Straighterline Macro Quiz Questions
the foreign currency that one unit of the domestic currency will buy
A country's nominal exchange rate, e, is defined as the number of units of:
do not change if inflation rises temporarily
Anchored inflationary expectations are people's expectations of future inflation that:
decrease; increase; decrease
At each value of the domestic interest rate, increases in the riskiness of domestic assets ______ capital inflows, ______ capital outflows, and ______ net capital inflows.
greater wealth
At the household level, higher saving rates lead to ______ and greater economic security.
the quantity and quality of human capital, physical capital, technology, natural resources, entrepreneurship, and the legal and political environment.
Average labor productivity is determined by:
increased; decreased
The price of a gallon of gasoline at the pump increased by 10 percent at the same time that the inflation rate was 15 percent. The nominal price of gasoline _____, and the real price of gasoline _____.
credibility
The degree to which the public believes the central bank's promises to keep inflation low, even if doing so may impose short-run economic costs, is the _____ of monetary policy.
the marginal product of labor; the price of output produced
The demand for labor depends on ______ and _______.
output gap
The difference between the economy's potential output and its actual output relative to its potential output at a point in time is called the:
Scarcity Principle.
The downward slope of the production possibilities curve illustrates the
the difference between the benefit and the cost of taking an action.
The economic surplus of an action is
when the AD and AS curves intersect at potential output, Y*
The economy is in long-run equilibrium
the Federal Reserve
The equilibrium quantity of money in circulation is determined by:
marginal benefit
The extra benefit that results from carrying out one additional unit of an activity is the ______ of the activity.
marginal cost
The extra cost that results from carrying out one additional unit of an activity is the _____ of the activity.
shoe leather costs
The extra costs incurred to avoid holding cash when there is inflation are called the
self-correcting property
The fact that output gaps will not last indefinitely, but will be closed by rising or falling prices is the economy's
macroeconomics
The field of economics that would be most concerned with a recent fall in interest rates is
gross domestic product
The market value of final goods and services produced within a country during a period of time is called
reservation price
The minimum payment you are willing to accept to do a job is your:
ATM machines are introduced.
The money demand curve will shift to the left if:
bracket creep
The phenomenon known as ______ occurs when inflation causes people to pay an increasing percentage of their income in taxes even when their real incomes have not changed.
flexible price-setting
"Smart" vending machines, which adjust prices automatically according to changes in demand factors (like time of day or outside temperature), are examples of:
$10; $1
If the desired reserve/deposit ratio equals 0.10, then every dollar of currency in bank reserves supports ______ of deposits and the money supply, while every dollar of currency held by the public contributes ______ to the money supply.
depreciated
If the nominal exchange rate were to be expressed as the number of units of domestic currency per unit of foreign currency, and that rate increases, then the domestic currency has
sell; fall; rise
If the quantity supplied of money is less than the quantity demanded of money, people will ______ bonds which will cause bond prices to ______ and the nominal interest rate to ______ until the quantity demanded and quantity supplied of money are equal.
you give up less to accomplish that task than do others
If you have a comparative advantage in a particular task, then
a medium of exchange
If you use $1,000 to purchase silver bullion, which you plan to keep in a safe, you are using money as:
$10,000
In Macroland, 500,000 of the 1 million people in the country are employed. Average labor productivity in Macroland is $20,000 per worker. Real GDP per person in Macroland totals:
real interest rate; exchange rate
In an open economy with flexible exchange rates, monetary policy affects consumption and investment by changing the ______ and affects net exports by changing the _____.
Y/N×N/POP
In symbolic terms where Y equals real GDP, POP equals total population, and N equals the number of employed workers, Y/POP must equal:
the factories and machinery used to produce other goods and services
Physical capital is:
when the AD and AS curves intersect at a level of real GDP that is above or below Y*
The economy is in short-run equilibrium
hiring low-wage workers overseas reduces firms' costs
The fundamental reason firms outsource is that
consumption
The largest component of planned aggregate expenditure is:
1.45
The price of gold is 300 U.S. dollars per ounce in New York and 435 Canadian dollars per ounce in Toronto, Canada. If the law of one price holds for gold, the nominal exchange rate is ______ Canadian dollars per U.S. dollar.
many goods and services are not traded internationally and not all internationally-traded goods are standardized
The purchasing power parity theory is not a good explanation of nominal exchange rate determination in the short run because
An expectation that the product's price will rise in the future
What might cause a supply function to shift to the left today
money is created.
When a bank makes a loan by crediting the borrower's checking account balance with an amount equal to the loan:
firms sold more output than expected
When actual investment is less than planned investment:
reserves will decrease and lending will contract, causing a decrease in the money supply
When the Fed sells government securities, the banks'
make more loans
When the actual reserve/deposit ratio exceeds the desired reserve/deposit ratio banks
depreciated
When the nominal exchange changes from 120 yen per dollar to 110 yen per dollar, the dollar has
macroeconomics
Which branch of economics is most likely to study differences in countries' growth rates
Gail buys paper and crayons to donate to poor children in need of school supplies
Which of the following activities is most likely to be counted in GDP?
Financial investors become concerned about increasing riskiness of stocks.
Which of the following would be expected to increase the demand for money in the U.S.?
Amanda Pie, a full-time homemaker.
Who from among the following would be classified as out of the labor force?
peak
The beginning of a recession is called the:
value of final goods and services
The sum of the value added by all firms equals total
it has a relative abundance in the natural resources needed to produce cars
A country is most likely to have a comparative advantage in the production of cars if
increase transfer payments
A fiscal policy action to close a recessionary gap is to:
varies according to supply and demand for the currency in the foreign exchange market
A flexible exchange rate is an exchange rate whose value
production possibilities curve
A graph that illustrates the maximum amount of one good that can be produced for every possible level of production of the other good is called a(n):
structural
A long-term mismatch between the skills of some workers and the jobs available is a principal cause of ______ unemployment.
the average price of a given class of goods or services relative to the price of the same goods and services in a base year
A price index measures
will lead to excess supply in the market
A regulated maximum price that is above the equilibrium price
increases; expansionary
An economic expansion in the United States ______ the demand for exports from Mexico resulting in an increase in Mexican autonomous expenditures and a(n) ______ output gap in Mexico.
applies economic insights to understand everyday life
An economic naturalist is someone who
positive net capital outflows
An economy with a trade surplus must also have
government support for basic research.
An example of a government policy to enhance technological progress is:
flexible
An exchange rate that varies according to supply and demand for the currency in the foreign exchange market is called a ______ exchange rate.
appreciated
An increase in the nominal exchange rate, e, defined as the number of units of the foreign currency that one unit of the domestic currency will buy, indicates that the domestic currency has ______ relative to the foreign currency.
there is 100% reserve banking.
Bank depositors will not lose their deposits in a banking panic if:
microeconomics and macroeconomics
By convention, there are two major divisions of economics, called
more likely to adjust policy in response to output gaps
Central banks that practice flexible inflation targeting are ____ than central banks that practice strict inflation targeting.
classified as investment expenditures
Changes in business inventories are
not caused by changes in output or changes in the inflation rate
Changes in planned spending that shift the aggregate demand curve are those
adjust their prices only periodically
Contrary to behavior that would be required to eliminate output gaps, many firms in the economy:
lower; higher
Countries with high real GDP tend to have ______ infant mortality rates and ______ literacy rates than countries with low real GDP.
are not part of people's wealth
Credit card balances are not considered to be money primarily because they:
planned investment is greater than actual investment.
In the short run, with predetermined prices, when output is less than planned aggregate expenditure:
in industrial countries including the United States.
In the twentieth century, average real wages have risen substantially
providing information and risk-sharing services
Decentralized market-based financial systems improve the allocation of saving by:
increase in the amount of productive resources.
Economic growth can result from a(n
they have to make trade-offs
Economists recognize that because people have limited resources:
assures a higher level of output
Efficiency is an important goal in economics because it
demanders of U.S. dollars in
European households wishing to purchase shares of stock in an American company are ______ the foreign exchange market. Select one:
Other people are trying to choose the shortest line too
Every time you go to the grocery store, you try to wait in the shortest line. But the lines always seem to be roughly the same length. Why
lower marginal tax rates encourage more work hours
Evidence from work hours and marginal tax rates in different countries suggests that
indicate the Fed's plans for monetary policy.
Financial markets pay close attention to changes in the federal funds rate because these changes:
it is costly to do so.
Firms do not change prices frequently because:
increases
For a given domestic and foreign price level, an increase in the nominal exchange rate ______ the real exchange rate.
increases
For a given nominal exchange rate and domestic price level, a decrease in the foreign price level ______ the real exchange rate.
increases
For a given nominal interest rate, an unexpectedly low inflation rate ______ the real interest rate
the federal funds rate
For the past 40 years, the Federal Reserve has expressed policy in terms of a target value for:
it is national saving, not household saving, that allows an economy to accumulate new capital.
From a macroeconomic perspective, the problem of low household saving has probably been overstated because:
the value of leisure
GDP would be a better measure of economic well-being if it included
the reciprocal of the opportunity cost of the good measured on the horizontal axis
Generally, on a linear two-good production possibilities curve, the opportunity cost of the good measured on the vertical axis is
Maryann should specialize in the activity for which she has a comparative advantage
Ginger and Maryann are lost in the jungle, where the only things to eat are mangoes and fish. Ginger can gather more mangoes per hour than Maryann and can also catch more fish per hour than can Maryann. Therefore
the opportunity cost of the time and trouble of sending in the rebate form is less than $10
Ginger bought a phone that came with a $10 rebate. Ginger should fill out and mail in the rebate form if
large increases
Government policies that increase the long-term economic growth rate by a small amount result in ______ in average living standards.
improving technology
Government support of basic research by funding scientists through the National Science Foundation is an example of a government policy to promote economic growth by:
decrease investment.
Holding other factors constant, an increase in the tax rate on revenue generated by capital will:
decrease; decrease
Holding other factors constant, if food prices decline relative to the prices of other products, then the real wages of agricultural workers will ______ and employment of agricultural workers will _____.
from 2001 to 2006; from 2007 to 2009
House prices in the U.S. increased dramatically _____, and decreased dramatically ______.
is less expensive in the United States
If a certain automotive part can be purchased in Mexico for 60 pesos or in the United States for $6.25 and if the nominal exchange rate is 8 pesos per U.S. dollar, then the automotive part:
decrease the total value of goods and services produced in that nation
If a nation restricts imports, it will
people would still have to make trade-offs
If all the world's resources were to magically increase one hundredfold, then
public saving decreases
If government spending increases by $1 million while net taxes are unchanged, then:
does not change; increases
If household saving decreases by $4 million, business saving increases by $4 million, and the government budget deficit decreases by $4 million, then private saving ______ and public saving ______.
the two countries will disagree about the approach to monetary policy
If one euro nation is experiencing rapid growth and inflation while another is facing sluggish growth and recession
only set a money supply target that is consistent with the nominal interest rate target.
If the Federal Reserve sets a target nominal interest rate, it can:
conduct open-market sales (bonds)
If the Federal Reserve wants to decrease the money supply, it should:
trade deficit of $300 billion
If the United States has a $300 billion net capital inflow, then there must be a
potential output equals real GDP
If the actual rate of unemployment equals the natural rate of unemployment, then:
normal good
If the demand for steak increases as income increases, this means that steak is a(n)
buys; increases
In an open-market purchase the Federal Reserve ______ government bonds from the public and the supply of bank reserves ______.
disposable income.
In the Keynesian model, consumption depends on:
price changes
In the long run, output gaps are eliminated by:
decrease planned aggregate expenditure.
In the short run with predetermined prices, when output is less than planned aggregate expenditure, firms will:
total spending; potential output
In the short run, ______ determines output, and in the long run ______ determines output.
decrease; increase
Initially, workers in the shoe industry and the computer industry earn the same wage. Reductions in trade barriers give domestic consumers access to cheaper shoes produced abroad, so domestic shoe prices fall. At the same time, foreign consumers purchase more computers, raising the relative price of computers. As a result of these changes, wages in the shoe industry ______ and wages in the computer industry ______.
purchases or sales of real and financial assets across international borders
International capital flows are
reservation price
Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 can also be called her
decreases; decreases
Lower real income ______ the demand for money and a lower price level ______ the demand for money.
keeping wages above the market-clearing level.
Minimum wage laws contribute to structural unemployment by:
households, businesses, and governments
National saving is done by:
exports minus imports
Net exports equal
velocity.
Nominal GDP divided by the money stock equals:
if insured intermediaries make many bad loans, the taxpayers may be responsible for covering the losses
One of the serious drawbacks of the deposit insurance system in the United States is that:
downward; more people find that the price is less than their reservation price
One reason for the ________ slope of the demand curve is that as prices fall ________.
China
Over the period from 1950 to 2010, which country experienced the fastest average annual growth rate of real GDP per person?
discouraged
People who say that they would like to have a job, but have not made an effort to find a job in the past four weeks, are called ______ workers.
C + Ip + G + NX
Planned aggregate expenditure (PAE) equals:
more of one good could be produced without producing less of the other
Points that lie below the production possibilities curve are inefficient because
attainable but inefficient
Points that lie beneath the production possibilities curve are
life-cycle
Saving to meet long-term objectives-such as retirement, college attendance, or to purchase a home,-is called ______ saving.
aggregate supply; aggregate demand
Shocks to _____ require the Fed to choose between inflation and output stability, while shocks to _____ do not require the Fed to choose between inflation and output stability
do not; do
Shocks to aggregate demand ______ require the Fed to choose between inflation and output stability; shocks to aggregate supply ______ require the Fed to choose between inflation and output stability.
strong; large
Someone who wants both the U.S. dollar to be ______ compared to other currencies and the value of U.S. net exports to be ______ wants two things that may be contradictory.
expansionary; higher; potential
Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ______gap in the short run and ____inflation and ____output in the long run.
overstate; quality adjustment
Suppose manufacturers introduce a new model car to replace a car currently included in the CPI basket. The price of the new car is 10 percent higher than the discontinued model, but the new car has additional safety features and amenities. In this situation the CPI will tend to ______ inflation as a result of ______ bias.
overstate; substitution
Suppose that the price of chicken rises sharply compared to the price of turkey. In response, consumers buy more turkey and less chicken than they did in the CPI base year. In this situation the CPI will tend to ______ inflation as a result of ______ bias.
the quantity supplied of doughnuts to decrease
Suppose that the price of doughnuts decreases and that doughnut-holes are a by-product of producing doughnuts. One would expect
the demand for sport utility vehicles to decrease
Suppose the price of gasoline increases and that sport utility vehicles get poor gas mileage compared to other available cars. One would expect
$10
Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade. Each company's stock currently sells for $100 per share. If the temperature next year is lower than average, the stock price for ABC will increase by $20, and the stock price for XYZ will not change. If the temperature next year is higher than average, the stock price for XYZ will increase by $20, and the stock price for ABC will not change. There is a 50% chance that it will be colder than average next year, and a 25% chance that it will be warmer than average. If you purchase two shares of XYZ stock and no shares of ABC stock, your expected gain will be ______.
bequest
Ted and Alice want to make sure that their children will inherit lots of money when they die, so that their children do not have to struggle the way they themselves did. Saving more in response to this is a______ reason for saving.
slopes downward; the inflation rate
The AD curve ______ because, holding all else constant, an increase in ______ causes C, IP and NX to fall
some firms will increase their prices and their output in response to an increase in aggregate demand
The AS curve slopes upward because
its extra benefit is greater than or equal to its extra cost.
The Cost-Benefit Principle indicates that an action should be taken if:
nominal; high
The Fisher effect is the tendency for ______ interest rates to be ______ when inflation is high.
inflation rate
The aggregate demand curve shows the relationship between planned spending and the
businesses and households; downward
The bursting of the housing bubble in 2006 caused ______ to cut back on their spending, thereby shifting the PAE line _____.
portfolio allocation
The decision about the forms in which to hold one's wealth is called the ______ decision.
the changing age structure of the population and more efficient labor markets
The decline in the natural rate of unemployment between the 1970s and the 2000s might be the result of:
increased the level of uncertainty about the future.
The recession of 2007-2009 happened in part because, after the housing bubble burst in 2006, the ensuing financial crisis:
Federal Open Market Committee.
The seven Fed governors, the president of the Federal Reserve Bank of New York, and four of the presidents of the other regional Federal Reserve Banks constitute the:
Board of Governors
The seven leaders of the Federal Reserve System headquartered in Washington, D.C. constitute the:
central bank independence
The situation in which central bankers are insulated from short-term political considerations and are allowed to take a long-term view of the economy is called:
negative; producing more of one good requires producing less of the other
The slope of a production possibilities curve is ______ because ______
equals the marginal propensity to consume
The slope of the consumption function:
inflation inertia
The tendency for inflation to change relatively slowly from year to year in industrial countries is called
the inside lag of macroeconomic policy.
The time between when Congress decides to cut taxes to stimulate aggregate demand and when the tax cuts are implemented is an example of
the inside lag of macroeconomic policy.
The time between when Federal Reserve policymakers decide to close an output gap and when they act to change the fed funds rate is an example of:
raises; decreases; decreases
To close an expansionary gap, the Fed ______ interest rates which ______ planned aggregate spending and ______ short-run equilibrium output.
rises; falls
Typically, the unemployment rate ______ during a recession and ______ during an expansion.
leisure
Using real GDP to compare the level of economic well-being in two countries may be misleading because the value of ______ contributes to economic well-being, but is excluded from real GDP.
interest paid on Government debt
What is NOT included in aggregate expenditure
Luddite
someone who opposes the introduction of new technologies
