Macro Econ Final

17) In the dynamic aggregated demand and aggregate supply model, inflation occurs if A) AD shifts faster than LRAS. B) AD shifts slower than LRAS. C) SRAS shifts faster than AD. D) SRAS shifts slower than AD.

A) AD shifts faster than LRAS.

11) Private saving is defined as A) Y + TR - C - T. B) T + G + TR. C) T - G + TR. D) Y + TR + C - T.

A) Y + TR - C - T.

17) All of the following are assumptions made by the dynamic model of aggregate demand and aggregate supply except A) aggregate demand and potential real GDP decrease continuously. B) the aggregate demand curve shifts to the right during most periods. C) potential real GDP increases continuously. D) the short-run aggregate supply curve shifts to the right except during periods when workers and firms expect higher wages.

A) aggregate demand and potential real GDP decrease continuously.

11) Corruption A) curtails economic growth. B) raises the rate of growth as bribes enhance income. C) is eliminated by foreign direct investment. D) acts as a magnet for foreign direct investment.

A) curtails economic growth.

23) Suppose the required reserve ratio is 20 percent. If banks are conservative and choose not to loan all of their excess reserves, the real-world deposit multiplier is A) less than 5. B) equal to 5. C) greater than 5. D) equal to 20.

A) less than 5.

24) A rapid increase in the price of oil will tend to A) shift short-run aggregate supply to the left. B) shift long-run aggregate supply to the left. C) shift long-run aggregate supply to the right. D) shift aggregate demand to the right.

A) shift short-run aggregate supply to the left.

8) Technological change will A) shift the per-worker production function up. B) shift the per-worker production function down. C) move the economy to a point beneath the per-worker production function. D) move the economy along a given per-worker production function.

A) shift the per-worker production function up.

19) If rapid increases in oil prices caused price levels to increase and real GDP to decrease in the short run, the economy would experience A) stagflation. B) long-run economic decline. C) hyperinflation. D) an increase in the natural rate of unemployment.

A) stagflation.

6) An increase in the government budget surplus will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________. A) supply; right; fall B) supply; left; rise C) demand; right; rise D) demand; left; fall

A) supply; right; fall

16) A negative supply shock in the short run causes A) the aggregate supply curve to shift to the left. B) the price level to fall. C) unemployment to fall. D) equilibrium real GDP to rise.

A) the aggregate supply curve to shift to the left.

18) Refer to the above table. The unemployment rate for this simple economy equals A) (100/1,000) × 100. B) (100/1,100) × 100. C) (100/15,000) × 100. D) (100/20,000) × 100.

B) (100/1,100) × 100.

22) If the required reserve ratio (RR) is 20 percent, the simple deposit multiplier is A) 2. B) 5. C) 10. D) 20.

B) 5.

2) If, between 2003 and 2013, the economy's real GDP grew from $20 billion to $40 billion, what was the average annual growth rate in the economy? A) 3% B) 7% C) 20% D) 100%

B) 7%

1.Monetary policy refers to the actions the A) President and Congress take to manage the money supply and interest rates to pursue their economic objectives. B) Federal Reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives. C) President and Congress take to manage government spending and taxes to pursue their economic objectives. D) Federal Reserve takes to manage government spending and taxes to pursue its economic objectives.

B) Federal Reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives.

12) Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. A shift in the demand curve from D0 to D1 might be caused by a(n): A) decrease in income if X is an inferior good. B) increase in the price of complementary good Y. C) increase in money incomes if X is a normal good. D) increase in the price of substitute product Y.

B) increase in the price of complementary good Y.

21) 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; decrease B) increase; not change C) not change; increase D) not change; decrease E) not change; not change

B) increase; not change

The law of demand implies, holding everything else constant, that as the price of yogurt A) increases, the demand for yogurt will increase. B) increases, the quantity of yogurt demanded will decrease. C) decreases, the quantity of yogurt demanded will decrease. D) decreases, the demand for yogurt will increase.

B) increases, the quantity of yogurt demanded will decrease.

23) The unemployment rate equals the number of unemployed divided by the ________, all times 100. A) number of employed B) labor force C) working-age population D) total population

B) labor force

16) In the circular flow model, the value of total income for an economy ________ the value of total production. A) is less than B) equals C) is more than D) may be greater than or less than

B) relative prices change over time and these are not reflected in base-year prices, and this distorts GDP.

13) Recessions cause the unemployment rate to ________ and the inflation rate to ________. A) rise; rise B) rise; fall C) fall; rise D) fall; fall

B) rise; fall

25) The real rate of interest is A) the nominal interest rate plus the inflation rate. B) the nominal interest rate minus the inflation rate. C) the interest rate determined by the supply and demand in the money market. D) the nominal interest rate.

B) the nominal interest rate minus the inflation rate.

23) The more excess reserves banks choose to keep, A) the larger the deposit multiplier. B) the smaller the deposit multiplier. C) the higher the required reserve ratio. D) the lower the required reserve ratio.

B) the smaller the deposit multiplier.

22) If the required reserve ratio is 10 percent, an increase in bank reserves of $1,000 can support an increase in checking account deposits (including the original deposit) in the banking system as a whole of up to A) $100. B) $1,000. C) $10,000. D) $100,000.

C) $10,000.

22) Refer to the above Table. Given the information above, calculate the GDP deflator in 2012. A) 87 B) 95 C) 105 D) 114

C) 105

21) Refer to the above table. Assume the market basket for the consumer price index has three products - Cokes, hamburgers, and CDs - with the following values in 2006 and 2013 for price and quantity: The Consumer Price Index for 2013 equals A) 121. B) 75. C) 93. D) 108.

C) 121.

8) If GDP grows at a rate of 3% per year, approximately how long will it take for GDP to double in size? A) 12 years B) 21 years C) 23 years D) 35 years

C) 23 years

13) The GDP deflator is a measure of the A) total production of the economy adjusted for inflation. B) total production of the economy unadjusted for inflation. C) average level of prices of final goods and services in the economy. D) average level of prices of intermediate goods and services in the economy

C) average level of prices of final goods and services in the economy.

23) The labor force equals the number of people A) employed. B) unemployed. C) employed plus unemployed. D) in the working-age population.

C) employed plus unemployed.

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

C) intermediate goods

19) Not enforcing property rights in an economy will A) cause the market system to work efficiently. B) not change the level of investment. C) lower the level of investment. D) raise the level of investment.

C) lower the level of investment.

18) The proponents of ________ think that the Federal Reserve should adopt a constant monetary growth rule. A) new Keynesianism B) the real business cycle model C) monetarism D) Marxism

C) monetarism

4) Firms A) have no influence on the circular flow in a market economy. B) purchase resources in the product market. C) sell goods in the product market. D) sell resources in the factor market.

C) sell goods in the product market.

11) If in the market for apples the supply has decreased then A) the supply curve for apples has shifted to the right. B) there has been a movement upwards along the supply curve for apples. C) the supply curve for apples has shifted to the left. D) there has been a movement downwards along the supply curve for apples.

C) the supply curve for apples has shifted to the left.

20) Commodity money is a good A) used as money that has no secondary use. B) that is designated as money by law. C) used as money that also has value independent of its use as money. D) used as money that has no intrinsic value

C) used as money that also has value independent of its use as money.

21) Refer to the above table. Assume the market basket for the consumer price index has two products - meat and potatoes - with the following values in 2006 and 2013 for price and quantity: The Consumer Price Index for 2013 equals A) 125. B) 129. C) 135. D) 141.

D) 141.

24) Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid? A) 17 percent B) 10 percent C) 7 percent D) 3 percent

D) 3 percent

24) Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $500 of interest. If the inflation rate was 4%, what was the real interest rate you paid? A) 16 percent B) 12 percent C) 8 percent D) 6 percent

D) 6 percent

2) If GDP is currently $13 trillion and is growing at a rate of 2.3% per year, how long will it take GDP to reach $26 trillion? A) about 15 years B) about 17 years C) about 25 years D) about 30 years

D) about 30 years

6) An outward shift of a nationʹs production possibilities frontier can occur due to A) a reduction in unemployment. B) a natural disaster like a hurricane or bad earthquake. C) a change in the amounts of one good desired. D) an increase in the labor force.

D) an increase in the labor force.

10) Which of the following would cause an increase in the supply of cheese? A) a decrease in the price of wine (assuming that cheese and wine are complements) B) an increase in the price of cheese C) an increase the price of a product that producers sell instead of cheese D) an increase in the number of firms that produce cheese

D) an increase in the number of firms that produce cheese

21) 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; increase B) not change; increase C) decrease; increase D) decrease; not change E) increase; decrease

D) decrease; not change

25) The percent increase in the CPI from one year to the next is a measure of the A) GDP deflator. B) unemployment rate. C) real interest rate. D) inflation rate.

D) inflation rate.

6) The best measure of the standard of living is A) nominal GDP. B) real GDP. C) nominal GDP per capita. D) real GDP per capita.

D) real GDP per capita.

2) Economists assume that rational people A) never use all available information as they act to achieve their goals. B) undertake activities that benefit others and hurt themselves. C) only weigh the benefits and costs of the most desirable alternative actions. D) respond to economic incentives.

D) respond to economic incentives.