ECON Final Study 3

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Choose the correct statement

Commercial banks are financial institutions that accept deposits, provide payment services, and make loans to firms and households

Choose the statement that is incorrect.

Each additional hour of labor increases real GDP by successively larger amounts.

Choose the statement about real business cycle theory that is incorrect

Economists have not been able to isolate the RBC theory impulse

Choose the statement that is incorrect

The demand for labor is the relationship between the quantity of labor demanded and the money wage rate.

Choose the statement that is incorrect

The demand-side effects of a tax cut are likely to be larger than an equivalent increase in government expenditure.

Example of a macroeconomics issue is _______.

What is the future growth prospect for the US economy Macro deals with nation wide questions

Choose the statement about a crawling peg that is incorrect

a crawling peg makes the exchange rate fluctuate wildly

If growers expect the price of wheat to increase significantly in one month then this will result in _______

a decrease in the current supply of wheat

Examples of monetary policy that decrease aggregate demand include, _____.

a decrease in the quantity of money and an increase in interest rate

A cost-push inflation begins with ______ as the result of an increase in the money wage rate or an increase in the money prices of raw materials.

a decrease in short-run aggregate supply

A decrease in the marginal propensity to import ____, everything else remains the same

makes the multiplier larger

An increase in income taxes ____ everything else remains the same

makes the multiplier smaller

According to RBC theory, the source of the business cycle is _______, which result mainly from _______.

fluctuations in productivity; fluctuations in the pace of technological change

For a given increase in aggregate demand, the steeper the slope of the short-run aggregate supply curve, the ____ is the increase in the price level and the ____ is the multiplier effect on real GDP in the short run

larger; smaller

Other things remaining the same, the _____

larger the value of U.S. imports, the greater is the quantity of U.S. dollars supplied to the foreign exchange market

Choose the statement about the Fed that is incorrect

The policy decisions of the Federal Open Market Committee are implemented each month by a different Federal Reserve Bank

When the Fed buys securities from a bank

the bank's reserves increase but its deposits do not change

When there is a surplus of dollars in the foreign exchange market, ______

the forces of supply and demand pull the foreign exchange market into equilibrium

The demand for U.S. dollars changes when there is a change in any of the following except ______.

the foreign exchange rate

The supply of U.S. dollars changes when there is a change in any of the following except

the foreign exchange rate

Russell studies instead of playing tennis. The opportunity cost to him of studying is _________________________

the forgone value of playing tennis.

The marginal propensity to consume is ______.

the fraction of a change in disposable income that is spent on consumption

The impulse in RBC theory is

the growth rate of productivity that results from technological change

The impulse in RBC theory is _______.

the growth rate of productivity that results from technological change

The fundamental precondition for labor productivity growth is ______.

the incentive system created by firms, markets, property rights, and money

When the price of an asset rises, ______.

the interest rate falls

If the natural unemployment rate increases and the expected inflation rate remains constant, then _____

the long-run Phillips curve shifts rightward and the short-run Phillips curve shifts rightward

If the natural unemployment rate increases and the expected inflation rate remains constant, then __________.

the long-run Phillips curve shifts rightward and the short-run Phillips curve shifts rightward.

An economy has a zero marginal tax rate. When real GDP increases, the change in consumption expenditure equals _______. When real GDP increases, the change in imports equals _______.

the marginal propensity to consume ×the increase in real GDP; the marginal propensity to import ×the increase in real GDP

A stagflation can turn into a cost-push inflation process when

the quantity of money persistently increases

A stagflation can turn into a cost-push inflation process when _______.

the quantity of money persistently increases

Other things constant, the economy's aggregate demand curve shows that

the quantity of real GDP demanded decreases when the price level rises

We distinguish btw the long-run aggregate supply curve and the short-run aggregate supply curve. In the long-run

the real GDP equals potential GDP

If the expected inflation rate increases and the natural rate of unemployment remains constant, then _____

the short-run Phillips curve shifts upward and the long-run Phillips curve does not shift

Human capital is

the skill and knowledge of workers.

Inflation

[(CPI current yr - CPI previous yr) / CPI previous yr ] x 100 =

Real GDP Growth %

[(Real GDP current - Real GDP Previous) / Real GDP Previous ] x 100

Potential GDP increases for all of the following reasons except _____.

the price level rises

A change in _______ creates a movement along the aggregate demand curve, while a change in _______ shifts the aggregate demand curve

the price level; government expenditures

You observe that unplanned inventories are decreasing. You predict that there will be ______

an expansion

Examples of fiscal policy that increase aggregate demand include ______.

an increase in government expenditure, a decrease in taxes, and an increase in transfer payments

Changes in which of the following items will shift the supply curve of hamburgers?

an increase in the price of meat used to produce hamburgers

when the FED fights recession, _____.

an increase in the supply of loanable funds lowers the long term interest rate and increases investment

Biscotti bought by Delta Airlines and served to passengers is an example of ________ good. The waste basket you bought when you moved into residence is an example of _________ good.

an intermediate; a final

Choose the statement that is incorrect

If a financial institution's net worth is positive, the institution must be solvent and liquid

US Business Cycle Graph

In an Expansion

Read the news clip, then answer the following question. The ______ macroeconomic school of thought justifies the policy discussed in this news clip.

Keynesian

Once a month, the bureau of _______ statistics calculates the consumer price index, which is a measure of the ______ consumers for a fixed basket of consumers goods and services.

Labor; average of the prices paid by urban

Structural Unemployment

Laid off cause industry doesn't exist, type writer -> computer

Which of the following statements about the monetarist view of the macroeconomy is incorrect?

Left alone, the economy rarely operates at full employment.

is an example of a good.

A Football

Cyclical unemployment

Based off the business cycle (recessions, troughs, peaks)

The two broad sources of potential GDP growth are growth of ________ and growth of _________. A. corporations; private firms B. government; the private sector C. the supply of labor; labor productivity D. exports; imports

C. the supply of labor; labor productivity

Change in U.S. interest rate differential

Changes both demand and supply for U.S. Dollars

Change in expected future exchange rate

Changes both demand and supply for U.S. Dollars

Choose the correct statement.

To isolate the increase in production from the rise in prices, we distinguish between real GDP and nominal GDP

When real GDP decreases, ____

a decrease in the demand for money occurs

A central bank performs all of the following functions except __________. A. conducts the nations monetary policy B. controls the quantity of money C. is a public authority that regulates a nations depository institutions D. provides debt counseling for individuals

D. provides debt counseling for individuals

Economic growth is shown on the production possibilities frontier as

an outward shift in the PPF.

Macroeconomics is concerned with

economy- wide variables.

Cyclical unemployment

fluctuates over the business cycle.

Students who leave school in the spring and look for work are one source of _______.

frictional unemployment

Potential GDP per person _______.

grows at a steady pace but not a constant pace

According to new growth theory ______.

growth can persist indefinitely

Aggregate demand increases if monetary policy ____ the quantity of money and ______ interest rates.

increases; decreases

In any year, the real GDP of an economy

may be greater or less than potential GDP.

If inflation is expected

neither a cost-push inflation nor a demand-pull inflation occur

A country that is borrowing more from the rest of the world then it is lending to the rest of the world is a _______, and a country that during its entire history has borrowed more from the rest of the world then it has lent to it is a _______ Currently, the United States is a __________

net borrower, debtor nation debtor nation and net borrower

A country that is borrowing more from the rest of the world than it is lending to the rest of the world is a ___ and a country that during its entire history has borrowed more from the rest of the world than it has lent to it is a ____ Currently, the United States is a ____

net borrower; debtor nation debtor nation

Which of the following are included in the expenditure approach to calculating GDP?

net exports of goods and services; investment; consumption expenditure

rise in the value of the U.S. dollar? The U.S. interest rate differential falls

rise in the value of the U.S. dollar? The expected future exchange rate falls

In calculating GDP, household production is

not included because there is no market transaction.

To increase the money supply, the Fed may conduct _______________

open market purchases or decrease the discount rate

The private sector balance and the government sector balance tend to move in _____. Net exports respond _____.

opposite directions; to the sum of the government sector and private sector balances

The private sector balance and the government sector balance tend to move in ______ Net exports respond _____

opposite directions; to the sum of the government sector and private sector balances

The bias in the CPI typically

overstates inflation.

One reason that the aggregate demand curve has a negative sloe is that when the domestic price level rises,

people substitute toward more imported goods and services

Assume that the preconditions for labor productivity growth are in place. The pace of labor productivity growth is influenced by all of the following except _______

population growth

Ongoing economic growth in real GDP is NOT helped by ____________ or _____________.

population growth; increase of unemployment benefits

The quantity of real GDP supplied depends on all of the following except the _____.

quantity of real GDP demanded

Monetarist economist ________.

regard money as the main source of economic fluctuations

To keep the exchange rate pegged at its target level, the country's central bank must ____ U.S. dollars and ____ its foreign currency reserves

sell; decrease

A fall in the price level _______.

shifts the AE curve upward and brings a movement down along the AD curve

An increase in labor productivity _______.

shifts the demand for labor curve rightward and the production function upward

The larger the public's currency drain from the banking system, the

smaller is the money multiplier

In RBC theory, the lower the real interest rate, other things remaining the same, the _____ today.

smaller is the supply of labor

An economy is at potential GDP when it experiences an increase in costs. The economy experiences

stagflation

Read the news clip, then answer the following question. Mr. Reddy is investing in the U.S. real estate market because ______.

the U.S. dollar depreciated and the price of U.S. investment properties to foreign investors like Mr. Reddy decreased

When an event occurs that changes the demand for coffee makers, _______ if demand increases and ______ if demand decreases.

the demand curve shifts rightward; the demand curve shifts leftward

In the short run, the nominal exchange rate is determined by ______. And in the short run ______.

the demand for U.S. dollars and the supply of U.S. dollars in the foreign exchange market; a change in the nominal exchange rate brings an equivalent change in the real exchange rate

When inflation is correctly anticipated

the economy remains at full employment

When there is a shortage of dollars in the foreign exchange market

the forces of supply and demand pull the foreign exchange market into equilibrium

The demand for U.S. dollars changes when there is a change in any of the following except

the foreign exchange rate

The U.S. interest rate differential rises if ____, and the larger the U.S. interest rate differential, the ____ is the demand for U.S. dollars in the foreign exchange market

the foreign interest rate falls; greater

The U.S. interest rate differential rises if ______, and the larger the U.S. interest rate differential, the ______ is the demand for U.S. dollars in the foreign exchange market.

the foreign interest rate falls; greater

The marginal propensity to save is _______.

the fraction of a change in disposable income that is saved

The opportunity cost of something you decide to get is

the highest valued alternative you give up to get it.

One of the Fed's main policy tools is

the last resort loan, which means that if a bank is short of reserves, it can borrow from the Fed

A cost-push rise in the price level can arise from an increase in _______.

the money wage rate or money prices of raw materials

As we move up along the short-run aggregate supply curve, ______.

the money wage rate, the prices of other resources, and potential GDP remain constant

The real interest rate

the nominal interest rate adjusted to remove the effects of inflation on the buying power of money -approximately = to the nominal interest rate minus the inflation rate

The nominal interest rate

the number of dollars that a borrower pays and a lender receives in interest in a year expressed as a % of the number of dollars borrowed and lent

Goods and services are ______.

the objects that people value and produce to satisfy human wants

A movement _____ along the short-run Phillips curve occurs when there is an ____ increase in aggregate demand

up; unexpected

In the absence of a RicardominusBarro effect, a government budget deficit ________ the demand for loanable funds, ________ the real interest rate, and ________ investment.

increases; increases; crowds out

The graph gives a long run aggregate supply curve and a short run aggregate supply curve. Draw an arrow along one of the curves that illustrates a rise in the price level when the money wage rate remains unchanged. Label it 1. Draw an arrow along one of the curves that illustrates a rise in the price level accompanied by the same percentage rise in the money wage rate. Label it 2. an increase in the price level when the money wage rate remains unchanged increases _____.

Draw an arrow going up along the SAS curve (pointing up to the right). label it 1. and then draw going up along the LAS curve, label it 2. the quantity of real GDP supplied

The central bank in the US is the_________

Federal Reserve System

Which of the following is a liability of the Federal Reserve?

Federal Reserve notes

Financial institutions

Firms that operate on both sides of the markets for financial capital -key financial institutions are: -commercial banks -gov sponsored mortgage lenders -pension funds -insurance companies -the federal reserve

Natural Unemployment

Frictional + Structural

Net =

Gross - Depreciation

I =

I = S + (T-G) + (M-X)

The currency drain ratio is 0.4 of deposits and banks' reserve is 0.6. What is the money multiplier? The money multiplier is ______.

1.6

When an economy is below full employment and the government has a budget deficit, that deficit _____.

exceeds the structural defecit

The quantity of U.S. dollars demanded is ______ in September 2010 than in January 2010. And the quantity of U.S. dollars supplied is ______ in January 2010 than in September 2010.

greater; greater; greater

When the unemployment rate is less than the natural unemployment rate, real GDP is ______ than potential GDP and the output gap is ______.

greater; positive

In the neoclassical growth theory

growth will stop if technology stops advancing

Choose the statement that is incorrect

Inflation brings a rising value of money

S + (T−G) + (M−X)

Potential GDP increases for all of the following reasons except

The government increases its expenditures

Economics explains the choices that end up determining ______ goods and services get produced.

What, How, and for Whom

The opportunity cost to produce 1 pretzel for Mark is 2 cookies. For Jessica, the opportunity cost to produce 1 pretzel is 3 cookies. Then, Mark has _____________________

a comparative advantage in pretzel production.

A central bank is ___________

a bank's bank and a public authority that regulates a nations depository institutions and conducts monetary policy

What can shift the short-run Aggregate supply curve?

a change in the money wage rate technological progress a reduction in the price of raw materials

Which of the following does NOT shift the SAS curve?

a change in the price level

Deflation can be cause by a falling price because __________.

aggregate demand increase more slowly than aggregate supply

An inflation that starts because _____ is called demand-pull inflation.

aggregate demand increases

Demand pull inflation occurs when __________.

aggregate demand shifts to the far right

Equilibrium expenditure is the level of aggregate expenditure that occurs when ______ Choose the correct statement

aggregate planned expenditure equals real GDP The level of aggregate expenditure that occurs where the AE curve intersects the 45 degree line is equilibrium expenditure

Over time, on average the demand for loanable funds ______, so the real interest rate ______.

and the supply of loanable funds increase at a similar pace; has no trend

Suppose a Canadian dollar bank deposit in Toronto earns 4% a year and a U.S. dollar bank deposit in Chicago earns 3% a year. For interest rate parity to hold, people expect that the U.S. dollar will ____ by ____ % a year

appreciate; 1%

As a result of financial innovation, ___ have become ____

checking deposits at thrift institutions an increasing percentage of M1

Choose the statement that is incorrect. A. If a financial institution's net worth is positive, the institution must be solvent and liquid. This is the correct answer. B. A financial institution can be solvent but illiquid. C. A financial institution's net worth is the market value of what it has lent minus the market value of what it has borrowed. D. A financial institution is illiquid if it has made long-term loans with borrowed funds and is faced with a sudden demand to repay more of what it has borrowed than its available cash.

If a financial institution's net worth is positive, the institution must be solvent and liquid.

Depository institutions provide four benefits, which are

creating liquidity, lowering the cost of borrowing, lowering the cost of monitoring borrowers, and pooling risk

A virus that destroys potato crops and decreases the quantity of potato chips produced by 40 million bags a week at each price. The virus decreases the _______.

supply of potato chips and decreases the quantity of potato chips demanded

A government budget surplus occurs, which increases the _____ loanable funds The real interest rate _______, household saving _____

supply of falls; decreases and investment increases

Each point on the demand curve reflects _______

the highest price consumers are willing and able to pay for that particular unit of a good.

When the price if an asset rises

the interest rate falls

The federal funds rate

the interest rate on loans made to other banks -the fed sets targets for this interest rate to influence the economy

International evidence shows us that

there is a general tendency for money growth and inflation to be correlated but the quantity theory does not predict inflation precisely

Suppose that the money multiplier is 3. If the monetary base increases by $1 million, the quantity of money will

increase by $3 million

Suppose the Fed buys $50 million of government securities from the Bank of America. The Fed's total assets ________ and its total liabilities _______. The Bank of America's Total assets _____ and its total liabilities ______.

increase by $50 million; increase by $50 million do not change; do not change

Government budget deficit

increase demand for loanable funds, raises real interest rate, and increases the equilibrium quantity go loanable funds, but decreases investment in a crowding out effect.

In the long-run starting at equilibrium if there is an increase in government expenditure then this ________ real GDP and ______ the price level.

increases; raises

Expansionary fiscal policy when the economy is below full employment _______ aggregate demand and real GDP, and the price level _____.

increases; rises

The price of a PC, a substitute for an MP 3 player, rises. As a result, you predict that the equilibrium quantity of MP3 players _______ and the equilibrium price _______.

increases; rises

A decrease in current income taxes ______ the supply of loanable funds today because it ______.

increases; increases disposable income, which encourages greater saving

Compared to a balanced budget, when the government runs a budget deficit, _______________________

interest rates rise, and firms' private investment decreases.

When the Federal Reserve Bank increases the federal funds rate, other

interest rates rise, and consumption, firms' private investment and net exports decrease.

A rational expectation

will often turn out to be wrong, but no other forecast that could have been made with the information available could do better

rise in the value of the U.S. dollar? The expected future exchange rate rises

yes

rise in the value of the U.S. dollar? U.S. import demand decreases

yes

rise in the value of the U.S. dollar? U.S. import demand increases

yes

The marginal propensity to consume is equal to ______, and the marginal propensity to save is equal to ______.

ΔC ÷ΔYD; ΔS ÷ΔYD

Read the news clip, then answer the following question. Choose the correct statement.

"Slowing growth" can reduce inflationary pressure if aggregate demand growth slows.

Cyclical Unemployment

Due to normal business Cycle

Potential GDP is $10 trillion and actual GDP is $8 trillion. The economy has a structural deficit of $1.5 trillion and an actual deficit of $2 trillion. The cyclical deficit is _____.

$0.5 trillion

If real GDP is $1,000,000, exports are $200,000, imports are $300,000, and aggregate labor hours are 100,000, labor productivity is _____.

$10 per hour Labor Productivity : (Real GDP / Labor Hours)

Aggregate income in an economy in 2014 is $995 billion. Saving is $30 billion and imports are $35 billion. Aggregate expenditure in the economy in 2014 is _______.

$995 billion

Employment to population %

(Employed/ Working age population) x 100 =

Labor Participation %

(Labor Force/ Working age population) x 100 =

CPI

(Market Basket Current / Market Basket Base) x 100 =

Labor Productivity

(Real GDP / Labor Hours)

Unemployment %

(Unemployment/ Labor Force) x 100 =

If the trend rate of change of velocity is 1% a year, potential GDP grows by 4% a year and the money growth rate is 2% a year, what is the trend inflation rate

-1% a year

The government sector balance is ____ billion dollars The private sector balance is ____ billion dollars Net exports is ____ billion dollars

-250 (or 150) (-50 when government expenditures= 650 net taxes=600 investment=450 saving=300 -50 (or -100) (-150 -300 (or 50) (-200

In 2012, US exports were $2,196 billion and imports were $2,743 billion. What is the value of net exports? The value of net exports in 2012 was ______ billion dollars

-547

In 2008, US exports were $1,847 billion and imports were $2,557 billion. What was the value of net exports? The value of net exports in 2008 was ______ billion dollars

-710

The ripple effects of an FOMC decision to fight recession, in order, are:

1 The Fed lowers the federal funds rate target. 2 The Fed buys securities in an open-market operation. 3 Short-term interest rates fall and the exchange rate falls. 4 The quantity of money and supply of loanable funds increase. 5 The long-term real interest rate falls. 6 Consumption, investment, and net exports increase. 7 Aggregate demand increases. 8 Real GDP growth and the inflation rate increase.

The table shows the receipts and the outlays of a nation at each level of real GDP. What is the budget deficit when real GDP is $6 trillion? When real GDP is $6 trillion, the budget balance is ____ trillion dollars.

.2 (receipts - outlays)

The marginal propensity to save is

.40 (or .20 if consumption expenditure is 20, 100, 180, 260)

An economy with no income taxes or imports has a marginal propensity to consume .75. The multiplier in the long run is

If the US interest rate is 1.5 per cent, Canada's interest rate is 1 per cent, the US inflation rate is 1.2 per cent and Canada's inflation rate is 0.70 per cent, then calculate the US interest rate differential

0.5 per cent

Suppose that potential GDP and the velocity of circulation are constant. What is the change in the price level in the long run if the quantity of money increases by 1 percent a year? If the quantity of money increases by 1 percent a year, in the long run the change in the price level is ____ percent a year

What are the functions of depository institutions? The functions of depository institutions include _______. A. lowering the cost of monitoring borrowers B. providing credit ratings C. implementing monetary policy D. maximizing Upper M 1 and Upper M 2

A mortgage is_________.

A legal contract that gives ownership of a home to the lender in the even that the borrower fails to meet the agreed loan payments (repayments and interest)

An increase in the real interest rate in the loanable funds market effects the supply of loanable funds with _____________.

A movement along the supply of loanable funds curve

Explain the flows of funds that finance business investment. Choose the correct statement. A. The funds that financial business investment flow through factor markets from households and through export markets from the rest of the world to U.S. firms. B. The funds that finance business investment come from the Federal Reserve and the amount is determined by the decisions of the Fed's Board of Governors. C. Funds from household saving, the government budget surplus, and the rest of the world flow through financial markets and institutions to firms who borrow the funds for investment. D. Business investment throughout the world is principally funded by the activity of publicly traded firms on U.S. stock markets and in a small part by bank loans. Governments have no influence on business investment.

New growth theory holds that ________ grows because of the choices people make in the pursuit of profit and that growth will ___________. A. real GDP; slowdown eventually B. real GDP per person; persist indefinitely C. labor productivity; persist indefinitely D. capital; slowdown eventually

B. real GDP per person; persist indefinitely

Kevin spent the first 6 months of 2014 actively searching for job but he didn't get hired. He believes there are no jobs, so he has given up looking. the labor force participation will ___________ if Kevin starts creating football apps in his garage and they turn out to be very popular. A. fall B. rise C. remain unchanged

B. rise

Producers of pianos expect the price of a factor of production used to produce a piano to rise and the number of firms producing and selling pianos to decrease. You predict that the price of a piano will ______ and the quantity of pianos bought will ______.

B. rise; decrease

The liabilities of the Fed are _____, and these liabilities along with ____ make up the monetary base.

Federal Reserve notes held by households and businesses and reserves of depository institutions; coins issued by the Treasury

The central bank of the US is the

Federal reserve system

Choose the statement that is incorrect

Liquid assets have a higher interest rate than securities

Which of the following equations is incorrect

MPC + MPS = delta YD

Which of the following equations is incorrect?

MPC + MPS = ΔYD

________ predicts that real GDP per person can grow indefinitely.

New growth theory

On January 1, 2014, Sophie's Sunlounge owned 4 tanning beds valued at $20,000. During 2014, Sophie's bought 3 new beds at a total cost of $12,000. At the end of the year, the market value of all of Sophie's beds was $27,000. Calculate Sophie's gross investment and depreciation during 2014.

Sophie's gross investment during 2014 was $12,000 Sophie's depreciation during 2014 was $5,000

Choose the correct statements. 1. Foreign currency is the money of other countries 2. In a growing economy, the exchange is always rising. 3. Foreign currency is always in the form of notes or coins 4. The foreign exchange market is made up of thousands of people including international tourists and foreign exchange brokers

Statements 1 and 4 are correct

A monetarist is a macroeconomist who believes that the economy is self-regulating and that it will normally operate _____, provided that monetary policy is not erratic and that the pace of _____ is kept steady.

at full employment; money growth

A fall in real GDP that results in a decrease in personal income tax receipts is an example of _____.

automatic fiscal policy

The multiplier is the amount by which a change in ____ expenditure is magnified or multiplied to determine _____ To calculate the multiplier, we divide _____ by _____

autonomous; the change in equilibrium expenditure and real GDP the change in equilibrium expenditure; the change in autonomous expenditure

The majority of money is created when

banks make loans

Which of the following statements are TRUE regarding the demand for labor? I. The quantity of labor demanded depends on the real wage rate. II. If the money wage rate increases and the price level remains the same, the quantity of labor demanded decreases.

both I and II

An increase in the quantity of capital increases _______ and increase in the full-employment quantity of labor increases

both the SAS and the LAS; both the SAS and the LAS

Draw a Laffer curve. Label it. Draw a point on the curve at the tax rate that generates the maximum tax revenue. Label it T*. Draw a point on the curve that shows the approximate location of the United States on the curve. Label it United States. Choose the correct statement

T* is top point. US is around 60, about half way down the curve on the left side of it. tax cuts can increase tax revenue

Gross =

Total spent on New

Cost push Pattern :

Up to the left, up to the right, up to the left, up to the right.

Albertas GDP is growing at 8 percent and their population is growing at 1 percent, how long until Alberta's real GDP doubles?

Use Rule 70 [70 / (8-1)] = 10 years

If the interest rate is 5% people will

buy bonds, bid up their price, and the interest rate will fall

A macroeconomic equilibrium in which real GDP is less than potential GDP is ________ equilibrium And one in which real GDP equals potential GDP is _______ equilibrium

a below full-employment; a recessionary

An increase in investment shifts the AE curve upward by an amount equal to the ___ and shifts the AD curve rightward by an amount equal to the _____

change in investment; change in investment times the multiplier

Change in world demand for U.S.exports

changes demand for U.S. Dollars

Leather purses and leather shoes are _________.

complements in production for producers

The components of aggregate expenditure that are influenced by real GDP are ______.

consumption expenditure and imports

Which of the following are included in the expenditure approach to calculating GDP?

consumption expenditure; investment; government expenditure

To make comparisons of real GDP between two countries we must ______.

convert the real GDP of one country into the same currency units as the real GDP of the other country, and use the same prices to value the goods and services in the countries being compared

Extending the period over which the government is willing to pay unemployment benefits to 99 weeks _______ the cost of being unemployed and ________ the unemployment rate. A. increases; increases B. decreases; decreases C. decreases; increases D. increases; decreases

C. decreases; increases

Operators of private dog parks in your city decide to eliminate their fees and allow dog owners to exercise their dogs in the parks at no charge. This statement means that the incentive to exercise dogs at the dog park ______. The operators' decision is a _______ decision.

Changes; Microeconomic

If Chris and Hermione devote equal amounts of time and effort to making pretzels, Chris produces more units than Hermione.

Chris has an absolute advantage in producing pretzels

Cindy takes a summer job painting houses. During the summer, she earns an after-tax income of $3,000 and she spends $1,500 on living expenses. What was Cindy's saving during the summer?

Cindy's saving during the summer was $1500

A shortage in the market for oil implies that ______. A. the market for oil needs government action B. the market for oil is a competitive market C. more people are traveling D. the price of oil is being prevented from influencing buying and selling plans

The effect of inviting worker immigrants in the US is ___________ the US production function and ________ in potential GDP.

a movement up along; an increase

A rise in the price of oil creates ______

a one-time cost push rise in the price level

All of the following are examples of investment except

a person's annual medical checkup

which of the following is included in the measure of US GDP?

a pizza produced and sold in the United States

The best forecast available, which is based on all the relevant information is called

a rational expectation

All of the following are examples of investment except ________.

a student increasing his human capital by attending college

Click on the icon to study the Economics in the News article. Then answer the following questions. The appreciation of the yuan against the dollar ______ the U.S. current account deficit. The U.S. current account deficit arises because ______.

has negligible effect on; there is too little private and government saving relative to investment

The _______ the exchange rate, the _______ are foreign- produced goods and hence the greater the quantity of dollars supplied

higher; cheaper

Opportunity cost means the

highest−valued alternative forgone.

A depository institution takes deposits from ___ and earns most of its income by ____ The deposits of the following three types of depository institutions make up the nation's money

households and firms; making loans and buying securities that earn a higher interest rate than that paid to depositors commercial banks, thrift institutions, and money market mutual funds

IF the price of a CD (a substitute for Music downloads) increases then you can expect the equilibrium quantity for Music downloads to _____ and the equilibrium price to _____.

increase; rise

In the short run, the quantity of real money and real GDP are given and the ____ adjusts to achieve equilibrium In the long run, supply and demand in the loanable funds market determines the _____ In the long run_____ adjusts to make the quantity of real money supplied equal the quantity demanded

interest rate real interest rate the price level

When the Federal Reserve Bank increases the federal funds rate, other __________________

interest rates rise, and consumption, firms' private investment and net exports decrease.

One consequence of China operating a crawling peg is that China ____ China fixes its exchange rate ____

is accumulating U.S. dollars as a way of achieving a low inflation rate

One consequence of China operating a crawling peg is that China _____. China fixes its exchange rate _____.

is accumulating US dollars; as a way of achieving a low inflation rate

A flexible exchange rate is one that _______.

is determined by demand and supply in the foreign exchange market with no direct intervention by the central bank

The income earned by the people who sell the services of the factor of production _______ is called _______.

labor; wages

The resources that are used to produce goods and services - _____ are factors of production.

land, labor, capital, and entrepreneurship

Leather belts and leather shoes are substitutes in production. If style changes increase the demand for leather belts, the supply curve of leather shoes will shift

leftward and the equilibrium price of leather shoes will rise.

Choose the statement that is incorrect

liquid assets have a higher interest rate than securities

Demand and supply in the market for _____ determine the long-term interest rate. In the short run, a change in the _____ changes the equilibrium real interest rate.

loanable funds; federal funds rate

Suppose the Fed increases the quantity of money. In the long run, supply and demand in the ___ market demand the real interest rate. The ___ adjusts to make the quantity of real money supplied equal to the quantity demanded

loanable funds; price level

The multiplier is greater than 1 because the change in autonomous expenditure leads to _______.

more induced expenditure

The demand for money is the relationship between the quantity of real money demanded and the ______ when all other influences on the amount of money that people wish to hold remain the same. When the nominal interest rate rises, the opportunity cost of holding money _______.

nominal interest rate rises; decreases

The United States is experiencing low inflation and real GDP is less than potential GDP. Describe the Fed's actions that will restore full employment. The New York Fed conducts and open market _____ to hit the new ______ federal funds rate target. The monetary base ____. The supply of money ____ and the interest rate _____. The supply of loanable funds _____ and the long term interest rate _____. Investment _______, and aggregate demand _____ with a multiplier effect.

purchase; lower increases; increases; falls increases; rises increases; increases

When the real interest rate rises, the ______ because the ______ is the opportunity cost of loanable funds.

quantity of loanable funds demanded decreases; real interest rate

When the real interest rate fals, the ____ because the ___ is the opportunity cost of loanable funds

quantity of loanable funds demanded increases; real interest rate

Four alternative fiscal policy changes that could be made to help the federal government meet its Social Security obligations are _______ income taxes, _______Social Security taxes, ______Social Security benefits, and ______ federal government discretionary spending.

raise; raise; cut; cut

The government budget deficit _____ the real interest rate because the _____ loanable funds ___________.

raises; demand for; increases

If the economy is in short run equilibrium then

real GDP can be greater than, less than, or equal to potential GDP

Real GDP per person is____________.

real GDP divided by the population

Real GDP per person grows when ______.

real GDP grows at a faster rate than the population grows

The federal funds rate is the interest rate at which banks can borrow and lend _____ in the _____ market.

reserves; federal funds

Republican politicians insist that tax cuts "pay for themselves," increasing receipts by goosing economic growth. Democrats and virtually all economists say they're wrong. A tax cut pays for itself if the economy lies to the _____ of the maximum point of the Laffer curve. This statements implies that the absolute value of the tax multiplier is _____. Tax cuts will not pay for themselves is _____.

right, greater than 1 the economy lies tot he left of the maximum point on the laffer curve

on average in the United States, the inflation rate and the money growth rate minus the real GDP growth rate ________

rise and fall together

A supply curve that illustrates the law of supply _______.

shows that the quantity supplied decreases as the price falls

When the price level is rising and real GDP is simultaneously decreasing _____________.

stagflation occurs

For a commercial bank, the term "reserves" refers to

the cash in its value and its deposits at the Federal Reserve

When cyclical unemployment increases and other things remain the same, _______.

the natural unemployment rate does not change.

An increase in current income taxes ______ the supply of loanable funds today because it ______.

decreases; decreases disposable income, which decreases saving

A fall in the price of a cellphone ______ the quantity supplied and ______ supply.

decreases; does not change

Suppose real GDP for a country is $13 trillion in 2010, $14 trillion in 2011, $15 trillion in 2012, and $16 trillion in 2013. Over this time period, the real GDP growth rate is

decreasing.

A flexible exchange rate is an exchange rate that is determined by ________ in the foreign exchange market with no direct intervention by the ________

demand and supply; central bank

Which of the following is NOT a monetary policy tool of the Federal Reserve?

deposit insurance

The required reserve ratio is the minimum percentage of ________ that _______ are required to hold as reserves

deposits; depository institutions

suppose a Canadian dollar bank deposit in Toronto earns 1 percent a year and a US dollar bank deposit in Chicago earns 5 percent a yea. What expectations do people hold if interest rate parity to to hold. For interest rate parity to hold, people expect that the US dollar will _____ by ____ percent a year

depreciate; 4

The decreasing slope of a production function reflects

diminishing returns.

Planned saving + planned consumption expenditure =

disposable income

The Ricardo-Barro effect ____ crowding out

eliminates

The Ricardo-Barro effect___________ crowding out.

eliminates

An increase in labor productivity increases potential GDP because ______.

employment increases and a given amount of employment produces more real GDP

Interest rate parity means

equal rates of return

Interest rate parity means ______.

equal rates of return

interest rate parity means ______.

equal rates of return

Interest rate parity, which means _____ across currencies, means that for risk free transactions, there is _____ gain from choosing one currency over another.

equal rates of return; no

Resource use is allocatively efficient when marginal benefit is _______

equal to marginal cost.

A typical business cycle can be described by the sequence _______.

expansion, peak, recession, trough

The demand for loanable funds changes when __________ changes.

expected profit

The supply of loanable funds is influenced by all of the following except

expected profit

The supply of loanable funds is influenced by all of the following except ______.

expected profit

The supply of loanable funds is influenced by all of the following except ______.

expected profit

When the interest rate falls, other things remaining the same, the opportunity cost of holding money ____ and _____

falls; the quantity of money demanded increases

The unemployment rate (and its calculation)

the percentage of the people in the labor force who are unemployed Unemployment rate = ((number of people unemployed)/(labor force)) X 100

According to the quantity theory of money, a 10 percent increase in the quantity of money ultimately leads to a 10 percent increase in

the price level

Neoclassical growth theory

the view that real GDP per person grows because technological change induces saving and investment that make capital per hour of labor grow. -growth ends if tech change stops b/c of diminishing returns on both labor and capital

Disoposable income is aggregate income minus taxes plus _____.

transfer payments

The quantity of U.S. dollars supplied in the foreign exchange market depends on all of the following except

world demand for U.S. exports

An assumption of neoclassical growth theory is that

technological change is random.

The Supply curve ________

tells us the lowest price at which someone is willing to sell

If you have $5,000 in wealth and the price level decreases by 20 percent, then

the $5,000 will buy more goods and services

The employment-to-population ratio ( and its calculation)

the % of people of working age who have jobs employment-to-population ratio = ((number of people employed)/(working age population)) X 100

The short-run aggregate supply curve is upward sloping because

money wage rates do not immediately change when the price level changes.

The multiplier is ____ and the slope of the AE curve is ______

2.0; .5 (or 2.5; .6 if investment is $50 billion and expenditure is $125 billion)

The size of the multiplier in the short run is ___

Choose the statement that is incorrect

A government budget surplus competes with investment funds

When firms in an economy start producing more computers and fewer televisions, they are answering the ________ question.

A. "what"

Suppose that the natural unemployment rate is 4.5 percent and the actual unemployment rate is 3.5 percent. Then cyclical unemployment is

A. -1 percent.

If real GDP per person doubles in 20 years, then the annual growth rate of real GDP per person is ________ percent a year. A. 3.5 B. 14.0 C. 28.5 D. 14.3

A. 3.5

The supply of loanable funds is influenced by all of the following except________. A. expected profit B. wealth and default risk C. disposable income and expected future income D. the real interest rate

A. expected profit

The key proposition of new growth theory that makes growth persist is that ________ is not subject to diminishing returns. A. knowledge capital B. labor C. production D. physical capital

A. knowledge capital

Choose the statement that is incorrect.

Along the LAS curve the money wage rate is constant and the real wage rate rises as the price level rises.

Choose the statement that is incorrect

Along the SAS curve, the real wage rate and the price level change by the same percentage.

A decrease in the supply of ski trips brings a ______ of ski trips at the original price and a ______ in their price. A. surplus; fall B. shortage; rise C. surplus; rise D. shortage; fall

Currently, the United States is a _______. A. debtor nation and a net lender B. debtor nation and a net borrower C. creditor nation and a net borrower D. creditor nation and a net lender

The money multiplier is the ratio of the change in the quantity of ____ to the change in the quantity of ____

money; monetary base

Choose the incorrect statement: A. Labor supply growth and labor productivity growth combine to determine real GDP growth. B. The presence of a banking system in Britain in the middle 1700s started the Industrial Revolution. C. As the amount of capital per worker increases, labor productivity also increases. D. Technological change has made an even greater contribution to labor productivity growth than the accumulation of physical capital and human capital.

B. The presence of a banking system in Britain in the middle 1700's started the Industrial Revolution

An economy is at full employment when __________. A. there is no frictional unemployment B. all unemployment is frictional and structural C. there is no structural unemployment D. all unemployment is frictional and cyclical

B. all unemployment is frictional and structural

The money multiplier is the ratio of the change in the quantity of _____ to the change in the quantity of ______.

money; monetary base

A means of payment is a method of __________ a debt. A. creating B. settling C. paying interest on D. transferring

B. settling

If the price is $ 6 a milkshake, there is a ______ of milkshakes, so the price of a milkshake ______. As the market moves toward the equilibrium price, the quantity demanded _______ and the quantity supplied _______.

B. shortage; rises C. decreases; increases

Choose the correct statement. A. A bias in the CPI gives workers with wage contracts linked to the CPI less real income than the firm intended. B. The bias in the CPI eliminates the substitution between different products by consumers. C. Many private agreements comma such as wage contracts comma are linked to the CPI. D. The Congressional Advisory Commission on the Consumer Price Index in 1996 said that the CPI overstates inflation by 0.1 percentage points a year.

The tax wedge is the gap between the before-tax and after-tax ______. A. equilibrium quantity of labor B. potential GDP C. wage rates D. investment

Older workers are more prone to experience ____________ unemployment. During the recession, the unemployment rate of older workers ___________. A. natural; increases B. frictional; decreases C. structural; increases D. structural; decreases

C. structural; increases

How can massive changes in the monetary base resulting from QE and QT be reconciled with the Federal Reserve Act of 2000? The massive changes in the monetary base resulting from QE and QT can be reconciled with the Federal Reserve Act of 2000 because the Fed attempts to _______. A. increase saving B. lower long-term interest rates as close to zero as possible C. lower the federal budget deficit and decrease the demand for loanable funds D. attain maximum employment and stable prices

Choose the statement that is incorrect: A. While a check is in circulation, the quantity of money does not increase by the amount of the check. B. A check is an instruction to transfer money, but it is not money. C. A credit card is an ID card that lets you take out a loan at the instant you buy something, but it is not money. D. Deposits are not money because you cannot settle a debt with a deposit

D. Deposits are not money because you cannot settle a debt with a deposit

Complete the following sentence. A firm is ______.

D. an economic unit that hires factors of production and organizes those factors to produce and sell goods and services

The gap between real GDP per person in the US and Hong Kong has __________ since 1960. During this period, the growth rate of real GDP per person in the United States bas been _________ than in Hong Kong. A. increased; faster B. remained constant; equal C. decreased; faster D. decreased; slower

D. decreased; slower

Sports cars and gasoline are complements. If the price of a sports car increases, how does the demand for gasoline change?

D. decrease, and the demand curve for gasoline will shift leftward

When the unemployment rate is less than the natural unemployment rate, real GDP is _________ than potential GDP and the output gap is _________. A. smaller; negative B. smaller; positive C. greater; negative D. greater; positive

D. greater; positive

Some unemployment is unavoidable because________. A. many part-time workers would like to have full-time work B. often people become discouraged workers C. many people in the working-age population attend school and are unemployed D. people are making transitions through the stages of life and businesses are making transitions

D. people are making transitions through the stages of life and businesses are making transitions

Unemployment arises for all of the following reasons except________. A. people leave their jobs and spend time searching for another job that better suits their abilities B. firms close, people lose their jobs and search for new jobs C. students enter the labor force to search for a job D. people leave the labor force

D. people leave the labor force

An increase in labor productivity_________.

Shifts the demand for labor curve rightward and the population function upward

Labor Force

Employment + Unemployment =

Choose the statement about money that is incorrect

Money is a completely stable store of value

Real Investment Rate

Nominal GDP - Inflation =

Frictional Unemployment

Normal Turnovers or chose to switch jobs

Equation for Potential GDP

Potential GDP = (Natural rate of employment / Real rate of employment) x Real GDP

How does price effect the demand and supply curves

Price never shifts the demand or supply curve, only causes a movement along the curves and is related to quantity supplied/Demanded

Read the news clip, then answer the following question. Mr. Reddy is investing in the U.S. real estate market because _____

The U.S. dollar exchange rate will rise

When the price of an asset rises, ______.

The interest rate falls

If taco bell decides to produce more tacos and fewer burritos, taco bell is answering the _______ part of one of the two big economic questions

What

Suppose the Fed sells $50 million of government securities to the Bank of America. The Fed's total assets ________ and its total liabilities _______. The Bank of America's Total assets _____ and its total liabilities ______.

decrease by $50 million; decrease by $50 million do not change; do not change

A decrease in government transfer payments

decreases aggregate demand

The increase in real GDP in the second quarter primarily reflected increases in personal consumption expenditures, exports, and investment. Government spending decreased. Read the news clip, then answer the following questions. The increase in the personal consumption expenditures ______ aggregate demand. The increase in exports ______ aggregate demand. The increase in investment ______ aggregate demand. The decrease in government spending _______ aggregate demand.

increases; increases increases; decreases

Draw the short run Phillips curve if the expected inflation rate is 5 percent a year. Label it SRPC1. Draw a point at the expected inflation rate and the natural unemployment rate. Label it 1. Draw the shirt run Phillips curve if the expected inflation rate is 15 percent a year. Label is SRPC2. Draw a point at the expected inflation rate and the natural unemployment rate. Label it 2. A movement _____ along the short run Phillips curve occurs when there is an _____ increase in aggregate demand.

look at picture up; unexpected

The exports effect is the result that the lower the exchange rate, other things remaining the same, the ______.

lower are the prices of U.S.-produced goods and services to foreigners and the greater is the volume of U.S. exports

The unemployment rate in May 2008 is ____________

lower than the unemployment rates that occurred in recessions since 1980

Decreasing government spending ____________

may combat inflation

Draw the short run phillips curve if the natural unemployment rate is 6 percent and the expected inflation rate is 4 percent a year. Label it. Draw a point at the natural unemployment rate and the unexpected inflation rate. Along the short run phillips curve, ________

picture the expected inflation rate and the natural unemployment rate are constant

Economic growth is the persistent increase in _____. Economic growth is accompanied by inflation when the ______.

potential GDP; AD curve shifts rightward at a faster rate than the LAS curve shifts rightward

According to mainstream business cycle theory, ______ grows at a steady rate and _____ grows at a fluctuating rate.

potential GDP; aggregate demand

The output gap is real GDP minus _______ expressed as a percentage of______.

potential GDP; potential GDP

According to mainstream business cycle theory, ___ grows at a steady rate and ___ grows at a fluctuating rate

potential GDP; short-run aggregate supply

The mainstream business cycle theory is that ______ grows at a steady rate while ______ grows at a fluctuating rate. In mainstream business cycle theory, the money wage rate is _______. If aggregate demand grows faster than potential GDP, ______ gap emerges and if it grows more slowly than potential GDP, ______ gap emerges.

potential GDP; aggregate demand Sticky an inflationary; a recessionary

Choose the correct statements. a. The Fed permits the quantity of money to find its own equilibrium and has no present view about what that equilibrium value should be. b. The fed normally changes the federal funds rate by only a quarter of a percentage point at a time. c. The fed has preset views about the exchange rate and frequently participates in the foreign exchange market to move the exchange rate closer to its target. d. the federal funds rate has never been set above 5 percent a year.

statements a and b are correct

The unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the location of jobs is _____ unemployment.

structural

I =

S + (T-G) + (M-X)

An Economy is at full employment when _______.

the unemployment equals the natural unemployment rate

The table gives data about an economy in 2010. The value of GDP in 2010 is ______. Table: (amount in billions) Personal consumption expenditures: 760 Compensation of employees: 695 Indirect taxes less subsidies: 156 Gross private domestic investment: 265 Net exports of goods and services: 51 Government expenditure on goods and services: 297

$1.373 billion

On January 1, 2014 Sophie's Sunlounge owned 4 tanning beds valued at $20000. During 2014, Sophie bought 3 new tanning beds at a total cost of $10000. At the end of the year the market value of all of Sophie's beds was $24000. Calculate Sophie's gross investment and depreciation during 2014. Sophie's gross investment during 2014 was _______. Sophie's depreciation during 2014 was ____

$10,000; $6,000 (or $3,000 if the the value is $27,000)

If saving is $800 billion, investment is $500 billion, government expenditure on goods and services is $700 billion, net export is $50 billion, and net taxes is $800 billion, then calculate government sector balance

$100 (net taxes-gov. expd.)

Aggregate income in an economy in 2014 is $100 billion. Saving is $25 billion and imports are $30 billion. Aggregate expenditure in the economy in 2014 is

$100 billion

In an economy, there is $125 million in currency held outside banks, $200 million in traveler's checks, $300 million in currency held inside the banks, $250 million in savings deposits, $2,000 million in time deposits, and $800 million in money market mutual funds and other deposits. The value of M1 is ______ and the value of M2 is ________.

$575 million; $3,875 million

On January 1, 2014, Sophie's Sunlounge owned 4 tanning beds valued at $20000. During 2014, Sophie bought 3 new tanning beds at a total cost of $8000. At the end of the year the market value of all of Sophie's beds was $26000. What was Sophie's net investment? Sophie's net investment during 2014 was ____

$6,000

A south sea island produces only coconuts. In 2011, the price of a coconut is $2.50 and the quantity produced is 300. In 2013, the price of a coconut is $2.00 and the quantity produced is 250. 2011 is the reference base year. Real GDP in 2013 in terms in terms of base-year prices is _______.

$625

The marginal propensity to consume is

.60

The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2013 (the reference base year). The average household spent $60 on juice and $30 on cloth in 2013 when the price of juice was $2 a bottle and the price of cloth was $5 a yard. In the current year, 2014, juice is $4 a bottle and cloth is $6 a yard. Calculate the CPI and the inflation rate in 2014. The CPI in 2014 is _____ The inflation rate in 2014 is _____ percent.

173.3 CPI : (Market Basket Current / Market Basket Base) x 100 = 73.3 Inflation : [(CPI current yr - CPI previous yr) / CPI previous yr ] x 100 =

The change in U.S. wealth exceeds U.S. saving in ____ U.S. saving exceeds the change in U.S. wealth in ____

1995 and 1996; none of the years in the table

The table provides official estimates of U.S. wealth and U.S. saving in three years. The change in U.S. wealth exceeds U.S. saving in ______. U.S. saving exceeds the change in U.S. wealth in ______.

1997 and 1998; none of the years in the table

The velocity of circulation is 3 and GDP is $ 6 billion. What is the quantity of money? The quantity of money is $____ billion.

2 Velocity of Circulation (V) = the Price level (P) x Real GDP (Y) divided by quantity of Money (M) M=PY/V 2=6/3

The bank plans to hold $2 for every $100 in deposits. The bank holds desired reserves of $15000 and actual reserves of $26000. What is the bank's desired reserve ratio and its excess reserves? The bank's desired reserve ratio is ____%. The banks excess reserves are $____

2%; $11000

What has been the average growth rate of U.S. real GDP per person over the past 100 years? In which periods was growth most rapid and in which periods was it slowest? Over the past 100 years, the average growth rate of U.S. real GDP per person is _____ percent. Over the past 100 years, growth was most rapid during the ______ and slowest during the ______. A. 1960s; Great Depression B. 1960s; 1980s C. 2000s; 1920s D. 1990s; 1970s

2, A

The table provides some data on real GDP and the population of Eastiana in 2010 and 2011. What is the growth rate of real GDP in Eastiana in 2011? What is the growth rate of real GDP per person in Eastiana in 2011? The growth rate of real GDP in Eastiana in 2011 is ___ percent. The growth rate of real GDP per person in Eastiana in 2011 is ___ percent. Table: Year, Real GDP (trillions), Population (billions) 2010: 600,000; 750 2011: 719,840; 818

20; 10

Amazon.com agreed to pay its workers $36 an hour in 1999 and $50 an hour in 2001. The CPI in 1999 was 166 and in 2001 it was 180. Calculate the real wage rate in each year (to the nearest cent). Did these workers really get a pay raise between 1999 and 2001? The real wage rate in 1999 was $_______ The real wage rate in 2001 was $_______ Because the real wage rate in 2001 is ________ the real wage rate in 1999, the workers ______ really get a raise between 1999 and 2001

21.69 27.78 greater than did

What is the present value of $250, three years in the future if the interest rate is 1 percent?

242.65

Suppose an increase in the monetary base of $400,000 increases the quantity of money by $1,200,000. Calculate the money multiplier. The money multiplier is _____.

Suppose an increase in the monetary baser of $300,000 increases the quantity of money by $900,000. Calculate the money multiplier. The money multiplier is _____

Suppose that potential GDP and the velocity of circulation are constant. What is the change in the price level in the long run if the quantity of money increases by 3 percent a year? If the quantity of money increases by 3 percent a year, in the long run the change in the price level is ____ percent a year

Suppose that potential GDP and the velocity of circulation are constant. What is the change in the price level in the long run of the quantity of money increases by 3% a year. If the quantity of money increases by 3% a year, in the long run the change in the price level is ____ % a year

An economy has a consumption function of C = 10 + 0.8Y, investment of 6, government expenditure of 10, exports of 10, and an import function of M = 0.1Y. What is the multiplier for this economy?

3.33

When real GDP is $3 trillion, aggregate planned expenditure is ____ trillion Autonomous expenditure is ___ trillion Induced expenditure is ____ trillion

3.6; 1.8; 1.8 when real GDP is $4 trillion.... 3.6; 2.2; 1.4

The quantity of money is $5 billion and the velocity of circulation is 6. What is GDP? GDP is $___ billion

The quantity of money is $4 billion and GDP is $20 billion. What is the velocity of circulation? The velocity of circulation is ____.

If the nominal interest rate is 8 percent and inflation is 3 percent, what is the real interest rate?

5 percent

If this year's price level is 126 and last year's price level was 120, the inflation rate is ________.

5 percent a year

Labor Force: 154,287,000 Employment: 145,362,000 Working-age population: 233,788,000 The unemployment rate is ____ percent. The labor force participation rate is _____ percent. The employment-to-population ratio is _____ percent.

5.8 Unemployment % : (Unemployment/ Labor Force) x 100 = 66.0 Labor Participation % : (Labor Force/ Working age population) x 100 = 62.2 Employment to population % : (Employed/ Working age population) x 100 =

The capital and financial account balance is ___ billion dollars

559 (or 860)

The labor force

= the sum of the employed and unemployed people

If the expected inflation rate increases and the natural rate of unemployment remains constant, then _______. A. the short-run Phillips curve shifts upward and the long-run Phillips curve does not shift B. the long-run Phillips curve shifts rightward and the short-run Phillips curve does not shift C. the long-run Phillips curve shifts rightward and the short-run Phillips curve shifts rightward D. neither the long-run Phillips curve nor the short-run Phillips curve shifts

In the long-run macroeconomic equilibrium, ______. A. potential GDP and aggregate demand determine the price level, and the money wage rate adjusts so that the SAS curve intersects the LAS curve at the long-run equilibrium price level B. potential GDP and short-run aggregate supply determine the price level C. real GDP is always increasing D. the AD and SAS curves determine the price level and technology advances so that the LAS curve intersects the AD curve at the equilibrium price level

The Ricardo-Barro effect _____ crowding out. A. eliminates B. increases

Japan's current exchange rate policy is ______. A. a flexible exchange rate B. an export-intensive exchange rate C. a crawling peg D. a fixed exchange rate

Which of the following is a positive statement?

A 5 percent increase in income leads to a 3 percent increase in the consumption of orange juice.

Choose the statement about a crawling peg that is incorrect

A crawling peg makes the exchange rate fluctuate wildly

Choose the statement about a crawling peg that is incorrect. A. A crawling peg makes the exchange rate fluctuate wildly. B. When China abandoned its fixed exchange rate, it replaced it with a crawling peg. C. A crawling peg is an exchange rate that follows a path determined by a decision of the government or the central bank. D. The Fed has never operated a crawling peg.

A crawling peg makes the exchange rate fluctuate wildly.

______ good in an item that is bought by its final user during a specific time period. ______ good is an item that is produced by one firm, bought by another firm, and used as a component of a final good or service.

A final; an intermediate

Choose the statement that is incorrect

A government budget surplus competes with investment for funds

Choose the statement that is incorrect. A. A government budget surplus competes with investment for funds. This is the correct answer. B. National saving and foreign borrowing finance investment. C. If we export more than we import, we lend (Xminus−M) to the rest of the world and part of U.S. saving finances investment in other countries. D. The sum of private saving and government saving is called national saving.

A government budget surplus competes with investment for funds.

Which of the following questions is a macroeconomic issue?

A. What is the future growth prospect for an economy?

When the Federal Reserve Bank increases the federal funds rate, other A. interest rates rise, and consumption, firms' private investment and net exports decrease. B. interest rates fall, and consumption, firms' private investment and net exports increase. C. interest rates rise, and consumption, firms' private investment and net exports increase. D. interest rates fall, and consumption, firms' private investment and net exports decrease

A. interest rates rise, and consumption, firms' private investment and net exports decrease.

Choose the statement that is incorrect.

As the federal funds rate rises, the quantity of reserves supplied increases.

Suppose a country is producing $20 million of real GDP. If the economy grows at 10 percent per year, approximately how many years will to take for real GDP to grow to $80 million?

A.14

The equation of the aggregate expenditure curve is given by _______.

AE = A + [b(1minus−t)minus−m]Y

Choose the statement that is incorrect

Against the Chinese yuan, the dollar appreciated between 2005 and 2014

Which of the following is correct?

Aggregate income, aggregate expenditure and GDP are all equal.

Choose the statement about the long run Phillips curve that is incorrect.

An unexpected increase in aggregate demand shifts the long run Phillips curve rightward.

Choose the statement about the long-run Phillips curve that is incorrect

An unexpected increase in aggregate demand shifts the long-run Phillips curve rightward

Choose the statement that is incorrect. A. The Fed's open market operations determine the supply of reserves. B. As the federal funds rate rises, the quantity of reserves supplied increases. C. The federal funds rate is the opportunity cost of holding reserves. D. The Fed uses open market operations to make the quantity of reserves supplied equal the quantity of reserves demanded at the federal funds target rate.

B. As the federal funds rate rises, the quantity of reserves supplied increases.

Sarah works 10 hours a week at McD's. She is available to work more hours but hasn't looked for extra work. The unemployment rate will ________ if Sarah quits and starts to search for a full-time job A. remain unchanged B. rise C. fall

B. rise

According to classical growth theory, when real GDP per person __________, the population grows. A. falls below the subsistence level B. rises above the subsistence level C. grows because of technological change D. equals the subsistence level

B. rises above the subsistence level

An increase in the population ______ the equilibrium quantity of labor, ______ and potential GDP. A. decreases; increases B. decreases; decreases C. increases; increases D. increases; decreases

Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services: Item 1. Newsprint bought by USA Today Item 2. Your purchase of a new iPhone Item 3. Trucks bought by Fedex Item 4. The purchase of a new security system for Congress Item 3 is ______ and item 4 is ______. A. a final good that is investment; a final good that is investment B. a final good that is consumption expenditure; a final good that is investment C. a final good that is investment; a final good which is government expenditure D. a final good that is consumption expenditure; a final good which is government expenditure

If the interest rate is 5 percent, people will ______. A. sell bonds, lower their price, and the interest rate will fall B. buy bonds, bid up their price, and the interest rate will rise C. buy bonds, bid up their price, and the interest rate will fall D. sell bonds, lower their price, and the interest rate will rise

In 2016, the price of corn fell and some corn farmers will switch from growing corn in 2017 to growing soybeans. Why would a corn farmer grow soybeans? A. Soybeans and corn can be grown with the same resources, so they are complements in production. B. Corn is an inferior good that has a strong demand and a low price. C. Soybeans and corn can be grown with the same resources, so they are substitutes in production. D. Soybean is a normal good that has a strong demand and a high price.

Keynesian macroeconomists recommend ______. A. an increase in the quantity of money to offset decreases in aggregate demand and a decrease in the quantity of money to offset increases in aggregate demand B. policies that minimize the disincentive effects of taxes on employment, investment, and technological change C. policies that actively offset changes in aggregate demand that bring recession D. policies that actively offset changes in long-run aggregate supply that result in negative economic growth

The currency drain ratio for M1 is ______ than for M2, and the banks' reserve ratio for M1 is ______ than for M2. A. larger; smaller B. smaller; smaller C. larger; larger D. smaller; larger

U.S. Ran $43 Billion Budget Deficit in July The U.S. government received $232 billion and spent $275 billion in July. The deficit of $43 billion edged the government's debt closer to the federal borrowing limit. Given the information provided by the news clip, how did U.S. government debt change in July 2017? In July 2017, U.S. government debt _______. A. decreased by $232 billion B. decreased by $43 billion C. increased by $43 billion D. increased by $275 billion

What are the main components of money in the United States today? The main components of money in the United States today are ______. A. notes and coins B. currency and traveler's checks C. currency and deposits at banks and other depository institutions D. credit cards and debit cards

If an economy experiences a decrease in the money supply, short-turn unemployment ___________. A. increases, and short-run output increases. B. does not change, and short-run output does not change. C. increases, and short-run output decreases. D. decreases, and short-run output increases

C. increases, and short-run output decreases

Choose the correct statement: A. There is no relationship between the price of an asset and the interest rate. B. When the price of an asset falls, the interest rate falls, everything else remaining the same. C. When the price of an asset rises, the interest rate falls, everything else remaining the same. D. When the price of an asset rises, the interest rate rises, everything else remaining the same.

C. when the price of an asset rises, the interest rate falls, everything reels remaining the same

The U.S. dollar exchange rate increased from $0.89 Canadian in June 2009 to $0.96 Canadian in June 2010, and it decreased from 83.8 euro cents in January 2009 to 76.9 euro cents in January 2010. Did the U.S. dollar appreciate or depreciate against the Canadian dollar? Did the U.S. dollar appreciate or depreciate against the euro cents? Between June 2009 and June 2010, the U.S. dollar ______ against the Canadian dollar. Between January 2009 and January 2010, the U.S. dollar ______ against the euro. A. depreciated; depreciated B. appreciated; appreciated C. depreciated; appreciated D. appreciated; depreciated

Think of examples of goods whose relative price has risen or fallen by a large amount. In 2007, the price of a gallon of gas was $2.59. In 2017, the price of a gallon of gas was $2.32. In 2007, the price of a dozen eggs was $1.63. In 2017, the price of a dozen eggs was $1.40. Between 2007 and 2017, the relative price of a gallon of gas with respect to a dozen eggs _______ and the relative price of a dozen eggs with respect to a gallon of gas _______. A. fell; rose B. rose; rose C. fell; fell D. rose; fell

When cyclical unemployment increases and other things remain the same, ______. A. the amount of frictional unemployment decreases B. the amount of structural unemployment increases C. the natural unemployment rate increases D. the natural unemployment rate does not change

In the short run, the quantity of real money and real GDP are given and the ______ adjusts to achieve equilibrium. In the long run, supply and demand in the loanable funds market determines the ______. A. inflation rate; inflation rate B. demand for money; quantity of money C. price level; price level D. interest rate; real interest rate

D. interest rate; real interest rate

The economy starts out on the curves AD0 and SAS0. Some events then occur that generate a demand-pull inflation. All of the following events except an increase in ______ might cause a demand-pull inflation. A.the quantity of money B.government expenditure C.exports D.the money wage rate Starting at point A, the initial effect of a demand-pull inflation is a move to point ______. As a demand-pull inflation spiral proceeds, it follows the path ______. A. B; E, G, I B. E; I C. C; E, H, I D. C; B, H, G,

D.the money wage rate C. C; E, H, I

Are deposits, checks, and credit cards money?

Deposits are money, checks are not money, and credit cards are not money

Choose the statement that is incorrect

Deposits are not money because you cannot settle a debt with a deposit

Choose the correct statement. Deposits are money, checks are not money, and credit cards are not money. Currency is money and credit cards are money because they are means of payment, but deposits are not money. A credit card is money because it allows you to take a loan at the instant you buy something. A check is money because while it is in circulation the quantity of money increases by the amount of the check.

Deposits are money, checks are not money, and credit cards are not money.

Choose the correct equation.

Depreciation = Gross investment - Net Investment

Choose the statement that is incorrect

In the federal funds market, the higher the federal funds rate, the smaller is the quantity of overnight loans supplied

Choose the statement that is incorrect

In the long run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate

The left graph shows an economy's labor market, Draw a point that shows equilibrium in the labor market The right graph shows the economy's production function. Draw a point on the production function that shows potential GDP in this economy.

Left graph: Draw a point at equilibrium, where two graphs meet. Right graph: Draw a point on the function at the same labor number. (so in this case on the function line where the labor is 200)

The best example of a frictionally unemployed individual is

Mary who quit her job to find work closer to her home.

What is the objective of US monetary policy?

Maximum employment, stable prices, and moderate long term interest rates.

Choose the statement about money that is incorrect

Money in the United States today is make up of notes and coins held by individuals and businesses

The number of people unemployed is calculated as:

People available for work who are one of the following: 1. without work but has made specific efforts to find a job within the pervious four weeks 2. waiting to be called back to a job from which he or she has been laid off 3. waiting to start a new job within30 days

The graph shows the unemployment rate and the natural unemployment rate from 1960 to 2014. Draw a point on the Unemployment rate curve that shows a year in which the economy experiences full employment.

Pick a spot on the graph where the unemployment rate and natural unemployment rate meet

Real GDP Standard of Living Table

Real GDP / Population (monitor change between each year)

Real GDP per person grows when ________.

Real GDP grows at a faster rate than the population grows

Real GDP Table

Real GDP in 2014 at base year prices = Quantities bought in 2014 x base year prices

By measuring ______, we can see that the economy of Singapore has caught up to and surpassed the economy of the United States, but that the economies of Central and South America have not.

Real GDP per person

Between 1914 and 2014, the average growth rate of real GDP per person in the United States was 2 percent a year. During this period, ________ grew at a faster rate than _______.

Real GDP, the population

Land earns ______ Labor earns _____ Capital earns ______ Entrepreneurship earns ______ ________ is an example of _________ A. The manager of Hershey's night shift; entrepreneurship B. Hershey stock worth $300; capital C. Milton Hershey, owner of Hershey's chocolate; labor D. A sewing machine at Levi's production plant; capital

Rent Wages Interest Profit D. A sewing machine at Levi's production plant; capital

If there is a shortage the price will ________ If there is a surplus the price will ________

Rise Fall

An increase in households' expected future disposable income occurs

SLF shifts leftward

Choose the correct statements

Statements 1 and 4 are correct The foreign exchange market is made up of thousands of people, including international tourists and foreign exchange brokers Foreign currency is the money of other countries

Choose the correct statements. 1. The foreign exchange market is made up of thousands of people, including international tourists and exchange brokers. 2.A fall in the exchange rate is called a devaluation of the dollar. 3. In a growing economy, the exchange rate is always rising. 4. If $ 1 buys 100 yen, then the exchange rate is 100 yen per dollar.

Statements 1 and 4 are correct.

Choose the correct statements

Statements 3 and 4 are correct Foreign currency is the money of other countries The foreign exchange market is the market in which the currency of one country is exchanged for the currency of another

When the price level, the money wage rate, and other factor prices rise by the same percentage , there is a movement along ______. Potential GDP _____. When the price level rises but the money wage rate and other factor prices remain the same, there is a movement along _______. The quantity of real GDP supplied __________.

The LAS curve; does not change The SAS curve; increases

The US goes from a free trade policy to a no trade policy with other countries. What is the result of this new policy?

The US no longer consumes outside its production possibilities frontier, because it can only consume what it is producing itself

Saving

The amount of income that is not paid in net taxes or spent on consumption goods and services.

the federal reserve act makes _____ responsible for the conduct of monetary policy.

The board of Governors of the federal reserve system and the federal open market comittee

How can the change in U.S. wealth differ from U.S. saving

The change in wealth includes changes in the prices of assets owned and saving excludes these items

How can the change in U.S. wealth differ from U.S. saving?

The change in wealth includes changes in the prices of assets owned and saving excludes these items.

How can the change in US wealth differ from US saving?

The change in wealth includes changes in the prices of assets owned and saving excludes these items.

The table shows the balance of payments accounts in the United Kingdom in 2004. What is the United Kingdoms current balance, capital and financial account balance, and official settlements account balance?

The current account balance is -43billion dollars The capital and financial account balance is 43 billion dollars The official settlements account balance is 0 billion dollars

The required reserve ratio

The minimum percentage of deposits that depository institutions are required to hold as reserves

What happens to the monetary base, the Feds assets, the banks total assets, and the banks reserves, when the Fed makes an open market sale of securities to a bank?

The monetary base decreases and the Feds assets decrease. The banks total assets are the same, and its reserves decrease

What happens to the equilibrium quantity and price when a new recording studio opens in Austin?

The supply curve for music downloads shifts to the right.

crowding out effect

The tendency for the government deficit to raise the real interest rate

Choose the statement that is incorrect

The unemployment rate includes all underutilized labor

rise in the value of the U.S. dollar?World demand for U.S. exports increases.

Yes

A central bank is _____ The central bank in the United States is the ____

a bank's bank and a public authority that regulates a nation's depository institutions and conducts monetary policy; Federal Reserve System

when the Fed fights inflation, _____.

a decrease in bank reserves decreases the quantity of money demanded.

It is expected that the price of a bushel of wheat will increase in one month. This belief will result in

a decrease in current supply of wheat.

An increase in labor productivity results in all of the following except _______.

a decrease in potential GDP per hour of labor because of diminishing returns

An economy is at full employment when ______.

all unemployment is frictional and structural

The fed in the U.S.

allows a flexible exchange rate, though their actions can impact the exchange rate.

suppose a Canadian dollar bank deposit in Toronto earns 5 percent a year and a US dollar bank deposit in Chicago earns 1 percent a year. What expectations do people hold if interest rate parity to to hold. For interest rate parity to hold, people expect that the US dollar will _____ by ____ percent a year

appreciate; 4

If the U.S. exchange rate changes from $1.00 Canadian to $1.05 Canadian, then the U.S. dollar has ____ and the Canadian dollar has ____

appreciated; depreciated

If the U.S. exchange rate changes from $1.00 Canadian to $1.05 Canadian, then the U.S. dollar has _______ and the Canadian dollar has _______.

appreciated; depreciated

An increase in potential GDP increases ________

both the long-run aggregate supply and short-run aggregate supply

Suppose the exchange rate is 90 yen per U.S. dollar and the U.S. wants to keep the exchange rate at a target rate of 90 yen per U.S. dollar. If the demand for U.S. dollar decreases, the Fed

buys dollars to raise the exchange rate

In real business cycle theory, all of the following events can be sources of fluctuating in productivity except _____.

changes in the growth rate of money

Suppose the Fed sells $50 million of government securities to the Bank of America. The Fed's total assets ______ and its total liabilities ______. The Bank of America's total assets ______ and its total liabilities ______.

decrease by $50 million; decrease by $50 million do not change; do not change

A currency drain ____ bank deposits and ____ bank reserves.

decreases; decreases

The government increases the tax rate on labor income. As a result, the supply of labor ______ and the demand for labor ______. The equilibrium level of employment ___________. At the equilibrium level of employment, the before-tax wage rate ______ and the after-tax wage rate ______. Potential GDP _________.

decreases; does not change decreases rises; falls decreases

Aggregate demand _______ when a decrease in foreign income occurs Aggregate demand _______ when an increase in government expenditure occurs

decreases; increases

Aggregate demand decreases if monetary policy _______ the quantity of money and _______ interest rates.

decreases; increases

Aggregate demand increases if fiscal policy ______ taxes or ______ transfer payments.

decreases; increases

When economists speak of full employment, they refer to the case in which the sum of frictional and structural unemployment is

equal to the actual amount of unemployment.

An economy at a full-employment equilibrium experiences an increase in aggregate demand. The unemployment rate ______ its natural rate, and to return to the long-run equilibrium, the money wage rate begins to ______.

falls below; rise

"As more people buy computers, the demand for Internet service will increase and the price of Internet service will decrease. The fall in the price of Internet service will decrease the supply of Internet service." This statement is ______ because ______.

false; an increase in demand for Internet service does not decrease the price of Internet service and a decrease in the price of Internet service does not decrease the supply of Internet service

The new growth theory

holds that real GDP per person grows because of the choices people make in the pursuit of profit and that growth will persist indefinitely -Paul Romer the pace at which new discoveries are made and at which tech advances is not determined by chance -profit is the spur to tech change -discoveries are a public capital good -knowledge is capital that is not subject to diminishing marginal returns

An increase in U.S. demand for imports ______ the supply of U.S. dollars. A fall in the U.S. interest rate differential ______ the supply of U.S. dollars.

increase; increases

Taxes and needs-tested spending work as automatic fiscal policy to dampen the business cycle because taxes ______ during an expansion, and needs-tested spending ______ during a recession.

increase; increases

As part of its policy to contain the financial crisis, the Fed extended deposit insurance. This action ______ bank deposits and ______ bank reserves.

increased; increased

A fixed exchange rate is one that _______.

is set by the government or the central bank and is achieved by central bank intervention in the foreign exchange market

The core inflation rate _____.

is the rate of increase in the core PCE deflator, which is the PCE deflator excluding food and fuel.

Demand for Loanable Funds

is the relationship between the quantity of loanable funds demanded and the real interest rate

The natural unemployment rate _______.

is the unemployment rate when there is no cyclical unemployment

The bias in the CPI is a problem because ________.

it distorts wage agreements linked to the CPI

The world market for crude oil is a competitive market because _______.

it has many buyers and many sellers and no single buyer or seller can influence the price

The graph shows an economy in a below full-employment equilibrium. To restore full employment, the government increases government expenditure by $0.5 trillion. Draw a curve that shows the effect if this increase in government expenditure is the only change in spending plans. Label it AD0+Upper DeltaE. The increase in government expenditure sets off a multiplier process. Draw a curve that shows the multiplier effect that returns the economy to full employment. Label it AD1. Draw a point at the long-run equilibrium.

look at pic

When Apple Inc. expands and rents an adjacent building, the flows are a ______ from firms to households and a ______ from households to firms. When you buy a new e dash book from Amazon, the flows are a ______ from households to firms and a ______ from firms to households.

money flow; real flow money flow; real flow

The demand for money is the relationship between the quantity of real money demanded and the _____ when all other influences on the amount of money that people wish to hold remain the same. When the nominal interest rate rises, the opportunity cost of holding money ____ and the quantity of real money demanded ______

nominal interest rate rises; decreases

New classical economist are based on _______.

rational expectations f individual firms and consumers

Suppose the Fed raises the fed funds rate. Describe the ripple effects of this monetary policy. Other short term interest rates and the exchange rate _____. The quantity of money and supply of loanable funds _____ The long term real interest rate____. Consumption expenditure, investment, and net exports _____. Aggregate demand _____. Real GDP growth and inflation rate _____.

rise; decrease; rises decrease; decreases; decrease

According to classical growth theory, when real GDP per person _______, the population grows.

rises above the subsistence level

An increase in the demand for burgers brings a ______ in the price of a burger and ______ in the quantity of burgers supplied.

rise; an increase

People make choices because of _________

scarcity

If the interest rate is 5%, people will ___ bonds. Bond prices will ____ The interest rate will ____

sell; fall rise

Short run equilibrium occurs at the intersect of

the SAS and AD curves

When the price level rises but the money wage rate and other factor prices remain the same, there is a movement along ______. The quantity of real GDP supplied ______.

the SAS curve; increases

The U.S. interest rate differential falls when

the U.S. interest rate falls and the foreign interest rate rises

The U.S. interest rate differential rises when

the U.S. interest rate rises and the foreign interest rate falls

The price level

the average level of prices, and the value of money

Suppose that yesterday, the U.S. dollar was trading on the foreign exchange market at 100 yen per U.S. dollar and today the U.S. Which has appreciated and which one has depreciated?

the dollar appreciated and the yen depreciated

The quantity of U.S. dollars supplied in the foreign exchange market depends on many factors, the main ones being ______.

the exchange rate, U.S. demand for imports, interest rates in the United States and other countries, and the expected future exchange rate

One of the Fed's main policy tools is _________.

the last resort loan, which means that if a bank is short of reserves, it can borrow from the Fed

The quantity of U.S. dollars demanded in the foreign exchange market depends on all of the following except

the price of gold (or the supply of U.S. dollars in the foreign exchange market)

An open market operation is

the purchase or sale of securities by the Federal Reserve System in the loanable funds market

Gross investment is ______. Net investment is ______.

the total amount spent on new capital; the change in the value of capital

Along the long-run Phillips curve

the unemployment rate is constant at the natural unemployment rate

If most prices increase in Japan and other countries but remain constant in the United States

then for purchasing power parity to hold, the demand for U.S. dollars increases and the supply of U.S. dollars decreases

If the expected inflation rate increases and the natural rate of unemployment remains constant, then _______.

the short-run Phillips curve shifts upward and the long-run Phillips curve does not shift

The number of people employed is calculated as:

to be employed a person must have a part time or full time job

A change in the expected future exchange rate changes the supply of U.S. dollars ____ and a change in U.S. demand for imports changes the supply of U.S. dollars____

today; today

Frictional unemployment

unemployment that arises from normal labor turnover, people entering and leaving the labor force and from the ongoing creation and destruction of jobs permanent and healthy part of a growing economy

An increase in investment shifts the AE curve ____ and the AD curve _____

upward; rightward

When a textile company keeps track of its inventory using a computer and its competitor uses a pad of paper and a pencil, they are both answering the ________ part of one of the two big economic questions.

"how"

A country has been in existence for only two years. In the first year, receipts were $1.0 million and outlays were $1.5 million. In the second year, receipts were $1.5 million and outlays were $2.0 million. At the end of the second year, the government had issued debt worth ______.

$1 million

A south sea island produces only coconuts. In 2014, the price of a coconut is $1.50 and the quantity produced is 400. In 2017, the price of a coconut is $2.50 and the quantity produced is 350. 2014 is the reference base year. What is real GDP in 2017 in terms of base-year prices? Real GDP in 2017 in terms of base-year prices is ______.

$525

An increase in labor productivity shifts the labor ________ curve ________.

demand; rightward

Suppose the market for loanable funds is in equilibrium. If the expected profit falls, the equilibrium real interest rate ________ and the quantity of loanable funds ________.

falls; decreases

M1 consists of

-Currency and traveler's checks -Checking deposits at commercial banks, savings and loan associations, savings banks, and credit unions

M2 consists of

-M1 -Time deposits -Savings deposits -Money market mutual funds and other deposits

If the annual interest paid on a $500 loan is $25, the nominal interest rate is _____ percent per year. If the nominal interest rate is 5 percent per year and the inflation rate is 2 percent a year, the real interest rate is _____ per year. A. 5; 3 B. 4; 4 C. 3; 5 D. 5; 7

A. 5;3

To increase the money supply, the Fed may conduct A. open market purchases or decrease the discount rate. B. open market sales or increase the discount rate. C. open market sales or decrease the discount rate. D. open market purchases or increase the discount rate.

A. open market purchases or decrease the discount rate

When cyclical unemployment increase and other thing remain the same, _________. A. the natural unemployment rate does not change B. the amount of frictional unemployment decreases C. the natural unemployment rate increases D. the amount of structural unemployment decreases

A. the natural unemployment rate does not change

Relationship between the economy's standard of living and the real GDP per person

The economy's standard of living decreases if real GDP per person decreases

Choose the statement that is incorrect A. The employment-to-population ratio falls during a recession and increases during an expansion. B. The trend in the labor force participation rate and the employment-to-population ratio is upward before 2000 and downward after 2000. C. The employment-to-population ratio fluctuates less than the labor force participation rate. D. The labor force participation rate and the employment-to-population ratio fluctuate with the business cycle.

C. The employment-to-population ratio fluctuates less than the labor force participation rate.

Older unemployed workers might become marginally attached workers or discouraged workers during a recession because _______. A. they take a longer time than younger unemployed workers to "transition" to a new job B. they take about five weeks longer than younger unemployed workers to find a job C. given their long employment history, they are eligible for longer periods of unemployment benefits D. they often lack the skills to craft resumes and cover letters

C. given their long employment history, they are eligible for longer periods of unemployment benefits

The two main official measures of money in the United States today are___________. The two main official measures of money in the United States ___________ really money. A. Currency and M2; are B. M2 and M3; are not C. M1 and currency; are not D. M1 and M2; are

D. M1 and M2; are

The statement about the Fed that is incorrect is: A. The main policy making organ of the Federal Reserve system is the Federal Open Market Committee B. There are 12 Federal Reserve districts C. The Board of Governors has seven members, who each serve a 14-year term D. The policy decisions of the Federal Open Market Committee are implemented each month by a different Federal Reserve Bank

D. The policy decisions of the Federal Open Market Committee are implemented each month by a different Federal Reserve Bank

Choose the statement that is incorrect: A. Deposits at commercial banks, thrift institutions, and money market mutual funds make up the nation's money. B. Deposits in depository institutions are components of M1 and M2. C. A depository institution is a financial firm that takes deposits from households and firms. D. If a depository institution fails, its deposits are guaranteed up to a maximum of $25,000 per depositor per bank.

D.If a depository institution fails, its deposits are guaranteed up to a maximum of $25,000 per depositor per bank.

ricardo-barro effect

holds that the effects are wrong the the gov budget has no effect on either the real interest rate or investment - says the taxpayers are rational and can see that budget deficit today mean that future taxes must be higher and future disposable incomes smaller -saving increases today

The money multiplier is calculated as:

in the textbook

Crowding out effect

the tendency for a government budget deficit to raise the real interest rate and decrease investment -does not decrease investment by the full amount of the government budget deficit because a higher real interest rate induces an increase in private saving that partly contributes toward financing the deficit

Quantity of loanable funds demanded

the total quantity of funds demanded to finance investment, the government budget deficit, and international investment or lending during a given period -determined/influenced by: 1. the real interest rate 2. expected profit

Rob takes a summer job with a landscaping firm. During the summer, he earns an after-tax income of $4,000 and he spends $2,500 on living expenses. Everything else remaining the same, what was the change in Rob's wealth during the summer?

$1,500

January 1, 2014, Sophie's Sunlounge owned 4 tanning beds valued at $20,000 During 2014, Sophie's bought 3 new beds at a total cost of $12,000, and at the end of the year the market value of all of Sophie's beds was $27,000. Calculate Sophie's gross investment and depreciation during 2014. Sophie's gross investment during 2014 was _______. Sophie's depreciation during 2014 was _______.

$12,000; $5,000

The figure show the labor market when an income tax is imposed. The tax wedge is _____.

$15 an hour

Rob takes a summer job with a landscaping firm. During the summer, he earns an after-tax income of $4000 and he spends $1500 on living expenses. Everything else remaining the same, what was the change in Rob's wealth during the summer? The change in Rob's wealth is

$2,500

Rob takes a summer job with a landscaping firm. During the summer, he earns an after-tax income of $3,500 Everything else remaining the same, what was the change in Rob's wealth during the summer? The change Rob's wealth is ______.

$2500

Equilibrium expenditure is equal to

$3 trillion (or $5 trillion if C= 1, 1.65, 2.30, 2.95, 3.60, 4.25)

Cindy takes a summer job painting houses. During the summer, she earns an after-tax income of $5,000 and she spends $2,000 on living expenses. What was Cindy's saving during the summer? Cindy's saving during the summer was ______.

$3,000

Cindy takes a summer job painting houses. During the summer, she earns an after-tax income of $4500 and spends $1000 on living expenses. What was Cindy' saving during the summer? Cindy's saving during the summer was ___

$3,500

An economy has no imports and no taxes. The marginal propensity to save is .5. A _____ increase in autonomous expenditure increases equilibrium expenditure by $60 billion. A multiplier is ____

$30 billion; 2.00

Annie runs a fitness center. On december 31, 2013, she bought an existing business with exercise equipment and a building worth $400,000. At the end of 2014, her equipment and buildings were worth $685,000. Calculate Annie's gross investment, net investment, and depreciation during 2014. Annies gross investment during 2014 was _________. Annies net investment during 2014 was ________. Annies depreciation during 2014 was _________.

$300,000 $285,000 $15,000

Aggregate income in an economy in 2014 is $350 billion. Saving is $30 billion and imports are $35 billion. Aggregate expenditure in the economy in 2014 is ______.

$350 billion

The value of M1 is ____ and the value of M2 is ___

$350 million; $3550 million (or $290 billion; $1060 billion)

In real business cycle theory, all of the following events can be sources of fluctuation in productivity except

changes in the growth rate of money

Population increases are the limiting factor in the growth process in

classical growth theory.

A ______ macroeconomist believes that the economy is self-regulating and always at full employment. A ______ macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment.

classical; Keynesian

The monetary base consists of

currency and reserves of depository institution

Growth rates are calculated in a similar manner for all variables. Real GDP growth rate = [(Real GDP in ______ year−Real GDP in ______ year) ÷Real GDP in ______ year ] ×100.

current; previous; previous

An electrician who is laid off because the economy is in a recession experiences ______.

cyclical unemployment

Suppose the Fed sells $50 million of government securities to the Bank of America. The Fed's total assets ____ and its total liabilities _____ The Bank of America's total assets ____ and its total liabilities ______

decrease by $50 million; decrease by $50 million (or increase by $50 million; increase by $50 million) do not change; do not change

An increase in expected future income _____.

decreases the supply of loanable funds today because households with larger expected future income will save less today

As the market moves toward equilibrium, the quantity demanded ________ and the quantity supplied _________.

decreases; Increases

Aggregate demand decreases if expected future income, inflation, or profits _______. And Aggregate demand decreases if fiscal policy ______ government expenditure.

decreases; decreases

Tax revenues _____ during a recession. Needs-tested spending _____ during an expansion.

decreases; decreases

A rise in the federal funds rate ____ reserves and _____ the quantity of deposits and bank loans created. The quantity of money demanded _____. Consumers and firms spend _____.

decreases; decreases decreases; less

An increase in current income taxes _______ the supply of loanable funds today because it _____.

decreases; decreases disposable income, which decreases saving

An increase in current income taxes ____ the supply of loanable funds today because it ____ A decrease in expected future income ____

decreases; decreases disposable income, which decreases saving increases the supply of loanable funds today because households with smaller expected future income will save more today

Aggregate demand increases if the exchange rate _____ or foreign income ________.

decreases; increases

January 1, 2014, Sophie's Sunlounge owned 4 tanning beds valued at $20,000 During 2014, Sophie's bought 3 new beds at a total cost of $14,000, and at the end of the year the market value of all of Sophie's beds was $27,000. What was Sophie's net investment? Sophie's net investment during 2014 was _______.

$7,000

The money multiplier can be calculated as ______, where C is currency, D is deposits, and R is banks' reserves.

(1 + C/D) + (R/D + C/D)

If the money price of 1/2 gallon of milk is $1.80, and the relative price of a 1/2 gallon milk is equal to 4 packs of burritos, then what is the money price of a pack of frozen burritos?

(1.80 / 4) = 0.45 cents

Suppose a country's real GDP is 5 trillion and its population is 10 million. What is the country real GDP per person?

(5,000,000,000,000 / 10,000,000) = 500,000

You plan to take summer classes at UT. If you do you won't be able to take your usual summer job that pays 6000. The cost of tuition is 2000, the cost of books is 100, and the you live at home with your parents which covers your living expense of 1900. What is the opportunity cost of going to school?

(6000 + 2000 + 100) = 8,100 living expenses are not added because they are covered

If equilibrium expenditure changes by $50 billion that results from an increase in autonomous taxes by $80 billion, find the autonomous tax multiplier.

0.625

1 million

Kim can produce 40 pies per hour or 400 cakes per hour. Liam can produce 100 pies per hour or 200 cakes per hour. Kim's opportunity cost of producing a pie is ____ cakes. Liam's opportunity cost of producing a pie is ____ cakes. ______ has the comparative advantage in producing pies. ______ has the comparative advantage in producing cakes. Kim spends 30 minutes producing pies and 30 minutes producing cakes, Kim produces _____ pies and ______ cakes. If Liam spends 30 minutes producing pies and 30 minutes producing cakes, Liam produces ______ pies and _____ cakes.

10 2 Liam Kim 20; 200 50; 100

The people who live on Second Life Island consume only juice and cloth. Last year, which was the CPI base year, the price of juice was $4 a bottle, the price of cloth was $6 a length, and the average urban household spent $24 on juice and $24 on cloth. This year, the price of juice is $6 a bottle and the price of cloth is $3 a length. What is the CPI in the current year? The CPI in the current year is _______.

100

Lori is a student who teaches golf on Saturdays. In a year she earns $35,000 after paying her taxes. At the beginning of 2014, Lori owned $4,000 worth of books, CDs, and golf clubs and she had $3,000 in a savings account at the bank. During 2014, the interest on her savings account was $150 and she spent a total of $25,000 on consumption goods and services. There was no change in the market values of her books, CDs, and golf clubs. How much did Lori save in 2014 and what is her wealth at the end of 2014? In 2014, Lori saved $______. Lori's wealth at the end of 2014 is $______

10150 Saving is what is earned and not spent on taxes or goods and services. Will include interest on savings account. 17150

The people who who live on Second Life Island consume only juice cloth. Last year, which was the CPI base year, the price of juice was $6 a bottle, the price of cloth was $3 a length, and the average urban household spent $54 on juice $27 on cloth. This year, the price of juices is $3 a bottle and the price of cloth is $7 a length. What is the CPI in the current year? The CPI in the current year is

111.1

The CPI in 2013 is 220 and the CPI in 2014 is 246.4. The inflation rate in 2014 is _____ percent. The inflation rate is 2014 _______.

12; might b higher, lower, or the same as in 2013.

The table gives information about the US labor market in 2011. What is the number of people unemployed? The number of people unemployed is _______ million. Table: Working age population: 239.6 million Labor force: 153.6 million Employed: 139.9 million

13.7

The current account balance is ___ billion dollars The capital and financial account balance is ___ billion dollars The official settlements account balance is ____ billion dollars

14 -10 -4

The level of disposable income at which all disposable income is consumed is ____ million

200

Refer to Graph 3, which represents Alice's Production Possibilities Frontier. At which levels of production is Alice producing inefficiently?

200 units of lemonade and 50 units of pizza

Nickelodeon's current account balance is _____ billion dimes Nickelodeon's capital and financial account balance is ___ billion dimes Nickelodeon's official settlements account balance is ___ billion dimes

50 -140 90

The population survey in blogsville for the past month is given in the table. In blogsville last month, _______ million people were in the labor force and ______ million people were in the working-age population. Table: 1. 40 million people had full time jobs 2. 11 million people had part time jobs 3. 5 million people were without work but were available for work and had made specific efforts to find a job within the past four weeks or were waiting to be recalled from a layoff or had a new job to start within the next 30 days. 4. 3 million part-time workers were looking for full-time jobs 5. 24 million people of working age did not have jobs and did not want jobs

56; 80

The bank plans to hold $5 for every $100 in deposits. The bank holds actual reserves of $8,000 and desired reserves of $22,000. What is the bank's desired reserve ratio and its excess reserves? The banks desired reserve ratio is ____ percent. The banks excess reserves are _____.

5; $14,000

The CPI in 2013 is 140 and the CPI in 2014 is 147. The inflation rate in 2014 is ___ percent. The inflation rate in 2014 ________.

5; might be higher, lower, or the same as in 2013

Rule 70

70/ Real GDP Growth = Time to double (sometimes you subtract a pop growth %)

The table provides some data on real GDP and the population of Europa in 2010 and 2011. What is the growth rate of real GDP in Europa in 2011? What is the growth rate of real GDP per person in Europa in 2011? The growth rate of real GDP in Europa in 2011 is ___ percent. The growth rate of real GDP per person in Europa in 2011 is ___ percent. Table: Year, Real GDP (trillions), Population (billions) 2010: 100,000; 200 2011: 107,060; 202

7; 6

The CPI in 2013 is 140 and the CPI in 2014 is 149.8. The inflation rate in 2014 is _____ percent. The inflation rate in 2014 _______.

7; might be higher, lower, or the same as in 2013.

A government budget deficit ______ the real interest rate because ______. A. raises; the demand for loanable funds increases B. lowers; the demand for loanable funds decreases C. lowers; the supply of loanable funds increases D. raises; the supply of loanable funds decreases

Assume that the preconditions for labor productivity growth are in place. What influences the pace of labor productivity growth? The pace of labor productivity growth is influenced in part by _______. A. human capital growth B. the rate of change of the U.S. dollar exchange rate in the foreign exchange market C. international trade D. population growth

Choose the correct statement. A. Modern-day Malthusians point to global warming and climate change as reasons to believe that eventually real GDP per person will decrease. B. Neoclassical growth theory is the view that the growth of real GDP per person is temporary and that when it rises above the subsistence level, a population explosion eventually brings it back to the subsistence level. C. Classical growth theory tells us that technological change induces a level of saving and investment that makes capital per hour of labor grow indefinitely. D. Neoclassical growth theory is sometimes called Malthusian theory.

Choose the statement that is incorrect. A. As the federal funds rate rises, the quantity of reserves supplied increases. B. The Fed uses open market operations to make the quantity of reserves supplied equal the quantity of reserves demanded at the federal funds target rate. C. The Fed's open market operations determine the supply of reserves. D. The federal funds rate is the opportunity cost of holding reserves.

If a shortage of U.S. dollars occurs in the foreign exchange market, the _______ and the exchange rate _______. A. quantity of U.S. dollars demanded decreases and the quantity of U.S. dollars supplied increases; rises B. demand for U.S. dollars decreases and the supply of U.S. dollars increases; falls C. quantity of U.S. dollars demanded increases and the quantity of U.S. dollars supplied decreases; falls D. demand for U.S. dollars increases and the supply of U.S. dollars decreases; rises

In 2016, the price of corn fell and some corn farmers will switch from growing corn in 2017 to growing soybeans. Does this fact illustrate the law of demand or the law of supply? As the price of corn fell in 2016, _________. A. farmers planned to decrease the quantity of corn supplied in 2017. This fact illustrates the law of supply. B. farmers planned to decrease the supply of corn. This fact illustrates the law of supply. C. the demand for corn increased. This fact illustrates the law of demand. D. the quantity of corn demanded decreased. This fact illustrates the law of demand.

The U.S. M1 multiplier is _______ the U.S. M2 multiplier. A. smaller than B. the same size as C. larger than

The law of demand states that ______, the ______ the price of a good, the smaller is the quantity demanded. A. other things remaining the same; higher B. even when other factors change; higher C. even when other factors change; lower D. other things remaining the same; lower

The Fed's monetary policy instrument is _______. A monetary policy instrument is _______. A. the federal funds rate; a variable that the Fed can directly control or closely target B. the exchange rate; a variable that the Fed can influence but not directly control C. the inflation rate; a variable that the Fed can influence but not directly control D. the monetary base; a variable that the Fed can directly control or closely target

Use the Rule of 70 to calculate the growth rate that leads to a doubling of real GDP per person in 20 years. The Rule of 70 states that the number of years it takes for the level of any variable to ______ is approximately ______. A. double; 70 divided by the annual percentage growth rate of the variable B. double; 70 multiplied by the annual percentage growth rate of the variable C. increase by a factor of 70; 70 divided by the annual percentage growth rate of the variable D. increase by a factor of 70; 1/70 multiplied by the annual percentage growth rate of the variable

What determines the real exchange rate and the nominal exchange rate in the short run? In the short run, the nominal exchange rate is determined by ______. And in the short run ______. A. the demand for U.S. dollars and the supply of U.S. dollars in the foreign exchange market; a change in the nominal exchange rate brings an equivalent change in the real exchange rate B. the equation E = (RER times P)/P*; a change in the nominal exchange rate brings an equivalent change in the real exchange rate C. the demand for U.S. dollars and the supply of U.S. dollars in the foreign exchange market; the real exchange rate is determined by the quantities of money in the two countries D. the equation E = (RER times P)/P*; the real exchange rate is determined by the quantities of money in the two countries

What determines the supply of loanable funds and what makes it change? The supply of loanable funds is determined by the _________. The supply of loanable funds changes when _______. A. saving decisions of households, which are influenced by the real interest rate, disposable income, expected future income, wealth, and default risk; disposable income, expected future income, wealth, or default risk change B. decisions of financial institutions; the real interest rate changes C. demand for loanable funds; the demand for loanable funds changes D. saving decisions of households, which are influenced by the real interest rate, disposable income, expected future income, wealth, and default risk; the real interest rate changes

What is the equation of exchange? The equation of exchange is ______ and it is true ______. A. MV = PY; by definition B. MP = YV; in the short run only if the rate of velocity change is approximately equal to zero C. MV = PY; in the short run only if the rate of velocity change is approximately equal to zero D. MP = YV; by definition

When fuel prices rise _______. When the price level in India increases _______. A. short-run aggregate supply decreases; the quantity of real GDP supplied increases B. short-run aggregate supply increases; the quantity of real GDP supplied decreases C. long-run aggregate supply decreases; short-run aggregate supply increases D. long-run aggregate supply increases; the quantity of real GDP supplied increases

______ has a comparative advantage in producing caps. If Sue and Tessa each specialize in producing the good in which they have a comparative advantage and trade 1 jacket for 7 caps, ______.

A. Tessa; both Sue and Tessa gain

Consider the following assessment: Unemployment is a more serious economic problem than inflation and it should be the focus of the Fed's monetary policy. Choose the statement that is incorrect. A.The Fed could achieve all of its goals if it focused monetary policy on lowering unemployment. B.The Fed's goals include maximum employment and stable prices. C.The Fed's goals include moderate long-term interest rates. D.The Fed's primary goal is price stability because price stability helps the Fed reach all three of its goals

A. The Fed could achieve all of its goals if it focused monetary policy on lowering unemployment.

The law of demand states that other things remaining the same, the _______ the price of a good, the _______. A. higher; smaller is the quantity demanded Your answer is correct. B. lower; greater is demand C. lower; smaller is the quantity demanded D. higher; greater is the quantity demanded A demand curve that illustrates the law of demand ______. A. shows that the quantity demanded decreases as the price rises B. shows that the quantity demanded remains the same when the price falls C. shows that the quantity demanded decreases as the price falls D. has a positive slope

A. higher; smaller is the quantity demanded A. shows that the quantity demanded decreases as the price rises

Choose the statement that is incorrect.

An increase in government expenditure increases government borrowing (or decreases government lending if there is a budget surplus) and lowers the real interest rate.

Choose the statement that is incorrect

An unexpected inflation or deflation has no effect on the economy

Choose the statement that is incorrect

Coins, which are issued by the Treasury are an asset of the Fed and a component of the monetary base

Full employment

Cyclical at 0

Among the G7, which country had the highest real GDP per person in 2016? Among the G7, the country with the highest real GDP per person in 2016 is _______. A. Japan B. the United States C.the United Kingdom D. Canada

An increase in the population _______ the real wage rate. A. raises B. lowers C. does not change

Choose the correct statement. A. The aggregate demand curve slopes downward because of the wealth effect and the money wage rate. B. The quantity of real GDP demanded is the sum of the real consumption expenditure, investment, government expenditure, and exports minus imports. C. The quantity of real GDP demanded depends on the quantity of real GDP supplied. D. The higher the price level, the greater is the quantity of real GDP demanded.

Choose the correct statement. A. Unemployment is a serious personal problem but not a serious social economic problem. It is only an effect of the business cycle. B. The class of 2017 had a better time in the job market than those of the decade that preceded it. C. In recent years, population growth has outstripped jobs growth, resulting in a serious unemployment problem. D. Prolonged unemployment increases a person's job prospects because they are willing to work for a lower wage.

Choose the statement about a crawling peg that is correct. A. The Fed operated a crawling peg in the decade following World War II. B. When China abandoned its fixed exchange rate, it replaced it with a crawling peg. C. A crawling peg makes the exchange rate fluctuate wildly. D. A crawling peg is not influenced by actions of the central bank.

Complete the sentence. An increase in the population ______. A. increases potential GDP and increases potential GDP per hour of labor B. shifts the supply of labor curve rightward and creates a movement along the production function C. shifts the production function upward D. increases the real wage rate, increases potential GDP, and decreases potential GDP per hour of labor

Explain why real GDP might be an unreliable indicator of the standard of living. Real GDP might be an unreliable indicator of the standard of living because ______. A. real GDP is measured differently in various parts of the country B. the standard of living depends on many factors, some of which are not part of real GDP C. real GDP values all production in constant prices D. real GDP numbers are constantly being updated

If a surplus of U.S. dollars occurs in the foreign exchange market, the _______ and the exchange rate _______. A. demand for U.S. dollars decreases and the supply of U.S. dollars increases; falls B. quantity of U.S. dollars demanded increases and the quantity of U.S. dollars supplied decreases; falls C. quantity of U.S. dollars demanded decreases and the quantity of U.S. dollars supplied increases; falls D. demand for U.S. dollars increases and the supply of U.S. dollars decreases; rises

If real GDP per person doubles in 20 years, then the annual growth rate of real GDP per person is ______ percent a year. A. 28.5 B. 3.5 C. 14.3 D. 14.0

The politician wants a ______ in the short run. This policy would have no effect on the exchange rate in the long run because in the long run ______. A. crawling peg; interest rate parity prevails and all exchange rates are constant B. crawling peg; the price level and the nominal exchange rate are determined together C. fixed exchange rate; the price level and the nominal exchange rate are determined together D. fixed exchange rate; interest rate parity prevails and all exchange rates are constant

The price of oil hit a record high above $135 a barrel in May 2008---more than twice what it cost the year before. OPEC has so far blamed price rises on speculators and says there is no shortage of oil. Complete the following sentences. The price of oil rises if the demand for oil ______ and the supply of oil ______. A. increases; increases B. increases; decreases C. decreases; decreases D. decreases; increases

The reference base period for the CPI is 1982-1984. In February 2017, the CPI was 243.6. Complete the sentence. This CPI in February 2017 tells us that the ______ of the prices paid by urban consumers for a fixed basket of consumer goods and services was ______ . A. inflation rate; 143.6 percent per year B. average; 143.6 percent higher in February 2017 than the average of 1982-1984 C. inflation rate; 243.6 percent per year D. average; 243.6 percent higher in February 2017 than the average of 1982-1984

In one hour, Sue can produce 50 caps or 10 jackets and Tessa can produce 70 caps or 7 jackets. Sue's opportunity cost of producing a cap is ______ jackets and Tessa's opportunity cost of producing a cap is ______ jackets.

B. 0.2; 0.10

The CPI basket contains 400 oranges and 800 pens. In the base year, the price of an orange is $1.00 and the price of a pen is $0.75. This year, urban consumers each buy 300 oranges at $2.00 each and 850 pens at $1.00 each. The CPI this year is ________.

C. 160

Choose the statement that is incorrect

Classical growth theory tells us that technological change induces a level of saving and investment that makes capital per hour of labor grow indefinitely

How would using the Taylor rule have changed the Fed's interest rate setting? If the Fed had followed the Taylor Rule, the federal funds rate would have been higher ______, and lower ______. A. between 2001 and 2007; after 2011 B. after 2011; between 2001 and 2007 C. between 2001 and 2005 and after 2011; in 2007 D. in 2007; between 2001 and 2005 and after 2011

When an economy is below full employment and the government has a budget deficit, that deficit ______. A. is equal to the structural deficit B. is equal to the structural deficit minus the cyclical deficit C. exceeds the structural deficit D. is equal to the cyclical deficit minus the structural deficit

Choose the correct statement. A. The Federal Reserve is the U.S. central bank that also acts as a commercial bank. B. Commercial banks are financial institutions that accept deposits, provide payment services, and make loans to firms and households. C. Fannie Mae is a commercial bank. D. Freddie Mac is a commercial bank.

Commercial banks are financial institutions that accept deposits, provide payment services, and make loans to firms and households.

A country that is borrowing more from the rest of the world than it is lending to the rest of the world is a ______, and a country that during its entire history has borrowed more from the rest of the world than it has lent to it is a ______. A. debtor nation; net borrower B. net debtor; borrower nation C. borrower nation; net debtor D. net borrower; debtor nation

A shortage occurs at a given price when ______. The price _____ to reach equilibrium. A. demand is greater than supply; rises B. the quantity supplied is greater than the quantity demanded; falls C. supply is greater than demand; falls D. the quantity demanded is greater than the quantity supplied; rises

According to mainstream business cycle theory, _______. A. the money wage rate is sticky and consequently if aggregate demand grows faster than potential GDP, a recessionary gap emerges B. the economy is always at full employment C. in a business cycle expansion, short-run aggregate supply increases by more than aggregate demand D. the money wage rate is sticky and consequently if aggregate demand grows faster than potential GDP, an inflationary gap emerges

Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services: Item 1. Newsprint bought by USA Today Item 2. Your purchase of a new iPhone Item 3. Trucks bought by Fedex Item 4. The purchase of a new security system for Congress Item 1 is ______ and item 2 is ______. A. a final good that is investment; a final good that is consumption expenditure B. an intermediate good; an intermediate good C. a final good that is investment; an intermediate good D. an intermediate good; a final good that is consumption expenditure

Potential GDP per person ______. A. is the market value of the final goods and services produced within a country in a given time period B. grew at a faster rate during the 1970s than during the 1960s C. is calculated as real GDP divided by the population D. grows at a steady pace but not at a constant pace

The defining feature of the Keynesian view of macroeconomics is that the economy is ______. A. constantly bombarded by shocks that arise from the uneven pace of technological change B. that the quantity of money is the most significant influence on aggregate demand C. self-regulating and always at full employment D. rarely at full employment

What does the Federal Reserve Act of 2000 say about the Fed's control of the quantity of money? The Federal Reserve Act of 2000 says that the Fed "shall maintain ______ growth of the monetary and credit aggregates commensurate with the economy's ______ potential to increase production." A. short-run; long-run B. short-run; short-run C. long-run; short-run D. long-run; long-run

What is the crowding-out effect and how does it work? The crowding-out effect is the tendency for a government budget deficit to ______ the real interest rate and decrease ______. A. lower; saving by the full amount of the government budget surplus B. lower; saving C. raise; investment by the full amount of the government budget deficit D. raise; investment

Who is responsible for U.S. monetary policy and what are the roles of the Fed, Congress, and the President? The ______ appoints the members and the Chairman of the Board of Governors of the Fed. The ______ is responsible for the conduct of monetary policy. A. Congress; Fed B. Congress; President C. Fed; Congress D. President; Fed

In goods markets ________ and in factor markets ________. A. households sell to firms; households sell to firms B. firms sell to households; firms sell to households C. households sell to firms; firms sell to households D. firms sell to households; households sell to firms

D. firms sell to households; households sell to firms

Which of the following fiscal policies combats inflation?

Decreasing government spending

Choose the correct statement

Deposits are money, checks are not money, and credit cards are not money

Click on the icon to read the news clip, then complete the following steps. The graph shows the market for loanable funds. Draw a curve to shows the effect of TransCanada going to the loanable funds market to finance the building of its pipeline. Draw a point to show the new equilibrium in the loanable funds market, When TransCanada goes to the loanable funds market to finance the building of its pipeline, the real interest rate _____, private saving ______, and investment _________.

Draw a curve above the demand curve so that it intersects one number above where the original did. draw a new equilibrium. Rises; increases; increases

Draw an aggregate demand curve. Label it AD. Draw an arrow on the AD cure that shows the international substitution effect when the price level falls. Label it 1. Draw an arrow in the AD curve that shows the international substitution effect when the price level rises. Label it 2. Other things remaining the same, when the US price level rises, US made goods and services become _____ expensive relative to foreign-made goods and services. People spend ____ on US made items and ____ on foreign made items. ________ decreases.

Draw a demand curve (straight line). Draw an arrow going along the demand curve going DOWN and label it 1. Draw an arrow along the demand curve GOING UP and label it 2. more less; more the quantity of US real GDP demanded.

The graph shows the demand curve for US dollars. Draw a new demand curve that shows the effect of an increase in the world demand for US exports. Label it A change in the expected future exchange rate changes the demand for US dollars ______, and a change in the world demand for US exports changes the demand for US dollars _________.

Draw a demand curve above the original demand curve. today, today

The graph shows the demand curve for US dollars. Draw a new demand curve that shows the effect of an increase in the US interest rate differential. Label it. The US interest rate differential rises when _________.

Draw a demand curve above the original one. The US interest rate rises and the foreign interest rate falls.

The graph shows the demand curve for US dollars. Draw a new demand curve that shows the effect of a decrease in the US interest rate differential. Label it. The US interest rate differential falls when _________.

Draw a demand curve below the original demand curve. The US interest rate falls and the foreign interest rate rises.

The graph shows the demand curve for US dollars. Draw a new demand curve that shows the effect of a decrease in the world demand for US exports. Label it A change in the expected future exchange rate changes the demand for US dollars ______, and a change in the world demand for US exports changes the demand for US dollars _________.

Draw a demand curve below the original one today; today

Draw an aggregate demand curve. Label it AD. Draw a shirt run aggregate supply curve. Label it SAS. Draw a point at the short run macroeconomic equilibrium. Label it 1. Draw a point on the SAS curve at which inventories pile up. Label it 2. When unwanted inventories pile up, _____. Prices _____.

Draw a demand curve line. Label. Draw a supply curve line. Label. Draw a pint at equilibrium. Label. Draw a point on the supply curve above the equilibrium point. the quantity of real GDP supplied is greater than the quantity of real GDP demanded; fall

Draw an aggregate demand curve in an economy with an above full-employment equilibrium. Label it AD. Draw a point at the above full-employment equilibrium. Draw a horizontal arrow at the equilibrium price level that shows the output gap. The output gap in the graph is _______ because _________.

Draw a demand curve that is a regular demand curve that crosses above the LAS curve. it needs to cross the SAS curve to the right of the LAS curve. then draw point where SAS and AD curve cross. Put an arrow in the space between the equilibrium point and the LAS line an inflationary gap; potential GDP is less than real GDP.

Draw an aggregate demand curve in an economy with a below full-employment equilibrium. Label it AD. Draw a point at the below full-employment equilibrium. Draw a horizontal arrow at the equilibrium price level that shows the output gap. The output gap in the graph is _____ because _________.

Draw a demand curve that is a regular demand curve that crosses below the LAS curve. it needs to cross the SAS curve to the left of the LAS curve. then draw point where SAS and AD curve cross. Put an arrow in the space between the equilibrium point and the LAS line a recessionary gap; potential GDP exceeds real GDP

The table gives an economy's aggregate demand, short run aggregate supply, and long run aggregate supply schedules. Draw the LAS curve, the SAS curve and the AD curve. Label the curves. Draw a point at the short run macroeconomic equilibrium. Draw a horizontal arrow at the equilibrium price that shows the output gap. The graph shows _______ gap

Draw a graph based on the points. Draw an arrow in the space between the lAS and the equilibrium an inflationary

Draw a curve that shows the relationship between the tax rate and the amount of tax revenue collected. The relationship between the tax rate and the amount of tax revenue collected is called the _____ curve. The curve shows that _____.

Draw a laffer curve laffer; tax cuts can increase tax revenue

The graph shows the loanable funds market. During the 1990's, the invention and use of fiber-optic technologies required billions of dollars to be spent laying new cables under the oceans and launching communications satellites Draw a curve that shows the effect of this event. Label it. Draw a point to show the new equilibrium quantity of loanable funds and real interest rate.

Draw a line above the demand curve. so from top left to bottom right draw a point on the new equilibrium

The graph shows the economy in long run equilibrium. Then the world economy expands and the demand for US produced goods increases. Draw a curve that shows: 1: the effect of increased demand for US produced goods. Label it 1. 2: the effect of a rising money wage rate that returns the economy to full employment. Label it 2. Draw a point at the new long run equilibrium. An economy is in a long-run equilibrium. An increase in aggregate demand creates _____ gap. A rise in the money wage rate decreases ____ and returns the economy to a full employment equilibrium.

Draw a new demand curve above the AD curve. label 1. draw a new supply curve above the supply curve label 2. (both should be higher than original curve). draw a new point where new lines cross an inflationary; the quantity of real gdp demanded

The graph shows an aggregate demand curve. Draw a curve that shows the effect on aggregate demand of an increase in the unexpected future inflation rate. Label it. An increase in unexpected future income _____ aggregate demand. An increase in the expected future inflation rate _____ aggregate demand An increase in expected future profits _____ aggregate demand.

Draw a new demand curve above the original one (on top of) increases; increases; increases

The graph gives a long-run aggregate supply curve and a short-run aggregate supply curve. Draw a new curve that shows the effect of a rise in the money wage rate. Label it When a rise in the money wage rate _________.

Draw a new supply curve above the old one (on top of) the quantity that firms are willing to supply at each price level decreases

The graph shows the loanable funds market when there is neither a government budget surplus nor a government budget deficit. Draw a point at the equilibrium quantity of loanable funds and the equilibrium real interest rate. Label it 1. Now suppose the government has a budget deficit of $1 trillion. Draw a curve that shows the effect of this deficit in the loanable funds market. Label it. Draw a point at the new equilibrium real interest rate and quantity of saving. Label it 2. Draw a point to show investment when the government budget deficit is $1 trillion. Label it 3

Draw a point at equilibrium and label 1 Draw a curve above the PDLF (demand curve) (make it so the intersection of the new demand curve and supply curve is one number above the original) label curve Draw a point at new equilibrium Draw a point on the old demand curve that is parallel to the new demand curve equilibrium

Draw a demand for dollars curve, Label it D. Draw a supply curve, label is S. Draw a point at the equilibrium quantity and equilibrium exchange rate. Draw an arrow between the D and S curves that indicates a price at which there is a surplus of dollars, Label it. Then there is a surplus of dollars in the foreign exchange market, _________.

Draw a supply and demand curve (curved not straight) Draw a point at the equilibrium Draw a horizontal arrow above the equilibrium between the supply and demand curve that touches each curve the forces of supply and demand pull the foreign exchange market into equilibrium

Draw an aggregate demand curve. Label it AD. Draw a short run aggregate supply curve. Label it SAS. Draw a point at the short run macro equilibrium. label it 1. Draw a point on the SAS curve at which firms are unable to meet the demand for their output. label it 2. When firms are unable to meet the demand for their output, ______. Prices _________.

Draw a supply and demand curve and label them (with straight lines, not curved) Draw a point at the equilibrium. Draw point on the SAS curve below the equilibrium point. Label it 2. the quantity of real gdp demanded is greater than the quantity of real gdp supplied; rise

Draw a labor supply curve and a labor demand curve. Label the LSo and LDo Draw a point at the equilibrium real wage rate. Label it 1. Draw and label a curve that shows the effect of an increase in population. Draw a point at the new equilibrium quantity of labor and the equilibrium real wage rate. An increase in the population ______ potential GDP and ______ potential GDP per hour of labor.

Draw a supply curve (bottom left to top right) and a demand curve (top left to bottom right) (make sure both curves are actually curved not just straight lines, especially supply curve) Put a point at the equilibrium point Draw a new supply curve to the right of the original supply curve and label put a point at new equilibrium point increases; decreases

The graph shows the supply curve of US dollars. Draw a new supply curve that shows the effect of a decrease in the US demand for imports. Label it A change in the expected future exchange rate changes the supply of US dollars _____, and a change in US demand for imports changes the supply of US dollars _______.

Draw a supply curve above the original supply curve. today; today

The graph shows an economy's long run aggregate demand curve. Draw an aggregate demand curve and a short run aggregate supply curve such that when the economy is in long run equilibrium, the price level is 11. label the curve. Draw a point at the long run macroeconomic equilibrium. In the long run macroeconomic equilibrium _____.

Draw a supply curve and a demand curve that cross at 110. potential GDP and aggregate demand determine the price level, and the money wage rate adjusts so that the SAS curve intersects the LAS curve at the long run equilibrium price level.

The figure shows the demand for money curve in Epsilon. The quantity of money is $3.1 trillion. Draw the supply of money curve. label it Draw a point at the equilibrium in the money market. If the interest rate is 5 percent, people will ________.

Draw a vertical line (up and down) at 3.1 on the x axis and label it buy bonds, bid up their price, and the interest rate will fall

Draw the long run aggregate supply curve when potential GDP is $12.5 trillion. Label it. As we move up along the long run aggregate supply curve, _____.

Draw a vertical line at 12.5 on the x axis. label it. the real wage rate remains constant.

The graph shows the supply curve for US dollars. The exchange rate is currently 100 yen per dollar. Over time, the exchange rate rises to 120 yen per dollar. Show the effect in the graph. Draw either a new supply curve or an arrow along the curve showing the direction of change. The law of supply for foreign exchange states that other things remaining the same, the _____ the exchange rate, the ______ in the foreign exchange market. The graph ____ illustrate the law of supply of foreign exchange

Draw an arrow along the curve going (pointing) upwards from where 100 on the graph is to 120 on the graph higher; greater is the quantity of US dollars supplied does

The graph shows the demand curve for US dollars. The exchange rate is currently 100 yen per dollar. Over time, the exchange rate rises to 120 yen per dollar. Show the effect in the graph. Draw either a new demand curve or an arrow along the curve showing the direction of change. The law of demand for foreign exchange states that other things remaining the same, the _____ the exchange rate, the smaller is the ______ in the foreign exchange market.

Draw an arrow along the curve going (pointing) upwards from where 100 on the graph is to 120 on the graph higher; quantity of US dollars demanded

The graph shows a short run Phillips curve. Draw an arrow on the curve that shows the effect of an unexpected increase in aggregate demand. When aggregate demand unexpectedly increases, _________.

Draw an arrow on curve going up to the left. the natural unemployment rate does not change

The graph shows the production function of an economy. Currently, the full-employment quantity of labor is 200 billion hours a year. Population increases and the new full time employment quantity of labor is 300 billion hours. Draw an arrow that shows the effect of this increase in population. Draw a point at the new value of full-employment and potential GDP. label it B. An increase in the population ______ the equilibrium quantity of labor, _______ and potential GDP. An increase in the population _____ the real wage rate.

Draw an arrow on the function starting at point A going up and to the right (along the function) until you get to the new quantity of labor stated int he question. Label the new quantity of labor B. Increases; increases lowers

The graph shows a business cycle. Draw points on the curve that show when the economy is at: 1: full employment. label it 1. 2: a below full employment equilibrium. Label it 2. 3: an above full employment equilibrium. label it 3. In the graph, the vertical distance between the horizontal line and point 2 is ______ gap. At point 2, the intersection of the AD and SAS curves is to the _____ of the LAS curve. The vertical distance between the horizontal line and point 3 is ____ gap. At point 3, the intersection of the AD and SAS curves is to the _____ of the LAS curve.

Draw one point at where potential GDP and Actual GDP meet, label 1. draw a point below potential gdp on actual gdp label 2. draw a point above potential gdp on actual gdp label3. a recessionary; left an inflationary; right

The graph shows the demand for money curve. Draw a point to show the interest rate and quantity of money demanded when the interest rate is 5 percent a year. Draw an arrow to show the effect of an increase in the interest rate above 5 percent a year. Label it 1. Draw an arrow to show the effect of a decrease in the interest rate 5 percent a year. Label it 2. When the interest rate falls, other things remaining the same, the opportunity cost of holding money _______ and ________.

Draw point on the demand curve where 5 percent is on the interest rate. Draw an arrow on the demand curve from the point going up and to the left. label it Draw an arrow form on the demand curve from the point going down and to the right and label it falls; the quantity of money demanded increases

A demand-pull rise in the price level will initially move the economy to point ___ and to point _____

E when aggregate demand increases; D when the money wage rate rises

The liabilities of the Fed are ___ and these liabilities along with ____ make up the monetary base

Federal Reserve notes held by households and businesses and reserves of depository institutions; coins issued by the Treasury

The graph shows the private demand for loanable funds curve and the supply of loanable funds curve. Draw a curve that shows the effect on the loanable funds market when the government has a budget deficit. Label it C1 Draw a curve that shows the Ricardo-Barro effect on the loanable funds market. Label it C2 Draw a point at the new real interest rate and quantity of loanable funds. The Ricardo-Barro effect ______ crowding out.

For C1, draw a new line above the demand curve. so from top left to bottom right. For C2, draw a new line below the supply curve so from bottom left to to right. the lines need to be so they intersect parallel to where the original curves intersected. One whole number over Draw a new equilibrium point Eliminates

GDP = ________ + _______ + _________ + (______ - _______)

GDP = Personal consumption (c) + Gross private domestic investment (I) + Government expenditure on goods and services (G) + [Exports (X) - Imports(M)] GDP = C + I + G + (X-M)

Choose the statement that is incorrect. A. If a financial institution's net worth is positive, the institution must be solvent and liquid. This is the correct answer. B. A financial institution's net worth is the market value of what it has lent minus the market value of what it has borrowed. C. A financial institution can be solvent but illiquid. D. A financial institution is illiquid if it has made long-term loans with borrowed funds and is faced with a sudden demand to repay more of what it has borrowed than its available cash.

If a financial institution's net worth is positive, the institution must be solvent and liquid.

Choose the statement about fixed exchange rates that is incorrect

If the Fed wanted to fix the U.S. dollar exchange rate against the Japanese yen, the Fed would have to buy U.S. dollars to prevent the exchange rate from rising above the target value

Choose the statement that is incorrect.

If the inflation rate is below or expected to move below the bottom of the comfort zone, the Fed considers raising the interest rate

___________ economists believe that active help from the fiscal and monetary policy is needed to insure that the economy is operating at full employment

Keynesian

In ____ cycle theory, animal spirits are the main source of fluctuation in aggregate demand In ____ cycle theory, fluctuation in both investment and consumption expenditure, driven by fluctuations in the growth rate of the quantity of money, are the main sources of fluctuations in aggregate demand

Keynesian; monetarist

The two business cycle theories that regard fluctuations in aggregate demand as the factor that is creating business cycles are ___________ and ____________.

Keynesian; monetarist

Choose the statement that is incorrect.

In the long run, demand and supply in the loanable funds market depends on demand and supply in the market for bank reserves.

Choose the statement that is incorrect A. In the long run, the nominal exchange rate is a monetary phenomenon. B. In the long run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate. Your answer is correct.C. In the long run, the nominal exchange rate is determined by the quantities of money in two countries. D. In the long run, a rise in the foreign price level brings dollar appreciation and a rise in the U.S. price level brings dollar depreciation.

In the long run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate.

Changes in Demand

Increase if : Price of Substitute rises, Price of complement falls, Expected future price rises, Income rises, expected income rises or credit is easier to get, population increase. Decrease if: Vise versa to

Changes in Supply

Increases if : The price of a factor of production falls, price of substitute in production falls, price of complement in production rises, expected future price falls, the number of suppliers increase, technology changes increasing production, a natural event increases production. Decreases if : vise versa to

If in the long run, the U.S. dollar appreciates against the Japanese yen, then ______.

Japan has created money at a faster pace than has the United States, and the price level in Japan has risen more rapidly than the U.S. price level

if in the long run, the US dollar appreciates against the Japanese yen, then ______.

Japan has created money at a faster pace than the has the United States, and the price level in Japan has risen more rapidly than the US price level

Deflation in Japan arose because

Japan's money stock did not grow fast enough to accommodate the growth of potential GDP and a trend rise in velocity

Supply of Loanable Funds

Is the relationship between the quantity of loanable funds supplied and the real interest rate.

If in the long run, the U.S. dollar appreciates against the Japanese yen, then

Japan has created money at a faster pace than has the United States, and the price level in Japan has risen more rapidly than the U.S. price level

Choose the statement that is incorrect

Money market mutual funds represent 13% of M1

Choose the statement that is incorrect

Most economists believe that the Ricardo-Barro effect holds in the loanable funds market

Choose the statement that is incorrect. A. According to the Ricardo-Barro effect, a budget deficit has no effect on either the real interest rate or investment. B. Most economists believe that the Ricardo-Barro effect holds in the loanable funds market. This is the correct answer. C. According to the Ricardo-Barro effect, a government budget deficit does not lead to the crowding-out effect. D. According to the Ricardo-Barro effect, taxpayers are rational people who know that a budget deficit today means that future taxes will be higher and future disposable incomes will be smaller.

Most economists believe that the Ricardo-Barro effect holds in the loanable funds market.

Choose the statement that is incorrect. A. According to the Ricardo-Barro effect, a government budget deficit does not lead to the crowding-out effect. B. According to the Ricardo-Barro effect, a budget deficit has no effect on either the real interest rate or investment. C. According to the Ricardo-Barro effect, taxpayers are rational people who know that a budget deficit today means that future taxes will be higher and future disposable incomes will be smaller. D. Most economists believe that the Ricardo-Barro effect holds in the loanable funds market.

Most economists believe that the Ricardo-Barro effect holds in the loanable funds market.

rise in the value of the U.S. dollar? World demand for U.S. exports decreases

The table shows the only international transactions that the citizens of Nickleodeon, whose currency is the dime, conducted in 2010. What is Nickleodeon's current account balance, capital and financial account balance, and official settlements account balance? Imports of goods and services: 350 Exports of goods and services: 400 Foreign investment in Nickleodeon: 210 Nickleodeon's investment abroad: 350 Decrease in official holdings of foreign currency: 90

Nickleodeon's current account balance is 50 billion dimes. Nickleodeon's capital and financial account balance is - 140 billion dimes. Nickleodeon's official settlements account balance is 90 billion dimes.

The Ukraine article: 1. What happened to Ukraine in February 2014? 2. What is Ukraine's immediate economic problem? 3. How will the withdrawal of Russia's financial support affect the interest rate in Ukraine? 4. How will the financial support from Europe and the IMF affect the interest rate in Ukraine? 5. Graph: Ukraine's lightning-speed revolution has ushered in uncertainty about how the country will pay its way and avoid economic collapse. Acting finance minister Yuriy Kolobov said that Ukraine needs $35 billion over the next two years. 1. Draw a private demand curve for loanable funds and label it DLFo. 2. Draw a supply curve of loanable funds and label it SLFo. 3. Draw a point at the equilibrium and label it 1. 4. Draw and label a new curve to show the effect on the loanable funds market of Ukraine getting financial support from Europe and the IMF. 5. Draw a point at the new equilibrium and label it 2.

President Viktor Yanukovych has been removed from power; lack of funds to pay for its imports; raise the interest rate; lower the interest rate; Draw a supply and demand curve (curved lines). label them Draw a curve below the supply curve, label Draw point on the new equilibrium

S+(T-G)+(M-X)

Choose the statements concerning neoclassical growth theory that are true. 1. technological change results from the choices people make in the pursuit of profit 2. neoclassical growth theory was developed in the late 19th century. 3. Neoclassical growth theory is the proposition that real GDP per person grows because technological change induces a level of saving and investment that makes capital per hour of labor grow. 4. The rate of technological change influences the economic growth rate but economic growth does not influence the pace of technological change

Statements 3 and 4 are correct

A government budget surplus occurs, which increases the ___________ loanable funds. The real interest rate ______, household saving ______,

Supply of; falls; decreases and investment increases

Which of the following statements about the Keynesian view of the macroeconomy is incorrect?

Technological change is the most significant influence on both aggregate demand and aggregate supply.

During the 1990s, the invention and use of fiber-optic technologies required billions of dollars to be spent laying new cables under the oceans and launching communications satellites.

The DLF shifts rightward

As part of the 2009 bail out crisis the FED should not bail out banks who made risky loans, this is an example of ________

The Fed taking actions that are not at the margin.

Choose the statement that is incorrect.

The Fed tries to maximize the output gap, especially when the gap is positive.

China currency article: 1. What does the Treasury Department say about China's currency? 2. What type of exchange rate policy does China practice? 3. How might it be determined whether the yuan is "significantly undervalued"? It might be determined whether the yuan is "significantly undervalued" from _____ and _____. Graphical Analysis. In its semi-annual report on international exchange rates, the Treasury Department called China's currency, the yuan, "significantly undervalued." 1. Draw a demand curve for U.S. dollars. Label it D0. 2. Draw a supply curve of U.S. dollars. Label it S0. 3. Draw a point at the equilibrium. Label it 1. 4. Draw a line to show China's target exchange rate such that the yuan-U.S. dollar exchange rate rises. Label it.

The Treasury Department says that China's currency is undervalued China practices a crawling peg exchange rate policy. PPP prices; the change in foreign exchange reserves Draw a supply and demand curve, label them. draw equilibrium and label. Draw a horizontal line above equilibrium all the way across intersecting the s and d curves

The table shows the balance of payments accounts in Canada in 2004. What is canadas current balance, capital and financial account balance, and official settlements account balance? Imports of goods and services: 437 Foreign investment in canada: 62 Exports of goods and services: 491 Canadian investment abroad: 88 Net interest income: -50 Net transfers: 25 Statistical discrepancy: -6

The current account balance is 29 billion dollars The capital and financial account balance is -32 billion dollars The official settlements account balance is 3 billion dollars

The table gives some items from the national income and product accounts. Calculate the government sector balance, the private sector balance, and net exports.

The government sector balance is 350 billion dollars The private sector balance is 50 billion dollars Net exports is 400 billion dollars

The table gives some items from the national income and product accounts. Calculate the government sector balance, the private sector balance, and net exports. Government expenditures: 200 Net Taxes: 250 Investment: 500 Saving: 400

The government sector balance is 50 billion dollars The private sector balance is -100 billion dollars Net exports is -50 billion dollars

Choose the correct statement

The long-run Phillips curve shifts rightward when the natural unemployment rises and leftward when the natural unemployment rate falls

In an economy without taxes and imports, an increase in investment of $50 billion increases equilibrium expenditure by $100 billion. What are the values of the multiplier and the slope of the AE curve?

The multiplier is 2 and the slope of the AE curve is 0.5

Choose the statement that is incorrect

The nominal interest rate is the real interest rate adjusted to remove the effects of inflation on the buying power of money

Choose the statement that is incorrect

The nominal interest rate is the real interest rate adjusted to remove the effects of inflation on the buying power of money.

Choose the statement that is incorrect. A. The real interest rate is the opportunity cost of loanable funds. B. The nominal interest rate is the real interest rate adjusted to remove the effects of inflation on the buying power of money. C. The nominal interest rate is the number of dollars that a borrower pays and a lender receives in interest in a year expressed as a percentage of the number of dollars borrowed and lent. D. The real interest rate is approximately equal to the nominal interest rate minus the inflation rate.

The nominal interest rate is the real interest rate adjusted to remove the effects of inflation on the buying power of money.

Consider the following statements about factors that influence the standard of living and choose the statement that is incorrect.

The omission of household production from GDP means that the growth rate of GDP underestimates the growth rate of total production

Choose the statement that is incorrect

The presence of a banking system in Britain in the middle 1700s started the industrial revolution

Choose the statement that is incorrect

The price level falls if aggregate supply increases at a persistently slower rate than aggregate demand

Choose the statement that is incorrect. A. During a period of deflation, the inflation rate is negative. B. A one-time fall in the price level is not deflation. C. The price level falls if aggregate supply increases at a persistently slower rate than aggregate demand. Your answer is correct. D. An economy experiences deflation when it has a persistently falling price level.

The price level falls if aggregate supply increases at a persistently slower rate than aggregate demand

The CPI tells us _______.

The prices level in a given period expressed as a percentage of the price level in the base period, which by definition equal to 100.

Choose the statement about an increase in the population that is incorrect

The production function shifts upward

Choose the statement about flexible exchange rates that is incorrect

The world economy has operated a flexible exchange rate regime since the end of World War II

Choose the statement about flexible exchange rates that is incorrect.

The world economy has operated a flexible exchange rate regime since the end of World War II.

The U.S. dollar exchange rate decreased from decreased from $1.331.33 Canadian in October, 2016 October, 2016 toto $1.251.25 Canadian in October, 2017 October, 2017, and it increased from in creased from 103.91103.91 Japanese yen in October, 2016 October, 2016 toto 112.50112.50 yen in October, 2017 October, 2017.

US Dollar depreciated against Canadian, US Dollar appreciated against yen

The quantity of U.S. dollars demanded in the foreign exchange market depends on all of the following except ______.

US demand for imports

Velocity of Circulation

Velocity of Circulation (V) = the Price level (P) x Real GDP (Y) divided by quantity of Money (M) V=PY / M M=PY/ V PY=V x M

Choose the correct statement about the U.S. short-run Phillips curve

We can interpret U.S. inflation and unemployment data in terms of a shifting short-run Phillips curve, which sometimes shifts upward and sometimes shifts downward

Choose the correct statement about the US short run Phillips curve.

We can interpret US inflation and unemployment data in terms of a shifting short run Phillips curve, which sometimes shifts upward and sometimes shifts downward

Choose the correct statement.

We measure the change in production by comparing the value of real GDP in two different years

If the government increases its expenditure on goods and services and as a result the money rate increases, the economy has experienced

a demand-pull rise in the price level

the waste basket you bought when you moved into residence is an example of _______ good. Your checking account is an example of ______ good.

a final; neither a final nor an intermediate

A mortgage is ____

a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments (repayments and interest)

A mortgage is _______.

a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments (repayments and interest)

You observe that unplanned inventories are increasing. You predict that there will be

a recession

The business cycle occurs because ______.

aggregate demand and short run aggregate supply fluctuate, but the money wage rate does not adjust quickly enough to keep real GDP at potential GDP

During the 100 years from 1914 to 2014, real GDP per person in the United States grew at ______.

an average of 2 percent a year

In the United States, the CPI basket consists of items that ______. _______ has the greatest weight in the CPI basket.

an average urban household buys; Housing

flour purchased by Chef Bondi to make pizza dough is an example of ________ good. The piano your parents bought when you started piano lessons is an example of ________ good.

an intermediate; a final

Lumber purchased by the Table and Chair Manufacturing Company is an example of _______ good. Sugar purchased by Angelo's bakery to make pies and cakes in an example of _______ good.

an intermediate; an intermediate

Economic growth can be represented by ______

an outward shift of the PPF

Over time, on average the demand for loanable funds ____, so the real interest rate ______

and the supply of loanable funds increase at a similar pace; has no trend

Structural unemployment is

associated with the general decline of specific industries.

Which of the following are included in the income approach to calculating GDP?

compensation of employees; proprietors' income; corporate profits

Goods that are produced this year, stored in inventories, and then sold to consumers next year

count in this year's GDP.

Depository institutions provide four benefits, which are ______.

creating liquidity, lowering the cost of borrowing, lowering the cost of monitoring borrowers, and pooling risk

Yesterday, the current exchange rate was $1.05 Canadian per U.S. dollar and traders expected the exchange rate to remain unchanged for the next month. Today, with new information, traders now expect the exchange rate next month to fallfall to $1 Canadian per U.S. dollar. The revised expected future exchange rate ______ the demand for U.S. dollars and ______ the supply of U.S. dollars.

decreases; increases

An increase in the population ______ the real wage rate and ______ the equilibrium quantity of labor. Potential GDP ______ and potential GDP per hour of labor ______.

decreases; increases increases; decreases

The ratio of reserves to deposits that a bank plans to hold is its ____. If a bank has $10 million in actual reserves and $8 million in desired reserves, then it has

desired reserve ratio; excess reserves

The ratio of reserves to deposits that a bank plans to hold is its _____. If a bank has $10 million in actual reserves and $8 million in desired reserves, then it has ______.

desired reserve ratio; excess reserves

Real GDP ________.

does not include a measure of household production or underground economic activity.

Real GDP _______.

does not include a measure of leisure time or environmental quality

Purchasing power parity________ hold between Brazil and the United States. PPP predicts that the Brazilian real will ______ against the U.S. dollar.

does not; depreciate

The graph shows the demand curve for reserves in the market for bank reserves. The federal funds target rate is 4 percent. Draw the supply curve of reserves to achieve the federal funds target rate. Label it. Draw a point at the equilibrium in the market for bank reserves. Choose the statement that is incorrect.

draw a vertical line so that it crosses the demand curve at 4. label and then label equilibrium point. The Fed's open market operations determine the demand for reserves.

Classical Economist believe _______.

economy is at full employment and that it is self regulating

When an economy is below full employment and the government has a budget deficit, that deficit ______.

exceeds the structural deficit

Gross domestic product can be measured in two ways: By the total ______ or the total ______.

expenditure on goods and services; income earned producing goods and services

Net exports increase when ______.

exports increase by more than imports increase

The consequences of deflation include all of the following except _______.

falling real wage rates for workers with long-term wage contracts

An economy at a full-employment equilibrium experiences an increase in aggregate demand. The unemployment rate ___ its natural rate, and to return to the long-run equilibrium, the money wage rate begins to ____

falls below; rise

Between 2007 and 2012, the U.S. exchange rate ____ against the Japanese yen because the U.S. interest differential ____ against the yen The expectations about the exchange rate ____ the demand for U.S. dollars and ___ the supply of U.S. dollars

fell; decreased and because currency traders expected the dollar to depreciate decreased; increased

US gross domestic products is the market value of all the ______ produced ______ in a given time period.

final goods and services; within the United States

A crawling peg exchange rate policy is one that _______.

follows a path determined by a decision of the government or the central bank and is achieved by central bank intervention in the foreign exchange market

The market in which the currency of one country is exchanged for the currency of another country is the _____ The price at which one currency exchanges for another currency is the ____

foreign exchange market; exchange rate

The market in which the currency of one country is exchanged for the currency of another country is the ______. The price at which one currency exchanges for another currency is the ______.

foreign exchange market; exchange rate

The RicardominusBarro effect holds that

government budget deficits have no effect on the real interest rate.

InJanuary 2010, the exchange rate was 91 yen per U.S. dollar. By September 2010, the exchange rate had fallen to 84 yen per U.S. dollar. Given the information above, for a given expected future exchange rate, the expected profit from holding U.S. dollars is_______ in September 2010 than in January 2010

greater

When the unemployment rate is less than the natural unemployment rate, real GDP is ______ than potential GDP and the output gap is ______.

greater; positive

The law of supply of foreign exchange states that other things remaining the same, the _____ the exchange rate, the ____ in the foreign exchange market The graph ____ illustrate the law of supply of foreign exchange

higher; greater is the quantity of U.S. dollars supplied does

The law of supply states that other things remaining the same, the _______ the price of a good, the _______.

higher; greater is the quantity supplied

The law of demand for foreign exchange states that other things remaining the same, the _____ the exchange rate, the smaller is the ____ in the foreign exchange market

higher; quantity of U.S. dollars demanded

Ricardo-Barro effect

holds that government budget has no effect on either the real interest rate or investment

Consumption expenditure minus imports, which varies with real GDP is called

included expenditure

Read the news clip, then answer the following question. The changes in exports and imports reported here ______.Of the two quarters reported, exports and imports make the greater contribution to aggregate demand growth in the________ quarter.

increase aggregate demand and have no effect on the quantity of real GDP demanded; second

It's the debt, stupid! Only when the government sets out a credible business plan will confidence and hiring rebound. Read the news clip, then answer the following question. Since 2008, U.S. government debt has ______ because as a percentage of GDP, _______.

increased; outlays increased by more than receipts increased

If the exchange rate falls, then the expected profit from holding the domestic currency

increases

Suppose that the exchange rate rises from 80 yen per U.S. dollar to 90 yen per U.S. dollar. The quantity of U.S. dollars that people plan to sell in the foreign exchange market________

increases and a movement up along the supply curve of U.S. dollar occurs

A government budget deficit occurs, which _____ The real interest rate ____ Private saving ____ and investment ____

increases the demand for loanable funds; rises increases; decreases

A government budget deficit occurs, which ______. The real interest rate ______. Private saving __________ and investment __________.

increases the demand for loanable funds; rises increases; decreases

A government budget deficit occurs, which ______. The real interest rate ______. Private saving________ and investment_________

increases the demand for loanable funds; rises; increases, decreases

The U.S. price level rises. This event ______.

increases the quantity of real GDP supplied

A decrease in expected future income ______.

increases the supply of loanable funds today because households with smaller expected future income will save more today

A decrease in expected future income ________.

increases the supply of loanable funds today because households with smaller expected future income will save more today.

Government Budget Surplus

increases the supply of loanable funds, lowers real interest rate, and increases investment and the equilibrium quantity of loanable funds.

Unanticipated deflation does all of the following except

increases the velocity of circulation

If an economy experiences a decrease in the money supply, short-run unemployment ______________

increases, and short-run output decreases.

The PPF bows outward because as we move from point A to point B to point C, the opportunity cost of producing a blanket ________

increases. Resources are not equally productive in all activities

Aggregate demand decreases if fiscal policy ______ taxes or _____ transfer payments.

increases; decreases

Aggregate demand decreases if the exchange rate _______ or foreign income _______.

increases; decreases

An increase in bank's reserves with no change in deposits _______ the banks' reserve ration and _____ the money multiplier

increases; decreases

If the interest rate on treasury bills is lower than the federal funds rate, the quantity of overnight loans supplied _____ and the demand for treasury bills _____. The price of treasury bills _____ and the interest rate _____.

increases; decreases falls, rises

A fall in the expected future exchange rate ______ the supply of U.S. dollars. A decrease in the world demand for U.S. exports ______ the supply of U.S. dollars.

increases; does not change

As the value of U.S. exports ________, the quantity of ________ demanded increases

increases; dollars

Aggregate demand increases if expected future income, inflation, or profits ______. And aggregate demand increases if fiscal policy ______ government expenditure.

increases; increases

Automotive firms in the United States switch to a new technology that raises productivity. This event ______ short-run aggregate supply and ______ long-run aggregate supply.

increases; increases

An increase in productivity _________ investment demand, ________ the demand for labor and _________ the supply of labor.

increases; increases; does not change

From 2009 to 2012, the long term real interest rate paid by the safest US corporations fell from 4 percent to 2 percent. During that same period, the federal funds rate was roughly constant at0.25 percent a year. A fall in the federal funds rate _____ the supply of bank loans and the supply of loanable funds, and _____ the equilibrium real interest rate

increases; lowers

An increase in real GDP ___ the demand for money and financial innovation ____

increases; might increase the demand for some types of deposits and decrease the demand for others

An increase in real GDP ______ the demand for money and financial innovation _________.

increases; might increase the demand for some types of deposits and decrease the demand for others

In an expansion, an increase in the rate of technological change ____ investment demand. The real interest rate ___

increases; rises

Autoworkers agree to a cut in the nominal wage rate. This event ______ short-run aggregate supply and ______ long-run aggregate supply.

increases; does not change

The events are A.The number of people writing and producing XBox One games increases. B. The price of an Xbox One falls. C. Programmers who write code for XBox One games become more costly to hire. D. The prices of a PlayStation 4 and a Wii Upper U fall. Event A ______ the ______ XBox One games. Event B ______ the ______ XBox One games. Event C ______ the ______ XBox One games. Event D ______ the ______ XBox One games.

increases; quantity demanded of increases; demand for decreases; quantity demanded of decreases; demand for

When the FED wants to return to long-run equilibrium after rising about natural unemployment they can do so by __________.

increasing government spending

When costs increase and the Fed wants to return the economy to full employment, the Fed responds by ____ the quantity of money. If the Fed continually responds to successive increases in costs, a ___ inflation evolves

increasing; cost-push

Balance of payments accounts are the accounts in which a nation records its _____.

international trading, borrowing, and lending

If aggregate planned expenditure exceeds real GDP, then

inventories decrease, and as real GDP increases a movement up along the AE curve occurs

If aggregate planned expenditure is less than real GDP, then

inventories increase, and as real GDP decreases a movement down alone the AE curve occurs

Which of the following are included in the expenditure approach to calculating GDP?

investment, government expenditure, net exports of goods and services

During 2012, the inflation rate increased but remained int he "comfort zone" and the unemployment rate remained high. During this period, the Fed would have raised the interest rate. If _____.

it thought that the rising inflation rate was a greater problem than unemployment.

The equilibrium quantity of a good will increase and its equilibrium price might rise, fall, or stay the same when

its demand and supply both increase.

According to new growth theory, ______ experience diminishing returns.

knowledge is capital that does not

Suppose the Fed increases the quantity of money. In the long run, supply and demand in the ____ market determines the real interest rate. The ______ adjusts to make the quantity of real money supplied equal to quantity demanded.

loanable funds; price level

The graph shows the demand for labor curve and supply of labor curve for an economy. Draw a point at the equilibrium real wage rate and equilibrium quantity of labor. Label it 1. Now the government imposes a tax on labor income. Draw a curve that shows the effect of this tax. Label it. Draw points at the new equilibrium quantity of labor to show: 1) the before tax wage rate. Label it 2. 2) the after tax wage rate. Label it 3. When the government imposes a tax on labor income, _____, the production function occurs and potential GDP _____.

look at pic a leftward movement along, decreases

The graph shows the demand for labor curve and supply of labor curve for an economy. Draw a point at the equilibrium real wage rate and equilibrium quantity of labor. Label it 1. Now the government imposes a tax on labor income. Draw a curve that shows the effect of this tax. Label it. Draw a points at the new equilibrium quantity of labor to show: before tax wage rate and after tax wage rate When the government imposes a tax on labor income, ______ the production function occurs and potential GDP ______.

look at pic a leftward movement along; decreases

The table gives the aggregate demand schedule, the short run aggregate supply schedule, and the long run aggregate supply schedule for an economy. What is the quantity of real GDP at the short run macroeconomic equilibrium? The quantity of real GDP at the short run macroeconomic equilibrium is ______. The economy has _____.

look at pic for graph. $550 an inflationary gap of $50 billion

The imports effect is the result that the higher the exchange rate, other things remaining the same, the ______.

lower are the prices of foreign-produced goods and services to Americans and the greater is the volume of U.S. imports

Money serves as a

medium of exchange, which means that it is generally accepted in exchange for goods and services

Money serves as a _______.

medium of exchange, which means that it is generally accepted in exchange for goods and services

The multiplier is greater than 1 because the change in autonomous expenditure leads to ____

more induced expenditure

After the Fed decreases the quanity of money, at an interest rate of 7 percent a year, people want to hold _______ money than the quantity supplied, so they _______ bonds The price of a bond _______ and the interest rate _______.

more;sell falls; rises

If the price of renting a DVD rises, a ______ the demand curve occurs. If any factor that influences buying plans other than the price changes, then a ______ the demand curve occurs.

movement up along; shift of

A country that is lending more to the rest of the world that it is borrowing from the rest of the world is a _____ A country that during its entire history has invested more in the rest of the world than other countries have invested in it is a _____ China, Japan, and Saudi Arabia are ____. The United States is a ______

net lender; creditor nation net lenders; net borrower

In ______ cycle theory, the rational expectation of the price level, which is determined by potential GDP and expected aggregate demand, determines the money wage rate and the position of the SAS curve. In _____ cycle theory, past rational expectations of the current price level influence the money wage rate and position of the SAS curve.

new classical, new Keynesian

A ______ macroeconomist believes that business cycle fluctuations are the efficient responses of a well functioning market economy that is bombarded by shocks that arise from the ......(didn't get it all in pic) A ______ macroeconomist believes that the short run aggregate supply curve is horizontal at a fixed price level

new classical; new Keynesian

In ___ cycle theory, the rational expectation of the price level, which is determined by potential GDP and expected aggregate demand, determines the money wage rate and the position of the SAS curve In ___ cycle theory, past rational expectations of the current price level influence the money wage rate an the position of the SAS curve

new classical; new Keynesian

The main sources of bias in the CPI are _______.

new goods bias, quality change bias, commodity substitution bias, and outlet substitution bias

Does an increase in government expenditure affect potential GDP?

no, it only shifts the aggregate demand curve.

Keynesian economist ___________.

price rigidly and regard economic expectations as a source of GDP fluctuations

The currently used method for calculating the CPI

probably overstates inflation.

Which of the following are included in the income approach to calculating GDP?

proprietors' income; compensation of employees; net income

In real business cycle theory ___ are the main source of economic fluctuations

random fluctuations in productivity

In real business cycle theory, _____ are the main source of economic fluctuations.

random fluctuations in productivity

On the first day of class you are given the choice between an orange or a class syllabus, you choose the orange because you are hungry. This is a ________

rational choice only IF you can get a copy of the syllabus later.

New Keynesian economist are based on _______.

rational expectations and unanticipated shifts in the AD curve that move economy along SAS curve as a real wage rates change

The demand for money curve shift rightward if...

real GDP increases

If a structural surplus exists but the government's budget is balanced, then ______.

real GDP is less than potential GDP

The standard of living is measured as _______ GDP per person because this measure _______.

real; removes any influence that rising prices and a rising cost of living might have

Short-run macroeconomic equilibrium occurs when the quantity of _____ demanded equals the quantity of _____ supplied at the point of intersection of the _____ curve and the _____ curve.

real GDP; real GDP; AD; SAS

On average in the United States, the inflation rate and the money growth rate minus the real GDP growth rate

rise and fall together

Between 2012 and 2014, the U.S. exchange rate ____ against the Japanese yen because the U.S. interest rate differential was expected to _____

rose; increase

A _____ is a depository institution that accepts savings deposits and makes mostly home-purchase loans A ___ is a depository institution owned by a social or economic group such as a firm's employees that accepts savings deposits and makes mostly personal loans

savings bank credit union

A ______ is a depository institution that accepts savings deposits and makes mostly home-purchase loans. A ______ is a depository institution owned by a social or economic group such as a firm's employees that accepts savings deposits and makes mostly personal loans.

savings bank; credit union

Suppose a country has a crawling peg exchange rate policy against the U.S. dollar and the equilibrium exchange rate in units of foreign currency per U.S. dollar is above the target rate. To keep the exchange rate pegged at its target level, the country's central bank must ______ U.S. dollars and ______ its foreign currency reserves.

sell; decrease

Suppose the exchange rate is 90 yen per U.S. dollar and the United States wants to keep the exchange rate at a target rate of 90 yen per dollar. If the demand for U.S. dollars increases the Fed

sells dollars to lower the exchange rate

A fall in the price level

shifts the AE curve upward and brings a movement down along the AD curve

An increase in the population ______.

shifts the supply of labor curve rightward and creates a movement along the production function.

A change in the capital stock ________ the short-run aggregate supply curve and _______ the long-run aggregate supply

shifts; shifts

The business cycle is actually a continuous series of different ______.

short-run macroeconomic equilibriums

In RBC theory, the lower the interest rate, other things remaining the same, the _____ today

smaller is the supply of labor

In RBC theory, the lower the real interest rate, other things remaining the same, the ______ today.

smaller is the supply of labor

The U.S. M1 multiplier is ____ than the U.S. M2 multiplier. The currency drain ratio for M1 is ____ than for M2 , and the banks reserve ration for M1 is _______ than for M2.

smaller; larger; larger

The government budget surplus occurs, which increases the ______ loanable funds. The real interest rate ______, household saving ________.

supply of falls; decreases and investment increases

Change in U.S.import demand

supply of U.S. Dollars

A government budget surplus occurs, which increases the

supply of loanable funds

If the price is above the equilibrium price, then there is a

surplus, and market forces will operate to lower price.

When the price level, the money wage rate, and other factor prices rise by the same percentage, there is a movement along ______. Potential GDP ______.

the LAS curve; does not change

The marginal propensity to import is equal to

the change in imports divided by the change in real GDP, other things remaining the same

When an event occurs that changes the demand for DVDs, _______ if demand increases and ______ if demand decreases.

the demand curve shifts rightward; the demand curve shifts leftward

The quantity of U.S. dollars demanded in the foreign exchange market depends on many factors, the main ones being ______.

the exchange rate, world demand for U.S. exports, interest rates in the United States and other countries, and the expected future exchange rate

Economic growth is _______.

the expansion of production possibilities

Along the short-run Phillips curve

the expected inflation rate and the natural unemployment rate are constant

Along the short-run Phillips curve, ______.

the expected inflation rate and the natural unemployment rate are constant

Aggregate income earned is equal to the total amount paid for ______ to produce final goods and services. And because firms pay out as incomes everything they receive from the sale of their output, aggregate income equals aggregate expenditure.

the factors of production used; C + I + G + (X−M) True

According to mainstream business cycle theory, _____.

the money wage rate is sticky and consequently if aggregate demand grows faster than potential GDP, an inflationary gap emerges

According to mainstream business cycle theory

the money wage rate is sticky and consequently if aggregate demand grows faster than potential GDP, and inflationary gap emerges

A cost-push rise in the price level can arise from an increase in ____

the money wage rate or money prices of raw materials

When aggregate demand unexpectedly increases

the natural unemployment rate does not change

When cyclical unemployment increases and other things remain the same, ______.

the natural unemployment rate does not change

For movements along the long-run aggregate supply curve

the price level and the money wage rate change by the same percentage

An open market operation is ______.

the purchase or sale of securities by the Federal Reserve System in the loanable funds market

The demand for loanable funds is determined by __________

the real interest rate and expected profit

As we move along the long-run aggregate supply curve, ___________

the real wage rate remains constant

For a given increase in the monetary base, ________

the resulting increase in M2 is greater than the resulting increase in M1

All of the following statements are correct except _____.

the return to full employment in an expansion phase of the business cycle is economic growth

Choose the statement that is incorrect.

the return to full employment in an expansion phase of the business cycle is economic growth

If most prices increase in Japan and other countries but remain constant in the United States, _________.

then for purchasing power parity to hold, the demand for US dollars increases and the supply of US dollars decreases

If most prices have increased in the United States and not increased in Japan and other countries, ____

then for purchasing power parity to hold, the value of the U.S. dollar in the foreign exchange market will fall

If most prices have decreased in the United States and not decreased in Japan and other countries, ______.

then for purchasing power parity to hold, the value of the U.S. dollar in the foreign exchange market will rise

A major characteristic of structural unemployment that differentiates it from frictional unemployment is that structural unemployment

usually lasts longer than frictional unemployment.

Electronic books are expected to be a major selling point for Apple's iPad. Amazon, Apples's main competitor, produces the Kindle and e-books to be read on the Kindle. But Amazon says that it will produce an iPad app that will enable iPad users to read Kindle e-books. Amazon has tussled with publishers over e-book prices, but book publishers will adopt a new pricing model that might improve Amazon's profit margin on e-books. The new e-book prices will assign 30% of revenue to e-book retailers such as Amazon and Apple. The news clip deals with the question of _________. The news clip implies a tradeoff between ______.

what is produced: e-books and e-book readers. an e-book reader from Amazon (the Kindle) and an e-book reader from Apple (the iPad)

rise in the value of the U.S. dollar? The U.S. interest rate differential rises

yes

______ is an example of US consumption expenditure.

your purchase of a model car kit

The real interest rate ______, household saving ______,

falls; decreases and investment increases

If an economy experiences a decrease in the money supply, short-run unemployment

increases, and short-run output decreases.

The increase in investment ______ aggregate demand. The decrease in government spending _______ aggregate demand.

increases; decreases

If the population increases, then potential GDP ________ and employment ________.

increases; increases

Read the news clip, then answer the following questions. The increase in the personal consumption expenditures ______ aggregate demand. The increase in exports ______ aggregate demand.

increases; increases

If the price level rises and the money wage rate remains constant, the quantity of real GDP supplied ______ and there is a movement up along the ______ aggregate supply curve.

increases; short-run

Between 2012 and 2014, the U.S. exchange rate ______ against the Japanese yen because the U.S. interest rate differential was expected to _______.

rose; increase

is an example of a service.

A Manicure

labor force participation rate

% of the working-age population who are members of the labor force = ((labor force)/(working age population)) X 100

Choose the statement that is incorrect A. Most economists believe that the Ricardo-Barro effect holds in the loanable funds market. B. According to the Ricardo-Barro effect, a budget deficit has no effect on either the real interest rate or investment. C. According to the Ricardo-Barro effect, a government budget deficit does not lead to the crowding-out effect. D. According to the Ricardo-Barro effect, taxpayers are rational people who know that a budget deficit today means that future taxes will be higher and future disposable incomes will be smaller

A.Most economists believe that the Ricardo-Barro effect holds in the loanable funds market.

The long-run historical evidence and international evidence show us that the relationship between money growth and the inflation rate _____________. A. supports the quantity theory, and the money growth rate equals the inflation rate in the long run B. supports the quantity theory, but the correlation is not perfect C. is an inverse relationship that does not correspond to the quantity theory D. is non-existent, and the quantity theory of money which was accurate in the past is no longer applicable

B. supports the quantity theory, but the correlation in not perfect

Depository institutions provide four benefits which are __________. A. pooling risk, keeping inflation low and steady, lowering the cost of borrowing, and lowering the cost of monitoring borrowers B. creating liquidity, lowering the cost of borrowing, lowering the cost of monitoring borrowers, and pooling risk C. minimizing interest rates on purchases of large ticket items, centralizing all household monetary needs in one location, introducing new technology into banking, and paying interest on investment funds D. creating liquidity, lowering the cost of borrowing, paying interest on investment funds, and introducing new technology into banking

B.creating liquidity, lowering the cost of borrowing, lowering the cost of monitoring borrowers, and pooling risk

Which is incorrect? A. Potential GDP per hour of labor increases. B. The real wage rate rises and the equilibrium quantity of labor increases. C. The demand for labor increases, the production function does not change, but a movement occurs along the production function. D. Potential GDP grows.

C.The demand for labor increases, the production function does not change, but a movement occurs along the production function.

The Rule of 70

States that the number of years it takes for the level of any variable to double is approximately 70 divided by the annual percentage growth rate of the variable

Classical growth theory

The view that the growth of real GDP per person is temporary and that when it rises above the subsistence level, a population explosion eventually brings it back to the subsistence level -Malthusian theory -Adam Smith, Thomas Robert Malthus, and David Ricardo Modern day malthusians point to climate change and global warming as reasons to believe that eventually real GDP per person will decrease

Natural unemployment

areas from frictions and structural change when there is no cyclical unemployment (when all the unemployment is frictional and structural)

Structural unemployment

arises when changes in technology or international competition change the skills needed to perform jobs or change the locations of jobs

Net investment is calculated as

net investment = gross investment - depreciation - gross investment = the total amount spent on new capital

In the long run, __________ adjusts to make the quantity of real money supplied equal the quantity demanded.

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