexico's aggregate demand ______________ a. is unchanged, but the price level falls and quantity of real GDP demanded increases b. increases. The AD curve shifts rightward c. decreases because as more investment occurs, less consumption expenditure occurs d. is unchanged, but the price level rises and quantity of real GDP demanded decreases

b. increases. The AD curve shifts rightward.

As the price level rises, firms respond in the short run to the change in the real wage rate by ______________ a. shutting down temporarily b. increasing production c. going out of business d. decreasing employment

b. increasing production

Which of the following are included in the income approach to measuring GDP? a. rent; wages; net exports of goods and services b. rent; wages; interest; profits c. interest; net exports of goods and services; government expenditure on goods and services d. wages; interest; consumption expenditure; profits

b. rent; wages; interest; profits

"The U.S. Department of Labor reported that Michigan's unemployment rate in June 2009 rose to 15.2%, becoming the first state in 25 years to suffer an unemployment rate exceeding 15%. Michigan has been battered by the collapse of the auto industry and the housing crisis and has had the highest unemployment rate in the nation for the past 12 months." The increased unemployment rate in Michigan is ______________ a. structural, frictional, and cyclical, which are all due in part to the downturn in the U.S. economy b. structural that arises due to changes in international competition, and cyclical due to a downturn in the U.S. economy c. frictional that arises due to normal labor turnover d. cyclical only, and is due to a downturn in the U.S. economy

b. structural that arises due to changes in international competition, and cyclical due to a downturn in the U.S. economy

The Fed's policy tools include ______________ a. extradorinaiy crisis measures, marginal tax rates, and the discount rate b. the required reserve ratio, discount rate, and open market operations c. open market operations, marginal tax rates, and government expenditure d. the required reserve ratio, discount rate, and government expenditure

b. the required reserve ratio, discount rate, and open market operations

The unemployment rate equals ______________ a. (labor force / working-age population) X 100 b. (number of people employed / working-age population) X 100 c. (number of people unemployed / labor force) X 100 d. (number of people employed / number of people age 16 and over) X 100

c. (number of people unemployed / labor force) X 100

A discouraged worker is ______________ a. a worker who lacks courage b. an unemployed person who can't find a job c. a person who gave up hope on finding a job and stopped searching d. a person who found a job but it's not the type of job he or she wants

c. a person who gave up hope on finding a job and stopped searching

In the United States today, money includes ______________ a. the outstanding balance on a VISA card account and the unused credit limit on a VISA card account b. the outstanding balance on a VISA card account and the funds in a student's checking account c. coins in parking meters and the funds in a student's checking account d. a student loan and a car loan

c. coins in parking meters and the funds in a student's checking account

If the government of Mexico cuts income taxes, Mexico's aggregate demand ______________ a. is unchanged because it just decreases the amount that taxpayers transfer to the government b. is unchanged, but the price level falls and quantity of real GDP demanded increases c. increases, and the aggregate demand curve shifts rightward d. increases, and the aggregate demand curve shifts leftward.

c. increases, and the aggregate demand curve shifts rightward

According to new growth theory, ______________ a. economic growth most often course in economies with large populations, such as what we see in China today. b. technological advances are determined by chance c. our unlimited wants will lead us to ever greater productivity and perpetual economic growth d. prosperity will last but growth will not last because eventually technology stops advancing

c. our unlimited wants will lead us to ever greater productivity and perpetual economic growth

Gross Domestic Product is equal to the market value of all the final goods and services ______________ in a given period of time a. produced and consumed within a country b. consumed within a country c. produced within a country d. produced by the citizens of a country

c. produced within a country

The economic growth rate is the annual percentage change of ______________ a. the quantity of money b. labor productivity c. real GDP d. real GDP per person

c. real GDP

Full employment means that ______________ a. the frictional unemployment rate is equal to the structural unemployment rate b. there is no frictional unemployment c. there is no cyclical unemployment d. the unemployment rate is zero

c. there is no cyclical unemployment

Based on the table of data below, what does GDP equal? a. $10,400 b. $9,800 c. $10,200 d. $10,000

d. $10,000

As people use mobile wallets to make purchases, most of M1 will be ______________ a. small time deposits b. currency and travler's checks c. savings deposits d. checkable deposits

d. checkable deposits

When the Fed sells securities in the open market, the monetary base ______________ and the interest rate ______________ a. increases; rises b. decreases; falls c. increases; falls d. decreases; rises

d. decreases; rises

Which of the following is an example of deflation? a. inflation rate drops from 7% to 3% b. inflation rate stays the same over a year c. inflation rate drops to zero d. inflation rate increases from -4% to -2%

d. inflation rate increases from -4% to -2%

The Consumer Price Index (CPI) measures the changes of ______________ a. lowest prices paid by producers for a fixed market basket of consumer goods and services b. prices paid by all businesses for a fixed market basket of production resources c. prices paid by consumers and businesses for a fixed market basket of goods and services d. prices paid by urban consumers for a fixed market basket of consumer goods and services

d. prices paid by urban consumer for a fixed market basket of consumer goods and services