Macroeconomics Final Exam

A person who is counted as "unemployed" by the Bureau of Labor Statistics

Is also in the labor force. must have recently looked for work or be on temporary layoff. must be at least 16 years old. Correct! All of the answers are correct.

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money

Being a medium of exchange

Which of the following lists is included in what economists call "money"?

Cash

An important function of the US federal reserve is to

Control the supply of money

The goal of the consumer price Index is to measure changes in the

Cost of living

Which of the following is not considered to be "money"?

Credit cards

Which list ranks assists from most to least liquid?

Currency, stocks, fine art

When prices are falling economists say there is

Deflation

Which of the following does the federal reserve NOT do?

Does Do: It acts as a lender of last resort to banks. It controls the supply of money. It tries to ensure the health of the banking system. Does Not Do: It makes loans to any qualified business that requests one.

The CPI is the only price index employed by economists to track prices

False

Organization responsible for regulating the US monetary system is the

Federal Reserve

Currently, US currency is

Fiat money with no intrinsic value

Which of the following statements about GDP is correct?

GDP is to a nation's economy as household income is to a household.

Observe the following table: Nation Real GDP ($) Population Germany $3,500 80 Japan $3,500 100 China $10,000 1,300 Ireland $200 5 Egypt $300 80 where real GDP is measured in $billions and population is measured in millions of people Assume all this data is for the same year. Which nation had the highest real GDP per capita?

Germany

He board of governors

Has 7 members

Fiat money

Has no intrinsic value

When the consumer price index rises, the typical family

Has to spend more dollars to maintain the same standard of living

Shoeleather costs arise when higher inflation rates induce people to

Hold less money

Which of the following about deflation is not true?

In a given economy, occurs regularly and frequently

When price level rises the number of dollars needed to buy a representative basket of goods

Increases, so the value of money falls

Which of the following is included in the aggregate demand for goods and services

Investment demand, consumption demand, net exports, all are correct!

The price index that measures the cost of a basket of goods and services bought by firms is called the

Producer price index

The aggregate demand and aggregate supply graph has the

Quantity of output on the horizontal axis. Output is best measured by real GDP

To explain the long-run determinants of the price level and the inflation rate, most economists today rely on the

Quantity theory of money

Other things the same, the aggregate quantity of goods demanded in the US increases if

Real wealth rises

The measure of the money stock called M1 includes

Wealth held by people in their checking accounts

Which of the following is the proper form of the expenditure approach to calculating GDP?

Y = C + Ig + G + NX

Which of the following is a way to compute GDP?

a. total income earned. b. total expenditures on final goods. c. add up the market values of all final goods and services. Correct! d. All of the above are correct.

Minimum wage laws DO NOT!

affect highly-educated workers more than high school dropouts. cause labor shortages, which further raise wages above equilibrium. reduce unemployment.

In a simple circular-flow diagram, total income and total expenditure are

always equal because every transaction has a buyer and a seller.

The people of the imaginary nation of Columbiana consume only 2 types of goods: coffee and donuts. The prices of each product in the years 2008 and 2018 are as follows: 2008 2018 Coffee Price $5 $4 Donut Price $2 $3 Using a fixed basket of 5 coffees and 1 donut, what is the CPI for Columbiana in 2008? Assume a base year of 2008.

100

The people of the imaginary nation of Columbiana consume only 2 types of goods: coffee and donuts. The prices of each product in the years 2008 and 2018 are as follows: 2008 2018 Coffee Price $5 $4 Donut Price $2 $3 Using a fixed basket of 5 coffees and 1 donut, what is the CPI for Columbiana in 2008? Assume a base year of 2018.

117

Suppose the banking system in a country has a prevailing stated interest rate of 4%. If the inflation between now and next year is 1.5%, what is the real interest rate on loans/deposits that are charged/receive this interest rate?

2.5%

Below is data about the labor market in the state of Northwoods. Wage $10. $9. $8. $7. $6. Quantity Demanded 80,000. 90,000. 100,000. 110,000. 120,000 Quantity Supplied 120,000. 110,000. 100,000. 90,000. 80,000 If the state government imposed a minimum wage of $9, how many people would be unemployed?

20,000

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

25%

If M = 3,000, P = 2, and Y = 6,000, what is velocity?

4

Other things the same, as he price level decreases it induces greater spending on

Both net exports and investment

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

The slope of the aggregate-demand curve

The long-run aggregate supply curve shifts left if

There is a natural disaster

Which of the following is a topic studied in macroeconomics?

Unemployment

Because every transaction has a buyer and a seller,

every transaction contributes equally to an economy's income and to its expenditure.

GDP includes the value of all

final goods and services produced within a country using primarily market prices to measure the value of goods and services.

Which of the following statistics is usually regarded as the best single measure of a society's economic wellbeing?

gross domestic product

For an economy as a whole,

income must equal expenditure.

Changes in real GDP reflect

only changes in the amounts being produced.

The Bureau of Labor Statistics places people in the "employed" category if they

work without pay in a family member's business. are self-employed. are temporarily absent from their jobs. Correct Answer All of the answers are correct.

If velocity = 5, the price level = 2, and the real value of output is 2,500, then the quantity of money is

$1,000

A banks reserve ratio is 8% and the bank has $20,000 in deposits. It's reserves amount to

$1,600

The fictitious country of Turner produces 2 types of goods: phones and burgers. Refer to the below information detailing Turner's economic production: 2008 2018 Phone Price $30 $50 Phones Produced 100 300 Burger Price $1 $2 Burgers Produced 2,000 2,300 Real GDP for Turner in 2018 would be ________ if the base year was 2008. However, if the base year was 2018, real GDP for Turner in 2018 would be ________.

$11,300; $19,600

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

$16,000 of new money

Assume the following scenario: In the year 2018, Germany had GDP of $5 trillion. Consumption for the country amounted to $3 trillion, while gross private domestic investment spending was $500 billion, and government spending amounted to $1.3 trillion. Given this information, what was Germany's net exports for 2018?

$200 billion

If in some year nominal GDP for a country was $500 billion and the GDP deflator was 125, what was real GDP?

$400 billion

The fictitious country of Turner produces 2 types of goods: phones and burgers. Refer to the below information detailing Turner's economic production: 2008 2018 Phone Price $30 $50 Phones Produced 100 300 Burger Price $1 $2 Burgers Produced 2,000 2,300 What were the respective nominal GDPs for Turner in 2008 and 2018?

$5,000 and $19,600

A man who worked at a steel mill in 1965 made $9,000 in wages. What is the 2018 approximate equivalent of these wages? Assume that the CPI in '65 was 32 and the present CPI is 240.

$68,000

Arlo is offered a job in Cleveland, OH, where the CPI is 225, and a job in New York, where the CPI is 370. Arlo's job offer in Cleveland is for $42,000. Approximately how much does the New York job have to pay in order for the two salaries to represent the same purchasing power?

$69,000

Which of the following is a shortcoming of GDP?

. It doesn't measure equality of wealth b. It doesn't measure quality of life c. It is understated because "underground" economic activity is hard to measure Correct! d. All of the answers

Below is data about the labor market in the city of Productionville. Wage $8. $7. $6. $5. $4. Quantity Demanded 6,000. 9,000. 12,000. 15,000. 18,000 Quantity Supplied 16,000. 14,000. 12,000. 10,000. 8,000 If the local government imposed a minimum wage of $4 in Productionville, how many people would be unemployed?

0

The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2 shirts, and 2 pairs of pants. In 2005, bread cost $1.00 per loaf, milk cost $1.50 per gallon, shirts cost $6.00 each, and pants cost $10.00 per pair. In 2006, bread cost $1.50 per loaf, milk cost $2.00 per gallon, shirts cost $7.00 each, and pants cost $12.00 per pair. Using 2005 as the base year, what was Aquilonia's inflation rate in 2006?

24.4%

Suppose that the adult population in the country of Atlantis is 115 million. If 80 million people are employed and 5 million are unemployed, then

30 million are not in the labor force

Suppose the Bureau of Labor Statistics reported an adult population of 170 million, the number in the labor force of 110 million, and the number of unemployed at 5 million. Based on these numbers the unemployment rate is

4.3%

Next week, you go to a local bank to take out a loan for a personal need. The bank lends the money to you. Before you receive the funds, you and the bank agree to loan terms of paying back the money within 12 months at an annualized stated fixed interest rate of 3.5%. At what rate of annual inflation between now and 12 months from now is the bank substantially worse off from loaning you this money?

4.5%

The price index was 120 in 2012 and 126 in 2013. What was the inflation rate?

5%

The price index was 220 in one year and 238.2 in the next year. What was the inflation rate?

8.3%

The people of the imaginary nation of Columbiana consumer only 2 types of goods: coffee and donuts. The prices of each product in the years 2008 and 2018 are as follows: 2008 2018 Coffee Price $5 $4 Donut Price $2 $3 Using a fixed basket of 5 coffees and 1 donut, what is the CPI for Columbiana in 2018? Assume a base year of 2008.

85

Other things the same, as the price level falls,

A dollar buys more domestic goods

The "yardstick" people use to post prices and record debts is called

A unit of account

Which of the following is a shortcoming of GDP?

It doesn't measure equality of wealth It doesn't measure quality of life It is understated because "underground" economic activity is hard to measure Correct! All of the answers

Which of the following is not true about the Consumer Price Index?

It relates one nations currency to that of another country

The Bureau of Labor Statistics is part of the US department of

Labor

The existence of money

Makes trade easier

The amount of unemployment an economy normally experiences is called the

Natural rate of unemployment

The inputs into production of goods and services that are provided by nature, such as land, rivers, and mineral deposits are called

Natural resources

Which of the following is Not correct?

Not Correct! A recession is a period of declining real incomes and declining unemployment. Is Correct: During a recession firms cut back production and workers are laid off. The model of aggregate demand and aggregate supply is used by most economists to analyze short-run fluctuations. A depression is a severe recession.

Suppose Americans only consume 3 products: burgers, fries, and doctors' visits. From 2017 to 2018, the average price of each item changed by 2%, 4%, and 8% respectively. Given this information, what was the inflation rate from 2017 to 2018?

Not enough information given

The regional federal reserves banks

Regulate banks in their regions

To decrease the money supply the Fed can

Sell government bonds or increase the discount rate

When conducting an open market sale, the Fed

Sells government bonds, decreasing the money supply

Most economists use the aggregate demand and aggregate supply model primarily to analyze

Short-run fluctuations in the economy

The aggregate demand curve

Shows an inverse relation between the price level and the quantity of all goods and services demanded

The amount of unemployment varies

Substantially over time and across countries

Which of the following agencies calculates the CPI

The Bureau of Labor Statistics

The inflation rate you are likely to hear on the nightly news is calculated from

The CPI

The discount rate is the interest rate that

The Fed charges banks for loans

The supply of money increases when

The Federal reserve purchases bonds

Which of the following combinations of places and periods is not a legitimate example of deflation or hyperinflation?

The USA during the 1990s

Gross private domestic investment ("Ig", alternatively known as "I" or "investment") excludes which of the following?

The amount of money invested in financial markets (bond market, stock market, etc.)

What basket of goods and services is used to construct the CPI?

The goods and services that are typically bought by consumers as determined by the government surveys

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

The price level is higher than expected making production more profitable

When computing the cost of the basket of goods and services purchased by a typical consumer, which of the following changes from year to year?

The price of the goods and services

Which of the following is Not Correct

The process by which unions and firms agree on the terms of employment is called a strike.

Most goods and services produced at home

and most goods and services produced illegally are excluded from GDP.

Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, has

increased measured GDP by the value added by the restaurant's preparation and serving of the meals.

Gross private domestic investment is the most unsteady component of GDP for many nations because Ig is...

largely influenced by interest rates

GDP excludes most items that are produced and sold illegally and most items that are produced and consumed at home because

measuring them is so difficult.

When economists talk about growth in the economy, they measure that growth as the

percentage change in real GDP from one period to another.

In a simple circular-flow diagram, firms

purchase resources from households.

Evidence from Research Studies by economists

shows that increased unemployment benefits decrease the job search efforts of the unemployed.