econ

This year pizza hut makes a total investment of 1.3 billion in new stores. its depreciation in this year is $300 million. pizza huts gross investment is ________ and its net investment it ____________

$1.3 billion;$1.0 billion

In January 2010, Tim's Gyms owned machines valued at $1 million. During the year, the market value of the equipment fell by 30%. During 2010, Tim spent $200,000 on new machines. Tim's net investment totaled

$100,000 (1 million x .30 - 200,000)

the slope of the consumption function is

1

the expenditure multiplier equals

1(1-slope of AE curve)

The expenditure approach to measuring GDP.

GDP = C + I + G + Xn

The income approach to measuring GDP.

GDP = W + I + R + P

The calculation of the final goods and services sold in an economy would NOT include

General Motors' purchases of tires for new automobiles

Our economist says that raising taxes on gas would be in the social interest. What does that economist mean?

Higher taxes on gas would benefit society as a whole

classical growth theory

I II and III

neoclassical growth theory

I II and III

the federal open market committee

is the main policy-making organ of the federal reserve

the long run aggregate supply (LAS) curve

is vertical

a banks required reserves are calculated by multiplying

its deposits by the required reserve ratio

moving along the aggregate production function, what is NOT held constant

labor

employment and total potential GDP increase if the

labor supply curve shifts rightward and the labor demand curve does not shift

in the keynesian model of aggregate expenditure, real GDP is determined by the

level of aggregate demand

The branch of economics that deals with the analysis of the whole economy is called

macroeconomics

GDP

measures the value of the aggregate production of goods and services in a country during a given time period

Which of the following is NOT an investment in human capital?

a student purchases a laptop computer

working age population

ages 16+ (not in jail, hospital, etc.)

at equilibrium expenditure

aggregate planned expenditure equals real GDP

which of the following is consistent with the law of demand

an increase in the price of a soda causes a decrease in the quantity of soda demanded

which of the following shifts the aggregate demand curve rightward

an increase in the quantity of money

A point outside a production possibilities frontier indicates

ann output combination that society cannot attain given its current current level of resources and technology

the majority of money is created when

banks make loans

they keynesian model of aggregate expenditure assumes that

both individuals firms prices and the price level are fixed

A person has a comparable advantage in an activity whenever he or she

can perform the activity at a lower opportunity cost than anyone else

reserves are

cash in a banks vault plus its deposits at federal reserve banks

the MPC is equal to

changeC/ChangeYD

Fiscal Policy

changes in government spending or taxation to promote full employment, price-level stability, and economic growth

suppose people buy more of good 1 when the price of good 2 falls. these goods are

complements

disposable income is divided into

consumption and saving

the AD curve shows the sum o

consumption expenditure, investment, government expenditures on goods and services, and net exports

a rise in the real interest rate

creates a movement upward along the demand for loanable funds curve

Components of M1 Money Supply

currency (coins and paper money) and travelers checks plus checking deposits (all deposits in commercial banks and "thrift" or savings that can be withdrawn) owned by individuals and businesses

in the United States today, money consists of

currency and deposits at banks

M1

currency+travelers checks+checking deposits at savings and loans

if the economy's capital stock decreases over time

depreciation exceeds gross investment

federal reserve policy tools include all of the following EXCEPT

desired reserve ratios

rule of 70

estimate how long it will take the level of any variable to double

the interest rate banks charge other banks for overnight loans is

federal funds rate

NOT and asset of the federal reserve

federal reserve notes

if a nation's population grows

growth in real GDP per person will be less than the growth of real GDP

the aggregate demand curve

has a negative slope

the aggregate expenditure curve shows

how planned aggregate expenditure and real GDP are related

historical record of united states since 1910

mostly positive economic growth, though the great depression caused actual GDP to dip well below potential GDP

A reduction in the amount of unemployment

moves the economy's point of production closer to the production possibilities frontier

Real income=

nominal income/CPI x 100

credit cards are

not money because they represent a loan of money to the user

unemployed

not working but looking for a job

The loss of the highest valued alternative defines the concept of

opportunity cost

Fundamental economic problems basically arise from

our wants exceeding our scarce resources

Personal disposable income=

personal income-income taxes

in the very short run, the components of aggregate planned expenditure that depend on the level of real GDP are

planned consumption and expenditure and planned imports

the slope of the aggregate expenditure curve equals the change in

planned expenditure divided by the change in real GDP

in the very short term, in the keynesian model, which of the following is fixed and does not change when GDP changes

planned investment

Which of the following statements regarding the production possibilities frontier is true

points inside the frontier are attainable

a consumption function shows a

positive(direct) relationship between consumption expenditure and disposable income

the long run aggregate supply curve is vertical because

potential GDP is independent of the price level

The economic level at which the economy can no longer produce additional amounts of a good without lowering the production level of another product.

production efficiency

in the figure above, at the point where AD equals SAS

real GDP exceeds potential GDP

economic expansion

real GDP increases, unemployment decreases

in the long run

real GDP is equal to potential GDP

the federal reserve system

regulates and conducts nations finances

according to the intertemporal substitution effect, when the price level increases, the interest rate

rises and the quality of the real GDP demand decreases

when disposable income is 0, consumption is $2000. then

savings= -$2000

the fed buys $100 million of government securities from bank A. what is the effect on the federal reserves balance sheet

securities increase by $100 million and reserves of bank A increase by $100 million

when a depository institution pools risk, it

spreads loans losses across many depositors so that no one depositor faces a high degree of risk

the monetary base is

sum of federal reserve notes, coins, and depository institutions' deposits at the federal reserve

the discount rate is the interest rate

that the fed charges on its last resort loans

which of the following institutions in NOT a depository institution?

the US treasury

equilibrium expenditure occurs where

the agregate expenditure curve crosses the 45 degree line

what is the marginal propensity to consume

the change in consumption expenditure divided by the change in disposable income

because of the choices people make in the pursuit of profit, new growth theory argues that

the economy can enjoy persisting economic growth

which of the following will occur if the fed buys $10 million of securities from the university national bank

the fed will pay by increasing the university national banks deposit account with the fed by $10 million

NOT part of the structure of the federal reserve system

the federal government

an open market operation involves

the federal reserves purchase or sale of securities

NOT one of fed's monetary policy tools

the income tax rate

1-MPC equals

the marginal propensity to save

Labor force

the number of people employed and the unemployed

the term "capital" as used in macroeconomics, refers to

the plant, equipment, buildings, and inventories of raw materials and semi-finished goods.

the sum of the components of aggregate expenditure that vary with real GDP is called

induced expenditures

Production efficiency occurs when production

is on the production possibilities frontier

gross investment

the purchase of new capital

The law of demand states that changes in

the quantity demanded of a good are inversely related to changes in its price

the quantity theory of money predicts how changes in

the quantity of money affect the price level

changes in all of the following shift the supply curve of loanable funds except

the real interest rate

a rise in the price level changes aggregate demand because

the real value of peoples wealth decreases and so they decrease their consumption

The circular flow diagram shows that

the total amount of income generated by the economy equals the total purchases of final goods and services

The production possibilities frontier is the boundary between

those combinations of goods and services that can be produced and those that cannot

the equation of exchange states that the price level is equal to

velocity of circulation multiplied by the quantity of money divided by real GDP

full employment

when unemployment rate equals the natural unemployment rate

M2

M1+savings deposits, mutual funds, and time deposits

which of the following is true?

MPS+MPC=1

Real GDP

Nominal GDP/GDP Deflator x 100

National Income

Personal Income-income received but not earned+income earned but not received

if demand pull inflation occurs when the economy is already at potential GDP, then following the initial increase in aggregate demand, the

SAS curve shifts leftward

in the figure above, as the economy adjusts towards equilibrium, the

SAS curve will shift leftward

Calculating nominal GDP

The quantity of various goods produced in a nation times their current prices, added together.

years to double GDP per capita=

70/ percent growth rate

In January 2010, Tim's Gyms owned machines valued at $1 million. During the year, the market value of the equipment fell by 30%. During 2010, Tim spent $200,000 on new machines. Tim's gross investment totaled

$200,000

if bank A holds $200 in reserves, deposits are $1000, and the desired ratio is 15 percent, how much are excess reserves

$50

unemployment rate formula

(unemployment/labor force) x 100

GDP

- the market value of the final goods and services produced within a country. GDP= C + Ig + G + Xn Personal Consumption Expeditures ( C) Gross Private Domestic Investment (Ig) Government Purchases (G) Net Exports (Xn)

when bank deposits increase from $1 million to $2 million, banks required reserves increase from $100,000 ti $200,000. the required reserve ratio is

.10

when disposable income increases from 6 trillion to 6.5 trillion, consumption expenditure increase from 5.5 trillion to 5.9 trillion. the MPC equals

0.2

if the marginal propensity to save is .6, then the marginal propensity to consume is

0.4

the real interest rate

=nominal interest-inflation rate

if the MPC is .9 and there are no income taxes or imports, the multiplier for a change in autonomous expenditure equals

10

in the figure above, when the economy is in s long run equilibrium, the price level will be

120

if required reserves are $150 and deposits are $1000, what is the required reserve ratio?

15%

if nominal GDP is 12 trillion, the price level is 120, and the quantity of money is 4 trillion, what is the velocity of circulation

3

if there are no taxes or imports and MOC =.67, the multiplier is

3

GDP deflator

A price index used to adjust nominal GDP to arrive at real GDP. Called the 'deflator' because nominal GDP will usually over-state the value of a nation's output if there has been inflation.

in the above figure, suppose that the economy is at point A when foreign countries begin

B; money wage rates

inflation rate=

CPI year 2- CPI year 1/CPI year 1

on the feds balance sheet, assets include

US securities and loans

cyclical unemployment occurs when

a business cycle recession decreases employment

a money market mutual fund is

a depository institution that sells shares and buys securities such as US treasury bills

which of the following does NOT describe a function of money?

a hedge against inflation

When an economist talks of scarcity, the economist is referring to the

inability of society to satisfy all human wants because of limited resources

autonomous consumption is that portion of consumption expenditure that is not influenced by

income

disposable income is

income minus taxes plus transfer payments

demand pull inflation is an inflation that results from and initial

increase in aggregate demand

if the slope of the AE curve increases, the multiplier

increases