Macro: Final

If the population growth rate is 2 percent, real GDP per person will double in 7 years if real GDP grows by ______ percent per year.

12

When the price level is rising at ______ and the real interest rate is 1 percent a year, the nominal interest rate is 3 percent a year.

2 percent a year

If nominal GDP increases by 5 percent a year and the GDP price index rises by 2 percent a year, then real GDP increases by ________.

3 percent a year

If real GDP increases from $5 billion to $5.25 billion and the population increases from 2 million to 2.02 million, real GDP per person increases by ___ percent.

4.0

Rick withdraws $500 from his savings account, keeps $100 as currency, and deposits $400 in his checking account.

M1 increases by $500 and M2 does not change.

Of the alternative measures of the price level, _________ overcomes the bias of the CPI and is a better measure of the cost of living because it _________.

PCE price index; uses a current basket of all consumption goods

The federal government's major outlay in its budget is_______ and its major source of revenue is _______.

Social Security and other benefits; personal income taxes

U.S. national debt _______ when the federal government's _______.

The national debt increases whenever the government's outlays exceeds its tax revenues.

When using the income approach to measure GDP at market prices, in addition to summing all factor incomes it is necessary to ________.

add indirect taxes less subsidies to convert aggregate income from factor cost to market prices

A tax cut increases _______.

aggregate demand because it increases disposable income and increases aggregate supply because it is an incentive to supply more labor

If the economy is at full employment and the Fed increases the quantity of money, _______.

aggregate demand increases, an inflationary gap appears, and the money wage rate starts to rise

When potential GDP increases, _______.

aggregate supply increases

The expenditure approach to measuring U.S. GDP equals _________.

all expenditure by Americans on goods and services produced in the United States in a given time period

All of the following increase labor productivity except _________.

an increase in consumption

An efficiency wage results in all of the following except _________.

an increase in the full-employment quantity of labor

An economy can achieve faster economic growth without ______.

an increase in the population growth rate

Needs-tested spending is _______ fiscal policy because it _______.

automatic; increases in recession and decreases in expansion

An increase in expected future income increases ________.

consumption expenditure, which increases current aggregate demand

When the economy goes into recession, the biggest increase in unemployment is _________.

cyclical because jobs are lost in many industries as they cut production

When the CPI increases from 200 in 2010 to 210 in 2011 and the nominal wage rate is constant at $10 an hour, the real wage rate ______.

decreases by 5 percent

The money multiplier _______.

decreases if banks increase their desired reserve ratio

Macroeconomic equilibrium occurs when the quantity of real GDP _______ equals the quantity of _______.

demanded; real GDP supplied

A marginally attached worker is a person who ________.

doesn't work, is available and willing to work, but hasn't looked for job recently

When the government lowers the income tax rate, ______.

employment increases and potential GDP increases

A government expenditure multiplier _______.

exceeds 1

When the unemployment rate _________ the natural unemployment rate, real GDP is _________ potential GDP and the output gap is _________.

exceeds; below; negative

Gross domestic product is the market value of all the _______ in a given time period.

final goods and services produced by all firms located in the United States

A ________ is a final good and ________ is an intermediate good.

gasoline bought by you; jet fuel bought by Southwest Airlines

A commodity or token is money if it is ________.

generally accepted as means of payment

Saving equals ________.

income minus consumption expenditure minus net taxes

The full-employment quantity of labor _______.

increases if labor becomes more productive

The natural unemployment rate _______.

increases if unemployment benefits become more generous

Job rationing ________.

increases the natural unemployment rate

The increase in real GDP per hour of labor that results from an increase in capital per hour of labor ________.

is larger at a small quantity of capital than at a large quantity of capital

The following statements about the business cycle are correct except ______.

it is a regular predictable cycle in real GDP around potential GDP

Commercial banks' assets include ________.

loans to individuals and businesses and government securities

Discretionary fiscal policy to stimulate the economy includes ________.

lowering the tax rate paid by households with middle incomes

The increase in real GDP per hour of labor that results from an advance in technology makes labor _______ productive ________.

more; at all quantities of capital

Real GDP per person is not an accurate measure of the standard of living because it ______.

omits the goods and services that people produce for themselves

The classical growth theory is that real GDP per person ______.

only temporarily rises and then returns to the subsistence level

Automatic fiscal policy ________.

operates as the economy moves along its business cycle

An open market _______ of $100 million of securities ______.

purchase; increases bank reserves

A commercial bank creates money when it does all the following except ______.

puts cash in its ATMs

When the price level_______, the inflation rate ______.

rises rapidly; is high

Over the past decade, the demand for goods produced in China has brought a sustained increase in demand for China's exports that has outstripped the growth of supply. As a result, China has experienced a _______.

rising price level and demand-pull inflation

The economy is at full employment when all unemployment is ________.

structural and frictional

The Fed's policy tools include all the following except _______.

taxing banks' deposits at the Fed

Money in the United States today includes _______.

the currency in people's wallets, stores' tills, and the bank deposits that people and businesses own

The CPI bias arises from all of the following items except ________.

the goods and services bought by poor people

Aggregate supply increases when ________.

the money wage rate falls

Households' labor supply decisions are influenced by all of the following except _______.

the number of full-time jobs available

In new growth theory, the source of economic growth is ______.

the persistent want for a higher standard of living

The quantity of real GDP demanded increases if _______.

the price level falls

The BLS reported that the CPI in July 2010 was 226. This news tells you that _______.

the prices of consumption goods and services have risen, on average, by 126 percent since the base year

The demand for labor curve shows the relationship between _________.

the quantity of labor businesses are willing to hire and the real wage rate

The supply of labor is the relationship between __________.

the real wage rate and the quantity of labor supplied

Potential GDP is the value of real GDP when ______.

the unemployment rate equals the natural unemployment rate

If the BLS included all marginally attached workers as being unemployed, the ________ would be __________.

unemployment rate; higher

The CPI measures the average prices paid by __________ for _________.

urban consumers; a fixed basket of consumption goods and services

The BLS count Jody as being unemployed if she _______.

wants a job and is willing to take a job but after searching last week cannot find a job

U.S. potential GDP is the value of the goods and services produced in the United States ________.

when the U.S. economy is at full employment