Econ Final
Interest rates in the economy have fallen. How will this affect aggregate demand and equilibrium in the short run? A. Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise. B. Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise. C. Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall. D. Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall.
A. Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise.
Investment spending increases during _______, and decreases during _________. A. An expansion; a recession B. A recession; an expansion C. A recession; a depression D. A deflation; an inflation
A. An expansion; a recession
Which of the following is not a consequence of the Fed changing the reserve requirement? A. Changes in the ratio are easily incorporated into banks' routine management. B. Decreasing the ratio will increase excess reserves. C. Increasing the ratio will decrease the amount of reserves banks have to loan. D. Changes in the ratio effectively places a tax on banks' deposit taking and lending activities.
A. Changes in the ratio are easily incorporated into banks' routine management.
When we graph consumption as a function of national income rather than as a function of _______, the slope of this consumption function is the _______. A. Disposable income; MPC B. Personal income; MPC C. Disposable income; MPS D. Personal income; MPS
A. Disposable income; MPC
In the long run, A. GDP = Potential GDP B. unemployment is below its natural rate. C. LRAS and SRAS lie on the same line. D. unemployment is above its natural rate.
A. GDP = Potential GDP
If the short-run aggregate supply increases by less than the long-run aggregate supply, then, at the short-run equilibrium, A. GDP will be below potential GDP. B. aggregate demand will increase. C. GDP will be above potential GDP. D. GDP will be equal to potential GDP.
A. GDP will be below potential GDP.
If inflation in the US is lower than inflation in other countries, what will be the effect on net exports for the US? A. Net exports will rise as US exports increase. B. Net exports will rise as US imports increase. C. Net exports will decrease as US exports decrease. D. Net exports will decrease as US imports decrease.
A. Net exports will rise as US exports increase
A decrease in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run. A. The price level will fall, and the level of GDP will be unaffected. B. The price level will fall, and the level of GDP will fall. C. The price level will rise, and the level of GDP will fall. D. The price level will rise, and the level of GDP will be unaffected.
A. The price level will fall, and the level of GDP will be unaffected.
Most recessions in the US since WWII have begun with A. a decline in residential construction. B. a rapid increase in the price level. C. a substantial number of bank failures D. a stock market crash
A. a decline in residential construction.
Stagflation usually results from A. a supply shock B. a decrease in aggregate demand. C. an increase in aggregate supply. D. an increase in aggregate demand.
A. a supply shock
Which of the following explains the ability of the US economy to avoid diminishing marginal returns and experience accelerating growth in the early to mid-20th century? A. continuing technological change B. immigration C. additions of a greater amount of capital of the same quality D. a decrease in the quality of labor
A. continuing technological change
Corruption A. curtails economic growth B. raises the rate of growth as bribes enhance income. C. is eliminated by foreign direct investment. D. Acts as a magnet for foreign direct investment.
A. curtails economic growth.
Given the fact that the productivity slowdown of the mid-1970s to the mid-1990s affected all industrial countries, which of the following explanations for the productivity slowdown in the United States is not likely to be correct? A. increased production costs, causing firms to reorganize production to conserve energy, which reduced output per worker. B. high oil prices C. services have become a larger fraction of GDP. D. Stricter environmental regulations
A. increased production costs, causing firms to reorganize production to conserve energy, which reduced output per worker.
Some economists argue that the productivity slowdown from mid-1970s to mid-1990s was due to changes in oil prices that A. increased production costs, causing firms to reorganize production to conserve energy, which reduced output per worker. B. decreased production costs, causing firms to reorganize production to conserve energy, which reduced output per worker. C. increased production costs, causing firms to reorganize production to conserve energy, which increased output per worker. D. decreased production costs, causing firms to increase production, which reduced output per worker.
A. increased production costs, causing firms to reorganize production to conserve energy, which reduced output per worker.
A. If firms are more pessimistic and believe that future profits will fall and remain weak for the next few years, then A. investment spending will fall. B. investment spending will rise C. investment spending will remain unaffected. D. investment spending will rise and then fall.
A. investment spending will fall.
An explanation for the productivity slowdown from 1974 through 1995 is A. measurement problems. B. creative destruction. C. a decline in oil prices. D. an increase in labor quality.
A. measurement problems
The main tool that the Federal Reserve uses to conduct monetary policy is A. open market operations. B. discount policy. C. setting reserve requirements. D. acting as the lender of last resort. E. check clearing.
A. open market operations.
According to new growth theory, the accumulation of ________ capital is subject to diminishing returns at the ________ level, but not at the level of the economy as a whole. A. physical; firm B. technological; personal C. knowledge; firm D. physical; production
A. physical; firm
Assume that inventories declined by more than analysts predicted. This implies that A. planned aggregate expenditure was greater than real GDP. B. planned aggregate expenditure was equal to real GDP. C. planned aggregate expenditure was less than real GDP. D. planned aggregate expenditure is unrelated to real GDP.
A. planned aggregate expenditure was greater than real GDP.
Growth in the US from 1800 to 1900 can be characterized as A. positive and increasing. B. positive and flat. C. positive and decreasing. D. negative.
A. positive and increasing
If banks do not loan out all their excess reserves, then the real world multiplier is A. smaller than 1/RR B. larger than 1/RR C. equal to 1/RR D. not related to 1/RR
A. smaller than 1/RR
If, during a deposit expansion, not all money gets redeposited into the banking system and some leaks out as currency, then the real world multiplier is A. smaller than 1/RR B. larger than 1/RR C. equal to 1/RR D. not related to 1/RR
A. smaller than 1/RR
If rapid increases in oil prices caused price levels to increase and real GDP to decrease in the short run, the economy would experience A. stagflation. B. long-run economic decline. C. hyperinflation. D. an increase in the natural rate of unemployment.
A. stagflation
A negative supply shock in the short run causes A. the aggregate supply curve to shift to the left. B. the price level to fall. C. unemployment to fall. D. equilibrium real GDP to rise.
A. the aggregate supply curve to shift to the left.
Ceteris paribus, in the long run, a negative supply shock causes A. the long-run aggregate supply curve to shift to the left. B. the price level to rise initially, and then return to its lower level. C. unemployment to fall below its short-run level. D. equilibrium real GDP to fall.
A. the long-run aggregate supply curve to shift to the left.
Which of the following is a true statement about the multiplier? A. the multiplier rises as the MPC rises. B. the smaller the MPC, the larger the multiplier. C. the multiplier is a value between zero and one. D. the multiplier effect does not occur when autonomous expenditure decreases.
A. the multiplier rises as the MPC rises.
The long-run adjustment to a negative supply shock results in A. the short-run aggregate supply curve shifting to the right. B. the price level rising. C. unemployment rising. D. workers being willing to accept higher wages.
A. the short-run aggregate supply curve shifting to the right.
As was demonstrated in 2007, firms in the shadow banking system A. were very vulnerable to bank runs. B. were protected from financial ruin by federal deposit insurance. C. were well insulated from bank runs. D. were more insulated from the financial crisis than were commercial banks.
A. were very vulnerable to bank runs.
Forecasts made by White House economists and economists at the Congressional Budget Office in 2011 projected that real GDP A. would return to potential GDP by the end of 2011 B. would not return to potential GDP until the first quarter of 2013. C. would not return to potential GDP until 2016. D. would never return to potential GDP.
A. would return to potential GDP by the end of 2011.
In the US, the annual growth rate of real GDP per house worked between 1996 and 2012 averaged A. -0.3%. B. 1.9%. C. 6.9%. D. 10.3%.
B. 1.9%
The real power within the Federal Reserve lies with the A. Federal Reserve District banks. B. Board of Governors. C. Council of Economic Advisors. D. Council of Monetary Advisors.
B. Board of Governors.
________ spending follows a smooth trend whereas, ________ spending is more volatile and subject to fluctuations. A. Consumer; government B. Consumer; investment C. Investment; consumer D. Government; consumer
B. Consumer; investment
_____ of unemployment during _____ make it easier for workers to _____ wages . A. High levels; a recession; negotiate higher B. Low levels; an expansion; negotiate higher C. Low levels; a recession; accept lower D. High levels; an expansion; accept lower
B. Low levels; an expansion; negotiate higher
Which of the following would cause the short-run aggregate supply curve to shift to the left? A. an increase in the price level. B. an increase in inflation expectations. C. a technological advance. D. a decrease in interest rates
B. an increase in inflation expectations.
Which of the following is considered a negative supply shock? A. increasing investment in the economy causes the capital stock to rise B. an unexpected increase in the price of natural gas C. a decline in wages D. an improvement in technology
B. an unexpected increase in the price of natural gas.
To offset the effect of households and firms deciding to hold less of their money in checking account deposits and more in currency, the Federal Reserve could A. raise the required reserve ratio B. buy treasury securities C. raise the discount rate D. lower bank taxes
B. buy Treasury securities
Most payments in the US for goods and services are made using A. currency. B. checking account deposits. C. traveler's checks. D. gold
B. checking account deposits
A fractional reserve banking system is one in which banks hold less than 100 percent of ______ in reserves. A. loans B. deposits C. securities D. shareholder equity
B. deposits
One way investment banks differ from commercial banks is that investment banks A. lend exclusively to households. B. do not take in deposits. C. only buy and sell mortgages. D. trade only in foreign exchange markets.
B. do not take in deposits
A person's wealth A. is a measure of how much money the person has B. equals the value the person's assets minus his or her liabilities. C. is measured independent of his or her current and expected future income. D. All of the above are correct.
B. equals the value the person's assets minus his or her liabilities.
If planned aggregate expenditure is less than total production, A. actual inventories will equal planned inventories B. firms will experience an unplanned increase in inventories. C. GDP will increase. D. the economy is in equilibrium.
B. firms will experience an unplanned increase in inventories.
Suppose there has been an increase in investment. As a result, real GDP will _______ in the short run, and _______ in the long run. A. increase, increase further B. increase, decrease to its initial value C. decrease, decrease further D. decrease, increase to its initial level
B. increase, decrease to its initial value
How does a decrease in government spending affect the aggregate expenditure line? A. it shifts the aggregate expenditure line upward. B. it shifts the aggregate expenditure line downward. C. it increases the slope of the aggregate expenditure line. D. it decreases the slope of the aggregate expenditure line.
B. it shifts the aggregate expenditure line downward.
From 1983-2013, ________ for the United States were negative. A. Planned investments B. next exports C. unplanned inventories D. transfer payments
B. net exports
On the 45-degree line diagram, for points that lie below the 45-degree line A. planned aggregate expenditure is greater than GDP. B. planned aggregate expenditure is less than GDP. C. planned aggregate expenditure is equal to GDP. D. planned aggregate expenditure is less than aggregate income.
B. planned aggregate expenditure is less than GDP.
Because of the productivity slowdown in the US from the mid 1970s through the mid-1990s, A. real GDP per capita grew more rapidly. B. real GDP per capita grew more slowly. C. the standard of living did not change. D. the standard of living increased in the US.
B. real GDP per capita grew more slowly.
During a(n) _________ many firms experience reduced profits, which reduces _________ and investment spending. A. expansion; business confidence B. recession; cash flow C. expansion; cash flow D. recession; government spending
B. recession; cash flow
M2 includes M1 plus A. currency in circulation, checking account deposits in banks, and holdings of traveler's checks. B. savings account balances, money market deposit accounts in banks, small-denomination time deposits, and non institutional money market fund shares. C. checking account deposits, large-denomination time deposits, and non institutional money market fund shares. D. currency in circulation, savings account balances, and small-denomination time deposits.
B. savings account balances, money market deposit accounts in banks, small-denomination time deposits, and non institutional money market fund shares.
The process of bundling loans together and buying and selling these bundles in a secondary financial market is called A. open market operations B. securitization C. fractional reserve landing D. seigniorage
B. securitization
To offset the effect of households and firms deciding to hold more of their money in checking account deposits and less in currency, the Federal Reserve could A. raise bank taxes B. sell Treasury securities C. raise government spending D. lower the required reserve ratio
B. sell Treasury securities
A rapid increase in the price of oil will tend to A. shift short-run aggregate supply to the left. B. shift long-run aggregate supply to the left. C. shift long-run aggregate supply to the right. D. shift aggregate demand to the right.
B. shift long-run aggregate supply to the left.
U.S. net export spending falls when A. the price level in the United States falls relative to the price level in other countries. B. the growth rate of US GDP is faster than the growth rate of GDP in other countries. C. the value of the US dollar decreases relative to other currencies. D. The inflation rate is lower in the United States relative to other countries.
B. the growth rate of US GDP is faster than the growth rate of GDP in other countries.
In the long run, A. GDP>potential GDP. B. unemployment is at its natural rate. C. LRAS and SRAS lie on the same line. D. the inflation rate is zero.
B. unemployment is at its natural rate.
A general formula for the multiplier is A. 1/ (1-MPS) B. 1/(MPC) C. 1/(MPS) D. 1/(MPC-1)
C. 1/(MPS)
Growth in real GDP per hour worked in the United States was slowest during what period of time? A. 1900-1949 B. 1950-1973 C. 1974-1995 D. 1996-2012
C. 1974-1995
For how long does a patent give a firm the exclusive legal right to a product? A. 10 years B. 17 years C. 20 years D. 50 years
C. 20 years
Which of the following accurately describes growth rates in the United States from 1900 to the present? A. Growth rates rose until the 1970s and then fell until the present. B. Growth rates have risen continuously from 1900 to the present. C. Growth rates rose until the 1970s, slowed until the 1990s, and then rose up to the present. D. Growth rates have fallen continuously ffrom 1900 to the present.
C. Growth rates rose until the 1970s, slowed until the 1990s, and then rose up to the present.
Which of the following is true regarding the productivity slowdown in the United States during the mid-1970s? A. The productivity slowdown occurred despite a rising quality of labor. B. The productivity slowdown was unique to the United States, as foreign countries experienced unprecedented rates of growth during that time. C. High oil prices raised the costs of doing business for markets worldwide, and reduced output worldwide as well. D. The move toward a "new economy" ended in the early 1970s, resulting in less technological progress in the United States during the mid-1970s.
C. High oil prices raised the costs of doing business for markets worldwide, and reduced output worldwide as well.
The productivity slowdown of the mid-1970s can be explained by which of the following? A. excessive use of fiscal policy B. large increases in research and development C. a decline in labor quality D. diminishing marginal returns
C. a decline in labor quality
A central bank can help stop a bank panic by A. raising the required reserve ratio. B. calling in consumer loans. C. acting as a lender of last resort. D. decreasing income taxes.
C. acting as a lender of last resort.
Investment spending will decrease when A. the interest rate will fall. B. the corporate income tax decreases C. business cash flow decreases. D. firms become more optimistic about earning future profits.
C. business cash flow decreases
If households in the economy decide to take money out of checking account deposits and put this money into savings accounts, this will initially A. decrease M1 and increase M2. B. decrease M1 and decrease M2. C. decrease M1 and not change M2. D. increase M1 and decrease M2.
C. decrease M1 and not change M2.
A decrease in investment causes the price level to _____ in the short run and _____ in the long run. A. increase; increase further B. increase; decrease C. decrease; decrease further D. decrease; increase
C. decrease; decrease further
A cash withdrawal from the banking system A. decreases reserves B. decreases deposits C. decreases excess reserves D. All of the above are correct
C. decreases excess reserves
The purchase of Treasury securities by the Federal Reserve will, in general, A. not change the money supply. B.not change the quantity of reserves held by banks. C. increase the quantity of reserves held by banks. D. decrease the quantity of reserves held by banks.
C. increase the quantity of reserves held by banks.
Net exports usually _______ when the US economy is in a recession and _______ when the US economy is expanding. A. increase; increase B. decrease; increase C. increase; decrease D. decrease; increase
C. increase; decrease
Stagflation occurs when A. inflation rises and GDP rises. B. inflation falls and GDP rises. C. inflation rises and GDP falls. D. inflation falls and GDP falls.
C. inflation rises and GDP falls.
The "new economy" that emerged in the mid-1990s is based on A. manufacturing. B. financial services. C. information technology. D. retail sales.
C. information technology
When firms benefit from the results of research and development they didn't pat for, we say firms A. are litigious. B. free ride. C. invest in knowledge capital. D. maintain a level playing field.
C. invest in knowledge capital.
The difference between GDP and disposable income is A. national income B. actual investment spending C. net taxes D. unplanned investment spending
C. net taxes
The three main monetary policy tools used by the Federal Reserve to manage the money supply are A. interest rates, tax rates, and government spending. B. tax rates, government purchases, and government transfer payments. C. open market operations, discount policy, and reserve requirements. D. open market operations, the exchange rate of the dollar against foreign currencies, and government purchases.
C. open market operations, discount policy, and reserve requirements.
On the 45-degree line diagram, the 45-degree line shows points where real aggregate expenditure equals A. unplanned investment B. planned investment C. real GDP D. nominal GDP
C. real GDP
On the 45-degree line diagram, the 45-degree line shows points where real aggregate expenditure equals A. unplanned investment. B. planned investment. C. real GDP. D. nominal GDP.
C. real GDP.
On the 45-degree line diagram, the 45-degree line shows points where A. real income equals real GDP B. real aggregate expenditure equals C+I. C. real aggregate expenditure equals real GDP. D. real aggregate output equals the quantity produced.
C. real aggregate expenditure equals real GDP.
Which of the follwoing is not a major function of the Federal Reserve System. A. lender of last resort. B. clearing checks between banks. C. setting income tax rates D. controlling the money supply
C. setting income tax rates
Money market mutual funds sell shares to investors and use the money to buy A. mortgage-backed securities. B. foreign currency. C. short-term securities. D. overseas assets through foreign direct investment.
C. short-term securities.
Some economists argue that the productivity slowdown from mid-1970s to mid-1990s actually didn't happen, but just "appeared" to happen because A. services were becoming a more important part of the economy, and i was hard to measure increases of output from services. B. new environmental laws had passed and forced firms to spend to reduce pollution, and this spending did not raise output. C. increased spending on health and safety raised worker productivity. D. A and B E. B and C
D. A and B
Which of the following is considered a negative supply shock? A. increasing immigration in the economy causes the labor supply to rise. B. an improvement in technology. C. an increase in unemployment. D. an unexpected decrease in the refining capacity for oil.
D. An unexpected decrease in the refining capacity for oil.
Because knowledge capital is nonexcludable and non rival, firms have an incentive to ________ the research and development of other firms. A. make bids on B. not use C. ignore D. free ride on
D. Free ride on
Autonomous expenditures is a type of expenditure that does not depend on A. wealth B. expectations C. rates D. GDP
D. GDP
If households in the economy decide to take money out of checking account deposits and hold it as currency, this will initially A. not change M1 and increase M2. B. decrease M1 and decrease M2. C. decrease M1 and not change M2. D. not change M1 and not change M2.
D. Not change M1 and not change M2.
All of the following are true statements about the multiplier except A. the formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports, inflation, and the interest rate. B. The larger the MPC, the larger the multiplier. C. The multiplier is the ratio of the change in the real GDP to the change in autonomous expenditure. D. The multiplier makes the economy less sensitive to changes in autonomous expenditure.
D. The multiplier makes the economy less sensitive to changes in autonomous expenditure.
In the US, each bank panic in the late nineteenth and early twentieth centuries was accompanied by A. inflation. B. deflation. C. a depression. D. a recession.
D. a recession.
Which of the following advances contributed to the "new economy" of the mid-1990s? A. the increased use of the Internet in selling products and services. B. expanded cell phone use. C. the lower cost and increased availability of laptop computers. D. all of the above.
D. all of the above.
Which of the following will increase aggregate expenditure in the United States? A. an increase in the value of the dollar. B. an increase in the price level. C. an increase in interest rates. D. an increase in government purchases.
D. an increase in government purchases.
In 1913, Congress established the Federal Reserve system with the intention of putting an end to A. high interest rates. B. high unemployment rates. C. inflation. D. bank panics
D. bank panics
The ratio of the increase in equilibrium real GDP to the increase in autonomous expenditure is called the A. MPC B. multiplier C. MPS D. consumption function
D. consumption function
Planned aggregate expenditure is equal to A. consumption spending only. B. consumption spending plus planned investment spending. C. planned investment spending only. D. consumption spending plus planned investment spending plus government purchases plus net exports.
D. consumption spending plus planned investment spending plus government purchases plus net exports.
Planned aggregate expenditure is equal to A. consumption spending only. B. consumption spending plus planned investment spending. C. planned investment spending only. D. consumption spending plus planned investment spending plus government purchases plus net exports.
D. consumption spending plus planned investment spending plus government purchases plus net exports.
The United States A. currently is one of the most corrupt countries. B. has never had a significant problem with corruption. C. had a significant problem with corruption in the 1930s. D. currently ranks among the least corrupt countries.
D. currently ranks among the least corrupt countries.
The sale of Treasury securities by the Federal Reserve will, in general A. not change the money supply. B. not change to quantity of reserves held by banks. C. increase the quantity of reserves held by banks. D. decrease the quantity of reserves held by banks.
D. decrease the quantity of reserves held by banks.
In 1973, the Club of Rome published a book titled The Limits to Growth, which predicted that economic growth would likely end in high-income countries because of A. declining populations B. rapid increases in government debt C. increases in outsourcing of the production of goods and services to low-income countries. D. increasing pollution and the depletion of natural resources.
D. increasing pollution and the depletion of natural resources.
Bank panics have largely disappeared in the US because A. banks are now required to hold a larger fraction of deposits as reserves. B. bank loans are more closely monitored by the Federal Reserve. C. of low interest rates. D. of deposit insurance.
D. of deposit insurance
In 2008, the Fed and the Treasury began attempting to stabilize the commercial banking system. A. Allowing domestic banks to be taken over by foreign banks. B. permitting banks to sell commercial bonds to the Federal Reserve Bank. C. allowing banks to double any outstanding claims for federal deposit insurance reimbursements. D. providing funds to banks in exchange for stock.
D. providing funds to banks in exchange for stock.
An increase in aggregate demand causes an increase in ______ only in the short run, but causes an increase in ______ in both the short run and the long run. A. the price level; real GDP B. real GDP; real GDP C. the price level; the price level D. real GDP; the price level
D. real GDP; the price level
When banks gain ______, they can ______ their loans; and the money supply ______. A. reserves; increase; contracts B. withdrawals; increase; expands C. withdrawals; decrease; expands D. reserves; increase; expands
D. reserves; increase; expands
All of the following are reasons why China is unlikely to maintain high enough rates of productivity growth to catch-up with the standard of living in the United States except A. the United States invests more in research and development than does China. B. much of China's growth is likely due to the transition from a centrally-planned economy to a market economy. C. because of the low birth rate in China, the labor force will soon decline. D. the Chinese migration of rural workers to more productive urban jobs.
D. the Chinese migration of rural workers to more productive urban jobs.
What is human capital? A. labor productivity B. buildings, equipment, and machinery owned by individuals rather than firms. C. buildings, equpiment, and machinery owned by firms D. the accumulated knowledge and skills that workers acquire from education, training, and their life experiences.
D. the accumulated knowledge and skills that workers acquire from education, training, and their life experiences.
When the aggregate demand curve and the short-run aggregate supply curve intersect, A. the long-run aggregate supply curve must also intersect at the same point. B. inflation must be increasing. C. structural and frictional unemployment. D. the economy is in short-run macroeconomic equilibrium.
D. the economy is in short-run macroeconomic equilibrium.
John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending, A. this may benefit the economy in the short run, but not in the long run. B. the economy will benefit in the short run and benefit by an even greater amount in the long run. C. this will have a major negative impact on the economy in both the short and long run. D. this may benefit the economy in the long run, but could be counterproductive in the short run.
D. this may benefit the economy in the long run, but could be counterproductive in the short run.
