Econ 144 final

As discussed in lecture, what is the current reserve requirement for a bank that has exactly $100 million in assets? What if the bank has $200 million?

$100 million: 3% $200 million: 10%

If you believe you can successfully fill a gap between current GDP of $17.6 trillion and potential GDP of $20 trillion by EITHER tax cut of $800 billion OR an injection of government spending of $600 billion you must believe that the MPC is....

.75

As discussed in class, list 4 ways that the CPI differs from the GDP deflators

1. CPI is calculated by the BLS. GDP is done by BEA 2. CPI's base year=1983. GDP=2009 3. CPI looks at price. GDP= PxQ 4. CPI is what consumers buy and GDP is all goods and services

If the nominal interest rate on a mortgage is 4.2% and inflation is the current annual measure of inflation as reported in the CPI, what is the real interest rate on that same mortgage?

1.7% (4.2-2.5) (2.5 is our current inflation rate)

What is the actual current value of the GDP deflator?

112.2

As discussed in lecture, what is the current value of M2?

13.35 trillion

Which is not apart of the market for loanable funds? A. The amount of net exports that makes up (x-m) B. The interest rate C. The Amount of investment D. All three are apart of it

A

What was the name of the index created by Dr. Alberto Cavallo from MIT that tracks changes in 5 million online prices every day?

Billion Prices Project

What is the name that calculates GDP and what is the base year?

Bureau of Economic Analysis, 2009

The entity that calculates the CPI is the ______ while the entity that determines the beginning and ends of business cycles is ______.

Bureau of Labor Statistics, National Bureau of Economic Research

Assume current reserve requirement is 10%. Also assume people keep 15% as currency. Assume a $30,000 initial deposit is made. After rippling through what is the total amount of deposits. A. $184,000 B. $162,000 C. $138,000 D. $112,000

C

Assume the current number of discouraged workers in the US in Feb. is 6 million. Assume in March that 1 million of these discourage workers start looking. They don't find a job, but they start looking. Which of the following is correct? A. The numerator of U6 will be smaller in March B. The numerator of U6 will be bigger C. the numerator of U6 will be unchanged D. None

C

Consider the graph above of the per worker production function. What is on the vertical axis of the graph? A. # of workers (quantity of labor) B. Equipment per hour worked C. Output per hour worked D. None

C

Consider these three statements... 1. Signed into law by President Bush 2. Approximately $840 billion 3. Included both tax cuts and government spending Which is most accurate? A. 1 and 2 describe Tarp, 3, describes the ARRA B. 1 and 2 describe the ARRA, 3 describes TARP C. 2 and 3 describe the ARRA, 1 describes TARP D. 2 describes TARP, 1 and 3 describe the ARRA

C

Consider these two statements: 1. The fed often changes the RR if it want to adjust the money supply 2. The fed often buys/sells government bonds if it wants to adjust the money supply Which is accurate? A. Both 1 and 2 are correct B. both 1 and 2 are incorrect C. Only 2 is correct D. Only 1 is correct

C

As discussed in the text if AE is different from GDP it is because of _____ and specifically because of _____. A. C, durable goods B. I, residential investment C. G, federal spending on defense D. I, changes to inventories

D

Assume that GDP is 6% below where we want it to be, and inflation is 2% above where we want it to be. Also assume current inflation is 1% and the real Fed Funds Rate is 1%. According to the Taylor Rule, if the weights on the output gap and inflation gap are each .5, what should the nominal Fed Funds Rate be set at? A. 4% B. 1% C. 2% D. None of the above

D

Assume unemployment is 5% and GDP is $18 tril. Which of the following is most likely an accurate description of a point to the left and slightly higher? A. Unemployment is 3% and GDP is 19 trillion B. Unemployment is 8% and GDP is 16 trillion C. Unemployment is 6% and GDP is 17 trillion D. Both B or C but not A

D

Consider the following 1. The exchange rate 2. the unemployment rate 3. The price level Which is correct? A. 1 and 2 will affect I, 3 won't B. 2 and 3 will affect I, 1 won't C. 1 will affect I, 2 and 3 won't D. None

D

Consider the following 2 items: 1. A Ford F-150 pick up truck made and sold in Mexico(ford is US) 2. A Mitsubishi Mirage made and sold in Alabama Which is right? A. 1 would be included in a calculation of US GDP but 2 would not B. 2 would be included in US GNP but 1 would not C. Both 1 and 2 would be included in a calculation of US GNP but not US GDP D. None

D

Suppose a tax cut successfully closes the gap between "current" GDP of $16.3 trillion and "potential" GDP of $19 trillion. If the MPC= .75 how much was the original tax cut? A. 600 billion B. 800 billion C. 1 trillion D. None of the above

D. 900 billion

As discussed in class, what is the current value of Real GDP for the US right now? and was is the rate that the economy is growing?

GDP: 16.8 trillion Growth: 1.9%

If you believe you can exactly fill a gap betwen current GDP of $17.5 trillion and potential GDP of $19 trillion with a tax cut of $1 trillion, what must be the value of MPC and what must be the value of the tax multiplier?

MPC: 0.6 Tax Multiplier: 1.5

Assume that an initial injection of $750 billion dollars into the economy ultimately increases GDP from $17 trillion to $20 trillion. What would the value of the MPC be? And multiplier?

MPC: 0.75 Multiplier: 4

In the Quantity Theory of Money, what exactly does "PY" represent?

Nominal GDP

In class we discussed supply side economics. In that discussion your textbook indicated that cutting income taxes and corporate taxes would produce which of the following effects?

Rightward shift of the LRAS curve.

What is the term for taking a bunch of financial assets like mortgages and bundling them together to create a new investment instrument?

Securitization

What percentage of the ARRA was made up of tax cuts? What percentage was made up of government spending?

tax cuts: 37% government spending: 63%

What is the term for government payments for which the government receives no goods or services in return?

transfer payments

In the spaces below, write down any 4 of the 5 components of GDP when it is calculated using the income approach

wages, interest, rent, profit

As discussed in lecture, which of the following parts of US debt is the largest? A. The portion of the debt that we owe to individual investors b. the portion of the debt that we owe to the Federal Reserve. C. The portion of the debt that we owe to state and local governments. D. its a trick question, A and B are almost the exact same size.

A

Assume current GDP is $16 trillion and full employment output is $22 trillion. If MPC is .75 an initial injection of G would need to be _______ to successfully fill the gap, while an initial tax cut would need to be ____ to successfully fill the gap. A. $1.5 trillion, $2 trillion B. $500 bil, $700 B C. $750 billion, $1 trillion D. None of the above

A

Assume that real GDP increases. Which of the following would we see? A. A right shift of AD? B. A right shift of the money supply? C. A left shift of AD? D. None of the above.

A

Assume the MPC is .75. Which of the following is correct? An initial injection of $500 billion into the economy, after it ripples through ultimately will increase overall output... A. From $18 trillion to $20 trillion B. From $17 trillion to $20 trillion C. From $19 trillion to $20 trillion D. None

A

Consider the following two phenomena: 1. The dollar gets stronger compared to other currencies 2. (x-m) decreases because M increases Which of the following is most accurate if interest rates rise in the US A. Both 1 and 2 are correct B. Neither 1 nor 2 is correct C. Only 1 is correct D. Only 2 is correct

A

Consider these three statements 1. Interest rates increase 2. Government spending (G) decreases 3. Consumption (C) and Investment increase Which of the following most correct regarding "crowding out" as we discussed it in lecture? A. 1 is part of crowding out, 2 and 3 aren't B. 2 is part of crowding out, 1 and 3 aren't C. 3 is part of it, 1 and 2 are not D. Actually all three are a part of it.

A

Consider these three statements: 1. m1 gets bigger 2. m2 gets bigger 3. M2 stays the same Assume you take $1000 out of your savings account and keep it as currency. Which of the following is most accurate regarding how this will affect the monetary aggregates we discussed in class? A. 1 and 3 will happen, 2 will not B. 1 and 2 will happen, 3 will not C. 1 will happen, 2 and 3 will not D. None

A

Consider: 1. reducing taxes is one example of monetary policy 2. monetary policy decisions made by the Fed must be approved by Congress 3. The chairman of the Fed must be approved by the senate. A. 1 and 2 are wrong, 3 is true B. 1 and 3 are wrong, 2 is correct C. 1,2, and 3 are right D. only 1 is right

A

The difference between a nominal and a real interest rate is.... A. The nominal rate = the real rate + inflation rate B. The real rate is the rate you actually see advertised and the nominal rate takes into account inflation C. The nominal rate = real rate/inflation rate D. The real rate = (nominal rate)(inflation rate)

A

What would cause a leftward shift of the SRAS? A. US sees massive drop in oil prices B. Wages in the US increasing significantly first increases in 20 years C. Federal Reserve Raises Interest Rates D. Actually all three would cause a shift

A

Assume the current reserve requirement is 6%. Also assume people keep 20% out as currency. Assume a $40,000 initial deposit is made into a bank. What is the total amount of deposits once the money has worked through the system? A. 184,000 B. 132,000 C. 251,000 D. 288,000

A. ( use (1+currency)/(RR+currency))

The American Recovery and Reinvestment Act (the Stimulus) was intended to cause....

AD to shift right

Based on our in class discussions of the Phillips Curve, which of the following is the correct term regarding the idea that people base their expectations of inflation on what inflation was last year?

Adaptive Expectations

In our discussion of the Phillips Curve which of these cause the short run Phillips Curve to shift upward?

An increase in expected inflation

As discussed in lecture, if unemployment is being caused by the existence of a minimum wage it must be that... A. The minimum wage is below the "market" wage B. The minimum wage is above the market wage C. The minimum wage is equal to the market wage D. None

B

Assume that full employment output is $20 trillion and current GDP is $17.5 trillion. If the government believes they can successfully fill the gap between those two with an initial injection of $500 billion of spending, what is the value that they believe the MPC is? A. .75 B. .8 C. .6 D none

B

Assume that prices in all other countries are increasing, which prices of goods in the US are not. Based on our discussion of AE this would cause... A. NX to decrease, which would move AD to the left B. NX to increase, which would move AD to the right C. NX to increase, which would move AD left D. NX to decrease, which would move SRAS right

B

Consider about business cycle: 1. if we're in a recession we know prices are falling 2. If we're in an expansion we know unemployment is declining Which is true? A. 1 and 2 are right B. 1 and 2 are wrong C. 1 is right, 2 is wrong D. 2 is right, 1 is wrong

B

In the case of "crowding out", if it works the way your author suggests which of the following is correct? A. We'd see a shift from Curve X to Z then back to Y (vertical lines) B. We'd see a right shift from Curve J to G, then left back to Curve H (demand lines) C. We'd see a shift from Curve X to Y, then additional shift to Curve Z D. We'd see a shift from Curve J to H then another shift to G

B

Looking at the market for loanable funds. If Congress votes to increase the corporate tax rate which would we see? A. AD shift right B. AD shift left C. Supply shift right D. Supply shift left

B

Products A and B are complements on the demand side. If the price for product A decreases what will we see in the market for product B? A. Demand left, decrease in demand B. Demand right, increase in demand C. Demand left, decrease in quantity demanded D. Demand shifting right, increase quantity demanded

B

Recall our discussions in lecture of the financial meltdown. Which of the following is correct? A. Collateralized debt obligations were a type of insurance you could purchase on a credit default swap. B. Credit default swaps were a type of insurance you could purchase on collateralized debt obligations. C. Both A and B are correct. D. Neither A nor B is correct

B

We examined the factors that affect the different parts of Aggregate Expenditure (AE). Which of the following is correct as we learned in the book? A. Interest rates affected the planned investment part of AE but not Consumption B. Taxes affected investment but not net exports C. The exchange rate affected consumption but not investment D. Both A and B

B

Which of the following is not a component of I in GDP? A. Business structures B. Durable goods C. Residential investment D. All three are apart of I

B

Which of the following was not listed in the book and in lecture as one of the answers to the question "Why don't more low income countries experience rapid growth"? A. Corruption B. insufficient natural resources C. Wars and revolutions D. poor public education and health

B

Which of the following will not result in a lower equilibrium price in the market you're looking at? A. Market for butter, price of margarine decreases B. Market for motorcycle helmets, price of motorcycles decreases C. Market for electric cars, technology used to make electric cars improves D. All three will result in a lower equilibrium price

B

Which of the following would not shift SRAS to the left? A. The price of oil increases significantly and quickly B. Technology advances significantly and quickly C. Real wages increase significantly and quickly D. All three would shift it

B

You are looking at the market for smartphones. Consider: 1. The technology used to produce smartphones improves significantly. 2. The incomes of buyers of smart phones increases, and smartphones are a normal good After curves have shifted what would we see? A. A higher equilibrium price, can't say quantity B. Higher quantity, can't say price C. Lower price and lower quantity D. None

B

Consider: 1. A house is sold that was built in 1992 2. The highway patrol purchases 100 brand new cars 3. A couple buy a new bed from a local company Which is true? A. All three purchases would be in GDP and part of durable goods B. Only 1 and 2 would be in GDP and part of durable goods C. Only 2 and 3 would be in GDP but only 3 would be durable goods D. Only 1 and 3 would be in GDP and both would be durable goods

C

Consider: 1. A new Toyota prius is built and sold in Alabama in 2016 (Japanese) 2. A new Ford Figo is built and sold in India in 2016. (US) A. Both 1 and 2 would be included for GDP B. Neither 1 nor 2 would be included in a calculation of GDP C. Only 1 would be in GDP D. only 2 would be in GDP

C

Consider: 1. The value of leisure is not included in GDP 2. The purchase of financial assets, such as stocks and bonds, isn't included in GDP A. both 1 and 2 were listed in the textbook as shortcomings of GDP B. neither 1 nor 2 were listed C. only 1 was listed D. only 2 was listed

C

Economists estimate the size of the US underground economy to be... A. at most 3% of GDP B. at most 5% of GDP C. at most 10% of GDP D. at most 20% of GDP

C

Following directly from above, Richard has been looking for a new job every single day since he was fired. He has never missed a day. In a normal calculation of the U6 by the BLS Richard would be... A. Included in the numerator but not denominator B. Included in the Denominator but not numerator C. Included in both the numerator and the denominator D. Not included in either the numerator or denominator

C

If buyers of jet skis expect the price to decrease in the future we will see _____ today, and if the sellers of jet skis also expect the prices to decrease in the future we will see ________ today. A. demand right, supply left B. Demand right, supply right C. Demand left, supply right D. Demand left, supply left

C

If the value of the GDP Deflator in 2015 is exactly 110.7 and the value of nominal GDP is 19.7 trillion, which of the following comes closest to the value of real GDP in 2015? A. 16.2 trillion B. 16.9 trillion C. 17.8 trillion D. 18.4 trillion

C

In the text, when your author was discussing tax cuts and supply side effect, which of the following was not listed as one of the tree impacts of reducing corporate income taxes A. The pace of technological change might increase. B. Corporations would see a higher return on investment in new equipment C. Corporations would hire more employees as their tax rates fell. D. Actually all three are listed

C

Richard was fired 2 months ago from his job as an architect because he refused to use a computer and architectural software to do his designs and blueprints; he insists on creating all his designs and blueprints using paper and pencil. Thats why he got fired. This is characterized as... A. Seasonal Unemployment B. Frictional Unemployment C. Structural Unemployment D. Cyclical Unemployment

C

Sometime the CPI market basket contains one good, such as a ticket to a movie in a theatre, and an increase in the price of the movie ticket causes people to shift their purchases to something else instead, like streaming a movie on Netflix (not apart of the market Basket) This is called _______ and it means that the CPI may ______ how price changes affect consumers. A. Quality Bias; overstate B. New Product Bias; understate C. Substitution Bias; overstate D. Substitution Bias; understate

C

The opposite of a government budget deficit is a government budget surplus. If the government did run a budge surplus which would we see? A. AD shift right B. AD shift left C. Supply shift right D. Supply shift left

C

Which of the following is correct? A. The U3 in Brianlandia (4.9%) is significantly higher than the current value for the US (more than 2% more) B. The U3 in Bland is lower than the US (more than 2%) C. The U3 in Bland is almost identical to the US (within 1/2 a percent in either direction) D. None of the above is correct

C

You are looking at the AD/SRAS/LRAS model and AD and SRAS are currently intersecting to the right of LRAS. Now, you open up the paper and read that real wages are declining. Which of the following is most accurate regarding what you could expect to see on the graph as a result of this? A. Unemployment was at 8% and it decreases 7.5% B. Unemployment was at 8% and it increases to 8.5% C. Was at 4% and it decreases to 3.5% D. Both A and C but not B

C

You are looking at the market for Diet Coke. Consider: 1. The price of diet pepsi decreases 2. The incomes of buyers of Diet Coke increase, and Diet Coke is a normal good. Which is correct? A. Neither 1 nor 2 would cause the demand curve to shift left B. Both 1 and 2 would cause the curve to shift left C. Only 1 would cause the demand curve to shift left D. Only 2 would cause the demand curve to shift left

C

You are looking at the market for tortilla chips. Two things happen at the same time: the price of corn, an input to tortilla chips, decreases. Also the price of salsa a complement to chips decreases. In the market for tortilla chips we would see.... A. Demand left, supply left, higher price and can't say quantity B. Demand left, supply right, higher quantity, no price C. Demand right, supply right, higher quantity, no price D. Demand left, supply left, lower price no quantity

C

You are supposed to know the four largest components of the CPI market basket. Which was not one of the four? A. Transportation B. Medical Expenses C. Recreation D. All of these were in the top four

C

Consider these 3 statements regarding "quantitative easing" 1. if the interest rate on long term bonds decreases, other long term interest rates will decrease as well. 2. If the price of long term bonds decreases, the interest rate on long term bond will decrease as well. 3. The Fed's goal was to reduce the prices of long term bonds Which is most accurate? A. 1, 2, and 3 are all incorrect B. 1,2 and 3 are all correct C. Only 2 is correct D. Only 1 is correct

D

Consider these 4 statements: 1. Today our debt is the highest its ever been. 2. Today our debt to gdp ratio is the highest its ever been 3. Last year, for 2016 our deficit was the highest its ever been 4. We have never had to raise the debt ceiling in this country before this year. A. Only 4 is correct B. Only 3 is correct C. Only 2 is correct D. Only 1 is correct

D

Consider these three statements: 1. Fiscal policy is enacted by the federal reserve 2. One example of fiscal policy would be a reduction in taxes 3. One example of fiscal policy would be raising interest rates Which is most accurate? A. 1, 2, and 3 are all incorrect B. 1, 2, and 3 are all correct C. 3 is correct, 1 and 2 are incorrect D. 1 and 3 are incorrect, 2 is correct

D

Consider: 1. The current level of Federal debt is ~20 trillion 2. The current level of Federal debt is too high 3. the current level of Federal debt should be lowered through a government austerity program Which is correct? A. 1 and 3 are positive statements, 2 is a normative statement B. 2 and 3 are positive statements, 1 is normative C. 1 and 2 and positive, 3 is normative D. None

D

In the country of Brianlandia there are 78 million people currently working; this includes people working both fulltime and part time. There are 4 million people who are not working but have looked for a job in the past 4 weeks. There are 58 million people who are 16 years or older, are not working, have not looked in the past 4 weeks, are not in the hospital, are not in prison or the military. If they calculated the U3 exactly as the BLS does for the US which of the following comes closest to the value of U3 in Brianlandia? A. 6.2% B. 5.6% C. 5.1% D. 4.9%

D

In the market for loanable funds, if there is a decrease in corporate taxes we would see... A. The supply of loanable funds shift left, producing a higher interest rate B. The demand for loanable funds shift left, producing a lower interest rate C. The supply of loanable funds shift right, producing a lower interest rate D. The demand for loanable funds shift right, producing a higher interest rate

D

Regarding the Quantity theory of money that we discussed in class, if real GDP is $12 trillion and the price level is 2 and the money supply is 8 trillion what must the value of velocity be? A. 8 B. 6 C. 4 D. None

D

The US dollar becomes weaker compared to all other major currencies in the world. On an SRAS/AD/LRAS graph we would see.... A. higher unemployment B. higher price levels C. A rightward shift in AD D. B and C but not A

D

The graph depicts the concept of diminishing returns. Consider: 1. All inputs are variable 2. At least one input is fixed Which is true: A. Both 1 and 2 are part of the description of diminishing returns B. Neither 1 nor 2 is part of it C. Only 1 is part of the description of diminishing returns D. Only 2 is part of the description

D

Throughout 2008 and 2009 the Fed spent billions of dollars buying bonds. The goal of this was to _____ which would have the effect of _______ ultimately producing a ________ level of output. A. Decrease MS, pushing AD left, lower B. Decrease MS, AD right, higher C. Increase MS, AD left, lower D. Increase MS, AD right, higher

D

Two weeks ago, on March 15th, the Federal Reserve's Federal Open Market Committee voted to do what? A. To lower the reserve requirement B. to lower the target for the Fed Funds rate C. To buy $1 billion worth of government bonds in order to increase the money supply D. None

D

Which of the following is correct based on our discussion of the Federal Government's budget in lecture? on the revenue side (money flowing in to the government....) a. payments from corporate income taxes make up a larger part of the government's revenue than payments on social security taxes. b. payments from corporate income taxes make up a larger part of the government's revenue than payments from individual income taxes c. Actually both A and B are correct d. Actually neither A nor B is correct

D

You are looking at the AD/SRAS curves and they are intersecting to the left of LRAS. Which of the following would cause a shift in AD in such a way as to move the intersection closer to LRAS? A. a decrease in banks' reserve requirement B. an increase in incomes in the rest of the world C. an increase in consumer confidence and improved consumer expectations D. All of the above

D

You are looking at the market for apple pies. The price of apples has increased. The market for apple pies will show.... A. Supply shift right, lower quantity and price B. Supply left, lower quantity and price C. Supply right, higher quantity and price D. Supply left, lower quantity and higher price

D

Assume that GDP is 7% below where we want it to be, and inflation is 3% above where we want it to be. Also assume current inflation is 4% and the real Fed Funds Rate is 1%. According to the Taylor Rule, if the weights on the output gap and inflation gap are each .5, what should the nominal Fed Funds Rate be set at? A. 4% B. 1% C. 2% D. None of the above

D (3%)

Which of the following would cause a leftward shift of AD? A. The Federal Reserve sells bonds. B. The Federal Reserve increases the target for the Fed Funds Rate. C. The Federal Reserve increases the reserve requirement. D. None of the above.

D. (all of those shift the money supply not demand)

What is on the vertical axis of the money supply graph? A. The overall price level. B. Real GDP C. The velocity of money D. None of the above.

D. (it is interest)

As discussed in lecture, what was the "magic" number for "how much debt is too much" that two Harvard economists came up with which turned out to be not such a magic number?

Debt to GDP ratio of 90%

What is our current debt to GDP ratio, and approximately how much debt do we owe other countries?

Debt to GDP: 105% Debt we owe other countries: 6.4 trillion

As discussed in lecture, the basic idea behind supply side economics is that lowering the taxes on an activity will do what?

Increase the level of that activity

In the money market, if the demand for money shifts right interest rates will _______. Since all interest rates move together, this will cause the AD/SRAS/LRAS graph to move _____________.

Increase; AD will shift left (people are buying less with high interest rates)

Consider: GDP is the market value of all goods and service produced in a country during a given period of time Fix the mistake

It is the FINAL goods and services

What are the names for the vertical line on the AD/SRAS curve?

Long run aggregate supply, full employment output, potential GDP

Assume you have calculated the Taylor Rule and the result is 1.0. What exactly is it that you have calculated? What is it used for?

Target for the Fed funds rate

In our discussion of the government's budget in class, on the expenditure side, what were the two largest categories.

Transfer Payments Defense