1015 final
If a bank has a required reserve ratio of 15% and has required reserves of $255,000, how much does the bank hold in deposits?
$1,700,000
Restaurant Supply, Inc. sells cheese to Windy City Pizza for $1,000. Windy City Pizza uses the cheese to make pizzas, selling them to consumers for a total of $10,000. These transactions contribute ________ to the gross domestic product (GDP).
$10,000
Your friend Josephine is starting a new photography business that specializes in photographs of Central Park in New York City. Because her business is new and risky, she is unable to obtain a loan from the local bank. On June 21, 2019, you agree to pay a price of $9,000 for a bond from Josephine. You will receive $10,000 in return on June 21, 2020. The par value of the bond mentioned in the scenario is equal to ________.
$10,000
A bank is holding $1,000,000 in excess reserves. If banks face a 10% required reserve ratio, by how much will the money supply increase when this bank's excess reserves are loaned out?
$10,000,000
An economy's potential output is equal to $2.40 trillion, and its current output is equal to $2.42 trillion. If the marginal propensity to consume has a value of 0.4, then the government should decrease spending by ________ billion to return the economy to the long-run equilibrium.
$12
Using the table, what is the total federal income tax bill for someone who makes $77,000 per year?
$12,798.5
If your marginal propensity to consume is 0.4 and you get an additional $300 in income, you would spend ________ on consumption.
$120
According to the graph, the amount of private savings after government borrowing shifts the demand for loanable funds is
$150 billion.
Company X sells leather to company Y for $60,000. Company Y uses the leather to make shoes, selling them to consumers for $180,000. The total contribution to gross domestic product (GDP) is
$180,000.
You are offered two jobs, one in Chicago paying $67,000 and one in Philadelphia paying $79,000. The price index in Chicago is 110.8, and in Philadelphia it is 126.5. Taking into cost of living differences, you conclude that Philadelphia is paying more. If you could negotiate, how much more on top the current offer would you ask to Chicago employer so they are just matching Philadelphia offer?
$2,195.3 more
What was the real gross domestic product (GDP) in 2018?
$2,600
Using the table, what is the total federal income tax bill for someone who makes $110,000 per year?
$20,574.5
Imagine that Stella deposits $25,000 in currency (which she had been storing in her closet) into her checking account at the bank. Assume that this institution and others like it have a required reserve ratio of 25%. Immediately as a result of this deposit, by how much will the bank's reserves increase?
$25,000
You buy a piece of land for $140,000 and anticipate the market value of the land will increase at a rate of 10% a year. Using the rule of 70, how much will the land be worth in 7 years?
$280,000
Donna Newton made $0.30 per hour in 1946 at a small restaurant in Clearfield, Pennsylvania. If the consumer price index (CPI) was 18.3 in 1946 and 202.4 in 2011, then Donna's wage in 2011 dollars would be
$3.32.
If the theory of purchasing power parity holds, then how much does a shirt made in Singapore cost in the United States if the same shirt sells for 50 Singapore dollars in Singapore and the exchange rate is $0.72 per Singapore dollar?
$36
If your marginal propensity to consume is 0.6 and you get an additional $600 in income, you would spend ________ on consumption.
$360
Suppose the price of a movie ticket was $0.25 in 1940. The consumer price index (CPI) in 1940 was 14, and the CPI today is 260. The price of the 1940 movie ticket in today's dollars is ________.
$4.64
If banks have a required reserve ratio of 25%, and one bank is currently holding $10,000 in excess reserves, what would be the maximum possible change to the money supply if the bank loans out all of the excess reserves?
$40,000
Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the following questions. Assume that the base year is 2012. Good2012 Price2012 Quantity2013 Price2013 QuantityA$2.00 500$2.50600B$4.001,000$5.00900C$2.00 200$1.00300 What was the real gross domestic product (GDP) in 2013?
$5,400
If the face value of a bond is $6,000 and its interest rate 6%, then its dollar price is equal to ________.
$5,660.4
If Bank of Mateer has a required reserve ratio of 40% and an individual makes a $100,000 in deposit, how much of this deposit can the bank turn around and lend out to borrowers?
$60,000
What is the value of real gross domestic product (GDP) in 2016?
$675.0 million
Refer to the following table to answer the next three questions. Currency$31,500,000Checkable deposits$18,000,000Money market mutual funds$9,000,000Small time deposits$6,000,000Savings deposits$7,000,000Traveler's checks$500,000 What is the value of M2?
$72,000,000
If the interest rate on a 1-year bond is 15% and its face value is $10,000.00, the dollar price of the bond is _________.
$8,695.65
Your friend Josephine is starting a new photography business that specializes in photographs of Central Park in New York City. Because her business is new and risky, she is unable to obtain a loan from the local bank. On June 21, 2019, you agree to pay a price of $9,000 for a bond from Josephine. You will receive $10,000 in return on June 21, 2020. The dollar price of the bond mentioned in the scenario is equal to ________.
$9,000
If your income increases by $1,200 and you consume only $360 of it, your marginal propensity to consume would be equal to ________.
0.30
If the spending multiplier is 1.5, what is the marginal propensity to consume in the economy?
0.33
If the spending multiplier is 2.5, what is the marginal propensity to consume in the economy?
0.6
From 2017 to 2018, a country's nominal gross domestic product (GDP) grew by 6.1%. Since prices increased by 2% and per capita real GDP grew by 2.7%, we know the population grew by _________.
1.4%
The consumer price index (CPI) in the base year will always have the value of ________.
100
Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been selected as the base year. In 2002, the basket's cost was $600; in 2004, the basket's cost was $650; and in 2006, the basket's cost was $700. The value of the CPI in 2004 was (rounded to one decimal place)
108.3
Your friend Josephine is starting a new photography business that specializes in photographs of Central Park in New York City. Because her business is new and risky, she is unable to obtain a loan from the local bank. On June 21, 2019, you agree to pay a price of $9,000 for a bond from Josephine. You will receive $10,000 in return on June 21, 2020. What is the interest rate paid on the bond described in the scenario?
11.11%
Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the following questions. Assume that the base year is 2012. Good2012 Price2012 Quantity2013 Price2013 QuantityA$2.00 500$2.50600B$4.001,000$5.00900C$2.00 200$1.00300 What was the gross domestic product (GDP) deflator in 2013?
116.67
There are _____ voting members on the FOMC.
12
Suppose that the Third Bank of Peoria has excess reserves of $400,000 and deposits of $50,000,000. If the bank has a reserve requirement of 25%, what is its total amount of reserves?
12,900,000
Using the table below, what was CPI of 2016, assuming 2011 is the base year? GoodQuantity2011Price2016PriceCokes10 $0.50 $0.60Hamburgers20$2.00$2.50CDs1$20.00$25.00
124.6
Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2016 has been selected as the base year. In 2016, the basket's cost was $1,000; in 2017, the basket's cost was $1,100; and in 2018, the basket's cost was $1,250. The value of the CPI in 2018 was ________.
125
What was the gross domestic product (GDP) deflator in 2018?
126.9
If your income increases at a rate of 5% per year, about how long will it take to double your income?
14 years
Trevor's starting salary at his new job is $40,000. His company gives a performance raise of 5% each year. If Trevor continues in the same position and always receives the performance raise, in how many years will he double his salary?
14 years
How many quizzes are offered in this course?
15
Suppose you are offered a job with Amazon upon graduation. Your starting salary will be $70,000, which will put you in the 22% federal income tax bracket. The total amount of income taxes you pay is $11,285.50. Your average tax rate is approximately ________.
16.1%
Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the following questions. Assume that the base year is 2012. Good2012 Price2012 Quantity2013 Price2013 QuantityA$2.00 500$2.50600B$4.001,000$5.00900C$2.00 200$1.00300 What was the rate of inflation between the two years?
16.67 percent
Imagine that Stella deposits $25,000 in currency (which she had been storing in her closet) into her checking account at the bank. Assume that this institution and others like it have a required reserve ratio of 25%. How much of this deposit can the bank turn around and lend out to borrowers?
18,750
Using the table, what is the average tax rate for someone who makes $110,000 per year?
18.7%
The Federal Reserve System was created in ________.
1913
From 2017 to 2018, nominal gross domestic product (GDP) in a country grew by 4.6%. Since the population grew by 1.3% and per capita real GDP grew by 1.2%, we know prices increased by _________.
2.1%
The Great Recession began in
2007
The Great Recession ended in
2009
If the unemployment rate is 5.8 percent and the number of unemployed persons is 15 million, the labor force is approximately
259 million.
Karenna has worked for the same company her entire life. Her current income is $70,000 per year. When she was hired, she made $35,000 per year. The company has given Karenna a 2% raise each year. How long has Karenna been with the company?
35 years
How many lowest quiz scores can a student drop?
4
If nominal gross domestic product (GDP) changed by 6 percent and the price level changed by 2 percent, then real GDP changed by
4 percent.
Weekly discussion board postings are worth____points.
5
If the dollar price of a bond is $10,000 and the face value of the bond is 10,500, the interest rate paid by the bond is equal to ________.
5%
Consider a country with a nominal gross domestic product (GDP) of $2.0 trillion in 2015 and $2.2 trillion in 2019. In the same period, the population decreased by 1% and price levels increased by 5%. What is the economic growth of this country?
6%
Group# in MillionsRelevant population243Labor force154Not in labor force 89Employed142Unemployed 12 According to the table, the labor force participation rate in this economy is equal to
63.4 percent.
According to the above table, the labor force participation rate in this economy is equal to
64.4%.
Group# in MillionsRelevant population243Labor force154Not in labor force 89Employed142Unemployed 12 According to the table, the unemployment rate in this economy is equal to
7.8 percent.
How many points is each midterm worth?
80
How many group homework assignments are offered in this course?
9
According to the above table, the unemployment rate in this economy is equal to
9.4%.
Which two countries have the same average living standard?
A and E
Which combination of events could have caused the equilibrium interest rate to rise and the equilibrium quantity of loanable funds (both borrowed and lent) to fall?
A baby boom begins, and people have higher time preferences.
________ would cause a leftward shift of the aggregate demand curve.
A decrease in real wealth
Which of the following best describes a mortgage-backed security?
A mortgage-backed security is a combination, or bundle, of mortgages. The new security is then available for resale in secondary markets.
The formula for the simple money multiplier, mm = 1/rr, assumes that all currency is deposited into banks. What else does the formula assume?
Banks hold no excess reserves.
An appreciation of the ________ is shown in ________.
British pound; both Graphs A and B
Which country has the lowest average living standard?
C
Which of these two countries are the major importers of U.S. goods?
Canada and Mexico
__________ economists were laissez-faire in their policy recommendations, having faith that the economy would self-correct without government intervention.
Classical
According to the WSJ article, GDP contracted at historically high level in the second quarter of 2020 due to the global pandemic. Which of the following GDP spending categories experienced the largest decline?
Consumption
In the equation M × V = P × Y, assuming velocity does not change, what must be the change in price level if money supply grows by 2% and real GDP grows by 4%?
Decrease by 2%
According to the WSJ article, a booming economy pushed the unemployment level to a record low in 2019. Despite this, some economists still doubted the the US economy reached a full employment level. What of the following explains a reason for such doubt?
Existence of many discouraged and part-time workers gave a false illusion of full employment.
________ policy is when a central bank acts to increase the money supply in an effort to stimulate the economy.
Expansionary monetary
Discussion board postings are always due on _______ 9:00 pm.
Friday
In the equation M × V = P × Y, the variable Y stands for
In the equation M × V = P × Y, the variable Y stands for
Consider a nation in which the price index last year was 130 and this year it is 150. Which statement is correct?
Inflation was 15 percent this year.
Which of the following is true about the interest rate?
It is both a return to savers and a cost to borrowers.
Consider the equation %ΔM + %ΔV ≈ %ΔP + %ΔY. If the velocity of money does not change (%ΔV = 0), and the change in real gross domestic product (GDP) exactly keeps pace with the change in the money supply (%ΔM = %ΔY), what will happen to the price level (P)?
It will stay the same, %ΔP = 0
Which of the following people would be officially considered unemployed?
Jenna, who just graduated from college and is searching for a job that fits her graphic-design skills
The current chair of the board of governors of the Federal Reserve is:
Jerome "Jay" Powell.
______________ economics emphasizes the inherent instability in the macroeconomy and the resulting need for government intervention to move back to full employment.
Keynesian
Why do Social Security and Medicare pose problems for the federal government budget?
Life expectancy of retirees is increasing.
According to the WSJ article, American households, despite their reputation as being not very frugal, have been saving at higher rates over the past decade. What is one reason for this trend?
Lingering effects of 2007-2009 recession.
A while ago, Zandra set aside some cash to give her father as a birthday gift. What will happen when she gives him the cash and he deposits it into his savings account?
M1 will decrease; M2 will be unchanged.
If Caitlin were to withdraw $100 from her savings deposit and give cash as a gift to her nephew, which of the following changes would take place?
M1 would increase; M2 would remain unchanged.
Which combination of events could have caused the equilibrium interest rate to fall unambiguously and the equilibrium quantity of loanable funds (both borrowed and lent) to rise unambiguously?
More individuals are middle-aged, and wealth increases.
Which of the following is a secondary stock market?
New York Stock Exchange
Nominal gross domestic product (GDP) increased from $15.44 trillion to $15.75 trillion, and the price level increased from 116.5 to 122.3. Which of the following is true?
Output grew slower than the price level.
Which of the following explains why resource prices are often the slowest prices to adjust?
Resource prices are often set by lengthy contracts.
What occurs in the loanable funds market?
Savers (typically households and individuals) supply funds to borrowers (typically firms).
How is savings represented on the loanable funds graphic?
Savings is represented by the supply curve.
If life expectancy rises because people begin to eat food containing fewer preservatives and chemicals, we would expect
Supply of funds to increase
Which of the following is a disadvantage of the Dow Jones Industrial Average (the Dow)?
The Dow tracks only the price of the stock, not the overall value of a company.
What is one difference between the Dow Jones Industrial Average (the Dow) and the Standard & Poor's (S&P) 500 index?
The Dow tracks the prices of the stocks, whereas the S&P 500 weighs the stock prices by the market value of the company.
Assume you put money into an asset that pays you 10% interest and assume that inflation is 4%. Which statement is correct?
The real rate of interest is 6%.
Quizzes are always due on ________ 9:00 pm.
Thursdays
Which one of these statements is an accurate definition of trade balance?
Trade balance is the difference between a nation's total exports and total imports.
Which of the following describes a Treasury security?
Treasury securities are only sold to individuals in primary markets.
During the Great Recession, the U.S. aggregate demand curve shifted to the left, in part, because
U.S. housing prices fell.
According to the WSJ article, before Snap Inc. (owner of Snapchat) went public in 2017, it was owned by a handful of investors. In addition to its founders, what type of financial institutions were its largest owners pre-IPO?
Venture capital firms.
Which of the following international organizations, founded in 1995, facilitates trade disputes between nations?
World Trade Organization (WTO)
Which of the following would be entered into the U.S. capital account?
a Mexican government bond purchased by a U.S. citizen
Expansionary monetary policy occurs when
a central bank acts to increase the money supply in an effort to stimulate the economy.
Which of the following can cause a shift in the long-run aggregate supply (LRAS)?
a change in labor productivity
Which of the following would have caused aggregate demand to decrease in the graph, such as occurred during the Great Recession?
a decrease in expected income
During the Great Recession, consumer sentiment in the United States declined, leading to a decrease in consumer spending. Which of the following factors caused this decrease in consumer sentiment?
a decrease in household wealth
Keynesian economists believe savings is _________ and stresses the importance of aggregate _________.
a drain on demand; demand
China has large reserves of rare minerals needed in high-tech manufacturing. These mineral deposits are _________ for China.
a natural resource
Expansionary monetary policy causes ________ the aggregate demand curve.
a rightward shift of
Assuming the graph represents the market for loanable funds, which of the following would represent the government borrowing less?
a shift from Line 3 to Line 2
Assuming the graph represents the market for loanable funds, which of the following would represent a decrease in wealth of foreign entities?
a shift from Line 4 to Line 1
At a ranch, an example of physical capital is
a truck that was just repaired.
When a village records the value of each family's dwelling in terms of an equivalent number of oyster pearls, pearls are serving as
a unit of account.
If the economy is expanding beyond its long-run capabilities, we know that
actual unemployment is less than its natural rate.
The wealth effect, interest rate effect, and international trade effect all explain why the
aggregate demand (AD) curve has a negative slope.
The goal of a contractionary fiscal policy is to shift the ________ curve to the ________.
aggregate demand; left
Which of the following is NOT a characteristic of fiat money?
always backed by something of high intrinsic value
Due to ________, government outlays have risen quickly since 2000.
an aging population
The Bill of Rights guarantees certain basic rights for citizens. This is an example of
an institution.
Transfer payments refer to funds that are transferred from one group in society to another group,
and these payments represent a growing share of the U.S. federal outlays.
Between July 1, 2019, and August 1, 2019, the U.S. dollar ________ against the British pound, and the U.S. dollar ________ against the euro.
appreciated; appreciated
Supply-side fiscal policy initiatives take a long time to shift the aggregate supply curve to the right. As a result, supply-side proposals
are generally emphasized as long-run solutions to growth problems.
Foreign entities
are generally lenders in the domestic (U.S.) loanable funds.
The Laffer curve is intended to show that
as taxes rates rise, tax revenue initially rises but eventually falls.
Typically, the average tax rate for a person is ________ his or her marginal tax rate, because the marginal tax rate applies to ________.
below; the last dollars taxed but not to all income
A security that represents a debt to be paid is known as a(n)
bond.
Marvin is a cheesemaker. He wants to increase his monthly production of cheese, so he knows he needs to acquire more resources. Which of the following actions would represent an increase in the physical capital resource at Marvin's cheesemaking plant?
buying machines to handle certain tasks
Macroeconomics includes the study of
changes in national income
Microeconomics includes the study of
changes in the price of commercial real estate.
To increase the money supply, the Federal Reserve could
conduct an open market purchase of U.S. Treasury securities
Classical economists believe savings is _________ and stresses the importance of aggregate _________.
crucial for growth; supply
What is the key identity of the balance of payments?
current account balance + capital account balance = 0
An economic downturn can lead mainly to which type of unemployment?
cyclical
Dido loses her job because sales are slow at her firm, due to a general slowdown in the entire economy. This is an example of ________ unemployment.
cyclical
When participants in the economy are able to adjust their expectations regarding inflation, this
dampens the effects of monetary policy.
If government revenues in 2018 were $3.1 trillion and government outlays, including interest on debt, were $2.8 trillion, the federal
debt decreased $300 billion.
If government revenues in 2019 were $2.7 trillion and government outlays, including interest on debt, were $3.1 trillion, the federal
debt increased $400 billion.
The sale of existing U.S. Treasury securities by the Federal Reserve will
decrease the money supply.
Suppose a lot of firms decrease investment spending by deciding to extend their use of old buildings and equipment. In the short run, aggregate demand (AD) will ________ and output will ________.
decrease; decrease
An increase in the value of the dollar will ________ exports and ________ imports.
decrease; increase
In the domestic market, following the imposition of an import quota, imports ________, domestic production ________, and prices ________.
decrease; increases; increase
According to the graph, private investment ________ as a result of crowding-out.
decreased by $25 billion
During the Great Recession, aggregate demand ________ and long-run aggregate supply ________.
decreased; decreased
Which federal budget category's portion of total government outlays has decreased since 1960?
defense
All else being equal, when foreign incomes rise, U.S. aggregate
demand will shift to the right.
Between January 1, 2019, and March 1, 2019, the U.S. dollar ________ against the British pound, and the U.S. dollar ________ against the euro.
depreciated; appreciated
Currency ________ occurs when a currency decreases in value relative to other currencies.
depreciation
Mandatory outlays are different than discretionary outlays because
discretionary outlays can be changed during the annual budget process, whereas mandatory outlays cannot.
The root cause of cyclical unemployment is
downturns in the business cycle.
When actual unemployment is greater than its natural rate, the
economy is in a recession.
The contraction phase of a business cycle is best described as the time
elapsed from a peak to a trough.
Between 2006 and 2010, per capita real gross domestic product (GDP) in China grew at an average rate of 10.62% per year. In contrast, its economy only grew by an average rate of 0.25% from 1961 to 1965. Which of the following factors would have contributed most to this rapid escalation in growth?
establishment of private property rights
Based on the graph, an increase in ________ could cause the economy to move from Point A to Point B.
exports
During healthy economic periods, cyclical unemployment
falls toward zero.
Institutions that help to channel funds from savers to borrowers are known as
financial intermediaries.
Keynesian economics
focuses on spending, or aggregate demand, as the fundamental factor in the economy.
Which of the following two types of unemployment occur even when the economy is healthy and growing?
frictional and structural
Maria is a high school math teacher. When her husband is transferred to another state with his company, she quits her job so she can move with him and will look for another job at the new location. She can be classified as ________ unemployed.
frictionally
Some individuals are unemployed because it takes time for them to find jobs that fit their skill sets. These individuals would be considered to be
frictionally unemployed.
In which direction does an increase of inflation redistribute wealth?
from lenders to borrowers
Contractionary fiscal policy occurs when the
government decreases spending or increases taxes to slow economic expansion.
The state of Florida spends $3 million to repave highways. This is included in the ________ category of gross domestic product (GDP).
government purchases
The crowding-out effect occurs when
government spending becomes a substitute for private spending.
Suppose you have the following information about the economy, where all figures are in millions of dollars: Consumption spending = $2,700 Investment spending = $500 Government spending = $600 Net exports = $200 Full employment output = $3,900 Because short-run output is ________ full-employment output, in the long run, we would expect the price level to ________.
greater than; rise
Hanif always needs to have the latest technology before anyone else. We can say that, for electronics, Hanif
has a high time preference.
A country with a small per capita gross domestic product (GDP)
has low living standards
A progressive income tax system is one in which
high-income households pay a larger percentage of earnings than low-income households.
All else being equal, the smaller the default risk, the _________ of the bond.
higher the price
Which of the following would be classified as an increase in human capital?
hiring a full-time art director
According to the textbook, what entities are the main suppliers of funds to the loanable funds market?
households and foreign entities
One shortcoming of the official unemployment rate is that it
includes only workers who have no jobs and are actively seeking work.
Budget deficits tend to
increase during wars.
To decrease the money supply, the Federal Reserve could
increase the discount rate.
If U.S. produced goods become more expensive than foreign-produced goods, imports will ________. At the same time, exports will ________.
increase; decrease
Mexico and the United States are trading partners. If wealth increases in Mexico, then, in the short-run, equilibrium output in the United States will ________ and the unemployment rate will ________.
increase; decrease
If interest rates rise in the United States relative to the rest of the world, the demand for U.S. dollars will ________ because there is greater demand for assets with ________ returns.
increase; higher
CNN.com runs a story reporting that the Consumer Confidence Index has risen. Having taken an economics class, you predict that spending in the economy will ________. At the same time, aggregate demand will ________.
increase; increase
Suppose firms increase investment spending to replace worn-out equipment. In the short run, aggregate demand will ________ and output will ________.
increase; increase
Tuition at a small university cost $5,000 per semester in 2014 and $5,500 in 2017. If the consumer price index (CPI) was 236.7 in 2014 and 245.1 in 2017, then we could say tuition has
increased more rapidly than inflation.
If nominal income increases, then real income
increases if the price index falls.
Talia owns a motorcycle dealership. She wants to increase the number of motorbikes she sells each month, so she knows she needs to acquire more resources. Which of the following actions would represent an increase in the human capital resource at Talia's dealership?
increasing the number of salespeople
When savers deposit funds into banks which then loan these funds to borrowers, it is called _________ finance.
indirect
The largest source of tax revenue for the government is ________ taxes.
individual income
When George buys a new computer for his business, it is included in gross domestic product (GDP) as ________, and when he buys a new computer for use at home, it counts as ________.
investment; consumption
In the long run, the output of an economy
is equal to full-employment output.
An impact lag happens because
it takes time for the effects of monetary and fiscal policy to materialize.
A recognition lag happens because
it takes time to collect data on the behavior of the economy.
If you have a savings account at a bank, you participate in the loanable funds market as a
lender.
A lower bond rating directly translates into _________ prices and _________ rates on the firm's bonds.
lower; higher interest
All else being equal, the _________ default risk; the _________ of the bond.
lower; higher the dollar price
Money eliminated the need for the double coincidence of wants through its role as a
medium of exchange.
As a business owner, you find that your resource prices are increasing often. Because these costs are rising, you find it necessary to change your prices frequently. This best describes
menu costs.
If your nominal wage rises and you think that it automatically means your real wage has risen, then you are experiencing
money illusion.
The Bureau of Labor Statistics releases consumer price index (CPI) data
monthly.
If Canada's central bank prints ________ Canadian dollars, the Canadian dollar will depreciate, and the aggregate demand curve will ________.
more; shift from AD2 to AD3
Which of the following are the three major categories of resources?
natural resources, physical capital, human capital
An example of an intermediate good would be
oil purchased by a restaurant to be used for frying.
Which point(s) would see tax revenues increase if the tax rate decreased?
only C
The Federal Reserve generally uses ________ to implement monetary policy.
open market operations
One explanation as to why monetary policy did not have the intended effects on the economy during the Great Recession is that
part of the recession was caused by a leftward shift in aggregate supply.
Which of the following is considered mandatory government spending?
payments to Social Security recipients
Which of the following is included in the government purchases category of gross domestic product (GDP)?
payments to people in the military
Economists refer to full-employment output as
potential GDP
If the current short-run equilibrium level of output is greater than full-employment output, we can expect that in the long run the
price level will rise.
The investment spending category of gross domestic product (GDP) does NOT include
purchases of stocks and bonds.
In the short run, expansionary monetary policy ________ real gross domestic product (GDP), ________ unemployment, and ________ the price level.
raises; lowers; raises
Economic growth is defined as the percentage change in
real per capita GDP.
It is difficult to determine when the economy is turning up or down because of a(n) ________ lag.
recognition
As a result of the decrease in aggregate demand and long-run aggregate supply, we can see in the graph that the price level ________, and real gross domestic product (GDP) ________.
remains unchanged; decreases
According to the textbook, which factor(s) shift the long-run output of an economy?
resources, technology, and institutions
Based on the graph, a decrease in ________ could cause the economy to move from Point D to Point A.
restrictions on immigrant labor
Which of the following is considered discretionary government spending?
salaries of government employees
When describing how the economy works, classical economists claim that
savings is crucial to economic growth.
Which of the following is NOT one of the four main reasons for the persistence of trade barriers?
scarcity of natural resources
Most people who purchase stocks and bonds use brokers who buy the stocks and bonds in _________ markets.
secondary
If the U.S. central bank decreases the supply of U.S. dollars, the supply curve in the above graph will ________; if the Indian central bank increases the supply of rupees, the supply curve in the above graph will ________.
shift leftward; not change
What is NOT an example of an institution?
ships and shipping ports
Aggregate demand is about ________ and aggregate supply is about ________.
spending; production
Expansionary fiscal policy occurs when the government increases ________, decreases ________, or both to stimulate the economy toward expansion.
spending; taxes
If the price level rises but workers have to wait for the next round of contract negotiations to get a raise, this is an example of
sticky wages.
If an economy entered a rare period of deflation, in the short run, input prices would be ________ and revenues would ________.
sticky; fall
Keynesian economists believe prices are _________ and focus on the _________ run.
sticky; short
What function of money is highlighted if someone puts cash under his or her mattress to have on hand for unexpected emergencies?
store of value
What function of money is highlighted when someone deposits a portion of his or her paycheck into an individual retirement account (IRA)?
store of value
What are three primary causes of current account deficits?
strong economic growth, lower personal savings rates, and fiscal policy
Workers who lose their jobs because the skill set they possess is no longer needed in the economy are considered to be
structurally unemployed.
Workers who lose their jobs because the skill set they possess is no longer required in the economy are considered to be
structurally unemployed.
Three accuracy problems with the consumer price index (CPI) are
substitution, quality changes, and the availability of new goods and services.
If your nominal wage rises but you think that it automatically means your real wage rose, then you are
suffering from money illusion.
Depositors of money in a bank are
suppliers of funds.
There is a 5% average tax on imported goods in the United States. This tax is known as a(n)
tariff.
If cheeseburgers become more expensive and consumers switch their purchases away from cheeseburgers but the consumer price index (CPI) still assumes they buy the same amount, then
the CPI will reflect upward bias.
Discretionary government spending includes payments made for
the Department of Energy.
Suppose an American citizen purchases a TV from Sony (a Japanese company). Sony then uses the dollars to purchase U.S. Treasury bonds. How will this transaction enter into the Japanese balance of payments?
the current account will increase; the capital account will decrease
What could cause an unambiguous drop in interest rates?
the demand curve for loanable funds shifting left or the supply curve for loanable funds shifting right
Classical economists believe that
the economy is inherently stable and self-correcting.
If the unemployment rate rises above the natural rate of unemployment,
the government will want to impose an expansionary fiscal policy.
Monetary neutrality is the idea that
the money supply does not affect real economic variables in the long run.
If foreign entities save more and governments decrease borrowing, we would correctly say that
the new equilibrium quantity of loanable funds would be indeterminate, but the new equilibrium interest rate would be less than the original.
Which of the following is a topic of macroeconomics?
the number of unemployed people in the economy
Deflation typically occurs when
the overall level of prices falls.
You borrow $50,000 today at a rate of 5%. Today, inflation instantly rises to 7% and stays that way for the duration of your loan. Based on the above information today
the real rate of interest on your loan is -2%
If nominal income increases by 10%, then real income increases by 4% only if
there is an inflation of 6%
During the Great Recession, the U.S. long-run aggregate supply curve shifted to the left, in part, because
there was an institutional breakdown in financial markets.
The contraction phase of a business cycle occurs from the
top of a peak to the bottom of the next trough.
Since 1975, the U.S. economy has had a
trade deficit.
Assume tuition at the University of Virginia cost $2,962 (per semester) in 2004 and $11,584 in 2012. If the price index was 184 in 2004 and 226 in 2012, then we could say
tuition has increased much more rapidly than inflation.
Structural, frictional, and cyclical are all
types of unemployment.
The slope of the long-run aggregate supply (LRAS) curve is
vertical because full-employment output is independent of the price level.
Troubled asset relief program (TARP)
was very controversial from the beginning.
During which of the following situations would the government most likely have an expansionary fiscal policy?
when the unemployment rate is running unusually high
If the interest rates in China rise relative to interest rates in the United States, the demand curve above
will increase from D1 to D2.
Underemployed workers are individuals who are
working part-time but would prefer to be working full-time.
You borrow $100,000 today at a nominal rate of 3%; inflation for the past 5 years has been exactly 2%. Today, inflation instantly rises to 3% and stays that way for the duration of your loan. Based on the above information, and all else being equal, today
you are better off because you are paying back the loan with dollars that represent less purchasing power today than the dollars you borrowed before.
In Dallas, the cost of living index is 91.9, and in San Francisco, it is 164.0. You currently work in Dallas and your salary is $60,000. You are offered a promotion and pay raise to $75,000 to move to San Francisco. If you take the promotion,
your nominal wage increased but your real wage has decreased.
