Chapters 7-10

The MPS is...

the change in saving divided by the change in income

If Mr. Garrison is paid an interest rate of 4% on his savings, but the inflation rate is 11%, the real interest rate Mr. Garrison earns is...

-7%

If the MPS is 0.60, MPC is...

0.40

If the MPS is 0.3, the MPC is...

0.7

If the MPS is 0.22, the MPC is...

0.78

If the MPS is 0.20, the MPC is...

0.80

If the MPS is 0.05, the MPC is...

0.95

You want to make a 6% real return on a loan that you are planning to make, and the expected inflation rate during the period of the loan is 4%. You should charge a nominal interest rate of...

10%

Lola wants to make an 11% real return on a loan that she is planning to make, and the expected inflation rate during the period of the loan is 5%. She should charge an interest rate of...

16%

Which of the following represents an action by the Federal Reserve that is designed to increase the money supply?

Buying government securities in the open market

The government wants to encourage consumer spending through cutting income taxes. This is an example of...

Fiscal policy

A man is fired from his job because he was late for work too many times. While he is searching for another job he would be classified as...

Frictionally unemployed

An individual who cannot find a job because his or her job skills have become obsolete is an example of...

Structural unemployment

The government implements fiscal policy when it changes...

Taxes and/or spending

Which of the following instruments is NOT used by the Federal Reserve to change the money supply?

The federal tax code

Deflation is a decrease in...

The overall price level

If the Fed sells government securities, then there is...

a decrease in the supply of money

The Fed uses open market operations to...

buy or sell government securities

When the Fed slows the rate of growth of the money supply to slow down the economy, the unemployment type that will be directly affected is the...

cyclical unemployment

Higher interest rates are likely to...

decrease consumer spending and increase consumer saving

A period during which aggregate output rises is known as an...

expansion

When an economics professor quits his/her job at a university and starts looking for a better job in another university, he/she is...

frictionally unemployed

Which of the following ARE topics studied in Macroeconomics?

gross domestic product; aggregate behavior of households and industries

A period of very rapid increase in the overall price level is known as...

hyperinflation

Lower interest rates are likely to...

increase consumer spending and decrease consumer saving

Inflation is an...

increase in overall price level

An increase in the overall price level is known as...

inflation

Household income is ___ related to consumption and ___ related to household saving.

positively; positively

A period when the economy shrinks is known as a...

recession, contraction, and/or slump

The term business cycle refers to the

short-term ups and downs in the level of economic activity

The MPC is...

the change in consumption divided by the change in income

The demand for corn has increased in May without any change in supply. Eight months later there still has been no change in corn prices. This is an example of a...

sticky price

Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are...

sticky prices

The natural rate of unemployment is generally thought of as the...

sum of frictional unemployment and structural unemployment

Deflation occurs when...

the average price level declines

Aggregate behavior is...

the behavior of all households and firms together

The discount rate is...

the interest rate the Fed charges commercial banks for borrowing funds

The trend of the economy is...

the long run growth path of the economy

The fraction of a change in income that is consumed or spent is called...

the marginal propensity to consume

Which of the following is NOT a topic studied in Macroeconomics?

the price of Dell computers

A decrease in the required reserve ratio...

will increase the money supply.

If you save $80 when you experience a $400 rise in your income,

your MPC is 0.80