macro final exam 2020
according to the table, which country was MOST likely to experience catch-up growth?
(graph in HW 7)
the economy is probably heading into a recession when the national activity index equals
-.94
assume that nominal wages increase 10% and productivity increases 20%. using the equation for the Phillips curve, inflation is
-10%
if income rises from $10,000 to $20,000 and consumption increases from $9,000 to $16,000, then the marginal propensity to consume is
.70
for which growth rate would the rule of 70 be most accurate
1%
suppose the Bureau of Labor statistics collects the data presented in the following table year. cost of basket 2010 $200 2011 $230 2012 $250
125
If an economy is growing at 10%, how long will it take for $1,000 to turn into $4,000?
14 years
if the marginal propensity to consume is 0.65, the spending multiplier is
2.86
the percentage of the world's population that is very poor, as opposed to living in extreme poverty, is about
25%
a bond has a face value of $1,000 and an annual interest payment of $44. What is its coupon rate, and what is its yield if it is sold for $1,100 in the secondary market
4.4% and 4.0%, respectively
in the graph, calculate the value of consumer surplus in this market
50 (answer is graph in hw 4)
net domestic product measures
GDP minus depreciation
which statement does NOT describe a problem in measuring the consumer price index (CPI)
The CPI includes new products in its basket
the supply of coffee has increased twice as much as the demand for coffee has increased. As a result, we can predict a(n)
decrease in equilibrium price, but equilibrium quantity increases
in the short run, a decrease in market power (or monopolization) will
decrease the price level
a decrease in demand causes the equilibrium price to __ and the equilibrium quantity to ____
fall; fall
A $2 maximum price on a gallon of gasoline would be an example of a price floor
false
GDP includes the value of illegal transactions, which means the level of economic activity in a country is overstated
false
Henry sells brownies to his classmates at college for cash. His income from this product is probably NOT part of the informal economy
false
Many U.S. retirement accounts have regained much of their lost value since the 2007-2009 stock market crash because investors switched their portfolio mix from stocks to bonds.
false
Supply shocks that are counteracted by increasing the money supply will restore the economy to full employment and also decrease the price level.
false
as used by economists, the term "capital" includes the human talent one is born with
false
economic models must fully reflect reality
false
falling interest rates in the United States lead to the appreciation of the dollar
false
first demand more funds for investment opportunities as interest rates rise
false
the numerical level of the natural rate of unemployment is independent of the frictional unemployment rate and the structural unemployment rate
false
which of these is a basic goal of the Federal Reserve SYstem
full employment
Thomas Malthus believed that population increased ____ and food resources increased _____
geometrically; arithmetically
because the private and foreign sectors of the economy were in a deep slump during the great depression, keynes suggested an increase in ___ spending
government
when consumers have no choice but to buy from one firm
government regulation is usually used to protect consumers
_____ are a higher-risk investment than _____ stocks.
growth stocks; blue chip
a firm will MOST likely decrease the price of its output if the
quantity supplied of the good exceeds the quantity demanded
over the past century, when worker productivity rose
real wages rose
If the economy has high levels of unemployment, the Federal Reserve will
reduce interest rates
actions taken by the european central bank to address the european unions financial crisis from 2009 to 2013 include all of these EXCEPT
reducing taxes to provide stimulus packages
which factor will cause the aggregate demand curve to shifts to the right
reduction in personal income taxes
a policy of transparency in the federal reserve
requires the Fed to explain why it acted or chose not to act in a specific situation
if oil prices decline, the short-run aggregate supply curve shifts ___ and output supplied will ____
right; increase
Suppose a perpetuity bond with a face value of $1,000 has a 10% coupon rate. If market interest rates fall to 8%, the price of the bond
rises to $1250
the great depression demonstrated that
short-run equilibrium can occur at levels substantially less than full employment
an increase in aggregate demand can be caused by
the depreciation of the dollar
Suppose the exchange rate is €0.70 = $1. Then the exchange rate becomes €0.80 = $1. What can be said about the value of the dollar and the value of the euro?
the dollar gas appreciated against the euro
monetary targeting is setting a steady growth rate in
the money supply
The stagflation of the 1960s and 1970s showed policymakers that
the phillips curve could shift over time
if a price floor is set below the equilibrium price in the market, consumer surplus will be
the same as it would be without the price floor.
which statement describes the unemployment rate
the unemployment rate counts as employed those people who may be only working part-time
which country voted to leave the european union in 2016
the united kingdom
why have many american's retirement accounts regained much of their lost value since the 2007-2009 stock market crash
they were able to buy more stocks for a cheaper value when the market price was low
When the Federal Reserve sells bonds, it is implementing
tight money policy
the measure of society's benefits due to a market transaction is called
total surplus
An example of a natural resource is a mineral deposit.
true
Year-over-year growth data excludes seasonal variations in growth rates.
true
added spending causing income to grow by a larger amount is called the multiplier effect
true
falling interest rates mean increased business investment and a resulting increase in aggregate demand for real GDP in the aggregate economy
true
hypothetically speaking, if the organization of the Petroleum Exporting Countries (OPEC) stopped exporting oil, a decrease in production would lead to a decrease in aggregate supply
true
if nominal GDP and the GDP deflator both rise by 5%, then real GDP is unchanged
true
if the economy is in a jobless recovery, output grows with little growth in employment
true
infrastructure is a country's public capital
true
the crowding-out effect is most prominent during times of rapid economic growth
true
the federal reserve system measures the money supply in the united states
true
the income tax is powerful stabilizers because of its progressivity
true
the inflationary gap is the amount of aggregate spending greater than the spending necessary to result in full employment
true
the recessionary gap is equal to the GDP gap divided by the multiplier
true
the rule of 70 is fairly accurate for small growth rates
true
the total of disposable income must be either spent or saved
true
wages that are higher than equilibrium can lead to
unemployment
the actual money multiplier is ___ the potential money multiplier
usually smaller than
(Figure: Aggregate Demand and Supply) The graph depicts an economy originally in equilibrium at point e. Assume that the government uses expansionary fiscal policy. The movement from point a to b is due to
workers and suppliers adjusting their expectations to higher price levels hw 10, q10 graph
Federal Reserve banks are located in all of these cities EXCEPT
augusta
which of these requires the government to balance its budget over the business cycle
cyclically balanced budget
Given the form of a typical production function, which of these would have the greatest impact on the output of a country?
entrepreneurial ability/technology increases by 12%
if the dollar appreciates, ___ will ____, causing aggregate demand to ____, the aggregate price level to ____, and output to ____ in the short run
exports; decreases; fall; fall; fall
The balanced budget multiplier means that government spending, when financed by taxes, cannot affect the economy.
false
robert locas argued that the theory of rational expectation suggests that tax cuts will work is used temporarily
false
the aggregate supply curve shows that the price level and real gdp are indirectly related
false
in the graph, a minimum price of $8 would allow for a binding price floor
false (answer in graph in hw 4)
which action would reduce frictional unemployment
holding job fairs
payments to the United States comprise income flow and include all of these except
income foreigners earn in the united states
a ____ occurs when price is above market equilibrium
surplus
What happens when desired saving exceeds desired investment?
the economy is not in equilibrium and income will fall
cryptocurrencies are used primarily for speculation
true
expansionary monetary policy tends to increase exports
true
which of these are functions performed by the federal reserve banks and their branches
1. regulating and supervising member banks 2. distributing coins and currency
which of these would NOT shift the AD curve
an increase in market power occurs in the airline industry
a decrease in the price of on-demand video-streaming services such as Netflix leads to a(n)
decrease in the demand for cable TV service
If an advance in technology shifts the long-run aggregate supply curve outward, prices _____ and output _____.
decreases; increases
Asset sales represent a large fraction of government finance in the United States.
false
which country was NOT bailed out by the European Central Bank in the period from 2008 to 2013
france
According to the classical model, which development does NOT contribute to economic growth?
higher interest rates
according to the production function, which of these changes will NOT result in economic growth
increase in consumption spending
as GDP increases, tax revenues ___ and transfer payments ____
increase; decline
which statement is/are true
increased use of technology has enabled companies to use fewer workers, contributing to job discoveries
a tariff placed on imported foreign vehicles will have what effect
it will entice domestics consumers to buy more domestic vehicles due to the higher price of foreign vehicles
in which situation are people experiencing money illusion
prices rise by 5% and income rise by 5% and people think that thier real incomes have risen 5%
If policymakers are successful at reducing inflationary expectations the
short-run phillips curve shifts leftward
which of these would NOT cause inflation in the united states
the federal government runs a budget surplus
Compounding means that growth builds on prior growth.
true
John Maynard Keynes devised the framework for developing policies to avoid future serve macroeconomic downturns.
true
low interest rates are primarily responsible for the fact that the U.S debt is relatively manageable
true
if the economy shown in the figure begins on AD1 and SRAS1, what will happen in the short run and long run if the price of oil rises significantly
the economy will move from point C to A to B (graph in hw 9 q10)
concerns about increased globalization include
the harmful effects to the environment
in the market for loanable funds, the government reduces tax breaks for saving and increases the penalties for corruption. What changes should be expected in the market for loanable funds due to these events
the interest rate will rise, but there is uncertainty about any change in the amount of borrowed funds
the actual price level is determined by
the intersection of short-run aggregate supply and aggregate demand
who is responsible for paying off a deferment on a college loan
the student at a later date
why are prices above equilibrium considered to be inefficient
they cause a deadweight loss in total surplus
which statement is TRUE in the case of the simple circular flow model with no savings?
total spending equals total income
which bank assets would NOT satisfy the definition of a bank reserve
treasury bonds that can be traded on the open market
A ___ is when the economy hits the bottom of the business cycle
trough
Adam Smith suggested that it is almost as if an invisible hand guides the market to equilibrium
true
Breck is in a training program to become a radiology technician, that is, someone who takes diagnostics images, such as X-rays. When he is certified, the amount of human capital in the economy will increase
true
Cryptocurrencies are used primarily for speculation
true
Exports are injections and imports are withdrawals from the domestic spending cycle
true
One of the responsibilities of the Federal Reserve Bank is to serve as the banker for the U.S. Treasury.
true
One reason the price level did not rise after the 2008-2009 stimulus policy actions is that it may not have shifted aggregate demand to the right.
true
The balance of trade is the difference between exports of goods and services and imports of goods and services.
true
The recessionary gap is the increase in aggregate spending needed to bring a depressed economy back to full employment.
true
an increase in French domestic income will hurt France's current account as long as exchange rates are flexible
true
barriers to free trade create inefficiencies in the allocation for foreign resources
true
both overspending on credit by households and low interest rates set in motion the events that led to the 2007-2009 recession
true
during the 2007-2009 financial crisis, both the federal reserve and the european central bank bough bad debt in order to stabilize banks
true
essentially, the way to reduce inflationary expectations using demand-side policies is to cause an economic slowdown.
true
for most goods, as their prices rise, fewer units are sold
true
generally speaking, private markets are the most efficient institutions for providing goods and services
true
if firms believe that the business climate is improving, then short-run aggregate supply will shift to the right
true
if real gross domestic product increased 0.625% from the first quarter to the second quarter of 2013, the annualized growth rate was 2.5%
true
in response to the financial crisis, the fed lowered the federal funds target to 0%
true
in the short run, Keynesian monetary analysis suggests that changes in the money supply change interest rates, leading to a change in investments and a change in aggregate demand that in turn changes income, employment, and output
true
kyle is working part-time as a bartender while he auditions for his dream job as member of a ballet company. according to the Bureau of Labor Statistics, kyle is employed
true
missing a minimum payment on a credit card can make it less likely that certain employers will hire you
true
one country has a comparative advantage in producing a good if its opportunity cost to produce that good is lower than that of another country
true
one difficulty with the infant industry arrangement is deciding when to wean the firm off protection
true
one of the innovations developed by Friedman is the idea that consumption is based not only on income but also on an individual's wealth
true
president reagan reduced marginal tax rates to promote work and business risk taking
true
the 12 regional federal reserve banks serve as the banker for the U.S Treasury
true
the Fed has been successful at keeping the federal funds rate near the target
true
the Fed works independently of policitcal parties
true
the national income and product accounts are released quarterly to ensure the accurate economic information is readily available
true
the national income and product accounts ignore non market transactions, investments in human capital, and the use of people's leisure time
true
(Figure: Market for Watches in Countries A and B) Referring to the graphs, we see that, as a result of free trade, consumers of watches in country A ____ and consumers of watches in country B _____
will be the losers; will be the winner hw 15 Q2
which of these will NOT cause a shift in the short-run aggregate supply curve
changes in the aggregate price level
with no trade, the equilibrium price of grapes is $2 per pound in Macroland and $4 per pound in econoland. Government leaders in macroland are negotiating a free trade agreement with Econoland to increase trade between the two countries. Who among consumers and producers is likely to support and who is likely to oppose the free trade agreement?
consumers in econoland and grape producers in Macroland would be likely supporters, while consumers in macroland and grade producers in econoland would be likely to oppose the agreement due to the direction of price changes that would result
according to the phillips curve, a rise in inflation would correspond to a(n) __ in unemployment, while is a rise in unemployment would correspond to a(n) __ in inflation
decrease decrease
according to the Phillips curve, a rise in inflation would correspond to a(n) ___ in unemployment, while a rise in unemployment would correspond to a(n) ___ in inflation
decrease, decrease
if a country wants to maximize its GDP, it should always
export goods in which it has a comparative advantage
in a two-country, two-good model, the
exports of one country must equal the imports of the other country
"the economic wealth of this country was built primarily by some individuals profiting from a transaction, whereas others were harmed by the transaction." This statement indicates that its author
fails to understand that all voluntary trades benefit both parties involved
which of these is NOT a problem in using GDP to measure standards of living
failure to include exports and imports
when the interest rate falls, the value of the U.S dollar in foreign exchange markets tend to __ and net exports tend to ____
fall; increase
kim recently purchased a perpetual bond for $1,000. The bond pays $50 in interest per year. If market interest rates rise to 7% after her purchase, the price of the bond
falls to $714
An absence of enforcement of contracts would encourage economic development because people would be more willing to incur risks if they did not have to worry about getting sued.
false
If the funds from deficit spending are used for public investment initiatives, it is more likely to hurt future generations than is deficit spending on current consumption.
false
Robert Lucas argued that the theory of rational expectations suggests that tax cuts will work if used temporarily
false
Savings account deposits are more liquid than currency is.
false
The index of economic freedom shows that countries with the fewest economic freedoms have the highest per capita GDP
false
The natural rate of unemployment occurs when the rate of increase in the wage is greater than the increase in productivity.
false
The nonaccelerating inflation rate of unemployment does not change over time.
false
The performance of the past two decades illustrates the ineffectiveness of discretionary monetary policy.
false
When Vanessa deposits cash in her bank, the net change in M1 is equal to the size of her deposit.
false
a consumer price index of 107 means that prices rose by 7% from the previous year
false
a deficit occurs when tax revenues exceed government spending
false
consumer surplus is defined as the gap between the supply curve and the market price
false
exports of goods and services are included in the capital account
false
if inflation is too high, the federal reserve will raise taxes to reduce spending
false
if the federal reserve pursues tight monetary policy, the dollar is likely to fall against foreign currencies, all other things being equal
false
if the united states has absolute advantages in producing wheat and automobiles, it should never trade with other countries that produce wheat and automobiles
false
in the United States, if an individual has stopped actively seeking work, he or she is considered to be unemployed
false
it is impossible to have a conflict between allocative efficiency and production efficiency
false
keynes defined the liquidity trap as a situation in which, once interest rates decrease, individuals spend their money rather than holding onto it
false
lowering marginal tax rates and increasing government transfer are policies commonly used to increase aggregate supply
false
one reason the price level did not rise after the implementation of the 2008-2009 stimulus policy actions is that U.S. capacity was fully utilized
false
one strength of the use of discretionary fiscal policy is the timing lags
false
positive questions are questions about how things ought to be
false
since 2008, females have had a higher unemployment rate than males
false
since 2008, females have had higher unemployment rate than makes
false
the 2007-2009 recession was brought on when the Federal Reserve used excessive tightening of the money supply to solve the period of stagflation from 2004 to 2007
false
the 2007-2009 recession was brought on when the Federal reserve used excessive tightening of the money supply to solve the period of stagflation from 2004-2007
false
the 2007-2009 recession was not as severe as the previous two recessions, in 1990 and 2001
false
the GDP deflator is the narrowest of the measures of inflation
false
the balanced budget multiplier changes according to the values of the marginal propensity to consume and the marginal propensity to save
false
the economy is not likely to be heading into a recession when the national activity index equal -0.95
false
the fact that automatic stabilizers work without having Congress or the president explicitly intervene is a major disadvantage
false
the goal of unemployment policy is to eliminate frictional unemployment
false
the government can always successfully intervene in the case of market failure
false
the informal economy in the United States is approximately 40% of GDP
false
the long-run aggregate supply curve is upward sloping because of sticky wages and prices
false
the most common type of short-term debt is college loans
false
the multiplier effect relates a change in savings to the resulting change in investment
false
the supply curve for loanable funds represents investors and is upward sloping
false
the target for the federal funds rate is set by the federal government
false
there are no instances where efficient solutions to problems conflict with equity issues
false
today, monetary policies are relatively unlike to be reinforced because of the flexible exchange rate system
false
total surplus is the sum of consumer surplus, producer surplus, and deadweight loss
false
trade restrictions, such as government regulation, licensing, foreign exchange control, and government purchasing policies do not affect consumers
false
when aggregate prices rise, U.S goods become more expensive relative to goods from other countries, which leads to an increase in export
false
when economists speak of "the money supply," they are usually referring to M2
false
assume the capital is perfectly mobile and substitutable and that the interest rate in the united states and the european union is currently 5%. Investors expect the euro to rise against the dollar by 2% and they thus demand a ____ in the _____
higher return equal to 7%; United States
if the dollar depreciates relative to the yuan, then American exports to China will
increase
suppose the economy is in a recession. To increase demand using discretionary fiscal policy, the government can
increase government spending or reduce taxes
monetized debt is paid for by a(n)
increase in the money supply
the money supply rises 6% at the same time the country's output rises 2%. What would occur in this country based on the equation of exchange
4% inflation
if an economy's GDP will double in 15 years, then its growth rate must be about
4.7%
if the exchange rate is US$1.28/euro, it takes _____ to buy 1 euro and it takes ___- to buy $1
$1.28; Euro 0.78
if you have $100,000 in a 401 (k) growing 10% per year on average, how much will this be worth in 35 years when you retire?
$3,200,000
if nominal wages increase by 3% and labor productivity increases by 2%, what is the rate inflation, all else equal
1%
which statement(s) is/are TRUE about Keynes's simple model of
1. the aggregate price level is fixed 2. all savings are considered to be personal savings 3. there is considerable slack in the economy
if the marginal propensity to consume is 0.9, what is the size of the multiplier
10
the peak of Internet growth, when new "dot.com" companies sprouted up daily, occured during
1998-1999
(Figure: Aggregate Demand and Supply) The graph depicts an economy originally in equilibrium at point e. Assume that the government uses expansionary fiscal policy. Which statement is TRUE
HW 10 Q9 the movement from point a to b is due to workers and suppliers adjusting their expectation to higher price levels
which of these is NOT a criticism of the dating of business cycles by the national Bureau of Economics Research (NBER)
The NBER is sometimes manipulated by the federal government
which statement(s) is/are true
a repeal of existing investment tax credits will cause aggregate supply to shift to the left
which of these would cause an increase in a country's aggregate demand
a rise in the country's stock market increases the value of stock held by people
what would cause the price level to decrease and employment to increase
a shift to the right of the short-run aggregate supply curve
if a Japanese mutual fund buys a share of stock on the New York Stock Exchange, it will be accounted for as a(n) account
addition to the U.S capital
an economy is expected to produce higher profits for business owners at the same time that the country's stock market surges. What changes can be expected in the country's market for loanable funds
an increase in demand and a decrease in supply
which factor is the LEAST likely to increase investment demand
an increase in product inventories held by firms
which list represents monetary policy actions that are consistent with one another
buy government bonds, lower reserve requirements, lower the discount rate
the great depression showed that the short-run aggregate supply curve and the aggregate demand curve
can interest at output levels below full employment
in a global economy, a problem with using fiscal and monetary policies to fix the problems in our country is that those policies
can lead to retaliatory actions by other nations
if Canada is using all its resources to their fullest extent, it can produce either 10 million iPads or 5 million HDTVs. If mexico is using all its resources to their fullest extent, it can produce either 6 million iPads or 6 million HADTV's. Thus
canada has a comparative advantage in producing iPads
the account that summarizes the flow of money into and out of domestic and foreign assets is called the ___ account
capital
***if a nation selects a product mix focused on ____ goods, the production possibilities frontier will expand at a greater rate than if the nation produced mostly ______ goods
capital; consumption
which of these would NOT cause a shift in the aggregate demand curve
change in the prive level
(figure: Corn and watches in the united states and canada) referring to the graphs, we see that the united states should export ___ to Canada and import ___ from canada
corn; watches Hw 15 Q6
people who want the federal government to restrict spending or raise taxes during booms and use surpluses from the booms to offset deficits during recessions would agree with the ___ approach to federal finance
cyclically balanced budget
All of the following are true for unanticipated inflation EXCEPT
debtors are hurt during inflationary times because the amount they pay creditors back increases
if the stock market collapses, consumption will
decrease because people feel that they have less money
which short run economic shock would be the most difficult to address through monetary policy
decrease in short-run aggregate supply
the country of economia has a higher productivity rate than producstan. Which statement is therefore correct?
economia has a higher standard of living than productstan
when the government funds Head Start, a program that provides early childhood education, it is acting in its role to promote economic growth by
enhancing physical and human capital
the balance budget multiplier is
equal to 1
which policy tends to be favored MOST by politicians seeking to be reelected
expansionary fiscal policy such as lower tax rates
a change in preferences causes a movement along the demand curve
false
suppose a country has a full employment and price stability when the unemployment rate is 4% to 5%, inflation runs at 2% to 3%, and real GDP grows at a rate of 2.25% to 3% per year. A functional finance economist would advocate doing nothing if the unemployment rate was 4.5% and the
federal deficit was $1 trillion, economic growth was 3%, and inflation was 2%
which law created the central bank of the united states
federal reserve act of 1913
if the reserve requirement is 25%, then a $1 increase in deposits means that the money supply
has the potential to increase by $4
which if these is NOT a problem for policymakers who want to reduce the national debt
high interest rates make it more difficult to pay down debt
assume the economy depicted in the figure is in long-run equilibrium, where the aggregate demand curve is AD0 and the short-run aggregate supply curve is SRAS0. If there is a supply shock, such as a drastic increase in the price of oil, this will cause a ___ and a movement to a short-run equilibrium at point ____
hw 9 graph Q 6 leftward shift to SRAS2; a
the concept of human capital is important to economists because
improvements to human capital lead to higher standards of living
Which of these is NOT a reason the aggregate demand curve is negatively sloped?
income effect
a chilean engineer comes to the united states to work on a one-year project and earns $75,000. In the balance of payments this transaction is a (n) _____ of $75,000
income outflow
after some troubling times in Egypt, American tourists are now visiting in record numbers. As a result, demand for Egyptian pounds will _____, which means the value of the pounds will ___ against the U.S dollar, all else equal.
increase; appreciate
As income increases, consumption
increases at a slower rate
the GDP gap divided by the multiplier yields the
inflationary or recessionary gap
The housing bubble of 2004-2006 caused _____ pressures, leading the Federal Reserve to _____ interest rates.
inflationary; raise
a credit default swap
is essentially the same as insurance against a default
to say that the federal reserve is transparent means that the Fed
is open regarding its monetary policy
if a bank has assets of $5 billion and liabilities of $4.8 billion
its equity equals $.2 billion
which famous economist suggested that people may hoard money if interested rates become too ineffective?
john maynard keynes
johnny is 17 and works in his father's bubble gum store 10 hours a week after school. his father pays him no money but buys video games for him. However, Johnny earns a spot on the high school football team and no longer works in his father's store. How is johnny categorized in the unemployment figures
johnny is not part of the labor force
Jose is putting money for college in a saving account. The bank makes the money available to business borrowers. In essence
jose is supplying loanable funds for business investment
If a country has a low capital-to-labor ratio, then it tends to have _____ labor productivity _____ wages.
low; low
A leveraged account
magnifies both gains and losses
Consumer surplus is the difference between the ___ is willing to pay and the market price
maximum price the buyer
The money multiplier
measures the maximum amount the money supply can increase when new deposits enter the banking system
a questions whose answer is based on what should or should not take place is a _____ question
normative
monetary policy involves all of these EXCEPT increases in
personal taxes
(figure: determining curves) The curve in the graph represents a __- curve
phillips Hw 14 q 6
when prices fall below equilibrium
producer surplus falls and it is uncertain what happens to consumer surplus
which of these would not be included in the capital account
profits earned by general motors in china that are brought back to the united states
in a pure market economy, the government's primary role does NOT include
reallocating resources across the economy
(table: Keynesian Equilibrium Analysis with Taxes and Net Exports) Given the data in the table, if full employment income is $1,000 while the current equilibrium is $750, a(n) ____ gap exists, such that a(n) _____ in spending equal to ____ is needed to close the gap
recessionary; increase, $100 (hw 8, chart Q 9)
assume the Fed's target for unemployment is 4% to 5% and its target for inflation is 2% to 3%. If the unemployment rate is 4.5% and the inflation rate is 6%, the federal Reserve will most likely
sell bonds
during 2010-2015, the untied states underwent a ___ economic recovery with ___
slow; persistent unemployment
the classical form of the production function states that output is determined by
some function of available labor or capital
the maximum amount of a product that sellers are willing and able to provide for sale over a particular period at various prices, ceteris paribus, is called
supply
(table) the capital account balance must be
surplus of $85 HW 16 Q 6
Which of these is NOT a criticism of the dating of business cycles by the National Bureau of Economic Research (NBER)?
the NBR is sometimes manipulated by the federal government
which event does NOT occur when there is an excess supply of U.S dollars?
the U.S current account worsens
which event does NOT occur when there is an excess supply of U.S dollars?
the U.S. current account worsens
which scenario does NOT fall under the category of microeconomics
the cost of living rises due to rising housing and food prices
demand refers to
the goods and services buyers are willing and able to purchase at various prices in a given period of time
if there is a surplus in a given market, then
the price will decrease
which if these is NOT a problem in measuring consumer prices
the reference period used for the consumer price index is 1982-1984
total factor productivity captures the factors that influence the overall effectiveness of inputs
true
when a demand shock occurs in the short run, monetary policy may focus on either output or income, since the effect is the same as focusing on price stability
true
about ____ of U.S currency is held outside the United States
two-thirds
which of these is NOT a concern regarding GDP as a measure of economic activity
value of investments in the stock and bond market
Suppose the government believes consumers should spend $1 billion more to get the economy out of a recession. The government wants to provide income to households by providing them with jobs and paying them directly. If the marginal propensity to consume is 0.8, the government should increase income by
$0.2 billion
If 1 euro will buy $1.30
$1 will purchase .77 euro
if Eighth Street Banks receives a $1,000 deposit; loans out $800; and keeps $200 in reserves, the total assets of Eighth Street Bank increased by
$1,000
suppose a bank has $1 million in deposits, a reserve requirement of 10%, and bank reserves $300,000. the bank has excess reserves of
$200,000
if the national debt is $55 million and this year's deficit is $5 million, what would the new national debt be
60 million
The typical length of a recession has been _____ months and is usually _____ than the subsequent period of expansion.
8 to 18; shorter
last year, the consumer price index was 115 while the consumer price index for this year is 125. the rate of inflation is
8.7%
the official unemployment rate (U-3) includes which person as unemployed
Logan, who was laid off from a cybersecurity firm and is actively seeking a similar job
Which statement about M1 and M2 is correct?
M2 is greater than M1
Assume that the price of a car in the United States is equal to $20,000 and the same car in Japan is priced at 2,400,000 yen. If 1 car in the United States is equal to only ½ car in Japan, then the nominal exchange rate between the two countries, based solely on this one product, is
US$1=Y240
which fiscal event increases a country's current account
a drop in disposable income
the value of cards that the ford motor company produces in a german plant is
a part of German GDP
when government spending rises
aggregate demand rises
according to Keynes, what determines the level of employment and income
aggregate expenditures
prices
allow sellers to determine what goods to sell, help buyers find possible substitute goods, and contain information useful for all people involved in a transaction
what does the paradox of thrift say
an economy that saves too much can end up with lower total savings
gross domestic product is a measure of
an economy's total output
which fiscal policy would LEAST likely result in an increase in aggregate supply
an increase in business regulations
which of these will NOT cause an increase in the consumption schedule
an increase in household debt
the Federal Reserve can purchase ___ to fund fiscal policy, resulting in __
bonds; an increase in the money supply
which statement is TRUE regarding various instruments in financial markets
compared with bonds, stocks provide equity and higher risk
the largest component of national income is
compensation of employees
if the price of a good is lower than the equilibrium price
consumer can gain at producers' expense
Which of the following would likely NOT cause inflation?
consumer confidence falls due to global economic concerns
if the price of a good is higher than the equilibrium price
consumer surplus is decreased and deadweight loss is increased
____ is a reduction in the rate of inflation
disinflation
changes in taxes first cause changes in ____, and thus the government tax multiplier is ___ than the government spending multiplier
disposable income; smaller
(Table: econoland and macroland annual production capacity in tons) based on the table, which statement correctly identifies the situation described therin
econoland's comparative advantage is in cabbages because its opportunity cost per ton of cabbage (.8 tons of oranges) is lower than macrolands
wages above market-clearing rates, intended to improve moral and reduce turnover, are called ___ wages
efficiency
the fractional reserve banking system
imposes limits on the amo0unt of money that banks can create
***a country operating outside of the production possibilities frontier is operating
impossibly because a country cannot operate outside the production possibilities frontier
Technology
improves the productivity of all factors
If the marginal propensity to consume increases, the spending multiplier _____ and the balanced budget multiplier _____.
increases; remains the same
if the marginal propensity to consume increases, the spending multiplier _____ and the balanced budget multiplier _____
increases; remains the same
which of these is NOT a major goal of the federal reserve
increasing exports
supply-side fiscal policies include all of these except
increasing transfer payments
the largest source of federal government revenues is ___ taxes
individual income
suppose a booming stock market encourages consumption spending to rise dramatically. what would be the most likely short-run impact?
inflation and rising real GDP
the price of a bond is equal to
interest payment divided by yield
The long-run Phillips curve
is a vertical line at the natural rate of unemployment
the study of economics
is about people making decisions regarding thier use scarce resources
money
is anything that is accepted in exchange for other goods and services or for payments of debt
in the long run, when the economy is at full employment, any change in money supply
leads to a change in prices
cost-push inflation occurs because of a shift to the
left of the short-run aggregate supply curve
if the amount of regulation in an economy increases, the aggregate supply curve shifts ____ and output supplied will ____
left; decrease
which statements is incorrect
monetary rules assume that the federal reserve has perfect insight into the effects of monetary policy on the economy
___ are near money
money market deposit accounts
if the Fed raises interest rates what would be the impact of the money supply and aggregate demand
money supply decreases and aggregate demand shifts to the left
until the 1970's
most industrialized countries used some form of fixed exchange rate
Suppose the economy is currently in equilibrium, with unemployment equal to the natural rate, and that people form expectations rationally. If the Federal Reserve announces that it is going to decrease the money supply, then the economy will
move to a lower price level but remain at potential GDP
which of these would lead to increased oversight of financial firms
much tighter regulations
if short-term interest rates become larger than long-term interest rates, the yield curve becomes __ sloped, and the chance of a recession becomes ___ likely
negatively; more
all of these are determinants of aggregate supply except
net exports
which component is the smallest part of the U.S GDP
net exports
which of these would not appear in a country's current account
net increase in foreign-owned holdings
the components of the current account include imports of goods and services, exports of goods and services, and
net transfers
which event would best represent short-run growth
new stores opening in vacant spaces in shopping malls
with respect to income, the investment schedule in the short run is
perfectly elastic
full employment on a production possibilities frontier (PPF) is shown by
points on the PPF
he public debt is the
portion of the national debt that is held by individuals, companies, and pension funds, along with foreign entities and foreign governments
The relationship between the risk level of an investment and its average return on investment is generally
positively correlated
in the short run, the aggregate supply curve is
positively sloped
(table) Consider the T-account in the table. If the reserve requirement is 20%, then the
potential money multiplier is larger than the actual money multiplier hw 12 q 10
___ is among the top five U.S exports to China
soybeans
what is the main claim of the aggregate expenditures model
spending will generate income, which allows for more spending
if the price of the U.S Post Office charges to deliver Express Mail rises, the demand facing FedEx will rise because its respective services are ___ goods
substitute
when Jay wins a contest, he is able to choose one prize from four options. He chooses a four-year certificate of the deposit that will accumulate interest and cannot be cashed in until maturity. Given the options below, which prizes would provide Jay with the largest value four year from now
$1,100 with an interest rate of 3%
according to the table, in a two-person market that includes person A and B, the willingness-to-pay for the third doughnut is
$4 hw 13 q 10
If the spending multiplier in an economy is 5, what is the corresponding marginal propensity to consume?
.80
suppose the town of treeville has a population of 200, of which 120 are in the labor force. Of those in the labor force, 100 are employed and 20 are unemployed. The unemployment rate in Treeville is
17%
the table shows the number of rubies and diamonds that botswana and Naminia can mine using one day of labor. The oppertunity cost of mining one diamond is ___ in Botswana and ____ in Namibia, and ____ has a comparative advantage in diamond production
3 rubies; 4 rubies; botswana
A bank has $50,000 in deposits from its checking account customers and loans of $49,000. Of the $49,000 loaned out, $43,000 remains in the checking accounts of the loan recipients. The bank has $50,000 cash on hand, and the reserve requirement is 25%. The reserve ratio for this bank is ____, and it ___ meeting its reserve requirement.
53.76%; is
assume that the price of a car in the united states is equal to @20,000 and the same car in Japan is priced at 2,400,000 yen. If 1 car in the united states is equal to only 1/2 car in Japan, then the nominal exchange rate between the two countries, based soley on this one product, is
US$1=Y240
anne and charlie are discussing the best possible fiscal policy to bring the country out of a recession. Charlie wants to see government reduce taxes by $100 billion. Anne prefers to see government spending increase by $100 billion. whose proposition would have the larger total impact on aggregate demand
anne's, because all of the additional government spending will enter the spending stream, while part of a tax cut would be saved and not spent
Which statement regarding the Fed's Board of Governors is correct?
appointments to the Board of Governors are staggered such that a term expires every other year
