ECON 104 EXAM 2, econ 104 exam 3, Econ 104 exam 1

a major source of inefficiency in barter economies is that they require

a double coincidence of wants in exchange

security

a financial asset such as a stock or bond that can be bought and sold in a financial market

inflation targeting

a framewoek for conducting monetary policy that involves the central bank announcing its target level of inflation

intermediate good or service

a good or service that is an input into another good or service (tire on a truck)

commodity money

a good used as money that also has value independent of its use as money

which of the following policies would not help promote economic growth

a law requiring that the funds in an individual retirement account be taxed

aggregate expenditure model

a macroeconomic model that focuses on the short run relationship between total spending and real gdp assuming that price level is constant

consumer price index

a measure of the average of the prices a typical urban family of four pays for the goods and services they purchase

new growth theory

a model of long-run economic growth which emphasizes that technological change is influenced by economic incentives and so is determined by the working of the market system

economic growth model

a model that explains growth rates in real GDP per capita over the long run

aggregate demand and aggregate supply model

a model that explains short-run fluctuations in real GDP and the price level

which of the following would be included in the US GDP in 2019?

a pair of jeans produced IN the USA in 2019

a transfer payment is

a payment by the government in which no good or service is received in return

taylor rule

a rule developed by john taylor that links the fed's target for the federal funds rate to economic variables

if the economy is in an expansion due to an increase in aggregate demand, the federal reserve will want to conduct _____ monetary policy which will ____ overall output and _____ the price level back to its original point

contractionary; lower; lower

speculators

currency traders who buy and sell foreign exchange in an attempt to profit from changes in exchange rates

if inventories decline by more than people predict they will decline, this implies that

actual investment spending was less than planed investment spending

if the price level rose in three consecutive years from 100 to 120 to 140 then the annual inflation rate over those years would

decrease

supply shock

an unexpected event that causes the SRAS curve to shift

positive analysis

analysis concerned what IS

Normative analysis

analysis concerned with what ought to be

marginal analysis

analysis that involves comparing marginal benefits and marginal costs

assets

anything of value owned by a person or firm

money

assets that people are generally willing to accept in exchange for goods and services or for payment of debts

the increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of

automatic stabilizers

to calculate GDP you need to use

base year prices and current year production values

A(n) _____ in private expenditure as a result of a(n) ____ in government purchases is called crowding out

decrease; increase

changes in price level

do not affect the level of aggregate supply in the long run

currency appreciation

dont need as many dollars to buy a euro ex: $0.80=1 euro currency gets stronger

nominal variables

economic variables calculated in current-year prices

someone who is working part-time but wants to be working full-time is classified as

employed

which of the following policies to promote economic growth did we not discuss in this lesson

enacting term limits on politicians

unemployment insurance payments

equal to about half the average wage

an increase in aggregate demand results in a(n) _____ in the _____

expansion, short-run if

net exports

exports minus imports

net exports is calculated as

exports minus imports

true or false: because the unemployment rate does not include people working part-time when they want to work full-time the unemployment rate overstates the true extent of joblessness in an economy

false

true or false: the establishment survey is the survey that samples 60,000 households, chosen to represent the US population

false

automatic stabalizers

government spending an taxes that automatically increase or decrease along with the business cycle

GNP

gross national product value of final goods/services produced by residents of US even if production takes place outside US

which of the following makes up the biggest part of the market basket?

housing

in this lesson we used the terms _____ when talking about knowledge capital and physical capital

ideas and objects

U-6 is a better measure of the true extent of joblessness in an economy than U-3 because

it includes discouraged workers and other marginally attached workers unlike U-3

an unemployment insurance program has which of the following effects?

it increases the amount of time spent searching for a job

the purchase of a used house would be counted under which component of GDP?

it is not included in GDP

canada runs a current account surplus with the united states. which of the following must be true about canada's balance of payments with the United States

it must run a financial account deficit

in early 2020, the world faced an outbreak of covid which halted labor productivity around the globe, specifically in China. What impact would this have on the pwpf for the economy of China?

it shifted down

in 1977, Congress amended the Federal Reserve Act and created what is knows as the dual mandate. which of the following two goals are associated with the dual mandate?

maximum employment and stable prices

net foreign investment is equal to

net foreign portfolio investment plus net foreign direct investment

Which of the following would be considered expansionary monetary policy? Select all that apply.

none of the above

the inflation rate for a given year is measured by taking the

percentage change in the price level from the previous year

frictional unemployment

short-term unemployment that arises from the process of matching workers with jobs

equity

the fair distribution of economic benefits

contractionary monetary policy

the fed's policy of increasing interest rates to reduce inflation

federal open market committee (FOMC)

the federal reserve committee responsible for market operations and managing the money supply in the united states

expansionary monetary policy

the federal reserves policy of decreasing interest rates to increase RGDP

potential GDP

the level of real GDP attained when all firms are producing at capacity

value added

the market value a firms adds to a product

GDP

the market value of all final goods and services produced in a country during a period of time, typically one year

all of the following are true statement about the multiplier except

the multiplier is a value between zero and one

real interest rate

the nominal interest rate minus the inflation rate

natural rate of unemployment

the normal rate of unemployment consisting of frictional unemployment and structural unemployment

current account

the part of the balance of payments that records a country's net exports, net income on investments, and net transfers

financial account

the part of the balance of payments that records purchases of assets a country has made abroad and foreign purchases of assets in the country

capital account

the part of the balance of payments that records relatively minor transactions such as a migrants' transfers and sales and purchases of non-produced non-financial assets

labor productivity

the quantity of goods and services that can be produced by one worker or by one hour of service

simple deposit multiplier

the ratio of the amount of deposits created by banks to the amount of new reserves

aggregate expenditure

total spending in the economy" the sum of consumption, planned investment, government purchases, and net exports

true or false: FRED began in the early 19990s

true

an increase in united states new foreign direct investment would occur if

united states citizens have increased their building or purchasing of facilities in foreign countries

during a recessionary period, the unemployment rate _____ and the total output and production ______

rises;falls

Italian car exports were hurt in 2009 as a result of the Great Recession. Holding all else constant, how did this decrease in exports affect Italy's aggregate demand curve?

shifts AD curve to the left

unemployed

someone who is not currently at work but who is available for work and who has actively looked for work during the previous month

economic variable

something measurable that can have different values (number of people employed in manufacturing )

government purchases

spending by federal , state, loca govts. on goods and services

assuming that the real interest rate rises, which of the following scenarios do you believe is most likely

the economy experiences a lower level of consumers' purchasing durable goods

patent

the exclusive right to produce a product for a period of 20 years from the date the patent application is filed with the government

one limitation of monetary policy is that the federal reserve cannot force individuals and banks to lend or borrow money even if the interest rates change by a lot. there could be other factors in play besides the interest rates. this limitation is known as

the financial system's strength uncertainty

consider two countries, alpha and beta. in alpha real GDP per capita is 6,000. in beta real GDP per capita is 9,000. based on the economic growth model, what would you predict about the growth rates in real GDP per capita across these two countries

the growth rate of real GDP per capita will be higher in alpha than it is in beta

opportunity cost

the highest valued alternative that must be given up to engage in an activity

trade-off

the idea that because of scarcity producing more of one good or service means producing less of another good or service

federal funds rate

the interest rate banks charge each other for overnight loans

required reserve ratio

the minimum fraction of deposits banks are required by law to keep as reserves

inflation rate

the percentage increase in the price level from one year to the next

unemployment rate

the percentage of the labor force that is unemployed

employment - population ratio

the percentage of the working-age population that is employed

recession

the period of a business cycle during which total production and total employment are decreasing

labor force

the sum of employed and unemployed workers in the economy

True or False: an 80 ear old who leaves their full time job but decides to start looking for a part time job is considered unemployed

true

true or false: contractionary monetary policy and expansionary fiscal policy both reduce net exports in an open economy

true

true or false: fiscal policy has a greater impact in a closed economy than it does in an open economy

true

true or false: the BLS is the government agency that releases data about the labor market including the unemployment and labor force participation rate

true

true or false: the official unemployment rate will never reach zero

true

not including discouraged workers in the offocial unemployment rate (U-3)causes the unemployment rate to ___ the true extent of joblessness

understate

seasonal employment/ unemployment rate

when industries higher someone just for the season

in which of the following scenarios will the real interest rate be greater than the nominal interest rate

when the economy is experiencing deflation

full employment

when the only unemployment is structural and frictional unemployment

if the price level in the US is 125, the price level in Mexico is 123, and the real exchange rate is 20.07 pesos per dollar, what is the nominal exchange rate from the U.S. perspective?

20.07= x (125/123) 20.07 = x (1.01) x= 19.8

if the price level in the US is 123, the price level in Mexico is 127, and the nominal exchange rate is 20.62 pesos per dollar, what is the real exchange rate from the U.S. perspective?

20.62 x (123/127)=19.97

the appreciation of the dollar is represented as a movement from which point to which point?

D->C A->B D->B shift of demand curve to right and diagonally up at where the equilibrium would be (D->B)

The Congressional Budget Office reported that federal budget deficits in the United States were likely to increase in future years, and these higher deficits might "pose a threat to the economy by crowding out business investment and threatening a spike in interest rates." This higher budget deficit would be represented graphically by

a shift in the loanable supply curve to the left

voluntary exchange

a situation that occurs in markets when both the buyer and the seller of a product are made better off by the transaction

allocative efficiency

a state of the economy in which production is in accordance with consumer preferences - every good/service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it

which of the following would be considered a fiscal policy action? select all that apply

a tax cut is designed to stimulate spending during a recession

assume that each of the following items is purchased by a typical urban family which of the following would be included in the CPI but not the GDP

a used pair of sunglasses purchased at the thrift store

A central bank like the Federal Reserve in the United States can help banks survive a bank run by

acting as a lender of last resort

all of the following are components of aggregate expenditure except

actual investment spending

if inventories decline by less than people predict they will decline, this implies that

actual investment spending was equal to than planned investment spending

at point A (above 45 line) in the figure above which of the following is true

aggregate expenditure is greater than GDP

employed

in govt. statistics, someone who currently has a job or who is temporarily away from his or her job

personal income

income received by households (includes transfer payments)

which of the following is true about the consumer price index?

it assumes that consumers purchase the same amount of each product in the market base each month

factors of production

labor, capital, natural resources, entrepreneurial ability

consumption is the ______ component of GDP in the USA

largest

your grandfather tells you he earned 6k/year in his first job in 1958. you earn 36k/year in your first job in 2019. you know the average prices has risen steadily since 1961 you earn

less than 6 times as much as your grandfather in terms of real income

empirical evidence from 1960 to 2014 shows that convergence in economic growth is occurring in which of the following cases

low-income industrial countries are catching up to high-income industrial countries

Expansionary monetary policy results in a ___________ interest rate and a ________ shift in the aggregate demand curve.

lower; rightward

the level of total investment by firms in new equipment is a ______ issue. understanding how much new equipments firms decide to purchase is a _____ issue

macroeconomic ; microeconomic

currently, out of the listed options, the largest category of outlay for the U.S. is:

mandatory spending

capital

manufactured goods that are used to produced other goods and services

financial markets

markets where financial securities such as stocks and bonds are bought and sold

poorly timed discretionary policy can do more harm than good. getting the timing right with fiscal policy is generally

more difficult than with monetary policy

long-run aggregate supply

a curve that shows the relationship between the price level and quantity of RGDP supplied in the long run

classical economists believe that prices are fairly ____ and are ____ policy intervention

flexible; opposed to

the advice "keep searching there are plenty of jobs around here for which you are qualified" would be most appropriate for which of the following types of unemployment

frictional unemployment

which of the following is a short-term unemployment that arises from the process of matching job vacancies with those who are searching for a job,

frictional unemployment

final good or service

good or service purchased by a final user

inventories

goods that have been produced but not yet sold

which of the following is a new tool of monetary policy as mentioned in this lesson?

interest paid on reverse repurchasing agreements

which of the following new tool of monetary policy ends up being the floor (minimum) of the federal funds rate range?

interest rate on reverse repurchasing agreements

which of the following increases labor productivity

inventions of new machinery, equipment, or software

which of the following increases labor productivity?

inventions of new machinery, equipment, or software

the purchase of a new house would be counted under which component of GDP

investment

assume that holding all else constant taxes on a business start to rise if this is true then

investment spending will fall

which of the following is.a reason why GDP is not the perfect measure of well-being in a society

it does not include health measures like life expectancy rates

enforcing property rights in an economy will

raise the level of total investment and entrepreneurship in an economy

Which of the following would be considered contractionary monetary policy? Select all that apply.

raising the discount rate open market sales raising the reserve requirement

a good measure of the standard of living is

real GDP per capita

when production in an economy grows more quickly than the population in that economy, which of the following must be occuring

real GDP per capita is rising

if production steadily increase year over year, which of the following must be true?

real GDP will always increase year over year

Suppose the labor force stays constant, and the working-age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will

remain constant

monetary policy

the actions the Fed takes to manage the money supply and interest rates to achieve macroeconomic objectives

marginal propensity to save (MPS)

the amount by which savings changes when disposable income changes

kimberland has a real GDP per-capita of 50,000. Mootopia has a real gdp per capita of 60k. which of the following can be said with certainty

the average person in mootopia can purchase more goods and services than the average person in kimberland

if foreign holdings of U.S> dollar increase, holding all else constant

the balance on the U.S. financial account will increase

open market operations

the buying and selling of treasury securities by the fed in order to control the money supply

federal reserve

the central bank of the united states

multiplier

the change in equilibrium real GDP divided by the change in autonomous expenditure

menu costs

the cost to firms for changing prices

menu costs

the costs to firms of changing prices

when the united states sends money to Philippines to help typhoon survivors, the transaction is recorded in

the current account

cyclically adjusted budget deficit or surplus

the deficit or surplus in the federal government's budget if the economy were at potential GDP

net foreign investment

the difference between capital outflows from a country and capital inflows, also equal to net foreign direct investment plus net foreign portfolio investment

cash flow

the difference between the cash revenues received by a firm and the cash spending by a firm

TAX WEDGE

the difference between the pretax and postax return to an economic activity

balance of trade

the difference between the value of the goods a country exports and the value of the goods a country imports

market for loanable funds

the interaction of borrowers and lenders that determines the market interest rate and the quantity of loanable funds exchanged

discount rate

the interest rate the fed charges on discount loans

expansion

the period of a business cycle during which total production and total employment are increasing

catch-up

the prediction that the level of GDP per capita (or income per capita) in poor countries will grow faster than in rich countries

real exchange rate

the price of domestic goods in terms of foreign goods

multiplier effect

the process by which a change in autonomous expenditure leads to a larger change in real GDP

long-run economic growth

the process by which rising productivity increases the average standard of living

globalization

the process of countries becoming more open to foreign trade and investment

labor market churn

the process of the economy creating and destroying jobs

securitization

the process of transforming loans or other financial assets into securities

foreign portfolio investment

the purchase by an individual or a firm of stocks or bonds issues in another country

foreign direct investment

the purchase or building by a firm of a facility in a foreign country

property rights

the rights individuals or firms have to the exclusive use of their property including the right to buy or sell it

multiplier effect

the series of induced increases in consumption spending that results from an initial increase in autonomous expenditure

marginal propensity to consume (MCP)

the slope of the consumption function: the amount by which consumption spending changes when disposable income changes

nominal interest rates

the stated interest rate on a loan

economics

the study of choices people make to attain their goals given their scarce resources

microeconomics

the study of how households and firms make choices how they interact in markets and how the government attempts to influence their choices

financial system

the system of financial markets and financial intermediaries through which firms acquire funds from households

real gdp

the value of final goods and services evaluated at base year prices

nominal gdp

the value of final goods and services evaluated at current-year prices

nominal exchange rate

the value of one countries currency in terms of another countries currency

grandmother 86 years old and retired 10 years ago. last month she decided she was bored and wanted to find a part time job. she put in some applications but has yet to hear back. she continues to look for a part-time job. we would officially count NANA as

unemployed

cyclical unemployment

unemployment caused by a business cycle recession

structural unemployment

unemployment that arises from a persistent mismatch between the skills or attributes of workers and the requirements of jobs

which of the following government provisions would help increase the accumulation of knowledge capital

- copyrights - education subsidies - patents

which of the following can be done using FRED

- view economic data graphically - access the source of where the economic data originated - change economic data to represent percentage change over time - download economic data into a spreadsheet format

which of the following represents the equation of the multiplier

1/MPS

the central bank of the united states targets a ___ inflation rate

2%

if the short-run aggregate supply decreases by less than the long-run aggregate supply, then, at the short-run equilibrium

GDP will be above potential GDP

federal budget deficits increase in future years and they might pose a threat to the economy by crowding out business investment and threatening a spike in interest rates this higher budget deficit would be represented graphically by

a shift in the supply curve for loanable funds to the left

economic model

a simplified version of reality used to analyze real-world economic situations

productive efficiency

a situation in which a good or service is produced at the lowest possible cost

bank panic

a situation in which many banks experience runs at the same time

bank run

a situation in which many depositors simultaneously decide to withdraw money from a bank

scarcity

a situation in which unlimited wants exceed the limited resources available to fulfill those wants

real variable

adjusted for inflation

in the basic AD-AS model, a decrease in taxes will shift ___ to the ____

aggregate demand; right

in the basic AD-AS model, short-run expansionary fiscal policy will shift ___ to the ___

aggregate demand; right

business cycle

alternating periods of economic expansion and economic recession

which of the following policies would reduce frictional unemployment

building an online job database that helps workers find jobs

which of the following would be a consequence of substitution bias in CPI

businesses would overcompensate employees for inflation when giving cost of living raises

underground economy

buying and selling of goods and services that is concealed from the govt. to avoid taxes or regulations or because the goods and services are illegal

suppose the economy is in long-run equilibrium and there is a decrease in consumers' expected future income. as a result, real GDP will ____ in the short run, and ____ in the long run.

decrease; increase to its initial level

discount loans

loans the fed makes to banks

required reserves

reserves that a bank is legally required to hold, based on its checking account deposits

excess reserves

reserves that banks hold over the legal requirement

looking at the AD-AS model and holding all else constant, if the FOMC conducts open market purchases, we would see the price level ____ and the real GDP _____

rise; rise

balance of payments

the record of a country's trade with other countries in goods, services, and assets

consumption function

the relationship between consumption spending and disposable income

per-worker production function (pwpf)

the relationship between real GDP per hour worked and capital per hour worked holding the level of technology constant

which of the following do we not include in calculating GDP?

used goods imported goods intermediate goods

suppose the economy is at point A. If the price of oil increase in the economy, where will the eventual long-run equilibrium be?

A

financial securities

A document that states the terms under which funds pass from the buyer to the seller

Which of the following would be included in the United States GDP in 2019?

A pair of jeans produced in the United States in 2019.

europe experiences an economic boom. assuming all else remains constant, this would be represented as a movement from

A->B ( shift of demand curve to right)

holding all else constant, suppose a government becomes corrupt and institutions such as the rule of law and property rights stop being enforced, this would be represented by a movement

LRAS2 TO LRAS 1(LRAS shift left)

Holding all else constant if the price of oil unexpectedly increase by 15% we would see a movement from

SRAS 2 TO SRAS 1 (SRAS shift left)

fiscal policy

changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives

suppose that the U.S. government deficit decreases, causing interest rates in the United States to fall relative to those in the European Union. Assuming all else remains constant, how would this be represented?

demand would decrease and the eocnomy moves from C to D (demand curve shift left)

suppose the U.S. government deficit causes interest rates in the United States to rise relative to those in the european union. Assuming all else remains constant, how would this be represented?

demand would increase and the economy moves from D to C ( demand shift right)

assuming no change to the federal budget deficit, if firms expect the economy to enter an expansion in the upcoming year the ____ curve for loanable funds will shift to the ______ and the equilibrium real interest rate will _______

demand; right; rise

financial intermediaries

firms such as banks, mutual funds, pension funds, and insurance companies that borrow funds from savers and lend them to borrowers

if prices steadily increase year over year, which of the following must be true?

none of these are correct^

assuming no change to the federal budget deficit, an increase in taxes on consumption will shift the _____ curve for loanable funds to the ______ and the equilibrium real interest rate will ______

supply; right; fall

rule of law

the ability of a government to enforce the laws of the country, particularly with respect to protecting private property and enforcing contracts

stagflation

a combination of inflation and recession usually resulting from a supply shock

if production and prices steadily increase year over year, which of the following must be true?

- real GDP ia higher than nominal GDP in years before the base year - nominal GDP will always increase year over year - nominal GDP is higher than real GDP in years after the base year - real GDP will always increase year over year

which of the following are examples of microeconomic issues

- sandra takes out a loan to invest in a new business - the federal government of sweden offers tax credits for individuals to put solar paneling on their homes - a local sandwhich shop shuts down during a recession

the GDP of the US was 21.4 trillion in 2018 this means that

- total spending in 2018 was 21.4 - the value of output in 2018 was around 21.4 total income in 2018 was around 21.4

holding all else constant, a decrease in consumers' expenditure future income would be represented by a movement from

AD2 to AD 1 (AD shift left)

Interest rates in the economy have fallen. How will this affect aggregate demand and equilibrium in the short run?

Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise.

suppose the economy is in macroeconomic equilibrium and the federal government pursues expansionary fiscal policy. using the basic AD-AS model in the figure above, this would be depicted as a movement from

C to B (movement upwards along SRAS)

suppose the economy is in an expansion and the fed pursues contractionary monetary policy. using the basic AD-AS model in the figure above, this would be depicted as a movement from

B to C (shift down and along SRAS back to equilibrium)

according to the graph above which point indicates that aggregate expenditure is less than GDP

C (below 45 line)

suppose the economy is in a recession and the federal government pursues expansionary fiscal policy. using the basic AD-AS model in the figure above, this would be depicted as a movement from

D to C (movement upwards along SRAS to equilibrium point)

looking at the AD-AS model and holding all else constant, if the FOMC raises the reserve requirement, we would see the price level ___ and the real GDP _____

Fall; fall

according to the basic AD-AS model, a decrease in taxes will ____ the price level and ____ level of real GDP

INCREASE; INCREASE

using the notation from this lesson and assuming we are in a closed economy, public saving is equal to which of the followiN

T-G-TR

technological change

a change in the quantity of output a firm can produce using a given quantity of inputs

which of the following is always the highest number?

U-6

using the notation from this lesson and assuming we are in a closed economy, private saving is equal to which of the following

Y+TR-C-T

fractional reserve banking system

a banking system in which banks keep less than 100% if deposits as reserves

M2

a broader definition of money supply that includes M1+savings account deposits + small denomination time deposits + balance in money market deposit accounts in banks, and noninstitutional money market fund shares

If the federal government's expenditures are more than its tax revenues, then

a budget deficit results

aggregate demand curve

a curve that shows the relationship between the price level and the level of planned aggregate expenditure in the economy, holding constant all other factors that affect aggregate expenditure

short-run aggregate supply

a curve that shows the relationship between the price level and the qty. of RGDP supplied by firms in the short run

crowding out

a decline in private expenditure as a result of increase in government purchases

crowding out

a decline in private expenditures as a result of an increase in government purchases

deflation

a decline in the price level

price level

a measure of the average prices of goods and services in the economy

gdp deflator

a measure of the price level, calculated by dividing nominal GDP by real GDPx 100

When a local restaurant accepts your $20 bill when you purchase a to-go order of pasta, the $20 bill serves as:

a medium of exchange

M1

a narrow definition of money supply, the sum of currency in circulation+checking account+deposits in banks+holdings of travelers checks

The ______________ model shows the relationship between total spending and total output whereas the __________ model shows the relationship between the price level and real GDP.

aggregate expenditure; aggregate demand-aggregate supply

efficiency wage

an above market wage that firms pay to increase workers productivity

which of the following transactions would be included in germany's current account?

an american citizen purchases a new volkswagon made in germany

producer price index (PPI)

an average of the prices received by producers of goods and services at all stages of the production process (includes intermediate goods) - changes in PPI can have warning for future movements in CPI

mixed economy

an economy in which most economic decisions result from interaction of buyers and sellers in markets but in which the govt. plays a significant role in the allocation of resources

market economy

an economy in which the decisions of households and firms interacting in markets allocate economic resources

centrally planned economy

an economy in which the government decides how economic resources will be allocated

open economy

an economy that has interactions in trade or finance with other countries

closed economy

an economy that has no interactions in trade or finance with other countries

saving and investments equations

an equation that shows that national savings is equal to domestic investment plus net foreign investments

autonomous expenditure

an expenditure that does not depend on the level of gdp

holding all else constant which of the following will shift the aggregate demand curve to the left?

an increase in business taxes

holding all else constant, if the economy's marginal propensity to consume (MPC) decreases, the consumption function will

become flatter

holding all else constant, if the economy's marginal propensity to save (MPS) increase, the consumption function will

become flatter

knowledge capital is

both nonrival and nonexcludable

suppose that an increase in capital per hour worked from 15,000 to 20,000 increases real GDP per hour worked by 500. if capital per hour worked increases further to 25,000 by how much would you expect real GDP per hour worked to increase if there are diminishing returns

by less than $500

Historical societies used precious metals such as gold or silver as money. This would be an example of a

commodity money

if the economy witnesses an unplanned increase in inventories we would expect to see production ____ and employment ____ moving the economy towards macroeconomic equilibrium

decrease; decrease

reserves

deposits that a bank keeps as cash in its value or on deposit with the fed

according to the world bank, albania does one of the worst jobs as a country enforcing the rule of law. the consequences of a weak rule of law is

difficulty in attracting investment and low economic growth

market

group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade

assume the economy is currently experiencing stagflation. if the monetary policy actions result in the price level returning to the original level, economics would say the FOMC conducted ____ monetary policy

hawkish

Holding all else constant, open market sales would result in a ___________ interest rate and a ________ shift in the aggregate demand curve.

higher; leftward

if the US economy is currently at D holding all else constant, which of the following could cause it to move to point B

household expect future income to decline (shifts down to equilibrium point)

assume that the economy is in a recession below potential GD. if policymakers implement an expansionary fiscal policy but underestimate the size of the multiplier, the new equilibrium level of GDP is likely to

increase and be above potential GDP

because of technological changem oil companies like chevron were able to produce almost twice as much output from refineries in 2016 as in 1950 while using 60 percent fewer workers. this represents _____ in output per worker which is also known as ______

increase; labor productivity

technological advances generally result in

increased life expectancy

Holding all else constant, an decrease in the interest paid on reserves and the interest paid on repurchasing agreements would result in a ___________ federal funds rate and a ________ shift in the aggregate demand curve

lower; rightward

fiat money

money such as paper currency that is authorized by a central bank or governmental body and that does not have to be exchanged by the central bank for gold or some other commodity money

M1 is ____ M2

more liquid than

currency depreciation

need more dollars to buy a euro ex: $1.20= 1 euro currency gets weaker

which of the following component of GDP can be negative

net exports

if the price level in the United States is changing at a faster rate than the price level in other countries, what will be the effect on net exports for the united states

net exports will decrease as US exports decrease

net foreign investment minus net foreign portfolio investment is equal to

net foreign direct investment

to be considered unemployed, one must

not be working and be actively looking for a job

Holding all else constant, when the price level decreases, what happens to the aggregate demand curve?

nothing, it results in a movement along

what are the old tools of monetary policy?

open market operations, discount policy, reserve requirements

suppose the economy is at full employment and workers expect the price level to increase in the future. which of the following will happen in the short run?

output will decline

transfer payment

payments by the govt. to households for which the govt. does not receive a new good or service in return - social security/unemployment insurance

discouraged workers

people who are available for work but have not looked for a job during the previous four weeks because they believe no jobs are available for them

the nominal interest rate equals the real interest rate ____ inflation rate

plus

holding all else constant, an increase in the price level would be represented by a movement form

point A to point B (shift up along SRAS)

african countries prohibiting foreign direct investment in the 1950s and 1960s. by doing so these countries were essentially preventing a movement from

point B to point C (shift up)

technological change is illustrated in the pwpf in the graph above by a movement from

point B to point C (shift up)

investment

spending by firms on new factories, buildings, machinery, and additions to inventories plus spending by households and firms on new houses

consumption

spending by households on goods and services not including spending on new houses

which type of unemployment is most often associated with long-term unemployment

structural unemployment

macroeconomics

study of the economy as a whole including topics such as inflation, unemployment, and economic growth

when the price of gas rises some consumers ride bikes instead the fact that CPI does not fully account for such changes in consumer behavior is called

substitution bias

assuming no change to the federal budget deficit, if individuals expect their wealth to decrease in the upcoming year, the _____ curve for loanable funds will shift to the _______ and the equilibrium real interest rate will _____

supply; right; fall

assuming no change to the federal budget deficit, if the government passes legislation that prohibits banks form chargin fees on savings accounts, the _____ curve for loanable funds will shift to the ______ and the equilibrium real interest rate will _____

supply;right;fall

according to your readings, there are many measurement probLems when it comes to the official unemployment rate in the US. one of them causes the measured unemployment rate to overstate the true extent of joblessness. this problem arise because

the BLS does not verify the responses of people included in the survey

economic growth

the ability of an economy to produce increasing quantities of goods and services

human capital

the accumulated knowledge and skills that workers acquire from education and training or from their life experience

a t shirt produced in vietnam in 2016 but sold to the US in 2019 would be included in

vietnams 2016 GDP