Quiz 3 Macro

The balanced budget multiplier is

1

The formula for the money multiplier is

1 / Required reserve ratio

In the figure above, when real GDP is $4 trillion, unplanned investment is

$1 trillion

Suppose that Tiger Woods buys a golf ball in England for $1 and the marginal propensity to consume in England is 0.75. What is the total increase in England's real GDP resulting from Mr. Wood's purchase?

$4

Julia would spend $30 per week even if she made no income. Her weekly income is $1,000 and her marginal propensity to consume is 0.5. How much does Julia save per week?

$470

What will cause the aggregate demand curve to shift to the left?

Expectations of surpluses of goods in the future

According to the theory of rational expectations, an increase in government spending to increase AD as illustrated in the figure above will be met with which of the following?

A decrease in AS

Which of the following will shift the demand curve for the Mexican peso to the left?

A decrease in the international demand for Mexican-made textiles

What will increase the money supply

A decrease in the required reserve ratio

Which of the following creates the tradeoff depicted by the Phillips curve?

A rightward shift in the aggregate demand curve

Which of the following is a direct, accurate link within the circular flow?

Households expenditures result in revenues for firms via the product markets

Having a fractional reserve banking system means that

a bank cannot lend out all of its deposits

When full-employment output

a recessionary gap exists

The upward sloping section of the aggregate supply curve can be explained by

accurate information within firms about how their prices compare to the overall price level

In order to go from national income to GDP, one must

add depreciation expenses add indirect taxes subtract subsidies add the net income of foreigners

The aggregate supply curve will shift to the right in response to

an increase in investment in capital

The practice of buying at a low price and selling at a high price for a certain profit is called

arbitrage

Which of the following must exist to allow for mutual benefit from specialization and trade between two countries?

Comparative advantage in the production of a good or service

Which of the following is illustrated in the figure above?

Demand-pull inflation

On a bank's balance sheet, what is considered a liability?

Deposits

What is an example of fiat money?

Dollar bills

Which of the following is the most likely to be a deterrent to growth in the economy?

Increases in the interest rate

A difference between M1 and M2 is that

M2 includes savings deposits

Kevin wants shoes and grows turnips. Lisa wants turnips and makes sheet metal. Bob wants sheet metal and makes shoes. Which function of money will cater most directly to the situation at hand?

Medium of exchange

In a given period, the average price level in the country of Sherwood tripled, and Robin's income increased from $30,000 to $60,000. What happened to Robin's nominal and real income?

Nominal: increased Real: decreased

The figure above illustrates a

Phillips Curve

A fixed output level in the long run at full-employment output corresponds with which of the following shapes of the long-run Phillips curve?

Vertical

A professional singer who loses his voice may have a hard time finding employment because he or she has no marketable skills. This is an example of which of the following?

Structural unemployment

Which of the following results from stagflation?

The Phillips curve shifts to the right

If technology makes production less expensive and at the same time exports decrease, which of the following will result with certainty?

The price level will decrease

Example of what is included in GDP?

The value of blue jeans made in the U.S. and sold in Japan. The value of wine made in the U.S. by Canadian citizens.

When the value of the U.S. dollar appreciates relative to other currencies, which of the Following is the most likely to occur?

U.S. residents will take more vacations in foreign countries.

If oil supplies are fixed, which of the following is the least likely to happen?

We will use up all of the oil

Assuming there is no statistical discrepancy, a trade surplus must be offset elsewhere in the

current-account or capital account only

A decrease in real investment stemming from higher interest rates due to government purchases is most commonly called

crowding out

In the aggregate expenditure / Keynesian Cross model, saying that some components are autonomous means that they

do not depend on income

Expansionary fiscal policy would best be prescribed to

eliminate a recessionary gap

In order to reduce or eliminate crowding out, expansionary fiscal policy can be accompanies by

expansionary monetary policy

According to Keynesian economists,

fiscal policy is more effective than monetary policy

A budget deficit exists when

government spending exceeds tax collections for a given period

The Keynesian AS curve is

horizontal at low levels of output

Economics is most accurately described as the study of

how to make choices given limited resources with unlimited desires

Inflation in excess of 50 percent per year is called

hyperinflation

Classical economists believe

in the quantity theory of money- that both the velocity and the quantity of goods and services sold per period are fairly stable

The GDP Deflator differs from the CPI in that the GDP Deflator

incorporates current year quantities in its calculations

Among those hurt by inflation are

individuals on fixed incomes those with savings earning fixed interest rates restaurant owners

One of the primary issues covered within Macroeconomics is?

inflation

The aggregate demand curve is

not found by adding product demand curves horizontally or vertically

Every choice results in a foregone best alternative, which economist call the

opportunity cost

According to Thomas Malthus and his followers,

population will grow geometrically and food production will grow more slowly

According to Say's Law,

supply creates its own demand

Droughts, technical glitches, and restrictions on the use of resources can all result in

supply shocks

Marginal propensity to consume is

the change in consumption divided by the change in income

The aggregate demand curve has a negative slope in part because when the price level increases

the interest rate increases

It is a monetarist point of view that

the money supply should be increased steadily

The real interest rate is

the nominal interest rate minus anticipated inflation

If prices are expected to rise more slowly in the future,

these expectations will become reality

The long-run classical aggregate supply curve is

vertical at full-employment output

Classical economists generally believe that

wages fluctuate quickly input and output prices will stay in line with each other the government should not worry about maintaining aggregate demand at an adequate level

The primary functions of an economic system are to answer to questions

what, how, and for whom to produce