202 Study Guide
All other thing unchanged, when the Fed sells government bonds, it aims to shift the aggregate demand curve to the right. a. True b. False
b. False
If the CPI is 120 in 2005 and 150 in 2006, what is the rate of inflation over this period? a. 8% b. 20% c. 25% c. 30%
c. 25%
Suppose the multiplier for fiscal policy is 2. If government spending increases by 400 billion dollars we expect GDP to increase by GDP increases by a. 800 billion dollars b. 200 billion dollars c. 0 it has no effect on GDP d. 400 billion dollars
a. 800 billion dollars
In this question unemployment is now 9%. Congress wants to use fiscal policy which of the following choices would be sound policy a. Increasing government spending and decreasing taxes b. increasing government spending and increasing taxes c. decreasing government spending and decreasing taxes d. decreasing government spending and increasing taxes
a. Increasing government spending and decreasing taxes
Consider the following scenario. In March 2006, 40,000 people are employed, 10,000 people are actively looking for work, and 30,000 people are neither working nor looking for work. In April, 12,000 of the 30,000 people who were not looking for work begin their job search. There are now 22,000 people looking for work and 40,000 people employed. What happens to the unemployment rate? a. It rises to 35.5%. b. It rises to 27.5%. c. It rises to 19.4 %. d. Nothing happens to the unemployment rate, because the new entrants were working before and are not working now.
a. It rises to 35.5%.
If the Federal Reserve sold bonds what two policies would help move the economy in a similar direction a. Raising the discount rate and reserve requirement b. Lowering the discount rate and reserve requirement c. Lowering the discount rate and increasing reserve requirement d. Increasing the discount rate and lowering reserve requirement
a. Raising the discount rate and reserve requirement
Kenya's GDP grew at 5.3% in 2015 and its population grew at 2.7% (I just googled these numbers). We would expect Kenya's GDP per capita to grow at what % in 2015 a. 5.3% b. 2.7% c. 8% d. 2.6%
d. 2.6%
Moldova is a small country that produces only two goods potatoes and cabbage. In 2010 Moldova produced 10 potatoes and 20 cabbages. The prices in 2010 were $1 per potato and $2 per cabbage. In 2011 Moldova produced 11 potatoes and 22 cabbages. The prices in 2011 were $2 per potato and $2 per cabbage. Assume 2010 is the base year. The nominal GDP in 2011 was $[x] Real GDP in 2011 was $[y] The deflator in 2011 was $[z] Real GDP growth from 2011-2010 was [zzz]%
x=66 y=55 z=120 zzz=10
On Saturday Dr. Gitter watched his own kids and Monday they went to child care which costs $100 dollars a day. The childcare pays its teachers $80 a day. Combing both Saturday and Monday how much GDP did Dr. Gitter create for his kids being watched. a. 0 dollars b. $100 c. $200 d. $280
b. $100
Bolivia and Peru make two goods beef and potatoes Beef Potatoes Bolivia 3 9 Peru 5 20 What is the opportunity cost of 1 beef in Bolivia [x] Potatoes If we drew a PPF for the two countries working together it would have three points 1. [a] beef and 0 potatoes 2. 0 beef and [b] potatoes 3. [c] beef and [d] potatoes If Bolivia sent 1 beef to Peru. Put the numbers in the range which both parties would accept ( [e], [f] ) potatoes per 1 beef.
x=3 a=8 b=29 c=3 d=20 e=3 f=4
The current reserve requirement is 10% for every $100 dollar that is deposited how many are added to the economy a. $100 b. $1000 c. $500 d. $20
b. $1000
Brenna's bakery makes the tastiest chocolate chip cookies in Silver Spring. Brenna sells her cookies for $5 a dozen at her store. To make the cookies she needs $1 worth of flour, $0.50 worth of sugar, $1 worth of chocolate chips and $0.25 for all the other ingredients not listed. How much does Brenna add to GDP each time she sells one dozen cookies? a. $7.75 b. $5 c. $2.75 d. $2.25
b. $5
Use the rule of 72 to answer this question. Costa Rica's GDP doubles every 24 years and its population is growing at 1% a year. What is the approximate rate of GDP per capita growth a. 1% b. 2% c. 3% d. 4%
b. 2%
We would expect Thailand using the rule of 72 to double its GDP per capita in 24 years if current growth of GDP and population continues. I tell you that its GDP growth rate is 5%. What is its population growth rate? a. 1% b. 2% c .4% d. 7%
b. 2%
If a nation's real GDP grows at approximately 3.4% per year and its population doubles in 120 years, calculate the approximate rate of change in per capita real GDP. a. 0.6% per year. b. 2.8% per year. c. 3.4% per year. d. 4% per year.
b. 2.8% per year.
If I go to the bank I can get 3 Peruvian Soles to $1. If I buy a quinoa salad at Whole Foods in Baltimore it costs $8 if I buy that same salad in Lima Peru it costs 6 Soles. For this question what is the nominal exchange rate: a. 4 times as expensive b. 3 Peruvian Soles to $1 c. 8 soles to $1 d. 6 Soles
b. 3 Peruvian Soles to $1
If I go to the bank I can get 3 Peruvian Soles to $1. If I buy a salad at Whole Foods in Baltimore it costs $8 if I buy that same salad in Lima Peru it costs 6 Soles. For this question what is the real exchange rate: a. 3 to 1 or 3 times as expensive in the US b. 4 to 1 or 4 times as expensive in the US c. 5 to 1 or 5 times as expensive in the US d. 6 to 1 or 6 times as expensive in the US
b. 4 to 1 or 4 times as expensive in the US
Now suppose 4,000 of the people looking for work get discouraged and give up their searches. What happens to the unemployment rate? population: 520,000 labor force:364,000 not labor force:156,000 employed:338,500 a. 6.35% b. 5.97% c. 5.91% d. 2.92%
b. 5.97%
Population 520,000 civilian labor force 364,000 not in labor force 156,000 employed 338,500 Now suppose 4,000 of the people looking for work get discouraged and give up their searches. What happens to the unemployment rate? a. 6.35% b. 5.97% c. 5.91% d. 2.92%
b. 5.97%
Suppose the multiplier for fiscal policy is 1.5. If government spending increases by 400 billion dollars we expect GDP to increase by GDP increases by a. 800 billion dollars b. 600 billion dollars c. 200 billion dollars d. 0 it has no effect on GDP
b. 600 billion dollars
Which of the following is an example of crowding out? a. A decrease in the rate of growth of the stock of money decreases GDP. b. A deficit causes an increase in interest rates, which causes a decrease in investment spending. c. An increase in tariffs causes a decrease in imports. d. A decrease in government housing subsidies causes an increase in private spending on housing.
b. A deficit causes an increase in interest rates, which causes a decrease in investment spending.
If I go to the bank I can get 3 Peruvian Soles to $1. If I buy a salad at Whole Foods in Baltimore it costs $8 if I buy that same salad in Lima Peru it costs 6 Soles. If the average Peruvian makes 15,000 Soles how many $s is that Purchasing Power Parity Adjusted? a. $10,000 b. $15,000 c. $20,000 d. $30,000
c. $20,000
The CPI in 2014 was 240. The base year is 1983. Based on this information $10 in 1983 is worth how much in 2014 dollars a. $100 b. $240 c. $24 d. $4.17
c. $24
In 2008, the average price of the baseball fan market basket (based on the cost of the basket for 30 major league baseball teams) was $191.92. The cost of attending a Boston Red Sox game was $320.71 in 2008. Calculate the fan price index for the Boston Red Sox using the average price of the market basket as the equivalent of a base year. a. 0.59 b. 0.67 c. 1.67 d. 4.01
c. 1.67
Using the rule of 72. Bangladesh's current GDP per capita is $1,000 if it grows at rate of 4% a year how long does it take to reach $32,000 (roughly the GDP per capita of Spain)? a. 72 years b. 18 years c. 90 years d. 36 years
c. 90 years
Net exports equal a. imports − exports. b. domestic consumption − foreign consumption. c. exports − imports. d. foreign consumption − domestic consumption.
c. exports − imports.
If the U.S. exchange rate decreases relative to foreign currencies, then a. imports and exports of the United States will both increase. b. imports and exports of the United States will both decrease. c. imports of the United States will decrease and exports of the United States will increase. d. imports of the United States will increase and exports of the United States will decrease.
c. imports of the United States will decrease and exports of the United States will increase.
What will happen at point "I" if nothing is done. Graph: point I SRAS&AD crosses right of LRAS a. inflation and GDP will increase b. unemployment will decrease and inflation will increase c. inflation and unemployment will increase d. inflation and unemployment will decrease
c. inflation and unemployment will increase
If discretionary fiscal policy is used to eliminate the gap, policy actions will Graph:YP=LRAS, SRAS&AD cross at Y1 P1 a. shift the aggregate demand curve to the right until long-run equilibrium is restored at a price level, P1 and output level, Yp. b. shift the short-run aggregate supply curve to the right until long-run equilibrium is restored at a price level, P1 and output level, Yp. c. shift the aggregate demand curve to the right until long-run equilibrium is restored at a price level, P2 and output level, Yp. d. shift the aggregate demand curve and the short-run aggregate supply curve to the right until long-run equilibrium is restored at a price level corresponding to point "d" and output level, Yp.
c. shift the aggregate demand curve to the right until long-run equilibrium is restored at a price level, P2 and output level, Yp.
The movement from point 3 to point 4 is consistent with which phase of the inflation-unemployment cycle? Graph:SRAS2 crosses left of LRAS SRAS1 crosses right of LRAS a. Phillips phase because inflation is increasing while unemployment is falling b. recovery phase because although inflation has risen, unemployment is closer to its natural rate c. stagflation phase because inflation and unemployment have risen d. recovery phase because the inflationary gap has been eliminated
c. stagflation phase because inflation and unemployment have risen
A number of semi-skilled workers in an industry find themselves out of work when improvements in technology render their jobs obsolete. These workers experience a. transitional unemployment. b. technological unemployment. c. structural unemployment. d. frictional unemployment.
c. structural unemployment.
Holding all else constant, a country's standard of living will decline if its a. nominal GDP grows at a faster rate than real GDP. b. nominal GDP grows at a slower rate than real GDP. c. the rate of population growth exceeds the rate of growth of real GDP. d. the rate of population growth is less than the rate of growth of real GDP.
c. the rate of population growth exceeds the rate of growth of real GDP.
Data from most industrialized countries show that countries with high investment rates (as a percentage of GDP) tend to be countries a. with the highest rates of inflation. b. with the most unequal income distribution. c. with high rates of economic growth. d. with the lowest rate of national saving.
c. with high rates of economic growth.
Sweden and Denmark make two goods meatballs and sweaters Meatballs Sweaters Sweden 10 20 Denmark 5 50 What is the opportunity cost of 1 meatball in Sweden [x] sweaters and Denmark [y] sweaters. Who has the comparative advantage in meatball [a] (fill in Sweden or Denmark) Who has the comparative advantage in sweaters [b] (fill in Sweden or Denmark) If we drew a PPF for the two countries working together the kink point would be at [c] meatballs and [d] sweaters If Sweden sent 1 meatball to Denmark it would want at least [e] sweaters and Denmark would pay no more than [f] sweaters
x=2 y=10 a= Sweden b=Denmark c=10 d=50 e=2 f=10
Argentina and Peru make two goods beef and potatoes Beef Potatoes Argentina 10 30 Peru 5 20 What is the opportunity cost of 1 beef in Argentina [x] Potatoes What is the opportunity cost of 1 beef in Peru [y] Potatoes. If we drew a PPF for the two countries working together the kink point would be at [c] beef and [d] potatoes If Argentina sent 1 beef to Peru. Put the numbers in the range which both parties would accept ( [e], [f] ) potatoes per beef.
x=3 y=4 c=10 d=20 e=3 f=4
Suppose Zambia produces two goods cobalt and cotton with the following possible production per day. Like in class the below table indicates Zambia could produce 20 Cobalt in a day or 100 Cotton, not both. Cobalt Cotton Zambia 20 100 The opportunity cost of 1 Cobalt in Zambia is [x] cotton If Zambia split its production each day spending half it's time on Cobalt and half on Cotton it would produce [y] Cobalt and [z] Cotton
x=5 y=10 z=50
Based on the above information (with 4 Pesos to the $) what is the real exchange rate? a. Goods are 4 times as expensive in Argentina than the US b. 1.5 that is goods are 50% more expensive in Argentina than in the US c. 1.5 that is goods are 50% more expensive in the US than Argentina d. Goods are 4 times as expensive in the US than Argentina
Correct 1.5 that is goods are 50% more expensive in the US than Argentina
If Dorothy deposits $500 in the bank and the reserve requirement is 25%. How much total will be added to the economy if all reserves in excess of the requirement are loaned out. a. $2,000 b. $500 c. $5000 d. $10,000
a. $2,000
Luke and Bernie are neighbors. Bernie hires Luke to mow his lawn for $25. Luke reports the income on his taxes. Luke also mows his own lawn. How much is added to GDP when Luke and Bernie's lawn are mowed. a. $25 b. $50 c. $0 d. $100
a. $25
The current reserve requirement is 25% for every $100 dollar that is deposited how many are added to the economy a. $400 b. $25 c. $200 d. $100
a. $400
Chipotle sells a burrito for $8. To make the burrito it purchases ingredients for $4, pays its workers $2 and pays $1 for the building where the restaurant is located. How much does me buying a burrito for lunch at to GDP a. $8 b. $15 c. $12 d. $0
a. $8
If the cost of a market basket is $150 in 2004 and $200 in 2005, the price index for 2004 using 2005 as the base year is a. 0.75. b. 1.00. c. 1.33. d. 1.50.
a. 0.75
We would expect India using the rule of 72 to double its GDP per capita in 12 years if current growth of GDP and population continues. I tell you that its GDP growth rate is 7%. What is its population growth rate? a. 1% b. 2% c. 6% d. 7%
a. 1%
In the previous question what is the unemployment rate of the ten people listed rounded to the nearest whole percent a. 17% b. 10% c. 25% d. 20%
a. 17%
Exchange rates a few years ago I went to Argentina. At the time the exchange rate a bank would pay was 4 pesos (the Argentine unit of currency) to the $1. During my visit I purchased a steak dinner for 80 pesos, in the United States a similar dinner would cost $30 What is the nominal exchange rate in pesos to the $1? a. 4 to 1 b. 3 to 1 c. 1.5 to 1 d. 1 to 1
a. 4 to 1
Population 520,000 civilian labor force 364,000 not in labor force 156,000 employed 338,500 Calculate the unemployment rate. a. approximately 7% b. approximately 5.16% c. approximately 4.9% d. approximately 3%
a. approximately 7%
At 8% unemployment which is likely to happen The Federal Reserve should a. buy bonds increasing the price of bonds and decreasing the interest rates. b. sell bonds lowering the price of bonds and driving up the interest rates. c. buy bonds lowering the price of bonds and driving up the interest rates. d. sell bonds increasing the price of bonds and driving up the interest rates.
a. buy bonds increasing the price of bonds and decreasing the interest rates.
A recession will lead to an increase in ________ unemployment. a. cyclical b. frictional c. transitional d. structural
a. cyclical
Diminishing marginal returns occurs when Selected Answer: a. each additional unit of a variable factor adds less to total output than the previous unit, given constant quantities of other factors. b. each additional unit of a variable factor adds more to total output than the previous unit, given constant quantities of other factors. c. each additional unit of a variable factor diminishes total output, given constant quantities of other factors. d. each additional unit of a variable factor adds a constant amount to total output than the previous unit, given diminishing quantities of other factors.
a. each additional unit of a variable factor adds less to total output than the previous unit, given constant quantities of other factors.
If an economy is operating on its production possibilities curve, it is: a. efficient and fully employed. b. fully employed but not necessarily efficient. c. efficiently producing but not necessarily fully employed. d. inevitably going to grow in the future.
a. efficient and fully employed.
Currency in the United States today is a. fiat money. b. intrinsic money. c. backed by gold. d. quasi- intrinsic.
a. fiat money.
If the U.S. runs a trade deficit a. foreigners purchase more of U.S. assets than U.S. residents purchase foreign assets. b. U.S. exports of capital goods exceed its imports of capital goods. c. U.S. residents purchase more foreign assets than foreigners purchase U.S. assets. d. the quantity supplied of U.S. financial assets exceed the quantity demanded.
a. foreigners purchase more of U.S. assets than U.S. residents purchase foreign assets.
All other things being equal which of the following is not likely to lead to faster growth of GDP per capita if we assume diminishing marginal product of capital a. higher population growth b. improving government c. starting poorer d. higher savings rates
a. higher population growth
Match the term to the description 1. Tommy used to work on the docks times are tough and with the current economic downtown Tommy is no longer employed 2. Gina was working in a diner, but the diner closed down. She is currently applying for jobs and has interviews next week. Her unemployment is reflective of the time it takes to find a new job 3. John was a cowboy, but now with a new robotic cowboy created by Google his skills are no longer needed in today's modern economy. 4. Herold applied for more jobs than he could count last year. At this point he has decided to stop looking for a job because it is just too frustrating. He is no longer in the labor force A. cyclical unemployment B. structural C. Discouraged worker D. frictional unemployment
1. A. cyclical unemployment 2.D. frictional unemployment 3.B. structural 4.C. Discouraged worker
Above is the PPF for fudge and cookies Graph: as cookies increase, fudge decreases cookie x, fudge y 1. The point 1 cookie and 2 fudge is 2. The point 5 cookies and 0 fudge is 3. The point 5 cookies and 5 fudge is A. ineffecient B. efficient and feasible C. infeasible
1. A. ineffecient 2.B. efficient and feasible 3. C. infeasible
Listed are four scenarios that could influence aggregate supply and demand (match) 1. More Immigrants Come to the US 2. The price of drones to deliver packages fall. Assume that extra income to the drone makers does not increase demand 3. A national program provides free college tuition and more people go to school 4. A recession hits the us economy so people have lower incomes A. The long run aggregate supply curve shifts right with more workers and demand also shifts right with more consumers. GDP goes up it is unknown what happens to prices B. long run aggregate supply shifts right. GDP goes up and prices go down C. The short aggregate supply shifts left causing wages to go up eventually though we would expect Long Run aggregate supply to shift right D. aggregate demand shifts down and left
1. A.The long run aggregate supply curve shifts right with more workers and demand also shifts right with more consumers. GDP goes up it is unknown what happens to prices 2. B. long run aggregate supply shifts right. GDP goes up and prices go down 3. C.The short aggregate supply shifts left causing wages to go up eventually though we would expect Long Run aggregate supply to shift right 4. D.aggregate demand shifts down and left
Mangoes Wheat US 30 40 Haiti 20 10 1. Which country has the comparative advantage in Mangoes? 2. Which country has the comparative advantage in Wheat? A.Haiti B.US
1.A. Haiti 2. B. US
extracting crude oil 5 refining oil 8 making plastic 10 making model airplane 16 distributing model to retailer 17 selling model to customer 21 The total market value of a model airplane is
21
Recall for Zambia the Production is Cobalt Cotton Zambia 20 100 The point 20 Cobalt and 0 Cotton is: The point 1 cotton and 1 cobalt is: the point 100 cobalt and 100 cotton: A. feasible and efficient B. is nonfeasible C. inefficient
A. feasible and efficient C. inefficient B. is nonfeasible
There are ten people listed below. What is their labor force participation rate? - Heather is a stay at home mom and is not looking for work and does not receive an income - Sam won the lottery and is not looking for work and does not have a job - Claire has a swimming scholarship and is going to school full time and not looking for work - Brenna has a job at Starbucks - Lura has a job as a chef - Jack works part time at a record store, while looking for a full time job - Larry was recently fired, but is applying to new jobs - Bill was fired a year ago and would like a job, but quit looking because he could not find one - Ryan has a job as a Librarian - Kumar has a job he is a doctor a. 60% b. 40% c. 70% d. 50%
a. 60%
If the Federal Reserve lowers the bank reserve requirement which of the following is most likely to happen a. Banks will loan out more money. GDP and CPI will go up b. Banks will loan out more money. GDP and CPI will go down c. Banks will loan out less money. GDP and CPI will go down d. Banks will loan out less money. GDP and CPI will go up
a. Banks will loan out more money. GDP and CPI will go up
a.)The long run natural rate of unemployment is 5%. The current rate of unemployment is 3% what do we expect to happen if no policy is used. If no policy is used in the long run we would expect unemployment to [increase, decrease, stay the same] b.)If no policy is used in the long run we would expect the CPI to [increase, decrease, stay the same] a. Both unemployment and CPI increase b. Unemployment increases and CPI decreases c. Unemployment decreases and CPI decreases d. Unemployment decreases and CPI increase
a. Both unemployment and CPI increase
At point "I" which policy is NOT a good idea Graph: point I SRAS&AD cross right of LRAS a. Buy bonds b. raise the discount rate c. increase taxes d. raise the reserve requirement
a. Buy bonds
If the Federal Reserve sold bonds we would expect a. CPI to go down and GDP to go down slowing the economy b. CPI to go down and GDP to go up c. CPI to go up and GDP to go up d. CPI to go up and GDP to go down slowing the economy
a. CPI to go down and GDP to go down slowing the economy
Cash Transfers programs in Mexico and Brazil have conditions. What are the conditions and why are they in place a. Children must attend school and go in for health check ups. This helps promote schooling and health influencing long term poverty reduction b. Participants are required to work to earn their pay c. To pass drug tests to show they are not wasting the money d. Adults are required to attend training classes to open businesses.
a. Children must attend school and go in for health check ups. This helps promote schooling and health influencing long term poverty reduction
According to the model from class with diminishing marginal product of capital, which of the following is true a. Countries that are poorer, save more, and have lower population growth see higher GDP per capita growth all other things equal b. Countries that are richer, save more, and have lower population growth see higher GDP per capita growth all other things equal c. Countries that are poorer, save more, and have higher population growth see higher GDP per capita growth all other things equal d. Countries that are richer, save more, and have higher population growth see higher GDP per capita growth all other things equal
a. Countries that are poorer, save more, and have lower population growth see higher GDP per capita growth all other things equal
Suppose that countries A and B are represented by the points on the above graph which is the most likely the explanation for A being richer a. Country A has a better functioning government b. Country A has more people c. Country A has more capital d. Country A has more machines per person
a. Country A has a better functioning government
When families in Kenya, Mexico and Brazil receive cash transfers they typically spend it on a. Food, education and health care. Sometimes they make investments to improve their income potential. b. Buying new houses c. Alcohol d. Tobacco
a. Food, education and health care. Sometimes they make investments to improve their income potential.
The above graph shows stagflation from a shift in the SRAS from SRAS 1 to SRAS 2. This could be caused by high oil prices. Compared to point 1 at point 2 what is happening Graph: SRAS2 left of LRAS, SRAS1 cross on LRAS a. Higher inflation and unemployment b. Higher inflation and lower unemployment c. lower inflation and lower unemployment d. lower inflation and higher unemployment
a. Higher inflation and unemployment
Expansionary fiscal policy is likely to a. Increase GDP and increase inflation b. Increase GDP and decrease inflation c. decrease GDP and decrease inflation d. decrease GDP and increase inflation
a. Increase GDP and increase inflation
Crowding out when the government use expansionary fiscal policy typically a. Runs counter to expansionary policy goals as it decreases GDP b. Is in line with expansionary policy goals as it increases GDP c. Is in line with expansionary policy goals as it decreases GDP d. Runs counter to expansionary policy goals as it increases GDP
a. Runs counter to expansionary policy goals as it decreases GDP
The average wage in Thailand is $15 a day, which is substantially lower than the US. Which goods would we expect to be the same price as in the United States. Assume that all of these goods have no taxes or trade restrictions and the goods are of equal quality a. T-shirts b .hair cuts c. taxi rides d. house cleaning
a. T-shirts
Which of the following is an advantage of the CPI over the deflator a. The CPI fixed the amount of each good in the basket so if purchases change only based on price it will show the effects of inflation b. The CPI varies the number of goods in each year to reflect changing spending patterns. c. The CPI measures inflation while the deflator measures changes in production d. The CPI fixes the prices of the goods each year and allows quantities to change
a. The CPI fixed the amount of each good in the basket so if purchases change only based on price it will show the effects of inflation
A shift from SRAS1 to SRAS2 could have been caused by all of the following except LRAS . .SRAS . . .SRAS . . . . . . . . . AD a. an increase in the consumer confidence index. b. an increase in payroll tax. c. a rise in health care costs which raises the cost of employing labor. d. terrorist attacks that destroys an economy's infrastructure.
a. an increase in the consumer confidence index.
Mangoes Wheat US 30 40 Haiti 20 10 Based on the above information what is true a. The US has an absolute advantage is both goods, but it still can benefit with trade from Haiti. b. The US has an absolute in mangoes and Haiti in Wheat. The US will trade mangoes to Haiti for Wheat. c. The US has an absolute in wheat and Haiti in Mangoes. The US will not trade with Haiti d. The US has an absolute advantage is both goods so it would never trade with Haiti
a. The US has an absolute advantage is both goods, but it still can benefit with trade from Haiti
A point inside the production possibilities curve may indicate that resources are not being used efficiently. a. True b. False
a. True
A reduction in tax rates may result in a short-term reduction in government revenues, but it will also leave people with more disposable income. a. True b. False
a. True
Mothers or care givers typically receive cash transfers because economic evidence shows they are more likely to spend it on children than fathers. a. True b. False
a. True
The above graph shows a recessionary gap. If no policy is used what is likely to happen Graph: SRAS and AD cross left of LRAS a. Wages will fall as unemployed workers are hired shifting the SRAS right. This will lower prices and increase GDP. b. Wages will fall as unemployed workers are hired shifting the AD right. This will lower prices and increase GDP. c. Wages will increase shifting the AD right. This will lower prices and increase GDP. d. Wages will increase as unemployed workers are hired shifting the SRAS right. This will lower prices and increase GDP.
a. Wages will fall as unemployed workers are hired shifting the SRAS right. This will lower prices and increase GDP.
Unemployed cat waits for the economy to recover. If current unemployment is 7% what is likely to happen a. Wages will fall causing unemployment to decrease and CPI to decrease b. Wages will increase causing unemployment to increase and CPI to increase c. Wages will increase causing unemployment to increase and CPI to decrease d. Wages will fall causing unemployment to increase and CPI to decrease
a. Wages will fall causing unemployment to decrease and CPI to decrease
Above is pictured an inflationary gap at point I. What is likely to happen if no policy is used Graph: SRAS and AD cross right of LRAS a. Wages will get higher as companies compete for the small number of workers left. This will shift SRAS to the left causing higher inflation and for GDP to fall. b. Wages will get higher as companies compete for the small number of workers left. This will shift SRAS to the left making inflation and GDP fall. c. Wages will fall. This will shift SRAS to the left causing higher inflation and for GDP to fall. d. Wages will get higher as companies compete for the small number of workers left. This will shift AD to the left causing higher inflation and for GDP to fall.
a. Wages will get higher as companies compete for the small number of workers left. This will shift SRAS to the left causing higher inflation and for GDP to fall.
If the aggregate demand curve is AD2, which of the following is the most appropriate discretionary fiscal policy to pursue? AD2 point to the right of LRAS AD0 point on LRAS AD1 point to left of LRAS a. a contractionary fiscal policy involving reductions in government spending and decreases in income tax rates b. a contractionary fiscal policy involving reductions in government spending and increases in income tax rates c. an expansionary fiscal policy involving increases in government spending and increases in income tax rates d. an expansionary fiscal policy involving increases in government spending and decreases in income tax rates
a. a contractionary fiscal policy involving reductions in government spending and decreases in income tax rates
If the Fed increases the discount rate, it is pursuing a. a contractionary policy because it will be more costly for banks to borrow funds and this puts upward pressure on interest rates in the economy. b. a contractionary policy because it reduces banks' profit margins by raising the cost of borrowing and lowering the return on lending. c. an expansionary policy because it raises the cost of holding excess reserves in the banking system. d. an expansionary policy because it increases bank profits by putting upward pressure on the interest rates that banks can charge on its loans.
a. a contractionary policy because it will be more costly for banks to borrow funds and this puts upward pressure on interest rates in the economy.
A change in the price level, all other things unchanged, causes a. a movement along the aggregate demand curve. b. a shift of the aggregate demand curve. c. both a movement along the aggregate demand curve and a shift in the curve. d. no change in the value of assets held in the form of money.
a. a movement along the aggregate demand curve.
Aggregate demand is the total value of real GDP that a. all sectors of the economy are willing to purchase at various average price levels, all other things unchanged. b. all sectors of the economy are willing to sell at various average price levels, all other things unchanged. c. consumers are willing to purchase at various average price levels, all other things unchanged. d. consumers are willing to purchase at various national income levels, all other things unchanged.
a. all sectors of the economy are willing to purchase at various average price levels, all other things unchanged.
A movement from point B to point E on could be due to . . A . D . B E a. an increase in consumer confidence b. an increase in the market interest rate c. an increase in personal income taxes d. a decrease in transfer payments
a. an increase in consumer confidence
Calculate the unemployment rate. Population:520,000 Labor force:364,000 Not in labor force: 156,000 Employed:338,500 a. approximately 7% b. approximately 5.16% c. approximately 4.9% d. approximately 3%
a. approximately 7%
If the Fed buys U.S. government bonds from the public, it a. increases the volume of reserves in the banking system and the money supply tends to grow. b. decreases the volume of reserves in the banking system and the money supply tends to grow. c. increases the volume of reserves in the banking system and the money supply tends to fall. d. decreases the volume of reserves in the banking system and the money supply tends to fall.
a. increases the volume of reserves in the banking system and the money supply tends to grow.
A country's exports minus its imports measures a. net exports. b. gross exports. c. net imports. d. gross imports.
a. net exports.
During the recession of 2001, the leftward shifts in aggregate demand and aggregate supply that occurred at that time necessarily reduced a. real GDP only. b. the price level only. c. real GDP and the price level. d. potential output.
a. real GDP only.
If a country's currency appreciates in value we would expect a. reduce its net exports. b. increase its net exports. c. reduce its imports and increase its exports. d. leave its net exports unchanged
a. reduce its net exports.
A contractionary fiscal policy is likely to ______ a government budget deficit and _______ borrowing by the Treasury. a. reduce; reduce b. increase; increase c. reduce; increase d. increase; reduce
a. reduce; reduce
All other things unchanged, an increase in government spending will a. shift the aggregate demand curve to the right. b. shift the aggregate demand curve to the left. c. make the aggregate demand curve flatter. d. make the aggregate demand curve steeper.
a. shift the aggregate demand curve to the right.
In drawing a production possibilities curve, it is assumed that: a. technology does not change. b. the economy is fully employed and may not be efficient. c. there are increasing qualities of the factors of production. d. all of the above are true.
a. technology does not change.
The vertical Phillips curve occurs in the long run because a. the aggregate supply curve is vertical which means that changes in aggregate demand will not change unemployment. b. wage and price rigidities prevent changes in aggregate demand to change unemployment. c. economic agents are quick to respond to changes in the price level. d. of lags in monetary and fiscal policies.
a. the aggregate supply curve is vertical which means that changes in aggregate demand will not change unemployment.
The basket for this example is 1 large pizza and 6 cans of soda. For all answer use 2018 as the base year. Pizza Soda 2018 $4 $1 2019 $5 $2 For all answers do not write $ or %. Round to nearest whole number or percent How much did the basket cost (giant bowl of pudding) in 2018 $[a] and how much in 2019 $[b] Calculate the CPI for 2019 [c] In 1990 the CPI was 68. What was the percentage change in prices from 1990 to 2019? [d]% In 1990 Towson student activities fund provided $20 per event for soda and pizza how much money is that equivalent to in 2019? [e]
a=10 b=17 c=170 d=150 e=50
Price Quantity (Coconuts) Price Quantity (Tuna) 2014 $1 30 $10 100 2015 $3 45 $30 150 Use 2014 as the base year. Write out all answer as whole numbers with no commas. Do not write $ or % Calculate nominal GDP for each year 2014 $[a] 2015 $[b] Calculate Real GDP for each year 2014 $[c] 2015 $[d] Calculate real GDP growth 2015-2014 [e]% Calculate the deflator 2014 $[f] 2015 $[g] If the deflator was 80 in 2013. Calculate inflation between 2013-2014 [h]%
a=1030 b=4635 c=1030 d=1545 e=50 f=100 g=300 h=25
The basket for this question is a giant bowl of pudding. To make a giant bowl of pudding you need 1 gallon of milk and 8 boxes of pudding mix. Below are the prices for 2014 and 2015. For all answer use 2014 as the base year. Price of 1 Gallon of Milk Price of 1 box of pudding mix 2014 $4. $2 2015 $5 $3 How much did the basket cost (giant bowl of pudding) in 2014 $[a] and how much in 2015 $[b] Calculate the CPI for 2014 [c] and 2015 [d] In 1997 the CPI was 80. What was the percentage change in prices from 1997 to 2014? [e]% In 1997 Barry and Levon spent $240 on pudding how much would the same pudding cost in 2014? [f]
a=20 b=29 c=100 d=145 e=25 f=300
Price Quantity (Coconuts)Price Quantity (Bananas) 2014 $1 30 $7 50 2015 $3 45 $10 100 Use 2014 as the base year. Write out all answer as whole numbers with no commas. Do not write $ or % Round to the nearest whole number or percent if the answer is a percent. Example if the answer is 42.4% write 42 Calculate nominal GDP for each year 2014 $[a] 2015 $[b] Calculate Real GDP for each year 2014 $[c] 2015 $[d] Calculate real GDP growth 2015-2014 [e]% Calculate the deflator 2014 [f] 2015 [g] If the deflator was 70 in 2013. Calculate inflation between 2013-2014 [h]%
a=380 b=1135 c=380 d=745 e=96 f=100 g=152 h=43
A recent study showed the cheapest daily diet that would meet nutritional standards is 18 bananas and 2 eggs. So your basket is 18 bananas and 2 eggs. Price (Egg) Price (Banana) 2012 $0.40 $0.20 2013 $0.50 $0.25 For all questions use 2012 as the base year Calculate the total cost of the basket in each year for 18 bananas and 2 eggs. Remember the above chart lists the price of 1 of egg and 1 banana For these answers write in the blanks 7.75 if for example the answer was $7.75. Do not round to the nearest dollar and do write in the dollar sign. 2012 $[a] 2013 $[b] Calculate the CPI in each year 2012 [c] 2013 [d] What was the rate of inflation between 2013-2012? [e]% Kate spent $60 a month on her food in 1998. The CPI in 1998 was 60. How much is $60 in 1998 worth in 2012 dollars? [g]
a=4.40 b=5.50 c=100 d=125 e=25 g=100
Wheat. Clothing Panama. 4 20 Dom Rep. 6 12 a.)The opportunity cost of 1 wheat is [a] clothing in Panama? b.) The opportunity cost of 1 wheat is [b] clothing in the Dominican Republic?
a=5 b=2
During expansionary policy which best describes crowding out a. As the government increases spending and lowers taxes it needs to borrow more money. To borrow money it must buy bonds. This lowers the price of bonds causing the interest rate to increase countering the goal of the expansionary policy. b. As the government increases spending and lowers taxes it needs to borrow more money. To borrow money it must sell bonds. This lowers the price of bonds causing the interest rate to increase countering the goal of the expansionary policy. c. As the government decreases spending and increases taxes it needs to borrow more money. To borrow money it must sell bonds. This lowers the price of bonds causing the interest rate to increase countering the goal of the expansionary policy. d. As the government increases spending and lowers taxes it needs to borrow more money. To borrow money it must sell bonds. This increases the price of bonds causing the interest rate to decrease countering the goal of the expansionary policy.
b. As the government increases spending and lowers taxes it needs to borrow more money. To borrow money it must sell bonds. This lowers the price of bonds causing the interest rate to increase countering the goal of the expansionary policy.
LRAS shifts the right what is most likely the cause. a. The federal reserve buying bonds b. Better technology c. A decrease in the money supply d. An increase in the money supply
b. Better technology
If the Federal Reserve purchased bonds we would expect a. CPI to go up and GDP to go down slowing the economy b. CPI to go up and GDP to go up c. CPI to go down and GDP to go up d. CPI to go down and GDP to go down slowing the economy
b. CPI to go up and GDP to go up
In the previous question there is a picture of an inflationary gap. Given the outcome of no policy, what is the best policy option. a. Contrationary fiscal and monetary policy that shifts AD left to fight unemployment b. Contrationary fiscal and monetary policy that shifts AD left to fight inflation c. Expansionary fiscal and monetary policy that shifts AD left to fight inflation d. Expansionary fiscal and monetary policy that shifts AD right to fight inflation
b. Contrationary fiscal and monetary policy that shifts AD left to fight inflation
In the previous problem a recessionary gap was pictured. Given this recessionary gap which is the best policy choice a. Contractionary monetary and fiscal policy intended to shift the SRAS to the right. b. Expansionary monetary and fiscal policy intended to shift the AD to the right. c. Contractionary monetary and fiscal policy intended to shift the AD to the right. d. Expansionary monetary and fiscal policy intended to shift the SRAS to the right.
b. Expansionary monetary and fiscal policy intended to shift the AD to the right.
A contractionary fiscal policy 1. decreases a government budget deficit or increases a government budget surplus. 2. includes tax cuts. 3. may include discretionary cuts in transfer payments. a. I, II, and III b. I and II only c. I and III only d. II and III only
b. I and II only
Which of the following is true of the multiplier a. It helps contractionary policy and greater than 1 when unemployment is below the natural rate of unemployment 5%. b. It helps expansionary policy and greater than 1 when unemployment is above the natural rate of unemployment 5%. c. It helps contractionary policy and greater than 1 when unemployment is above the natural rate of unemployment 5%. d. It helps expansionary policy and greater than 1 when unemployment is below the natural rate of unemployment 5%.
b. It helps expansionary policy and greater than 1 when unemployment is above the natural rate of unemployment 5%.
What do economists mean by the term "sticky wage"? a. It refers to the reluctance by employers to increase nominal wages during an inflationary period. b. It refers to a wage that is slow to adjust to its equilibrium level, creating sustained periods of shortage or surplus in the labor market. c. It refers to a breakdown in wage negotiations between employers and employee unions. d. It refers to a union negotiated wage.
b. It refers to a wage that is slow to adjust to its equilibrium level, creating sustained periods of shortage or surplus in the labor market.
Suppose the economy is operating at point a. If policymakers undertake expansionary policies in period 1, what happens if there are lags in the application of policy? Graph Philips phase decreasing Graph AD1 AD2 left of LRAS AD3 right of LRAS a. The economy may not experience any change in the price level or level of employment. b. The economy could move past full employment to AD3 and encounter an inflationary gap. c. The economy could be stuck in a below full-employment equilibrium such as at point b. d. The economy could experience deflation resulting in a movement along the Phillips phase from point G to point F.
b. The economy could move past full employment to AD3 and encounter an inflationary gap.
At 3% unemployment which of the following is a best policy if long term unemployment is 5% a. The federal reserve should buy bonds to raise interest rates b. The federal reserve should sell bonds to raise interest rates c. The federal reserve should buy bonds to lower interest rates d. The federal reserve should sell bonds to lower interest rates
b. The federal reserve should sell bonds to raise interest rates
As households eat out more, purchase more prepared foods at the grocery store, hire out child care services that they once performed themselves, what is likely to happen to the value of GDP? a. The value of GDP is likely to decrease. b. The value of GDP is likely to increase. c. GDP will not be affected because there is no net increase in the output of goods and services. d. GDP will not be affected because there is no net increase in the output of goods and services but GDI will increase.
b. The value of GDP is likely to increase.
In stagflation which is most likely to happen a. Unemployment increases and inflation decreases b. Unemployment and inflation increase c. Unemployment and inflation decrease d. Unemployment decreases and inflation increases
b. Unemployment and inflation increase
At point B what is likely to happen if no policy is used Graph: AD2 crosses left of LRAS, AD1 crosses on LRAS a. Wages will get higher as companies compete for the small number of workers left. This will shift SRAS to the left making inflation and GDP fall. b. Wages will fall as companies get many applications jobs and have no trouble finding good workers due to the high unemployment rate. This will shift SRAS to the right causing inflation to fall and for GDP to rise. c. Wages will get higher as companies compete for the small number of workers left. This will shift AD to the left causing higher inflation and for GDP to fall. d. Wages will fall. This will shift SRAS to the left causing higher inflation and for GDP to fall.
b. Wages will fall as companies get many applications jobs and have no trouble finding good workers due to the high unemployment rate. This will shift SRAS to the right causing inflation to fall and for GDP to rise.
If the aggregate demand curve is AD2, which of the following is the most appropriate discretionary fiscal policy to pursue? Graph: AD0 on LRAS AD1 left of LRAS AD2 right of LRAS a. a contractionary fiscal policy involving reductions in government spending and decreases in income tax rates b. a contractionary fiscal policy involving reductions in government spending and increases in income tax rates c. an expansionary fiscal policy involving increases in government spending and increases in income tax rates d. an expansionary fiscal policy involving increases in government spending and decreases in income tax rates
b. a contractionary fiscal policy involving reductions in government spending and increases in income tax rates
Stagflation implies that a. policymakers can choose to have less unemployment if they are willing to accept a higher rate of inflation. b. a tradeoff between inflation and unemployment may not always exist. c. any relationship between the inflation and unemployment was purely random. d. the relationship predicted by the Phillips curve is stable.
b. a tradeoff between inflation and unemployment may not always exist.
All else constant, if a nation's potential output doubles in 36 years, its average annual growth rate is a. approximately 1% b. approximately 2% c. approximately 3% d. approximately 4%
b. approximately 2%
Changes in nominal GDP a. are due to changes in price only while changes in real GDP are attributed to movements in output and price. b. are due to changes in output and price while changes in real GDP are attributed to movements in output only. c. are due to changes in output and price while changes in real GDP are attributed to movements in price only. d. and changes in real GDP are due to changes in output and price
b. are due to changes in output and price while changes in real GDP are attributed to movements in output only.
a.) The long run natural rate of unemployment is 5%. The current rate of unemployment is 4% what do we expect to happen if no policy isused. If no policy is used in the long run we would expect unemployment to [increase, decrease, stay the same] b.)If no policy is used in the long run we would expect the CPI to [increase, decrease, stay the same] a. both to decrease b. both to increase c. CPI increase and unemployment decrease d. CPI decrease and unemployment increase
b. both to increase
By shifting the supply curve from S1 to S2, the Fed is attempting to ____ the economy by _______ interest rates. Graph: SRAS1 left SRAS2 right a. expand; increasing b. contract; increasing c. contract; decreasing d. expand; decreasing
b. contract; increasing
A recession in foreign countries will a. decrease imports of the United States. b. decrease exports of the United States. c. have no effect on the aggregate demand of the United States. d. shift the aggregate supply curve of the United States.
b. decrease exports of the United States.
In this situation, if policymakers want to close the output gap with fiscal policies that will stimulate aggregate demand, what should they do? Graph: SRAS and AD cross left of LRAS a. lower personal income taxes to encourage savings b. increase government spending c. loosen environmental regulations to lower businesses cost of production d. raise interest rates
b. increase government spending
In this situation, if policymakers want to close the output gap with fiscal policies that will stimulate aggregate demand, what should they do? Graph: SRAS and AD cross to left of LRAS a. lower personal income taxes to encourage savings b. increase government spending c. loosen environmental regulations to lower businesses cost of production d. raise interest rates
b. increase government spending
An increase in saving a. decreases the amount of resources available for investment. b. increases the amount of resources that can be devoted to the purchase of capital goods. c. reduces real GDP by decreasing consumption. d. increases a country's present standard of living.
b. increases the amount of resources that can be devoted to the purchase of capital goods.
A movement from point A to point B . . A . D . B E a. is a change in aggregate demand resulting from a lower price level. b. is change in aggregate quantity demanded resulting from a lower price level. c. could be due to an increase in investment demand. d. occurs because aggregate output supplied has increased.
b. is change in aggregate quantity demanded resulting from a lower price level.
If banks were required to keep 100% of deposits in reserves, they could a. make more loans. b. make no loans. c. create more deposits. d. only use required reserves for loans.
b. make no loans.
All of the following are held constant along a short-run aggregate supply curve except a. factor prices. b. output prices. c. nominal wages. d. capital stock.
b. output prices.
Double counting in GDP accounting a. refers to the fact that accountants check their figures twice. b. refers to the inclusion of intermediate goods. c. is the method of using both income and expenditures in measuring GDP. d. is represented by all of the above.
b. refers to the inclusion of intermediate goods.
As the incomes in foreign nations rise, their imports from the United States will a. fall as they become less dependent on other countries. b. rise. c. not be affected. d. rise and the U.S. dollar exchange rate will fall.
b. rise.
Suppose the government increases government purchases and there is some crowding out. As a result a. the rightward shift of the aggregate demand curve due to increased government purchases is reinforced by the crowding out effect. b. the rightward shift of the aggregate demand curve due to increased government purchases is offset to some degree by the crowding out effect. c. the rightward shift of the aggregate demand curve due to increased government purchases is completely offset by the crowding out effect. d. the aggregate demand curve shifts right due to increased government purchases and the short-run aggregate supply curve shifts left due to the crowding out effect.
b. the rightward shift of the aggregate demand curve due to increased government purchases is offset to some degree by the crowding out effect.
Assume that the economy is initially at Y1. A nonintervention policy would result in the restoration of potential output by allowing the Graph y1= SRAS and AD cross left of LRAS a. the aggregate demand curve to shift to the right. b. the short-run aggregate supply curve to shift to the right. c. the aggregate demand curve to shift to the left. d. the short-run aggregate supply curve to shift to the left.
b. the short-run aggregate supply curve to shift to the right.
An expansionary fiscal policy shifts the aggregate demand curve a. to the right and is used to close an inflationary gap. b. to the right and is used to close a recessionary gap. c. to the left and is used to close an inflationary gap. d. to the left and is used to close a recessionary gap.
b. to the right and is used to close a recessionary gap.
GDP is defined as the a. total value of business sales of goods and services during a given period. b. total value of all final goods and services produced during a given period. c. value of all economic transactions made among consumers, businesses, and government during a particular period. d. measure of economic and social welfare for the economy.
b. total value of all final goods and services produced during a given period.
If deflation occurs and your income is fixed, a. your real income falls. b. your real income rises. c. your real income remains unchanged. d. your real income equals your nominal income.
b. your real income rises.
Assume that Brazil gives up 3 automobiles for each ton of coffee it produces, while Peru gives up 7 automobiles for each ton of coffee it produces. a. Brazil has a comparative advantage in automobile production and should specialize in coffee. b. Brazil has a comparative advantage in coffee production and should specialize in the production of automobiles. c. Brazil has a comparative advantage in coffee production and should specialize in coffee production. d. Brazil has a comparative advantage in automobile production and should specialize in automobile production.
c. Brazil has a comparative advantage in coffee production and should specialize in coffee production.
In the previous question the LRAS curve shifted right. What is one potential problem with this change. a. Inflation b. Low GDP growth c. Deflation d. High unemployment
c. Deflation
In the long run expansionary policy a. decreases prices and output b. Increases prices and output c. Increases prices but has no effect on output d. only decreases prices and does not influence output
c. Increases prices but has no effect on output
Suppose the United States doubled the number of work visas for international immigrants. This would increase the working age population shifting the SRAS down and right and the population of consumers shifting AD up and right. What will the effect be on prices and production a. Prices and production will increase for certain b. Production will increase and for certain prices will fall. c. Production will increase, though the effect on prices is unknown d. Prices will increase the effect on production is unknown
c. Production will increase, though the effect on prices is unknown
Economic research on the effect of undoccument immigrants with no high school education on wages suggests a. The effect of undocumented workers are only seen for those with college degrees b. The effect on workers without college degrees is large and undocumented immigrants are responsible for 25% reduction in wages c. The effect on workers without college degrees is small and possibly zero based on some studies d. The effect on all US workers is negative
c. The effect on workers without college degrees is small and possibly zero based on some studies
At 7% unemployment which of the following is a best policy a. The federal reserve should buy bonds to raise interest rates b. The federal reserve should sell bonds to raise interest rates c. The federal reserve should buy bonds to lower interest rates d. The federal reserve should sell bonds to lower interest rates
c. The federal reserve should buy bonds to lower interest rates
When the government uses fiscal policy to help the economy crowding out occurs because a. The government must buy bonds which decreases interest rates. b. The government must buy bonds which increases interest rates. c. The government must sell bonds which increases interest rates. d. The government must sell bonds which decreases interest rates.
c. The government must sell bonds which increases interest rates.
Crowding out occurs when expansionary fiscal policy leads to a. a higher money supply and a reduction in net exports. b. a higher money supply and a reduction in the interest rate. c. a higher interest rate and a reduction in private investment. d. a higher price level and a reduction in the money supply.
c. a higher interest rate and a reduction in private investment.
A Phillips curve implies a. a negative relationship between consumption and saving. b. a positive relationship between inflation and prices. c. a negative relationship between inflation and unemployment. d. a positive relationship between consumption expenditure and inflation.
c. a negative relationship between inflation and unemployment.
An unemployed person is a. one who is eligible to work but chooses not to work. b. one who is not working. c. a person without a job who is actively seeking and available for work. d. one who can only find jobs that are below his abilities.
c. a person without a job who is actively seeking and available for work.
If the aggregate demand curve is AD1, which of the following is the most appropriate discretionary fiscal policy to pursue? Graph: AD0 on LRAS AD1 left of LRAS AD2 right of LRAS a. a contractionary fiscal policy involving reductions in government spending and increases in income tax rates b. a contractionary fiscal policy involving reductions in government spending and decreases in income tax rates c. an expansionary fiscal policy involving increases in government spending and increases in investment tax credits d. an expansionary fiscal policy involving increases in government spending and decreases in investment tax credits
c. an expansionary fiscal policy involving increases in government spending and increases in investment tax credits
Decreasing the reserve requirement ratio is a. a contractionary policy because it lowers the amount of total reserves in the banking system. b. a contractionary policy because it lowers the amount of excess reserves in the banking system. c. an expansionary policy because it raises the amount of excess reserves in the banking system. d. an expansionary policy because it raises the amount of required reserves in the banking system.
c. an expansionary policy because it raises the amount of excess reserves in the banking system.
Which of the following could cause the production function to shift upward? graph . . . . a. an increase in the quantity of labor employed b. an increase in the economy's average price level c. an increase in the availability of natural resources d. an increase in the real wage rate
c. an increase in the availability of natural resources
If the economy is at point c, the Federal Reserve can close the output gap Graph: C left of LRAS, A&D on LRAS, B right of LRAS a. by pursuing an expansionary monetary policy to raise the interest rate and increase short-run aggregate supply. b. by pursuing a contractionary monetary policy to drive down the interest rate and increase aggregate demand. c. by pursuing an expansionary monetary policy to drive down the interest rate and increase aggregate demand. d. by pursuing a contractionary monetary policy to raise the interest rate and short-run aggregate supply.
c. by pursuing an expansionary monetary policy to drive down the interest rate and increase aggregate demand.
A change in government purchases shifts the aggregate demand curve by an amount equal to the A) change in consumption x marginal propensity to consume. a. change in consumption x marginal propensity to consume. b. change in government purchases x money multiplier. c. change in government purchases x spending multiplier. d. change in the spending multiplier x change in government purchases.
c. change in government purchases x spending multiplier.
Economic research has generally shown that increases in migrants a. Do not increase crime b. Do not increase budget deficits (that is migrants pay more in taxes than get benefits) c. Do not generally reduce wages of domestic workers d. All of the above
d. All of the above
In the previous question the reserve requirement was 25% if the Federal Reserve lowered the requirement to 10%. We would expect which of the following to happen a. A decrease in the money supply which would increase GDP and inflation. b. A increase in the money supply which would increase GDP and lower inflation. c. A decrease in the money supply which would increase GDP and lower inflation. d. An increase in the money supply which would increase GDP and inflation.
d. An increase in the money supply which would increase GDP and inflation.
Which of the following statements is true a. CPI and GDP are both measures of prices CPI uses the same number goods each year, while GDP uses a different number of goods each year. b. CPI and the Deflator are both measures of prices the deflator uses the same number goods each year, while the CPI uses a different number of goods each year. c. CPI and GDP are both measures of prices GDP uses the same number goods each year, while the CPI uses a different number of goods each year. d. CPI and the Deflator are both measures of prices the CPI uses the same number goods each year, while the Deflator uses a different number of goods each year
d. CPI and the Deflator are both measures of prices the CPI uses the same number goods each year, while the Deflator uses a different number of goods each year
Which of the assumption is consistent with the lines that contain points A&B. a. Decreasing marginal product of capital. That is each extra unit of capital increases GDP per capita more than the previous one. b. Increasing marginal product of capital. That is each extra unit of capital increases GDP per capita more than the previous one. c. Constant marginal product of capital. That is each extra unit of capital increases GDP per capita as much as the previous one. d. Decreasing marginal product of capital. That is each extra unit of capital increases GDP per capita less than the previous one.
d. Decreasing marginal product of capital. That is each extra unit of capital increases GDP per capita less than the previous one.
Which of the following is true based on the standard model of economic growth with diminishing marginal product of capital assumed. a. GDP per capita tends to increase faster in countries with high population growth, high savings and lower starting GDP per capita all things equal. b. GDP per capita tends to increase faster in countries with low population growth, low savings and lower starting GDP per capita all things equal. c. GDP per capita tends to increase faster in countries with low population growth, high savings and higher starting GDP per capita all things equal. d. GDP per capita tends to increase faster in countries with low population growth, high savings and lower starting GDP per capita all things equal.
d. GDP per capita tends to increase faster in countries with low population growth, high savings and lower starting GDP per capita all things equal.
The intersection of the economy's aggregate demand and long-run aggregate supply curves 1. determines its equilibrium real GDP in both the long run and the short run. 2. determines its equilibrium price level in both the long run and the short run. 3. occurs at the economy's potential output. a. I, II, and III b. I and III only c. II and III only d. III only
d. III only
Kenya uses unconditional cash transfers and Mexico uses conditional cash transfers, why might this be a. In Mexico enforcement costs are high and school might not be available every where b. It is easier to politically sell an unconditional program c. Families prefer conditional programs in Mexico d. In Kenya enforcement costs are high and school might not be available every where
d. In Kenya enforcement costs are high and school might not be available every where
The above graph shows a recessionary gap. What is the best policy response Graph:AD&SRAS cross left of LRAS a. Sell bonds b. Raise the discount rate and lower the reserve requirement c. Use policies to increase interest rates d. Increase government spending and decrease taxes
d. Increase government spending and decrease taxes
On a visit to Vancouver Canada you notice a lot of immigrants. Looking up economic data you also find that Vancouver is doing quite well economically. What can you conclude about migrants effect on wages of people born in Vancouver. a. Migrants have no effect on wages in Vancouver b. Migrants decrease wages in Vancouver c. Migrants increase wages in Vancouver d. It is difficult to conclude anything since migrants may go to where wages are already high.
d. It is difficult to conclude anything since migrants may go to where wages are already high.
In the United States, through most of the 1990s, the unemployment rate and the inflation rate generally fell. With which phase of the inflation-unemployment cycle does this conform to? a. Phillips phase b. Growth phase c. Stagflation phase d. Recovery phase
d. Recovery phase
Suppose the price of an important natural resource such as oil falls. What will be the effect on the short-run aggregate supply curve? a. There will be movement to the left, along the aggregate supply curve. b. The aggregate supply curve will shift to the left. c. There will be movement to the right, along the aggregate supply curve. d. The aggregate supply curve will shift to the right.
d. The aggregate supply curve will shift to the right.
Economic research on the effect of immigrants with graduate degrees like PhDs and MDs would have the following effect a. The effect on all US workers is negative b. The effect on workers without college degrees is small and possibly zero based on some studies c. The effect on workers without college degrees is large and immigrants are responsible for 25% reduction in wages d. The potential negative effect of high skilled immigrants is likely are only seen for those with those degrees in the US who would compete for jobs. However, the increase productivity of the high skilled migrants is likely to offset those negative effects.
d. The potential negative effect of high skilled immigrants is likely are only seen for those with those degrees in the US who would compete for jobs. However, the increase productivity of the high skilled migrants is likely to offset those negative effects.
All of the following are instruments of fiscal policy except a. rebate on payroll taxes. b. education tax credits. c. unemployment insurance benefits. d. an interest rate cut.
d. an interest rate cut.
a.)The long run natural rate of unemployment is 5%. The current rate of unemployment is 7% what do we expect to happen if no policy isused. If no policy is used in the long run we would expect unemployment to [increase, decrease, stay the same] b.)If no policy is used in the long run we would expect the CPI to [increase, decrease, stay the same] a. CPI increase and unemployment decrease b. both to increase c. CPI decrease and unemployment increase d. both to decrease
d. both to decrease
Money that has value apart from its use as money is called a. fiat money. b. currency. c. convertible paper money. d. commodity money.
d. commodity money.
In the long run, a decrease in aggregate demand, all other things unchanged, will cause the price level to _______ and potential output to _______ . a. increase; increase b. decrease; decrease c. increase; remain stable d. decrease; remain stable
d. decrease; remain stable
The potential output in this economy is (graph) a. $7,000 billion at a price level of 1.16. b. $7,000 billion at a price level of 1.12. c. $7,000 billion at a price level of 1.08. d. described correctly in all of the above.
d. described correctly in all of the above.
The determinants of economic growth include all of the following except a. technological improvement. b. growth in physical capital. c. growth in human capital. d. growth in money supply.
d. growth in money supply.
If the aggregate demand curve is AD0, which of the following is the most appropriate discretionary fiscal policy to pursue? Graph: AD0 on LRAS AD1 left of LRAS AD2 right of LRAS a. increase government spending, increase individual income tax rates, and increase corporate income tax rates b. increase government spending, increase individual income tax rates, and decrease corporate income tax rates c. increase government spending, decrease individual income tax rates, and decrease corporate income tax rates d. maintain existing government spending, individual income tax rates, and corporate income tax rates
d. maintain existing government spending, individual income tax rates, and corporate income tax rates
If the aggregate demand curve is AD0, which of the following is the most appropriate discretionary fiscal policy to pursue? Graph:AD1 cross left of LRAS, AD0 cross on LRAS, AD2 cross right of LRAS a. increase government spending, increase individual income tax rates, and increase corporate income tax rates b. increase government spending, increase individual income tax rates, and decrease corporate income tax rates c. increase government spending, decrease individual income tax rates, and decrease corporate income tax rates d. maintain existing government spending, individual income tax rates, and corporate income tax rates
d. maintain existing government spending, individual income tax rates, and corporate income tax rates
A decrease in aggregate demand, all other things unchanged, will generate _______ in potential output and _______ in the price level. a. an increase; no change b. a decrease; no change c. no change; an increase d. no change; a decrease
d. no change; a decrease
According to the Bureau of Labor Statistics, a person who is not working and is not looking for work is a. considered unemployed. b. considered underemployed. c. counted as a "not currently working" member of the labor force. d. not a member of the labor force.
d. not a member of the labor force.
The movement from point C to point D is consistent with which phase of the inflation-unemployment cycle? Graph: .C .D a. Phillips phase because inflation is increasing while unemployment is falling b. recovery phase because although inflation has risen, unemployment has fallen c. growth phase because the economy is producing above its potential output d. recovery phase because inflation and unemployment have fallen
d. recovery phase because inflation and unemployment have fallen
At 3% unemployment which is likely to happen The Federal Reserve should a. buy bonds lowering the price of bonds and driving up the interest rates. b. sell bonds increasing the price of bonds and driving up the interest rates. c. buy bonds increasing the price of bonds and increasing the interest rates. d. sell bonds lowering the price of bonds and driving up the interest rates.
d. sell bonds lowering the price of bonds and driving up the interest rates.
Suppose the aggregate demand curve is AD2. All of the following events would bring the economy back to the natural rate of unemployment except AD2 point to the right of LRAS AD0 point on LRAS AD1 point to left of LRAS a. the government orders a one-time surcharge of 10% to be added to individual income tax liabilities. b. the government raises business taxes. c. the Federal Reserve sells bonds on the open market. d. the government orders a cut in withholding rates designed to increase disposable income and boost consumption.
d. the government orders a cut in withholding rates designed to increase disposable income and boost consumption.
All other things unchanged, an increase in the value of the dollar against the euro a. increases U.S. net exports and shifts the investment demand curve to the right. b. decreases U.S. net exports and shifts the investment demand curve to the left. c. increases U.S. net exports and shifts the aggregate demand curve to the right. d. decreases U.S. net exports and shifts the aggregate demand curve to the left.
d.decreases U.S. net exports and shifts the aggregate demand curve to the left.
