Macro Final

c. 2.5%

According to the current estimates of Okun's law, if the output gap is 3%, the equilibrium unemployment rate is 4%, and the expected rate of inflation is 5%, then the unemployment rate is _____. a. 3.5% b. 3% c. 2.5% d. 1.5%

b. 1%; increases; 0.5%

Okun's law suggests that a ____ increase in a positive output gap _____ the unemployment rate by ______. a. 1%; increases; 0.5% b. 1%; increases; 0.5% c. 0.5%; increases; 1% d. 0.5%; decreases; 1%

b. use short-term loans to create long-term loans

Maturity transformation occurs when banks: a. assess the creditworthiness of borrowers b. use short-term loans to create long-term loans c. provide payment services d. use long-term loans to create short-term deposits

c. adjustment of interest rates to influence economic conditions

Monetary policy is defined as the: a. implantation of ceilings on the federal economic changes b. change of the tax code to achieve economic changes c. adjustment of interest rates to influence economic conditions d. change in government spending to change economic conditions

a. the negative effect of government budget deficits on private investment spending

The crowding-out effect is: a. the negative effect of government budget deficits on private investment spending b. the positive effect of government budget deficits on private investment spending c. what happens when a company employs too many workers d. the positive effect of government budget deficits on private saving

a. Okun's

The idea that a 1% increase in the output gap will lead to a decrease in the unemployment rate of 0.5% is know as _____ law. a. Okun's b. Phillip's c. Greenspan's d. Keynes's

b. unemployment

The most painful effect of a recession is: a. inflation b. unemployment c. money neutrality d. the liquidity trap

Saving

The permanent income hypothesis implies that consumers whose income exceeds their permanent consumption will engage in a. dissaving. b.saving. c. borrowing d. not paying taxes.

a. productivity increases

The short-term aggregate supply curve may shift to the right if a. productivity increases b. nominal wages increase c. personal income taxes decrease d. commodity prices rise

d. stock market, the bond market, and the banks

The three major pillars of the financial sector are the: a. banks, the goods market, and the labor market b. stock market, the labor market, and the bond market c. foreign exchange market, the bond market, and the government d. stock market, the bond market, and the banks

Leading indicators are variables that tend to predict the future path of the economy Examples: Business Confidence Consumer Confidence Stock Market

What are leading indicators? Provide two examples of leading indicators.

c. a negative relationship between the price level and consumer spending.

8. The wealth effect suggests: a. a positive relationship between the price level and consumer spending. b. that changes in the price level do not affect real wealth c. a negative relationship between the price level and consumer spending. d. that when the price level increases, the real value of money increases also.

b. many bank customers try to withdraw their savings at the same time

A bank run occurs when: a. a lender makes both long-term and short-term loans b. many bank customers try to withdraw their savings at the same time c. many bank customers try to deposit small amounts of money at the bank d. bank customers expect the bank to open new branches

c. government revenue exceeds government spending.

A budget surplus occurs when: a. discretionary spending exceeds automatic spending. b. imports exceed exports. c. government revenue exceeds government spending. d. government spending exceeds government revenue.

a. above the equilibrium rate

A negative output gap implies an unemployment rate that is: a. above the equilibrium rate b. below the equilibrium rate c. equal to the equilibrium rate d. equal to the sum of the frictional and structural rates of unemployment

c. increase in output

An economic expansion in the United States is typically associates with a(n): a. falling inflation rate b. increase in the poverty rate c. increase in output d. decrease in corporate profits

b. stocks on a broad market index

An index fund us a mutual fund that consists of: a. stocks that are not listed on a broad stock index b. stocks on a broad market index c. only risky stocks d. only inflation-indexed stocks

b. Bond A will have a higher interest rate than Bond B

Bond A is a 10-year old bond issues by a company with a very good credit rating. Bond B is a five-year bond issued by a different company with a very good credit rating. Which of the following is likely? a.Bond B will have a higher term risk than Bond A b. Bond A will have a higher interest rate than Bond B c. Bond B will have a higher default risk than Bond A d. Bond B will have a higher interest rate than Bond A

b. the labor market

Confirm payroll is an important indicator because it tells you how _____ s doing. a. employment within the agriculture sector b. the labor market c. consumer confidence d. farm production

d. $16.99

Consider the following financial information for Nestle SA stock. What is Nestle's book value per share? Stock price per share: $108.55 Earnings per share: $3.14 Price-to-book ration: 6.3882 a. $108.55 b. $34.52 c. $3.14 d. $16.99

d. $9.65

Consider the following financial information for Toyota Motor Corporation stock Ford Motor Company is a competitor and has a book value per share of $9.05, IfFord has the same price-to-book ratio as Toyota, what is the value of Ford stock? Toyota Motor Corporation Stock price per share: $136.28 Earnings per share: 912.29 Price-to-book ratio: 1.0658 a, $9.05 b. $10.05 c. $14.19 d. $9.65

a. equilibrium real interest rate.

Equilibrium in the loanable funds market determines the: a. equilibrium real interest rate. b. amount of inventories in an economy. c. up-front cost of capital. d. point where there is excess demand for loanable funds.

b. reducing the interest rate by increasing the money supply

Examples of the fiscal policy do NOT include: a. government spending on infrastructure to simulate aggregate demand b. reducing the interest rate by increasing the money supply c. an economies stimulus package d. a $1,500 per family tax rebate

a. lowers; rises; boosts; raises

Expansionary fiscal policy _____ taxes, _____ government expenditures, _____ aggregate expenditures, and ____ aggregate demand. a. lowers; rises; boosts; raises b. raises; lowers; decreases; lowers c. lowers; raises; decreases; lowers d. raises; lowers; boosts; raises

0.64, 0.67, 0.82

Fill in the blanks. (a) If the average marginal propensity to consumer is ______ then a $10 million increase in total income will lead to a $6.4 million increase in consumption. (b) If the average marginal propensity to consumer is ______, then a $100 million increase in total will lead to a $67 million increase in consumption. (c) If the average marginal propensity to consumer is _____, then a $1 million increase in total will lead to a $0.82 million increase in consumption

b. higher; greater

Holding everything else equal, the ________ the interest rate on saving, the _______ the future value of that saving. a. higher; lower b. higher; greater c. lower; greater d. lower; the more negative

d. GDP is 3% above potential GDP

If an economy has a positive output gap of 3% this means: a. unemployment is 3% above the natural rate of unemployment b. GDP is 3% below potential GDP c. inflation is 3% above the long-term rate of inflation d. GDP is 3% above potential GDP

d. actual GDP is at potential GDP

If an economy has an output gap of 0%, this means: a. the neutral rate of interest is at 0% b. unemployment is 0% c. inflation is 0% d. actual GDP is at potential GDP

c. increase; decreases; left

If the Fed decreases the quantity of money in circulation, interest rates _____, investment spending _____, and the aggregate demand curve shifts to the _____. a. decrease; increases; right b. decrease; decreases; left c. increase; decreases; left d. increase; decreases; right

c. buy the stock

If the fundamental analysis reveals that the fundamental value of a particular stock is higher than the market price for that stock, you should: a. purchase a competing stock b. remove that stock from your portfolio of assets c. buy the stock d. sell the stock

d. saving is the money left over after paying for spending, and investment is the purchase of new capital.

In macroeconomics, the difference between saving and investment is that: a. saving is the money left over after paying for spending, and investment is the purchase of stocks and bonds b. saving does not depend on income, but investment depends of profitability c. saving is created by the government, and investment is specific to firms d. saving is the money left over after paying for spending, and investment is the purchase of new capital.

b. the GDP deflator and the real GDP

In the AD-AS framework, price and quantity are represented by ____, respectively. a. nominal interest rates and real GDP b. the GDP deflator and the real GDP c. the real interest rate and consumption d. the real GDP and the real interest rate

c. lower the profitability of investment projects

In the loanable market, the demand for loanable funds is negatively sloped because the higher the real interest rate, the: a. higher the profitability of investment projects b. smaller the benefits of saving c. lower the profitability of investment projects d. greater benefits of saving

b. discounted future value

Present value is the: a. Discounted real interest rate b. discounted future value c. compound future value d. compounded real interest rate

d. $1,550 million

Refer to the following statistics. Based on these statistics, the level of business investment is: Inventories: $12 million Housing: $400 million Equipment: $500 million Business Structures: $350 million Intellectual Property: $700 million a. $1,050 million b. $1,562 million c. $500 million d. $1,550 million

a. doesn't look like traditional banking but serves similar purposes while posing simnifically more risk

Shadow banking: a. doesn't look like traditional banking but serves similar purposes while posing significantly more risk b. is another name fro traditional banking c. looks like a traditional bank but serves different purposes and imposes significantly more risk d. doesn't look like a traditional banking but serves similar purposes while not posing any additional risk

a. increasing; increasing

Stagflation is a combination of ____ unemployment and ____ inflation. a. increasing; increasing b. decreasing; decreasing c. increasing; decreasing d. decreasing; increasing

c. the output gap is zero

When the actual unemployment rate is equal to the equilibrium unemployment rate: a. the unemployment rate is zero b. potential output exceeds actual output c. the output gap is zero d. actual output exceeds potential output

$650 million

When the government rises government spending by $325 million, what is the final effect on the GDP if the multiplier is 2?

A 2010 Toyota Camry

Which asset is the LEAST liquid? a. A U.S. government bond b. 100 shares of Apple c. stock money in a checking account d. a 2010 Toyota Camry

c. the multiplier effect

Which of the following increases the effectiveness of fiscal policy? a. monetary policy b. time lags c. the multiplier effect d. crowding out

A bank savings account

Your are a financial advisor. Your client, Mean, does no like risk and wants Federal Deposit Insurance Corporation Insurance. Which of the following instruments should she invest in? a. An Index Fund b. A Bank Savings Account c. Bonds issued by a corporation in financial distress d. treasury bills