Macroecon final
The consumer price index measures private goods as well as public goods. True or False
False The CPI measures only private goods
The catch-up effect is the idea that up to a certain point, developing countries can achieve greater productivity for each unit of capital invested because they have the advantage of using technologies already developed by other countries. True or False.
True
Thomas Malthus believed that the geometric growth of the population and the arithmetic growth of the food supply would never be altered. True or False
True
To convert a nominal value to a real value in dollar terms, the base year index must be set at 100. True or False
True
Savers to bank= Banks to borrowers= Borrowers to banks= Banks to savers= word bank: loan repayments, interest payments on deposits, deposits, withdrawals, loans
First: deposits Second: loans Third: loan repayments Fourth: withdrawals, interest payments on deposits
If foreign countries abandon the use of the dollar as their only form of legal currency, the United States money multiplier would likely increase. True or False.
True
Knowing the marginal propensity to consume makes it possible to calculate the marginal propensity to save. True or False.
True
Last year, the consumer price index was 115 while the consumer price index for this year is 125. The rate of inflation is a.) 8.7% b.) 8% c.) 10.8% d.) 9.2%
a.) 8.7% CPI=[(CPI in current year)/(CPI in original year)x100]-100 CPI=[(125/115)x100]-100 =8.695%
In the figure, equilibrium saving equals __________ when investment saving is at AE= C+ I*0 and __________ when investment is at AE= C+ I*1; consumption line (C) is at $200, AE=C+ I*0 is at $300, and AE= C+ I*1 is at $400 a.) $50; $150 b.) $100; $200 c.) $0; $0 d.) -%50; -$200
b.) $100; $200 consumption line (C) is at $200, AE=C+ I*0 is at $300, and AE= C+ I*1 is at $400
If a one-year bond with a face value of $1,000 is sold for $950, what is the bond's approximate yield? a.) 9.5% b.) 5.26% c.) 1.05% d.) 95%
b.) 5.26% yield=interest/selling price 50/950=0.0526
Increased consumer confidence will shift the aggregate demand curve to the ____________ and _____________ output demanded a.) left; increase b.) right; increase c.) left; decrease d.) right; decrease
b.) right; increase
Which change is likely to increase wages the MOST in a country? a.) drainage of swampy land allows 2% more land to be farmed b.) the capital-to-labor ratio rises by 2% c.) since the growth rate is 2% in all listed situations, wages would increase equally in all of them d.) the labor force grows by 2%
b.) the capital-to-labor ratio rises by 2% increasing the other factors of production does not necessarily improve productivity
Which of these provides an accurate description regarding the slope of the short-run aggregate supply curve? a.) the negative slope of the SRAS curve is flatter the more flexible prices are or steeper the more rigid prices are b.) the positive slope of the SRAS curve is steeper the more flexible prices are or flatter the more rigid prices are c.) the positive slope of the SRAS curve is flatter the more flexible prices are or steeper the more rigid prices are d.) the negative slop of the SRAS curve is steeper the more flexible prices are or flatter the more rigid prices are
b.) the positive slope of the SRAS curve is steeper the more flexible prices are or flatter the more rigid prices are Sticky prices (resistant to change) are reflected in a flatter SRAS curve where increases in aggregate output can be achieved without a large increase in price level
A bank has excess reserves of $4,000 and demand deposits of $40,000; the reserve requirement is 20%. Its current level of total reserves is ___________. If the reserve requirement is increased to 25%, the new level of excess reserves would be __________. a.) $15,000; $4,000 b.) $30,000; $5,000 c.) $12,000; $2,000 d.) $25,000; $3,000
c.) $12,000; $2,000 $40,000(0.2)=8,000+4,000= 12,000 40,000(.25)=10,000 12000-10000=2000
When Main Street Bank buys new automatic teller machines, the quantity of ________ in the economy increases. a.) labor b.) entrepreneurial ability, technology, and ideas c.) physical capital d.) land and natural resources
c.) physical capital
Macroeconomics was developed to explain a.) jobless recoveries b.) the Internet boom c.) the Great Depression d.) the Industrial Revolution
c.) the Great Depression
Compared with stocks, bonds tend to reward investors with a higher average return on investment over the long run. True or False.
False
The consumer price index measures private goods as well as public goods True or False
False- the CPI measures only private goods
A rise in real GDP is associated with increased employment. True or False.
True
Gross private domestic investment is a key factor behind economic growth in the United States True or False
True
To convert a nominal value to a real value in dollar terms, the base year index must be set at 100. True or False
True
Total factor productivity captures the factors that influence the overall effectiveness of inputs. True or False.
True
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 a.) 17% b.) 10% c.) 20% d.) 60%
a.) 17% Unemployment rate= # of people unemployed/# of people in the labor force rate= 20/120 =0.1667= 17%
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? a.) 4.4% and 4.0% respectively b.) 44% and 4.4% respectively c.) 4.4% and 10% respectively d.) 4.0% and 4.4% respectively
a.) 4.4% and 4.0% respectively coupon rate= 44/1000=0.044 yield=interest/price=44/1100=0.04
If the economy starts below full employment, an expansionary fiscal policy will shift the aggregate demand curve from ______ to ________, and equilibrium will move from point ___ to ____ a.) AD0; AD1; a; b b.) AD1; AD0; a; b c.) AD1; AD0; b; a d.) AD0; AD1; b; a
a.) AD0; AD1; a; b full employment is where aggregate demand meets the LRAS curve
If your goal was to have the largest amount of money in your bank account as possible in two years, which option would you choose? (Assume that the beginning deposit and all interest earnings remain in the account of the full two years.) a.) a beginning deposit of $930, earning 8% per year b.) a beginning deposit of $1000, earning 4% per year c.) a beginning deposit of $1,010, earning 3% per year d.) a beginning deposit of $950, earning 5% per year
a.) a beginning deposit of $930, earning 8% per year 930(.08)= 74.4 930+74.4= 1004.4 1004.4(.08)= 80.352 1004.4 + 80.352= $1084.75
Which of these would NOT shift the investment demand schedule? a.) a change in interest rates b.) a change in technology c.) a change in operating costs d.) a change in expectations
a.) a change in interest rates the investment demand schedule is determined by expectations about future revenues and ROI, technological changes, operating costs, capital goods on hand, and rate of return (main determinant of investment spending)
What are the determinants of short-run aggregate supply? a.) changes in input prices, taxes, and business and inflationary expectations b.) changes in input prices, taxes, and technology c.) changes in education, taxes, and business and inflationary expectations d.) changes in government spending, taxes, and business and inflationary expectations
a.) changes in input prices, taxes, and business and inflationary expectations the LRAS determinants are technology, education, and globalization the SRAS determinants are input prices, productivity, taxes, regulation, market power, and business and inflationary expectations
If the economy shown in the figure begins at point C, an increase in consumer confidence leads to what changes in the short run? a.) demand-pull inflation b.) an increase in unemployment c.) a decline in tax revenue d.) cost-push inflation
a.) demand-pull inflation an increase in consumer confidence shifts aggregate demand to the right which is demand-pull
Assume that the reserve requirement is 25% and the Federal Open Market Committee buys $4 million of US government bonds from the public. As a result of this transaction, the supply of money is a.) directly increased by $4 million and has the potential to be increased by another $12 million b.) directly increased by $4 million and has the potential to be increased by another $8 million c.) not directly affected but has the potential to be increased by a total of $12 million d.) directly reduced by $4 million and has the potential to be reduced by another $12 million
a.) directly increased by $4 million and has the potential to be increased by another $12 million money multiplier=1/reserve requirement as a decimal= 1/0.25=4
Changes in taxes first cause changes in __________, and thus the government tax multiplier is ______________ than the government spending multiplier a.) disposable income; smaller b.) aggregate spending; larger c.) disposable income; larger d.) aggregate spending; smaller
a.) disposable income; smaller
A passive job search a.) entails merely talking to friends about jobs b.) includes contacting a private employment agency c.) entails the scheduling of job interviews d.) means participating in productive activities, like sending out résumés
a.) entails merely talking to friends about jobs
Unanticipated ___________ is detrimental to economic growth. a.) inflation or deflation b.) inflation c.) deflation d.) neither deflation nor inflation
a.) inflation or deflation
The __________ is the change in consumption associated with a change in income. a.) marginal propensity to consume b.) marginal propensity to save c.) average propensity to save d.) average propensity to consume
a.) marginal propensity to consume
A production function says output per worker equals A x f(L/L, K/L, H/L, N/L) and tells us that all of these EXCEPT __________ will lead to a better standard of living. a.) more people b.) more natural resources c.) increases in capital d.) more human capital
a.) more people Leads to a worse standard of living because it causes higher demand for things and makes resources more scarce
A production function says output per worker equals A x f(L/L, K/L, H/L, N/L) and tells us all of these EXCEPT __________ will lead to a better standard of living. a.) more people b.) more natural resources c.) increases in human capital d.) more human capital
a.) more people everything in the function is divided by L, more people=more L which means everything will be spread over more people which lowers standard of living
Assume that the MPC is 0.75, full employment is considered to be at GDP level of $500 billion, and the GDP is $600 billion. What should the government do to achieve full employment? a.) reduce spending by $25 billion b.) increase spending by $10 billion c.) reduce spending by $100 billion d.) increase spending by $25 billion
a.) reduce spending by $25 billion An inflationary gap currently exists, so the gov needs to decrease spending 100=x(1/.25) X=25
Which assumption is NOT a problem related to using the consumer price index (CPI) to accurately state the rate of inflation? a.) the CPI does not deal with produce prices b.) the CPI does not account for quality changes c.) the CPI assumes people do not substitute goods d.) the CPI does not include new products
a.) the CPI does not deal with producer prices
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? a.) the economy will move from point C to A to B b.) the economy will move from point C to E to B c.) the economy will move from point D to C to B d.) the economy will move from point D to C to E
a.) the economy will move from point C to A to B the rise in oil price creates a leftward shift in the SRAS (price of input increase so output decreases) which moves the equilibrium point back then up
According to the table, which country will have the lowest real GDP per capita in 23.67 years? Ecoland: $10,000 real GDPpc current year, 12% growth rate real GDPpc Macia: $22,000 real GDP pc current year, 6% growth rate real GDP pc Nomia: $28,000 real GDPpc current year, 3% growth rate real GDP pc Coland: $30,000 real GDPpc current year, 3% growth rate a.) Ecoland b.) Nomia c.) Coland d.) Macia
b.) Nomia 28,000(.03(23.67))= 19,882.80
Which of these is NOT a financial intermediary in the market for loanable funds? a.) an insurance company b.) a school c.) mutual funds d.) credit unions
b.) a school
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? a.) a decrease in the demand and an increase in supply b.) an increase in demand and a decrease in supply c.) increases in both demand and supply d.) decreases in both demand and supply
b.) an increase in demand and a decrease in supply
The US economy is currently experiencing high unemployment and low inflation. To lessen the unemployment problem, the Federal Reserve could a.) sell bonds through open market operations, thereby enabling banks to lend more money, increase the money supply, stimulate spending, and create jobs b.) buy bonds through open market operations, thereby enabling banks to lend more money, increase the money supply, stimulate spending, and create jobs c.) raise the reserve requirement, thereby enabling banks to lend more money, increase the money supply, stimulate spending, and create jobs d.) lower the discount rate, thereby enabling banks to increase liquidity, lend more money, decrease the money supply, stimulate spending, and create jobs
b.) buy bonds through open market operations, thereby enabling banks to lend more money, increase the money supply, stimulate spending, and create jobs
Which list represents monetary policy actions that are consistent with one another? a.) sell government bonds, raise reserve requirements, lower the discount rate b.) buy government bonds, lower reserve requirements, lower the discount rate c.) buy government bonds, raise reserve requirements, raise the discount rate d.) sell government bonds, lower reserve requirements, raise the discount rate
b.) buy government bonds, lower reserve requirements, lower the discount rate ALL INCREASE THE MONEY SUPPLY
Which event will shift the aggregate demand curve to the right? a.) decrease in military spending b.) decrease in taxes c.) catastrophic hurricane hits the northeaster United States d.) increase in household debt
b.) decrease in taxes decrease in taxes is associated with an increase in consumption spending
If the marginal propensity to consume is 0.6; full employment income is $500; and the current equilibrium is $750, a(n) ____________ gap exists, such that a(n) ______________ in spending equal to _______________ is needed to close the gap. a.) recessionary; increase; $250 b.) inflationary; decrease; $100 c.) inflationary; decrease; $250 d.) recessionary; increase; $100
b.) inflationary; decrease; $100 balanced budget multiplier: change needed to bring GDP to equilibrium= X(1/MPS) 250=X(1/0.4)=$100
Bonds are considered to be ___________ than stocks because _______________. a.) riskier; stockholders are less affected by a firm's bankruptcy b.) less risky; bondholders are less affected by a firm's bankruptcy c.) riskier; stockholders earn dividends and bondholders do not d.) less risky; bondholders earn dividends and stockholders do not
b.) less risky; bondholders are less affected by a firm's bankruptcy
Which situation indicates that total output in a country has grown the most when the starting output is the same in all situations? a.) output per worker grows by 4% while the labor force grows by 12% b.) output per worker grows by 10% while the labor force grows by 10% c.) output per worker remains constant while the labor force grows by 11% d.) output per worker grows by 11% while the labor force remains constant
b.) output per worker grows by 10% while the labor force grows by 10% Total output= (1+rate of output growth as a decimal)x(1+rate of labor force growth as a decimal)
If the marginal propensity to consume is 0.6; full employment income is $1000; and the current equilibrium is $750, a(n) _____________ gap exists, such that a(n) ____________ in spending equal to ____________ is needed to close the gap. a.) inflationary; decrease; $250 b.) recessionary; increase; $100 c.) inflationary; decrease; $100 d.) recessionary; increase; $250
b.) recessionary; increase; $100 recessionary gap: the increase in spending needed to eliminate a negative GDP gap and bring the economy back to equilibrium Balanced budget change in GDP needed to bring back to E=1/MPS -250=x (1/0.4) x=100
When a perpetual bond with a face value of $1,000 is issued, general interest rates are 3%, so the annual interest payment is ________. After the bond is issues, market interest rates rise to 4%, which forces the price of the bond to _____ to _______. a.) $3; fall; $75 b.) $3; rise; $750 c.) $30; fall; $750 d.) $30; rise; $750
c.) $30; fall; $750 interest payment=$1,000(0.03)=$30 new bond price= $30/0.04= $750
If the national debt is $55 million and this year's deficit is $5 million, what would the new national debt be? a.) $50 million b.) $11 million c.) $60 million d.) $275 million
c.) $60 million national debt is the total deficits over the years; add the new debt to the old debt
Based on the information provided in the graph, at an income level of $300, savings equals __________, the MPC equals __________, and the APC equals ____________. consumption line starts at $200 and the Y=C and C line meet at $500. a.) -$120; 0.4; 0.7 b.) $80; 0.6; -0.27 c.) -$80; 0.6; 1.27 d.) $300; 0.4; 0.5
c.) -$80; 0.6; 1.27 consumption line is above the Y=C line where savings=0, so the savings amount must be negative; APC=C/Y= 380/300; MPC=change in C/change in Y= (380-200)/300; subtract the new consumption level from the y-intercept and divide by the change in income on the x-axis
In the figure, suppose investment has increased from AE=C+I*0to AE=C+I*1. Investment increased from $300 to $400 and equilibrium income increases from $750 to $1000. The multiplier equals a.) 0.6 b.) 5 c.) 2.5 d.) 0.4
c.) 2.5 Multiplier=1/(1-MPC) OR multiplier= change in income/change in investment
According to the table, what is the labor force of this economy? population: 500 Number Employed: 300 Number unemployed: 50 a.) 300 b.) 50 c.) 350 d.) 500
c.) 350 the labor force includes everyone who is considered employed and unemployed
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. a.) 20%; is b.) 0.002%; is not c.) 53.76%; is d.) 186%; is not
c.) 53.76%; is 50000/50000+43000
In the following PPF, between which two points would long-run growth be represented? A is at origin, B is below efficiency, D is above efficiency, C is on the x-axis at efficiency a.) C to D b.) A to B c.) B to C d.) A to C
c.) B to C it's an improvement of efficiency
Esteban's annual salary is $80,000, of which he saved $20,000. When he received his bonus of $10,000, he spent $8,000 on home renovations and saved the remaining $2,000. Which statement is true? a.) Esteban's average propensity to consume cannot be calculated. b.) Esteban's average propensity to consume stayed the same. c.) Esteban's average propensity to consume increased d.) Esteban's average propensity to consume decreased.
c.) Esteban's average propensity to consume increased. His initial APC= 60,000/80,000=0.75 His new APC= (60,000+8,000)/(80,000+10,000)= 0.755556
Which statement(s) is/are TRUE regarding the paradox of thrift? I. People intend to save less but their actions actually lead to an increase in savings. II. For the paradox of thrift to occur, investment must be positively related to income. III. The increased savings of households leads to more consumption, income, and output, increasing investment and aggregate savings. a.) II and III only b.) I, II, and III c.) II only d.) I and II only
c.) II only investment varies with economic conditions and is positively related to income 1 is wrong because the paradox of thrift is when households intend to save more, but at equilibrium they end up saving less 3 is wrong because increased savings leads to decreases in consumption, income, and output, which decreases investment and actual aggregate savings
The demand for loanable funds is downward sloping because a.) higher interest rates encourage firms to borrow more b.) as interest rates fall, the value of the money supply drops c.) as interest rates fall, businesses find more projects to be profitable and thus want to borrow more d.) higher interest rates are equivalent to higher returns on business projects
c.) as interest rates fall, businesses find more projects to be profitable and thus want to borrow more
Suppose a government finances its expansionary fiscal policy by borrowing from the public. Joseph is concerned that this will increase the demand for loanable funds, drive up interest rates, and leave less loanable money available for consumers and businesses. Joseph is concerned about the ____________ effect. a.) opposite expansionary b.) boomerang c.) crowding-out d.) ricochet
c.) crowding-out
Suppose three years ago a nation's inflation rate was 8%, two years ago it was 5%, and last year it was 2%. This nation is undergoing a.) hyperinflation b.)a drop in its price level. c.) disinflation d.) deflation
c.) disinflation disinflation: a reduction in the rate of inflation; still experiencing a rise in price, just at a slower rate deflation: a decline in the overall prices throughout the economy; opposite of inflation
In September 2013, the Federal Open Market Committee said it would wait for more evidence that progress had been made on the economic recovery before it cut back on open market purchases. The Bureau of Economic Analysis did not release its advance estimate of the third quarter's GDP growth until a month after the quarter had ended. The second estimate was released two months after the quarter ended, and a third revised estimate was released about three months after the quarter ended. This wait for accurate data to be collected is known as the _______ lag. a.) implementation b.) recognition c.) information d.) decision
c.) information
If the economy shown in the figure begins on AD1 and SRAS1, what will happen in the short run and the long run if the government begins a sustained period of increased spending a.) the economy moves from point C to A to B b.) the economy moves from point D to C to A c.) the economy moves from point C to E to B d.) the economy moves from point D to C to E
c.) the economy moves from C to E to B the increased government spending shifts the aggregate demand curve to the right; the movement from E to B is because the economy cannot perform at above full-employment for a long period of time
In which situation is a country LEAST likely to be producing on its production possibilities curve? a.) the land is dry and has low productivity in farming. b.) there are legal penalties for breaking a contract c.) there are legal disputes over the ownership of 15% of the factory buildings in the country d.) the average education level is of the fourth grade
c.) there are legal disputes over the ownership of 15% of the factory buildings in the country
Based on the information in the graph, when income equals $1000, the average propensity to save equals At $1000 the Y=C curve is at $1000 and the C curve is at $800 a.) 0.4 b.) 0.5 c.) 0.6 d.) 0.2
d.) 0.2 APC= C/Y= 800/1000=0.8 APC+APS=1 1-0.8=0.2=APS
If an economy is growing at 10%, how long will it take for $1000 to turn into $4000? a.) 21 years b.) 28 years c.) 7 years d.) 14 years
d.) 14 years rule of 70: years to double in value=70/growth rate as a percentage 70/10=7 years to double (worth $2000, so to get to double again it takes 14 years and will be worth $4000)
If the reserve requirement is 25%, then the potential money multiplier is ______ and the actual money multiplier is _________. a.) 25; greater than 25 b.) 250; greater than 250 c.) 25; less than 25 d.) 4; equal to or less than 4
d.) 4; equal to or less than 4
Which of these would likely cause the market for loanable funds to change as shown in the following figure? (graph shows a leftward shift of the aggregate supply curve) a.) increased incentive for individuals to save b.) improved business expectations about future profits c.) increased regulations placed on businesses d.) a decrease in average incomes
d.) a decrease in average incomes
Assume that Macroland starts in long-run equilibrium and then faces a reduction in government spending. What chain of events will lead to a new long-run equilibrium? a.) SRAS falls; then aggregate demand falls, leading to a new long-run equilibrium with lower prices and lower output b.) SRAS falls causing unemployment; with less output, investment falls, leading to a reduction in LRAS and a new long-run equilibrium with lower output and higher prices c.) aggregate demand falls causing prices to fall; at lower prices, aggregate demand then rises back to its original level, leading to a return to the original price and output levels d.) aggregate demand falls causing unemployment; unemployed workers eventually accept lower wages, increasing SRAS and leading to a new long-run equilibrium with lower prices and the original output
d.) aggregate demand falls causing unemployment; unemployed workers eventually accept lower wages, increasing SRAS and leading to a new long-run equilibrium with lower prices and the original output
Which statement is NOT correct? a.) discouraged workers have actively stopped seeking work. b.) discouraged workers are not classified as unemployed c.) discouraged workers are considered part of the leisure class and not part of the labor force d.) discouraged workers are considered underemployed
d.) discouraged workers are considered underemployed
Which statement is not correct? a.) discouraged workers have stopped actively seeking work. b.) discouraged workers are not classified as unemployed. c.) discouraged workers are considered part of the leisure force and not part of the labor force. d.) discouraged workers are considered underemployed.
d.) discouraged workers are considered underemployed. Underemployed refers to people who are currently working part time or are seeking a better job
Under which condition would the Fed be most likely to engage in its role as the lender of last resort? a.) when throngs of borrowers apply for loans as the housing market picks up b.) when a stock market crash causes people to sell their stocks and purchase bank CDs instead c.) when record amounts of student loans are paid back before interest rates rise d.) if a lack of confidence in the financial system causes savers to withdraw money from banks
d.) if a lack of confidence in the financial system causes savers to withdraw money from banks
___________ government spending, _____________ transfer payments, and ___________ taxes are all examples of expansionary fiscal policy a.) increasing; reducing; raising b.) reducing; increasing; lowering c.) reducing; increasing; lowering d.) increasing; increasing; lowering
d.) increasing; increasing; lowering
Which statement regarding discretionary and mandatory spending is correct? a.) discretionary spending has steadily grown as a percentage of the federal government since the 1960s. b.) mandatory spending programs include national defense, income security, and education c.) discretionary spending is authorized by permanent laws d.) mandatory spending may act as an automatic stabilizing force in the macro economy
d.) mandatory spending may act as an automatic stabilizing force in the macro economy
Assume the economy is currently experiencing aggregate expenditures greater than aggregate income. The economy will move toward equilibrium as businesses begin to produce ____________, leading to ________________ employment and __________ income. a.) less; less; less b.) more; less; less c.) less; more; more d.) more; more; more
d.) more; more; more when aggregate expenditures exceed aggregate income and output, there are more goods being demanded than are being supplied, so businesses will produce more which will raise employment and income and move the economy toward the desired income and output level
A bond's price and yield a.) move in the same direction b.) are usually equal in value c.) must sum up to $1000 d.) move in opposite directions
d.) move in opposite directions as the bond price increases the yield decreases
Bond prices and their yields are _____________ because the bond's face value and _____________ are fixed, forcing its ________ to change in response to changing market conditions. a.) positively related; sales price; coupon payment b.) positively related; coupon payment; sales price c.) negatively related; sales price; coupon payment d.) negatively related; coupon payment; sales price
d.) negatively related; coupon payment; sales price
One argument against using taxation to pay off the public debt it that it will redistribute wealth from a.) poorer bondholders to richer people who do not own bonds b.) richer bondholders to richer people who do not own bonds c.) richer bondholders to poorer people who do not own bonds d.) poorer people who do not own bonds to richer bondholders
d.) poorer people who do not own bonds to richer bondholders
A breakthrough in solar energy research that halves the cost of electricity will a.) shift the aggregate supply curve to the left b.) cause the aggregate supply curve to become vertical c.) have no effect on the aggregate supply curve d.) shift the aggregate supply curve to the right
d.) shift the aggregate supply curve to the right electricity is an input so when the cost of inputs decreases the supply increases which is a shift to the right
Order the following savings mechanisms in descending order of liquidity from most liquid to least liquid. Savings account, a house, corporate bond, cash in your pocket, checking account
Cash in your pocket Checking account Savings account Corporate bond A house
Identify which are goals of monetary policy and which are not. Maximum employment, economic growth, high inflation, price stability, financial market stability, increasing the size of the financial sector, improving banks' profits
Goals: price stability, maximum employment, financial market stability, economic growth Not goals: high inflation, improving banks' profits, increasing the size of the financial sector
If an employer uses an elevator clause to determine an employee's raise each year, in an inflationary environment, the employer is more likely that the employee to want to use the personal consumption expenditures price index in this clause. True or False
True. An escalator clause is a provision allowing for an increase in wages or prices that is activated under certain conditions, such as when the cost of living or inflation rises. The personal consumption expenditures index measures inflation across consumer expenses
Assume taxes increase by $200 and the marginal propensity to consume is 0.75. Equilibrium income would likely to a.) fall by $600 b.) remain the same c.) rise by $800 d.) by $800
a.) fall by $600
The graph depicts an economy originally in equilibrium at point e. Assume that the government uses expansionary fiscal policy. Which statement is TRUE? a.) the movement from a to b is due to increased consumer spending brought about by increased government spending and/or lower taxes b.) the movement from point a to b is due to workers and suppliers adjusting their expectations to higher price levels c.) the movement from point e to a is due to decreased consumer spending brought about by increased government spending and/or lower taxes d.) the movement from point e to a is due to workers and suppliers adjusting their expectations to lower price levels
b.) the movement from a to b is due to workers and suppliers adjusting their expectations to higher price levels expansionary fiscal policy involves increasing government spending and/or decreasing taxes to increase aggregate demand
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 point b is due to a.) increased consumer spending brought about by increased government spending and/or lower taxes b.) workers and supplier adjusting their expectations to higher price levels c.) decreased consumer spending brought about by increased government spending and/or lower taxes d.) workers and supplier adjusting their expectations to lower price levels
b.) workers and supplier adjusting their expectations to higher price levels
______________ unemployment is the result of changes in the business cycle. a.) frictional b.) structural c.) cyclical d.) seasonal
c.) cyclical
What is the difference between the typical structure of a retirements savings account (401(k)) and an individual retirement arrangement account (IRA)? a.) IRA contributions are typically made with pretax income while 401(k) contributions are made with post tax income b.) taxes are due on withdrawals from an IRA but not on withdrawals from a 401(k) c.) employers often match 401(k) contributions, but they do not match IRA contributions d.) IRAs typically earn interest, but 401(k) accounts typically earn dividends
c.) employers often match 401(k) contributions, but they do not match IRA contributions
Which of these is NOT a reason the aggregate demand curve is negatively sloped? a.) export effect b.) wealth effect c.) income effect d.) interest rate effect
c.) income effect wealth effect, export effect, and interest rate effect are all reasons the aggregate demand curve is negatively sloping
Cost-push inflation occurs because of a shift to the a.) right of the short-run aggregate supply curve. b.) left of the aggregate demand curve c.) left of the short-run aggregate supply curve d.) right of the aggregate demand curve
c.) left of the short-run aggregate supply curve cost-push inflation occurs when a supply shock hits the economy, shifting the aggregate supply curve leftward demand-pull occurs when aggregate demand
In the TED talk that we watched in class today, what was the name of the Nobel prize winning economist? a.) David Card b.) Abhijeet Banerjee c.) John Keynes d.) Esther Duflo
d.) Esther Duflo
If Kelly transfers $500 from her savings account to her checking account, M1 will (increase, decrease, stay the same) and M2 will (increase, decrease, remain the same)
increase; remain the same M1 is very liquid (cash, checks, etc.) M2 is M1 plus savings
