every study plan and chapter test from chap 1-12

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The labor force is the number of people employed plus the​ _____.

# unemployed

If saving is​ $850 billion, investment is​ $500 billion, government expenditure on goods and services is​ $600 billion, and net exports is​ $100 billion, then calculate private sector balance.

$350 billion

The U.K. pound is trading at 1.50 U.S. dollars per U.K. pound. There is purchasing power parity at this exchange rate. The interest rate in the United States is 1 percent a year and the interest rate in the United Kingdom is 2.0 percent a year. What is the U.S. interest rate​ differential? What is the U.K. pound expected to be worth in terms of U.S. dollars one year from​ now? The U.S. interest rate differential is nothing percent.

-1

The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.25, and the marginal propensity to import is 0.2. The autonomous tax multiplier is​ _______.

-1.33

The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.20, and the marginal propensity to import is 0.14. The autonomous tax multiplier is​ _______.

-1.6

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.

A financial institution is a firm that operates on both sides of the markets for​ _____: It​ _____ in one market and​ _____ in another.

. financial​ capital; borrows; lends

A fall in the expected future exchange rate​ ______ the supply of U.S. dollars. Upper A decrease in the world demand for U.S. exports​ ______ the supply of U.S. dollars.

. increases​; does not change

The demand for money is the relationship between the quantity of money demanded and the​ _____, when all other influences on the amount of money that people wish to​ _____ remain the same.

. nominal interest​ rate; hold

Inflation results when​ ______.

. the quantity of money increases rapidly

William Gregg owned a mill in South Carolina. In December​ 1862, he placed a notice in the Edgehill Advertiser announcing his willingness to exchange cloth for food and other items. Here is an​ extract: 1 yard of cloth for 1 pound of bacon 2 yards of cloth for 1 pound of butter 4 yards of cloth for 1 pound of wool 8 yards of cloth for 1 bushel of salt Calculate the relative price of 1 pound of bacon1 pound of bacon in terms of pounds of butterpounds of butter. If the price of butterbutter is ​$0.300.30 a​ pound, what do you predict is the money price of a pound of woolpound of wool​? ​>>> Answer to 2 decimal places. If the price of butterbutter is ​$0.30 a​ pound, you would predict that the price of a pound of woolpound of wool is ​$ nothing

.5 .6

Amber, a computer science​ student, has noticed that for every problem she​ works, her grade increases by a half a percent. She decides to work 200 problems before her next exam and try for a perfect 100. The marginal benefit to Amber of working a problem is​ ________.

.5%

An economy with no income taxes or imports has a marginal propensity to consume of 0.75. The multiplier in the long run is​ _______.

0

If disposable income increases from​ $4 trillion to​ $7 trillion, saving increases from​ $1.5 trillion to​ $2 trillion, and nothing else​ changes, the marginal propensity to save is​ _____.

0.17

In one​ hour, Sue can produce 60 caps or 18 jackets and Tessa can produce 60 caps or 24 jackets. ​Sue's opportunity cost of producing a cap is​ ______ jackets and​ Tessa's opportunity cost of producing a cap is​ ______ jackets.

0.3​; 0.40

If the US interest rate is 1.5​ percent, Canada's interest rate is 1​ percent, the US inflation rate is 1.2​ percent, and​ Canada's inflation rate is 0.70​ percent, then calculate the US interest rate differential.

0.5 percent

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

If disposable income increases from​ $4 trillion to​ $7 trillion, consumption expenditure increases from​ $3.5 trillion to​ $5.5 trillion, and nothing else​ changes, the marginal propensity to consume is​ _____.

0.67

An economy has a consumption function of C​ = 15​ + 0.7Y​, investment of​ 8, government expenditure of​ 12, exports of​ 20, and an import function of M​ = 0.2Y. What is equilibrium real​ GDP?

110

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 equilibrium real​ GDP?

120

You plan to travel in Europe this summer. If you​ do, you​ won't be able to take your usual summer job that pays ​$9 comma 0009,000 for the​ summer, and you​ won't be able to live at home for free. The cost of transportation is ​$1 comma 0001,000​, visas cost ​$300300​, and living expenses are ​$2 comma 0002,000. What is the opportunity cost of your plan to travel in​ Europe?

12300 (ALL TOGETHER)

The figure shows the flows of expenditure and income in PacificaPacifica. During 2013​, flow A was ​$13,134 billion​, flow B was ​$9,162 billion​, flow D was ​$3,340 billion​, and flow E was negative $−$777 billion. Calculate GDP and government expenditure. ​>>> Answer to 1 decimal place. During 2013​, GDP was ​$ gov expend was

13134 1409

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. If government expenditure increases to​ 15, what is the increase in equilibrium​ expenditure?

16.65

Over the past 100​ years, growth was most rapid during the​ ______ and slowest during the​ ______.

1960s; Great Depression

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 table

An economy has a consumption function of C​ = 15​ + 0.7Y​, investment of​ 8, government expenditure of​ 12, exports of​ 20, and an import function of M​ = 0.2Y. What is the multiplier for this​ economy?

2

If the money price of a cup of coffee is​ $1 and the money price of gum is 50 cents per​ pack, then the relative price of a cup of coffee in terms of a pack of gum is​ _____.

2

Over the past 100​ years, the average growth rate of U.S. real GDP per person is _ percent.

2

If the monetary base increases by​ $1 million and the quantity of money increases by​ $2.5 million, then the money multiplier is​ _____.

2.5

An economy has a consumption function of C​ = 15​ + 0.7Y​, investment of​ 8, government expenditure of​ 12, exports of​ 20, and an import function of M​ = 0.2Y. If government expenditure increases by​ 10, what is the increase in equilibrium​ expenditure?

20

Suppose that in 2014​ China's real GDP is growing at 7 percent a year and its population is growing at 0.5 percent a year. If these growth rates​ continue, then​ China's real GDP per person in​ ______ will be twice what it is in 2014.

2025

The money price of a pack of frozen burritos is ​$0.50 and the money price of a jar of pasta sauce is ​$1.50. The opportunity cost of a jar of a jar of pasta sauce is​ _______.

3.00 packs of frozen burritos​, which is the relative price of a jar of pasta sauce

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

Use the​ (approximate) facts about the U.S. economy to answer the following questions. What was the inflation rate in 2005 and​ 2009? How do you​ know? The inflation rates in 2005 and 2009 were​ _____ percent and​ _____ percent respectively because the inflation rate equals​ _____ . Use the​ (approximate) facts about the U.S. economy to answer the following questions. What happened to the price of a bond between 2005 and​ 2009? How do you​ know? The price of a bond ​ _____ between 2005 and 2009 because the​ _____.

3;0 remained​ unchanged; nominal interest rate remained unchanged

Use the​ (approximate) facts about the U.S. economy to answer the following questions. 1. What was the inflation rate in 2005 and​ 2009? How do you​ know? The inflation rates in 2005 and 2009 were​ _____ percent and​ _____ percent respectively because the inflation rate equals​ _____ . What happened to the price of a bond between 2005 and​ 2009? How do you​ know? The price of a bond ​ _____ between 2005 and 2009 because the​ _____. What happened to the demand for loanable funds between 2005 and​ 2009? How do you​ know? Between 2005 and​ 2009, the government budget deficit​ increased, so the demand for loanable funds​ _____ between 2005 and 2009. Did the change in the government budget deficit crowd out some​ investment? The change in the government budget deficit​ _____ crowd out some investment because the​ _____. What happened to the quantity of saving and​ investment? The quantity of saving​ _____ and the quantity of investment​ _____.

3;0 nominal remain unchanged increased did; real interest rate rose increased; decreased

An economy is at potential GDP and the price level is 100 in the figure. If aggregate demand unexpectedly​ increases, the inflation rate is​ ______.

4 percent a year

Suppose that the velocity of circulation of money is constant and real GDP is growing at a constant 4 percent a year. To achieve an inflation target of 1 percent a​ year, the central bank grows the quantity of money at nothing percent a year. Deflation will be created if the growth rate of the quantity of money is ​ _______.

5% less than 4 percent a year

Hyperinflation is an inflation rate of​ _____ or higher that grinds the economy to a halt and causes a society to collapse.

50 percent a month

Both Mia and Mario produce only the item in which they have a comparative advantage. Then they trade one pasta for one pizza. Before specialization and trade​ started, Mia and Mario were each producing 6 dishes of pasta and 6 pizzas an hour. The total gains from trade are​ ______ dishes of pasta and​ ______ pizzas an hour.

6​, 6

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.

75​; 97

In 2013 and in​ 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for​ Dexter's CPI is​ 2013, and 2013 is also the year of the Consumer Expenditure Survey. The inflation rate in 2014 is​ ______ percent.

76

The real wage rate is​ $_____ when the money wage rate is​ $2,000 and the price level is​ $25.

80

In 2013 and in​ 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for​ Dexter's CPI is 2013 and 2013 is also the year of the Consumer Expenditure Survey. The CPI in 2014 is​ ______.

98.5

Consider the following events. Event​ 1: Growth in the world economy slows. Event​ 2: The world price of oil rises. Event​ 3: U.S. labor productivity declines. Choose the statement that is correct.

A classical macroeconomist and a monetarist recommend that taxes be kept low to avoid disincentive effects for all of the events and a Keynesian recommends active fiscal policy and monetary policy to offset all events.

Choose the statement about a crawling peg that is incorrect.

A crawling peg makes the exchange rate fluctuate wildly.

Choose the correct statement.

A credit card is not a means of payment.

Choose the statement that is incorrect.

A government budget surplus competes with investment for funds.

Choose the statement that is incorrect about the Eurozone economy.

A rise in the expected inflation rate shifts the​ short-run Phillips curve rightward.

Choose the statement about money that is incorrect.

A. Inflation brings a rising value of money.

Which of the following is an example of absolute advantage​?

A. Tom does his math homework in 2 hours while Harry takes only 30 minutes to do the same task.

The PPF shows a tradeoff because when​ Hillary's Hobby Factory produces more model​ cars, ______.

A. it decreases the quantity of toy trains that it produces

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 the position of the SAS curve.

A. new​ Keynesian; new classical B.

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 equation of the aggregate expenditure​ curve?

AE​ = 36​ + 0.7Y

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

AE​ = A​ + ​[b​(1minust​)minusm​]Y

Choose the statement that is incorrect.

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

Production efficiency occurs when we produce goods and services at the lowest possible cost.

Allocative efficiency occurs when goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit.

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.

​______ earns​ ______. Land earns rent. Labor earns wages. Capital earns interest. Entrepreneurship earns profit.

An oil deposit is an example of landland​, which earns rentrent.

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.

An unexpected inflation or deflation has no effect on the economy.

2. The price of oil falls unexpectedly and aggregate supply increases by​ $50 billion. What type of output gap​ appears? If the central bank responds to close the output​ gap, does Shell Island experience inflation or​ deflation? ​_____ gap appears and the central bank closes the output​ gap, aggregate demand​ _____ and a​ _____ is created.

An​ inflationary; decreases;​ cost-push deflation

The table shows the aggregate demand and​ short-run aggregate supply schedules of Shell Island in which potential GDP is​ $600 billion. The economy is at​ full-employment. The price of oil falls unexpectedly and aggregate supply increases by​ $50 billion. What type of output gap​ appears? If the central bank responds to close the output​ gap, does Shell Island experience inflation or​ deflation? ​_____ gap appears and the central bank closes the output​ gap, aggregate demand​ _____ and a​ _____ is created.

An​ inflationary; decreases;​ cost-push deflation

Aqua Springs makes the following four statements about bottled spring water. Which statement best describes the​ firm's quantity supplied in the bottled water​ market?

At a price of​ $1 bottle, we plan to sell​ 2,000 bottles per day.

Jeb makes the following four statements about peanuts. Which statement best describes his quantity demanded in the peanut​ market?

At a price of​ $1 per​ pack, I plan to buy 2 packs of peanuts per week.

​______ is triggered by a decrease in autonomous expenditure and​ ______ is triggered by an increase in autonomous expenditure.

A​ recession; an expansion

The Bureau of Labor Statistics reports six alternative measures of the unemployment rate. Choose the correct statements. a. Upper U dash 5 measures the job losers. b. Upper U dash 3 adds discouraged workers to the official unemployment rate. c. Upper U dash 1 measures those who are unemployed for 15 weeks or more. d. Upper U dash 3 is the official unemployment rate.

B and C

Choose the statement that is incorrect.

B. All unemployment at the natural unemployment rate is structural unemployment.

The natural unemployment rate​ ______.

B. fluctuates because the frictions and the amount of structural change fluctuate

The main influences on the quantity of money that people and businesses plan to hold include all of the following except​ ______.

B. the number of depository institutions in the economy

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

B. world demand for U.S. exports

Big Lobster sells lobster and​ fish, and so too does H Salt. If Big Lobster​'s opportunity cost of preparing lobster exceeds H Salt​'s opportunity cost of preparing​ lobster, then all the following are true except​ ______. If H Salt and Big Lobster decide to specialize and​ trade, then the source of the gains from the trade between H Salt and Big Lobster is​ _______.

Big Lobster has a comparative advantage in lobster divergent opportunity cost

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 U.S. dollar. If the demand for U.S. dollars decreases​, the Fed​ ______.

Buys dollars to raise the echange rate

The figure shows the aggregate​ demand, short-run aggregate​ supply, and​ long-run aggregate supply curves for the economy of Tomorrowland. The economy is currently at point A. A​ cost-push rise in the price level will initially move the economy to point​ ______ and to point​ ______.

C when the money prices of raw materials​ rise; D when aggregate demand increases

Choose the statement that is incorrect.

C. The CPI calculation assumes that everyone shops at discount stores and no one shops at convenience

Choose the statement that is incorrect.

C. The United States and Great Britain were the only countries who suffered the Great Depression

First​ Call, Inc. is a smartphone company. First Call expects its profit to crash next year. If everything else remains the​ same, how does this decrease in expected profit influence First​ Call's demand for loanable​ funds? This decrease in expected profit​ _______ the demand for loanable funds and brings​ _______ the demand for loanable funds curve.

C. decreases​; a leftward shift of

The required reserve ratio is the ​______. The Fed is the lender of last​ resort, which means​ _______.

C. minimum percentage of deposits that depository institutions are required to hold as reserves if depository institutions are short of​ reserves, they can borrow from the Fed

Read the news​ clip, then answer the following question. Using the news​ clip's definition of​ productivity, choose the statement that is incorrect.

Changing the number of hours employed changes the growth of productivity.

China's real GDP per person was​ 13,165 yuan in 2013 and​ 14,088 yuan in 2014.​ India's real GDP per person was​ 49,516 rupees in 2013 and​ 51,521 rupees in 2014. By maintaining their current growth​ rates, _______.

China will double its standard of living first

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.

Choose the statement that is incorrect.

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

Choose the statement that is incorrect.

D. The bias in the CPI eliminates the need for people to shop in discount stores

A fall in the expected future exchange rate​ ______ the demand for U.S. dollars. Upper A decrease in the U.S. demand for imports​ _______ the demand for U.S. dollars.

D. decreases​; does not change

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

D. increases​; disposable​ income, which encourages greater saving decreases the supply of loanable funds today because households with larger expected future income will save less today

An economy is at full employment when​ ______.

D. the unemployment rate equals the natural unemployment rate

Who in the following statements is a discouraged worker​?

Dan is available to work but has not looked for a job in the past eight weeks because of repeated applications but no single offer.

Which of the following is an example of comparative advantage​?

Dave makes 4 pizzas giving up 6 jars of milk shakes while Rob makes 2 pizzas giving up 4 jars of milk shakes.

If real GDP and aggregate expenditure are less than equilibrium​ expenditure, firms' inventories decrease ​, Firms​ ______ production, and real GDP​ ______.

Decreases inc;inc

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.

Planned saving​ + Planned consumption expenditure​ = ______.

Disposable income

The figure shows the aggregate​ demand, short-run aggregate​ supply, and​ long-run aggregate supply curves for the economy of Tomorrowland. The economy is currently at point A. 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

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 correct statement

Entrepreneurship is the human resource that organizes​ labor, land, and capital.

The central bank of the United States is the​ ______. A central bank performs all of the following functions except​ ______.

Federal Reserve System it provides debt counseling for individuals

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 monetary base is the sum of​ _______. The monetary base is equal to​ _______.

Federal Reserve​ notes, coins, and depository institution deposits at the​ Fed; the liabilities of the Fed plus coins issued by the Treasury

Read the news​ clip, then answer the following questions. The article defines productivity as​ ______. Real GDP per person is​ ______.

GDP divided by the number of people​ employed; real GDP divided by the population

Choose the statement that is incorrect.

Growth in average hours per worker increase labor productivity.

Which of the following statements describes a change in the quantity supplied and which describes a change in supply​? I Farms are selling less chicken because the price of turkey has increased. II Farms are selling less chicken because the price of chicken has fallen. III Farms are selling more chicken because the price of chicken has risen. IV Farms are selling more chicken because the cost of chicken feed has fallen.

I and IV are changes in supply and II and III are changes in the quantity supplied.

Which of the following statements about the market for chicken describes a change in the quantity demanded and which describes a change in demand​? I People are buying less chicken because the price of beef has fallen. II People are buying less chicken because the price of chicken has increased. III People are buying more chicken because the price of chicken has fallen. IV The cost of chicken feed has increased.

I is a change in demand and II and III are changes in the quantity demanded.

Which of the following statements is about a normal good​, which is about an inferior good​, which is about​ both, and which is about​ neither? I With incomes falling in the​ recession, people are buying more chicken. II People are buying more beef now that incomes have increased. III People are buying more chicken because the price of chicken has fallen. IV With higher incomes people are switching from chicken to beef.

I is​ inferior, II is​ normal, III is​ neither, and IV is both

Read the news​ clip, then answer the following questions. According to this news​ clip, consumption expenditure increased as household wealth decreased. This change in consumption expenditure could be attributed to​ ______ in disposable income or​ ______ in expected future income.

INCEASED an​ increase; an increase

Choose the statement that is incorrect.

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

Choose the statement that is incorrect.

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

Choose the correct statement about purchasing power parity.

If purchasing power parity does not​ prevail, the demand for U.S. dollars changes and the supply of U.S. dollars changes.

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 demand for Treasury bonds​ increases, the interest rate on the Treasury bond rises.

Which of the following statements by Aqua Springs demonstrates that the​ firm's selling plans obey the law of supply​?

If the price of bottled water falls and all the other influences on our selling plans remain the​ same, we will cut back on production and lay off some workers

If real GDP increases by​ $2 million and potential GDP increases by​ $3 million and the marginal propensity to import is​ 0.2, by how much do imports​ change?

Imports increase by​ $400,000

Choose the statement about the business cycle that is incorrect.

In a business​ cycle, real GDP shows steady growth and steady inflation.

Choose the statement that is incorrect.

In a​ deflation, the inflation rate is positive but decreasing in consequent years.

Choose the statement that is incorrect.

In the United States in​ 2009, 22 million fewer people had jobs than in 1989.

Choose the statement that is incorrect.

In the long​ run, China manages its exchange rate to keep its export prices low and to make it easier to compete in world markets.

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.

If real GDP and aggregate expenditure are greater than equilibrium​ expenditure, firms' inventories increase . Firms​ _______ production, and real GDP​ _______.

Increases dec;dec

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

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.

Read the news​ clip, then answer the following questions. The components of the 787 Dreamliner that Boeing produces in Japan are part of​ ______ GDP. The aircraft that are assembled in the United States and sold to All Nippon Airways are part of​ ______ GDP. The purchase of the 787 Dreamliner by ANA is recorded as an​ ______ in​ Japan's GDP and as an​ ______ in U.S. GDP.

Japans;US import;export

Which of the following is an example of money price​?

Joe paid​ $15 to buy a pizza box from​ McDonald's.

Read the news​ clip, then answer the following question. Based on this news​ clip, Paul Krugman most likely follows the​ ______ school of thought and Ben Bernanke most likely follows the​ ______ school of thought.

Keynesian or new​ Keynesian; Keynesian or new Keynesian

Read the news​ clip, then answer the following question. Based on this news​ clip, Barack Obama most likely follows the​ ______ school of thought and John McCain most likely follows the​ ______ school of thought.

Keynesian or new​ Keynesian; classical or new classical

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

Keynesian; monetarist

In​ ______ cycle​ theory, fluctuations in investment driven by fluctuations in business confidence are the main source of fluctuations in aggregate demand. In​ ______ cycle​ theory, fluctuations in both investment and consumption​ expenditure, driven by fluctuations in the growth rate of the quantity of​ money, are the main source of fluctuations in aggregate demand.

Keynesian; monetarist

Choose the statement that is incorrect.

Labor hours are all equally productive.

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

Left​ alone, the economy rarely operates at full employment.

Choose the statement that is incorrect.

Liquid assets have a higher interest rate than securities.

Read the news​ clip, then answer the following questions. The MPS in the United States is lower than the MPS in​ China, and the MPC in the United States is higher than the MPC in China. A reason for the difference in the values between the countries may be​ ______.

Lower Higher U.S. consumers are more confident about the future

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.

M1 and​ M2; are

M2 consists of​ _____ plus​ _____ and​ _____ deposits,​ _____, and other deposits.

M1; savings​ deposits; small​ time; money market funds

Which of the following equations is incorrect​?

MPC ​ + MPS​ = Upper DeltaYD

The equation of exchange is​ ______ and it is true​ ______.

MV​ = PY​; by definition

Choose the statement that is incorrect.

Malthusian growth theory holds that real GDP per person growth slows as the opportunity cost of women in the labor force increases.

Choose the statement that is incorrect.

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

​______ sees the economy as a perpetual motion machine.

New growth theory

Leisure Island has 50 hours of labor a day that it can use to produce entertainment and good food. The table shows the maximum quantity of each good that Leisure Island can produce with different quantities of labor. 1. Can Leisure Island produce 4 shows and 14 meals a​ week?

No

2. If Leisure Island produces 4 shows and 9 meals a​ week, is production​ efficient? 3. If Leisure Island produces 8 shows and 5 meals a​ week, do the people of Leisure Island face a​ tradeoff? 4. Suppose that Leisure Island produces 4 shows and 12 meals a week. Calculate the opportunity cost of producing 2 additional shows a​ week? The opportunity cost of producing 2 additional shows per week is

No Yes 3 meals per week

The table to the right shows the values of disposable income and consumption expenditure for each of the past four quarters. Could these levels of disposable income and consumption expenditure be on the same consumption​ function? ​___ because consumption expenditure changed by​ _____ than disposable income in​ _______ .

No​; more​; 2017 comma Upper Q 4

Which of the following statements illustrates structural unemployment​?

Outsourcing resulted in many job losses in the mid 2000s.

Choose the statement that is incorrect.

Over the business​ cycle, aggregate supply fluctuates around potential GDP.

Use the data reported by the Current Population Survey in July 2014 to answer the following question. 1. Who does the BLS classify as being​ unemployed, a​ part-time worker, an employed​ person, a discouraged​ worker, and not in the labor​ force? Explain your classification. ​______ are​ unemployed, ______ is a​ part-time worker,​ _____ is a discouraged​ worker, and​ _____ is not in the labor force. How will the labor force change if the following events​ occur? 1. Sarah starts a second job 2. Pat finds a good job and is hired. 3. Mary takes a job at​ McDonald's while she waits to start her new job. How will the unemployment rate change if Sarah quits and starts to search for a​ full-time job? The unemployment rate will​ _____ if Sarah quits and starts to search for a​ full-time job. How will the labor force participation rate change if Kevin starts creating football apps in his garage and they turn out to be very​ popular? The labor force participation will​ _____ Kevin starts creating football apps in his garage and they turn out to be very popular.

Pat and​ Mary; Sarah;​ Kevin; Johnie Events​ 1, 2, and 3 will not change the labor force. rise rise

In September 2007 before the financial crisis and​ recession, the Fed had assets of​ $800 billion, mainly​ short-term government securities. In June 2012 after two rounds of quantitative​ easing, the​ Fed's assets totaled​ $2,600 billion. Many of those assets were​ long-term securities and not all of them were government securities. Choose the statement that is incorrect. Between 2007 and 2012 the monetary base​ _______.

Quantitative easing decreased bank reserves. increased

Defenders of RBC theory claim all of the following except ​_______.

RBC theory is consistent with a negligible intertemporal substitution effect

Which of the following is an example of financial capital​?

Rachel has taken a loan to buy a new home.

Choose the statement that is incorrect.

Real GDP per person grows whenever real GDP grows.

Read the news​ clip, then answer the following questions. ​______ cycle theory would say that the rise in unemployment is not cyclical but is a change in the natural unemployment rate.

Real business

Which of the following statements illustrates frictional unemployment​?

Robin is quitting his current job to find another that has better prospects.

Choose the statement that is incorrect.

Slower economic growth is always better than rapid economic growth because of reduced environmental damage.

Choose the correct statements. 1. The unemployment that arises from normal labor turnover is frictional unemployment. nothing 2. Students who leave school and look for a job are frictionally unemployed. nothing 3. Structural unemployment increases during a recession and decreases during an expansion. nothing 4. Frictional unemployment increases during a recession and decreases during an expansion. nothing

Statements 1 and 2 are correct.

Choose the statements concerning neoclassical growth theory that are true. 1. As incomes increase both the birth rate and the death rate decrease. nothing 2. Economic growth will stop if technology stops advancing. nothing 3. Neoclassical growth theory was developed in the late 19 th century. nothing 4. Neoclassical growth theory states that growth in real GDP per person can persist indefinitely. nothing

Statements 1 and 2 are correct.

Choose the correct statements. 1. The Chicago Fed implements the policy decisions of the FOMC. 2. FOMC stands for Federal Open Market Committee. 3. The chairman and the other six members of the Board of Governors are members of the FOMC. 4. Current chairman of the Fed is Alan Greenspan.

Statements 2 and 3 are correct.

Choose the correct statements. 1. In a growing economy comma the exchange rate is always rising. nothing 2. The foreign exchange market is made up of thousands of people comma including international tourists and foreign exchange brokers. 3. The foreign exchange market is made up of thousands of people including international tourists and foreign exchange brokers. 4. Foreign currency is always in the form of notes or coins. nothing

Statements 2 and 3 are correct.

Choose the correct statements. a. There is no relationship between the opportunity cost of producing an additional good measured on the x dash axis andThere is no relationship between the opportunity cost of producing an additional good measured on the x-axis and the opportunity cost of producing an additional good measured on the y dash axis.the opportunity cost of producing an additional good measured on the y-axis. nothing b. Opportunity cost of a good cannot be accurately measured along a PPF because the PPF shows only two goods.Opportunity cost of a good cannot be accurately measured along a PPF because the PPF shows only two goods. nothing nothing c. The opportunity cost of producing more x comma illustrated as a movement between two points on the PPF is equal toThe opportunity cost of producing more x, illustrated as a movement between two points on the PPF is equal to the inverse of the opportunity cost of producing more y comma illustrated as a movement between the same two points in thethe inverse of the opportunity cost of producing more y, illustrated as a movement between the same two points in the nbsp opposite direction. opposite direction. d. Opportunity cost of a good is the decrease in the quantity produced of one good divided by the increase in the quantityOpportunity cost of a good is the decrease in the quantity produced of one good divided by the increase in the quantity produced of another good as we move along the PPF .produced of another good as we move along the PPF. nothing

Statements c and d are correct.

​______ bring business cycle turning points.

Swings in autonomous expenditure

I​ = ______.

S​ + ​(TminusG​) ​+ ​(MminusX​)

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.

Which of the following illustrates an efficient​ outcome?

Ted cuts the price of his sausages and his profit increases.

Choose the statement about the Consumer Price Index that is incorrect. CPI​ = ______.

The CPI is defined to equal 1.00 for a period called the reference base period. ​(Cost of CPI basket at​ current-period prices divided by Cost of CPI basket at​ base-period ​prices) times 100

Which of the following economies is facing a stagflation​?

The European economy is experiencing a decrease in real GDP for three quarters and a rise in the price level.

Which of the following statements illustrate monetary policy​?

The Fed has raised the federal funds rate by 0.3 percent.

Which of the following statements illustrate fiscal policy​?

The US government has proposed a hike in the corporate tax rate.

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.

The left graph shows the consumption function and the right graph shows the saving function. Suppose there is a decrease in household wealth.

The consumption function shifts from A to B and the saving function shifts from C to D.

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 about growth in labor productivity that is incorrect.

The demand for labor​ increases, the production function does not​ change, but a movement occurs along the production function.

The table gives the demand and supply schedules for hamburgershamburgers. What is the equilibrium price of a hamburgerhamburger and the equilibrium quantity of hamburgershamburgers per​ day?

The equilibrium quantity of hamburgers is 30 a day. The equilibrium price is ​$5 a hamburger.

Choose the statement that is incorrect.

The greater the default​ risk, the greater is the supply of loanable funds.

Choose the statement concerning​ firms' investment decisions that is incorrect.

The higher the real interest​ rate, the greater is the demand for loanable​ funds, other things remaining the same.

Labor productivity is rising at a rapid rate in China and wages are rising at a similar rate. Choose the statement that is incorrect.

The increase in labor productivity has no effect on​ short-run aggregate supply.

Choose the correct statement.

The inflation rate is the annual percentage change in the price level.

Choose the correct statement.

The level of aggregate expenditure that occurs where the AE curve intersects the 45degrees line is equilibrium expenditure.

Every​ week, SallySally plays the pianoplays the piano for threethree hourshours​, and herher grade on each FrenchFrench test is 8585 percent. Last​ week, after playing pianoplaying piano for threethree hourshours​, SallySally considered playingplaying for another hour. SheShe decided to playplay for another hour and cut herher study time by one hour. But last​ week, herher FrenchFrench grade fell to 8080 percent. Given that SallySally spent a fourthfourth hour playing pianoplaying piano​, what can you conclude about the marginal benefit and marginal cost of the thirdthird hour of playing pianoplaying piano​?

The marginal benefit of the first hour of playing guitar exceeded its marginal cost.

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.

Which of the following statements by Tom demonstrates that his buying plans obey the law of demand​?

The only thing​ that's changed is the price of​ textbooks: they've become more expensive and now​ I'm not buying as many.

Pam, Pru, and Pat are deciding how they will celebrate the New Year. Pam prefers to go on a​ cruise, is happy to go to​ Hawaii, but does not want to go skiing. Pru prefers to go​ skiing, is happy to go to​ Hawaii, but does not want to go on a cruise. Pat prefers to go to Hawaii or to take a​ cruise, but does not want to go skiing. Their decision is to go to Hawaii. What is the opportunity cost of the trip to Hawaii for each of​ them?

The opportunity cost for Pam and Pat is a cruise and for Pru it is skiing.

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.

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.

Dairies make​ low-fat milk from​ full-cream milk. In the process of making​ low-fat milk, the dairies produce​ cream, which is made into ice cream. In the market for​ low-fat milk, which of the following events illustrates the law of​ supply?

The price of​ low-fat milk rises.

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

The production function shifts upward.

Choose the correct statement.

The quantity of real GDP demanded is the sum of the real consumption​ expenditure, investment, government​ expenditure, and exports minus imports.

Choose the statement that is incorrect.

The return to full employment in an expansion phase of the business cycle is economic growth.

Choose the statement that is incorrect.

The unemployment rate includes all underutilized labor.

Choose the statement that is incorrect.

The unemployment rate is zero when the economy is at a business cycle peak.

Choose the statement that is incorrect.

The unemployment rate was lower during the recession in 1982 than it was during the recession of​ 1990-1991.

Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. Choose the statement that is incorrect.

The wings appear as imports in U.S. GDP. If any parts for the cars come from​ Japan, they are recorded as a positive entry in calculating U.S. GDP

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.

Read the news​ clip, then answer the following question. Choose the statement that is incorrect.

The​ "Mexican peso is gaining on the​ greenback" because the demand for pesos is increasing at a slower pace than the supply of pesos is increasing.

Choose the statement that is incorrect.

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

Choose the correct statement.

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

Read the news​ clip, then answer the following question. Choose the statement that is incorrect.

Treasury Secretary Timothy Geithner most likely follows the monetarist school of thought if he thinks that a falling money wage rate will respond quickly to changes in government tax policy.

Choose the statement that is incorrect.

Trends around which the exchange rate fluctuates are impossible to predict.

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

US demand for imports

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

Upper DeltaC divided by Upper DeltaYD​; Upper DeltaS divided by Upper DeltaYD

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.

When the price of an asset​ rises, the interest rate​ falls, everything else remaining the same.

According to the quantity theory of​ money, in the long run an increase in the quantity of money of 5​ percent, brings​ _____ in the price level.

a 5 percent increase

The quantity theory of money tells us that​ _______.

a change in the money growth rate brings an equal change in the inflation rate Your answer is correct.D.

All of the following will change the demand for the onions except​ _______.

a change in the price of onions

A fixed exchange rate is an exchange rate that is determined by​ ______ and is achieved by central bank intervention in the foreign exchange market to block​ ____

a decision of the government or the central​ bank; the unregulated forces of demand and supply Your answer is correct.D.

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

In the​ graph, the initial aggregate supply curve is SAS0 and the initial aggregate demand curve is AD0. Some events that could have changed aggregate demand from AD0 to AD1 are​ ______.

a decrease in taxes or a fall in the exchange rate

On March 30 comma 2012 the U.S. dollar was trading at 82 yen per dollar on the foreign exchange market. On August 30 comma 2012​, the U.S. dollar was trading at 79 yen per dollar. The events in the foreign exchange​ market, everything else remaining the same that could have resulted in this change in the value of the U.S. dollar include​ _______.

a decrease in the U.S. interest rate and a fall in the expected future exchange rate of the U.S. dollar

Examples of monetary policy that decrease aggregate demand include​ ______.

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

​So, as the price level​ rises, there is​ ______.

a decrease in the quantity of real GDP demanded

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

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. The purchase of new computers for the office of Secretary of StateThe purchase of new computers for the office of Secretary of State Item 2. New kitchen equipment bought by Burger KingNew kitchen equipment bought by Burger King Item 3. Banking services bought by a studentBanking services bought by a student Item 4. Jet engines bought by Boeing item 1 is and item 2 is item 3 is and item 4 is

a final good which is gov expenditure; a final good that is investment a final good that is consumption expenditure and an intermediate good

With the strengthening of the yen against the U.S. dollar in​ 2012, Japan's central bank did not take any action. A Japanese politician called on the central bank to take actions to weaken the​ yen, saying it will help exporters in the short run and have no​ long-run effects. ​Japan's current exchange rate policy is​ ______.

a flexible exchange rate

A rise in the money wage rate with no change in potential GDP creates​ ______.

a leftward shift of the SAS curve and no change in the LAS curve

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)

Eurozone Unemployment Hits Record High As Inflation Rises Unexpectedly Eurozone unemployment rose to 10.7 percent. At the same​ time, Eurozone inflation unexpectedly rose to 2.7 percent a​ year, up from the previous​ month's 2.6 percent a year. ​Source: Huffington Post​, March​ 1, 2012 A very high unemployment rate can be accounted for by the Phillips curve model by all of the following except​_______.

a movement up along the​ long-run Phillips curve if the natural unemployment rate increases

The United States is​ ______.

a net borrower and a debtor nation

Deflation is​ _______.

a persistently falling price level

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

a rational expectation

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

a recession

In the​ graph, the initial aggregate supply curve is SAS0 and the initial aggregate demand curve is AD0. The events which could have changed​ short-run aggregate supply from SAS0 to SAS1 are​ ______. Following the change in aggregate​ supply, the new macroeconomic equilibrium is at​ ______. If potential GDP is​ $1 trillion, the economy has ▼ an inflationary no output a recessionary gap.

a rise in the money wage rate or a rise in the money price of any other factor of production point A a recessionary

The table shows the demand schedule and supply schedule in the market for ricerice. If the price of rice is ​$1.40 a pound​, there is​ ______ and the price of rice will​ ______.

a shortage of rice;rise

Excess reserves are a​ bank's _____ reserves minus its​ _____ reserves.

actual; desired

Choose the correct statement about interest rate parity.

adjusted for risk

A person is in the labor force if any one of the following statements is true except that he or she is​ ______.

aged 16 and over and not in​ jail, hospital, or some other form of institutional care

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

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

aggregate demand increases

Deflation occurs when​ _______.

aggregate demand increases at a persistently slower rate than aggregate supply

Equilibrium expenditure is the level of aggregate expenditure that occurs when​ ______.

aggregate planned expenditure equals real GDP

Read the news​ clip, then answer the following question. Mexican goods might become more expensive to U.S. consumers because​ ______.

an appreciation of the Mexican peso against the U.S. dollar means that the U.S. dollar depreciates against the Mexican peso

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

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

an expansion

The economy starts out on the curves AD0 and SAS0. Some events then occur that generate an expected inflation. Which of the following events would not cause an expected​ inflation?

an expected increase in taxes

A​ demand-pull inflation begins with​ _______.

an increase in aggregate demand

Examples of fiscal policy that increase aggregate demand include​ ______.

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

The economy starts out on the curves AD0 and SAS0. Some events then occur that generate a​ cost-push inflation. Which of the following events might cause a​ cost-push inflation?

an increase in the money wage rate or an increase in the money prices of raw materials

The growth rate is the​ _____ of a variable​ - the change in the level expressed as a percentage of the initial level.

annual percentage change

The graph shows​ Brazil's PPF for ethanol and food crops. Brazil faces​ ______ opportunity cost of a barrel of​ ethanol, which is shown by the​ _____________ of the PPF.

an​ increasing; bowed-out shape

If a euro deposit in a bank in​ Paris, France, earns interest of 0.7 percent a year and a yen deposit in​ Tokyo, Japan, earns 0.1 percent a​ year, other things remaining the same and adjusted for​ risk, what is the exchange rate expectation of the Japanese​ yen? The Japanese yen exchange rate is expected to appreciate against the euro by 0.6 percent.

apprecciate .6

Explain the effect of the two announcements on the U.S. dollardashyen exchange​ rate: Would the U.S. dollar appreciate or​ depreciate? The two announcements on the U.S.​ dollar-yen exchange rate would​ _____ the U.S. dollar.

appreciate

Social institutions such as​ firms, markets, property​ rights, and money​ _______.

are required for society to enjoy the benefits of specialization/trade

A Classical macroeconomist believes that the economy is​ self-regulating and always​ _____.

at full employment

The natural unemployment rate is the unemployment rate when the economy is​ _____.

at full employment

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 multiplier is the amount by which a change in any component of​ _____ is magnified or multiplied to determine the change in​ _____ and​ _____ that it generates.

autonomous​ expenditure; equilibrium​ expenditure; real GDP

The price level is the​ _____.

average level of prices

The reference base period for the CPI is​ 1982-1984. In April ​2014, the CPI was 237.1. This number tells us that the​ ______ of the prices paid by urban consumers for a fixed basket of consumer goods and services was​ ______ .

average; 137.1 percent higher in April 2014 than the average of​ 1982-1984

The velocity of circulation is the​ _____ number of times in a​ _____ that each dollar of money gets used to buy final goods and services.

average; year

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

The Fed is the lender of last resort​, which means that if​ _____ is short of​ reserves, it can borrow from the​ _____.

a​ bank; Fed

A type of​ _____ is a ​mortgage-backed security​, which entitles​ _____ to the income from a package of mortgages.

a​ bond; its holder

A problem with using a commodity as money is​ ______.

a​ commodity's value changes over time

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

a​ demand-pull rise in the price level

A rise in the price of oil creates​ _______.

a​ one-time cost-push rise in the price level

Cyclical unemployment is the fluctuating unemployment over the business cycle that increases during​ _____ and decreases during​ _____.

a​ recession; an expansion

Gross domestic product and gross investment are measured​ ______. Net domestic product and net investment are measured​ ______. Domestic product is​ _______. National product is​ _______.

before the depreciation of​ capital; after the depreciation of capital production within a​ country; the value of goods and services produced anywhere in the world by the residents of a nation

A business cycle can be described by the following​ sequence: ​______ equilibrium,​ ______ equilibrium,​ ______ equilibrium.

below​ full-employment; full-employment; above​ full-employment

The marginal benefit of a good or service is the​ _____.

benefit received from consuming one more unit of it.

A country produces only pencils and erasers. Pencil production is efficient if the marginal​ _______ a pencil equals the marginal​ _______.

benefit​ from; cost of a pencil

Rational choice is a choice that uses the available resources to​ _____ of the person making the choice.

best achieve the objective

A debtor nation is a country that during its entire history has​ _____ the rest of the world than it has​ _____ the rest of the world.

borrowed more​ from; lent to

A depository institution creates liquidity by​ ______. ' Depository institutions pool risk because they use funds obtained from​ ______ depositors to make loans to​ ______ borrowers. Depository institutions minimize the cost of monitoring borrowers by​ ______.

borrowing short and lending​ long; many; many using specialized resources that have a much lower cost than what households would incur if they had to undertake the activity individually

The price of food increased during the past year. The law of demand applies to food because when the price of food​ rises, there is​ ______. The substitution effect influences food purchases because when the price of a certain food​ rises, other things remaining the​ same, ______. Consumers​ ______.

both a substitution effect and an income effect its relative price​ rises; purchase more of a different food that is less expensive

These events that resulted in this change in the value of the U.S. dollar changed​ _______.

both the demand for dollars and the supply of dollars

A market is an arrangement that brings​ _____ together and enables them to get information and do business with each other.

buyers and sellers

The production possibilities frontier is the boundary between the combinations of goods and services that​ _____, given the available factors of production and the state of technology.

can be produced and the combinations that cannot be produced

The graph shows​ Brazil's PPF. ​Brazil's PPF illustrates scarcity because Brazil​ ______. If Brazil produces 40 barrels of ethanol a​ day, it must produce​ _____ tons of food a day to achieve production efficiency.

cannot attain the points outside the PPF​; 3

During​ 2008, the inflation rate increased and the unemployment rate increased. These events​ ______.

cannot be explained by a movement along the SRPC because along this curve the inflation rate and unemployment rate move in opposite directions

Economic growth results when there are increases in​ ______.

capital accumulation

Economic growth comes from​ _______.

capital accumulation and technological advance

The​ ______ account records​ ______ U.S. investment abroad.

capital and​ financial; foreign investment in the United States minus

The Federal Reserve System ​(the Fed) is the​ _____ of the United States.

central bank

The four price indexes that are alternatives to the CPI are​ ______. The chained CPI​ ______.

chained​ CPI, personal consumption expenditure​ deflator, GDP​ deflator, and core PCE Your answer is correct.C. overcomes the sources of bias in the CPI by incorporating substitutions and using current and previous period quantities

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

Labor supply growth is influenced by all of the following except​_______.

changes in labor productivity

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

Read the news​ clip, then answer the following questions. The​ Fed's policy tools include all of the following except​ ______ To increase its assets to​ $2.3 trillion in​ 2008, the Fed used​ ______.

changing government expenditure last resort loans

As a result of financial​ innovation, ______ have become​ ______.

checking deposits at thrift​ institutions; an increasing percentage of M1

Which of the following news headlines does not illustrate the potential for conflict between​ self-interest and the social​ interest?

college coaches are cashing in

The debtor nation status of the United States would be a concern if the borrowed funds were used to finance​ ______.

consumption

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

consumption expenditure and imports

Aggregate planned expenditure is the sum of planned​ _____.

consumption​ expenditure, investment, government​ expenditure, and exports minus imports

A stock market is a financial market in which shares of stocks of​ _____ are traded.

corporations

An inflation that is kicked off by an increase in​ _____ is called ​cost-push inflation.

costs

Stagflation occurs when​ _______.

costs increase

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​ ______.

crawling​ peg; the price level and the nominal exchange rate are determined together

Depository institutions provide four​ benefits, which are​ ______.

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

The main components of money in the United States today are​ ______.

currency and deposits at banks and other depository institutions

an electrician who is laid off because of the economy is in a recession experiences ​______.

cyclical unemployment

In February 2017​, the U.S. unemployment rate LOADING... was 4.7 percent. In February 2018​, the unemployment rate was 4.1 percent. Assuming that the labor force remained constant between February 2017 and February 2018​, then unemployment​ _______.

dec

In March 2007​, the U.S. unemployment rate was 4.4 percent. In August 2008​, the unemployment rate was 6.1 percent. Assuming that unemployment remained constant between March 2007 and August 2008​, then the labor force​ ______._.

dec

The Fed cuts the quantity of money and all other things remain the same. In the short​ run, aggregate demand​ _______.

dec

The effect of this decrease is ▼ an increase a decrease in the demand for​ labor, ▼ a decrease an increase in the supply of​ labor, ▼ a decrease an increase in​ employment, and ▼ an increase a decrease in the real wage rate.

dec all

The effect of this decrease is ▼ a decrease an increase in investment​ demand, ▼ a decrease an increase in the demand for loanable​ funds, and ▼ a decrease an increase in the real interest rate.

dec for all

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

dec inc

Aggregate demand if the exchange rate​ ______ or foreign income ​______.

dec inc

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

In January​ 2010, the price of gasoline was​ $2.70 a gallon. By spring​ 2010, the price had increased to​ $3.00 a gallon. Assume that there were no changes in average​ income, population, or any other influence on buying plans. Given the law of​ demand, you would expect the rise in the price of gasoline to​ ______ the quantity of gasoline demanded and​ ______ the demand for gasoline.

decrease;not change

Read the news​ clip, then answer the following questions. In both​ sectors, output fell while labor productivity increased. The quantity of labor​ (aggregate labor​ hours) in the nonfarm sector __

decreased

The following events have occurred at times in the history of the United States. 1. A deep recession hits the world economy 2. The world oil price rises sharply 3. U.S. businesses expect future profits to fall Event 1​ ______. Event 2​ ______. Event 3___

decreases aggregate​ demand; decreases​ short-run aggregate supply decreases aggregate demand

The following events have occurred at times in the history of the United​ States: 1. A deep recession hits the world economy 2. The world oil price rises sharply. 3. U.S. businesses expect future profits to fall. Starting from a position of​ long-run equilibrium, a deep recession​ ______, and a decrease in expected future profits​ ______.

decreases real GDP and lowers the price​ level; decreases real GDP and lowers the price level

Starting from a position of​ long-run equilibrium, a sharp increase in the world oil price​ ______.

decreases real GDP and raises the price level

An increase in the price of onions ​_______.

decreases the quantity of onions demanded and results in a movement up along the demand curve for onions

The following events occur one at a​ time: ​(i) The price of crude oil rises. ​(ii) The price of a car rises. ​(iii) All speed limits on highways are abolished. ​(iv) Robots cut car production costs. The supply of gasoline​ _______. The quantity of gasoline demanded​ _______. The quantity of gasoline supplied​ _______.

decreases when the price of a car rises decreases when the price of crude oil rises decreases when the price of crude oil rises increases when the speed limits are abolished

The multiplier increases when the marginal propensity to import​ ______ or the income tax rate​ ______.

decreases; decreases

A rise in the wage rate of dairy workers​ ______ the supply of​ low-fat milk. A rise in the price of cream​ ______ the supply of​ low-fat milk.

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

decreases;falls

Chinese Premier Wen Jiabao has warned Japan that its companies operating in China should raise the pay for their workers. A rise in wages in China​ _______ aggregate supply.

decreases​ China's short-run

Read the news​ clip, then answer the following question. The​ "average overall increase across the​ board" wage increase​ _______.

decreases​ short-run aggregate supply

In the long​ run, the real exchange rate is determined by​ ______ and the nominal exchange rate is determined by​ ______.

demand and supply in the markets for goods and​ services; the quantities of money in two countries

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

Suppose a Canadian dollar bank deposit in Toronto earns 2 percent a year and a U.S. dollar bank deposit in Chicago earns 3 percent a year. What expectations do people hold if interest rate parity is to​ hold? For interest rate parity to​ hold, people expect that the U.S. dollar will ▼ depreciate appreciate by nothing percent a year.

depreciate by 1

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

Potential GDP is​ ______.

determined by the​ full-employment quantity of labor

Use the​ (approximate) facts about the U.S. economy to answer the following questions. Did the change in the government budget deficit crowd out some​ investment? The change in the government budget deficit​ _____ crowd out some investment because the​ _____. What happened to the quantity of saving and​ investment? The quantity of saving​ _____ and the quantity of investment​ _____.

did; real interest rate rose ​increased; decreased

The consumption function is the relationship between consumption expenditure and​ _____, other things remaining the same.

disposable income

The relationship between saving and​ _____, other things remaining the​ same, is called the saving function.

disposable income

Real GDP per person is real GDP​ _____.

divided by the population

The Rule of 70 is the number of years it takes for the level of any variable to double. It is approximately 70​ _____ by the annual percentage​ _____.

divided; growth rate of the variable

The Bank of​ America's total assets​ ______ and its total liabilities​ ______.

do not​ change; do not change

The expected inflation rate ▼ does not change falls rises .

does not change

A rise in the money wage rate​ ______.

does not change the LAS curve because along the LAS curve a rise in the money wage rate is accompanied by an equal percentage change in the price level

If the price level and the money wage rate rise by the same​ percentage, the quantity of real GDP supplied​ ______ and there is a movement up along the​ ______ aggregate supply curve.

does not​ change; long-run

3. The government of Shell Island announces an increase in spending of​ $50 billion a year and the central bank will increase the quantity of money to pay for the spending. Does the economy go into a​ boom? Will there be​ inflation? The economy​ _____ into a​ boom, real GDP​ _____ billion, and​ _____ arises.

does not​ go; remains at​ $600; inflation

The table shows the aggregate demand and​ short-run aggregate supply schedules of Shell Island in which potential GDP is​ $600 billion. The economy is at​ full-employment. The government of Shell Island announces an increase in spending of​ $50 billion a year and the central bank will increase the quantity of money to pay for the spending. Does the economy go into a​ boom? Will there be​ inflation? The economy​ _____ into a​ boom, real GDP​ _____ billion, and​ _____ arises.

does not​ go; remains at​ $600; inflation

The U.S.​ long-run Phillips curve​ ______ when the expected inflation rate rises. The U.S.​ long-run Phillips curve​ ______ when the natural unemployment rate increases.

does not​ shift; shifts rightwarddoes not​ shift; shifts rightward

The price of a Big Mac in different countries​ _______ provide a valid test of purchasing power parity because​ _______.

does​ not; purchasing power parity is determined by the price level not by individual prices

Economic growth​ ______ overcome scarcity because​ ______.

does​ not; we can produce more goods and services but it is still impossible to satisfy all our wants

The table provides some data on real GDP and the population of Pacifica in 2008 and 2009. If the growth rates of 2009 are maintained in future​ years, real GDP per person in Pacifica will​ ______.

double by 2023

The table provides some data on real GDP and the population of Atlantis in 2010 and 2011. If the growth rates of 2011 are maintained in future​ years, real GDP per person in Atlantis will​ ______.

double by 2046

A rational expectation is a forecast that results from the use of all the relevant data and​ _____. A.

economic science

A new Classical view is that business cycle fluctuations are the​ _____ responses of a​ well-functioning market economy that is bombarded by shocks that arise from the uneven pace of​ _____.

efficient; technological change

The main functions of markets include​ _______.

enabling buyers and sellers to get info about eachother

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

Arbitrage in the foreign exchange market and international loans market achieves all of the following except​ _______.

equal real exchange rates across the major currencies

Long-run macroeconomic equilibrium occurs when real GDP​ _____ potential GDP​ - equivalently, when the economy is on its​ _____ curve.

equals; LAS

The quantity theory of money is the proposition that when real GDP​ _____ potential​ GDP, an increase in the quantity of money brings​ _____ percentage increase in the​ _____.

equals; an​ equal; price level

The government expenditure multiplier equals the change in​ _____ that results from a change in government expenditure divided by the change in government expenditure.

equilibrium expenditure and real GDP

A below​ full-employment equilibrium is an equilibrium in which potential GDP​ _____ real GDP.

exceeds

When potential GDP​ _____ real​ GDP, the output gap is called a recessionary gap.

exceeds

An above​ full-employment equilibrium is an equilibrium when real GDP​ _____.

exceeds potential GDP

Households make saving decisions by considering all of the following factors except​ _______.

expected profit

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

expected profit

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

Potential GDP increases for all of the following reasons except​ ______.

exports increase

Property rights are legally established titles to the​ ownership, use and disposal of​ _____ and goods and services that are enforceable in the courts.

facotrs of prod

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

In December 2007​, the exchange rate was 0.97 Canadian dollars per U.S. dollar. By December 2008​, the exchange rate had risen to 1.06 Canadian dollars per U.S. dollar. As the exchange rate rises​, the prices of​ foreign-produced goods and services to Americans​ ______ and the volume of U.S. imports​ ______.

fall​; increases

In January 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. As the exchange rate falls​, prices of​ U.S.-produced goods and services to foreigners​ ______ and the volume of U.S. exports​ ______.

fall​; increases

As fewerfewer people buy bicycles, the demand for bicycle helmets will decrease and the price of a helmet will increase. The rise in the price of a bicycle helmet will increase the supply of bicycle helmets​." This statement is​ ______ because​ _____

false; a decreasea decrease in demand for bicycle helmetsbicycle helmets does not increaseincrease the price of a bicycle helmeta bicycle helmet and an increasean increase in the price of a bicycle helmeta bicycle helmet does not increaseincrease the supply of bicycle helmets

The loanable funds market is the aggregate of all the individual​ _____ markets.

financial

Bonds issued by​ _____ are traded in the bond market.

firms and governments

1. In the 1950s and​ 1960s, the United States operated a​ ______. Now the United States operates a​ ______ .

fixed exchange​ rate; flexible exchange rate

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

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

For each news item​ below, indicate whether it involves a what​, how​, or for whom question. ​"Oscar stars' swag dash bags may be taxableOscar stars' swag-bags may be taxable​" involves a​ ______ question. ​"Cancer scientists hail breakthrough treatmentCancer scientists hail breakthrough treatment​" involves a​ ______ question.

for whom;what

U.S. official reserves are the​ government's holding of​ _____.

foreign currency

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 capital and financial account is the record of​ _____ minus U.S. investment abroad.

foreign investment in the United States

The official settlements account records the change in U.S. official​ reserves, which are the​ government's holdings of​ ______. If U.S. official reserves decrease​, the official settlements account balance is​ ______.

foreign​ currency; positive

The unemployment that arises from normal labor turnover long dash from people entering and leaving the labor force long dash and from the ongoing creation and destruction of jobs is ​______ unemployment.

frictional

a tradeoff is

giving up one thing to get something else.

The balanced budget multiplier equals the change in equilibrium expenditure and real GDP that results from equal changes in​ _____ divided by the change in government expenditure.

government expenditure and​ lump-sum taxes

An open market operation is the purchase or sale of​ _____ -​ _____ - by the​ _____ in the open market.

government​ securities; U.S. Treasury bills and​ bonds; New York Fed

In January 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

Read the news​ clip, then answer the following questions. The unemployment rate in May 2008 is​ ______ the estimated natural unemployment rate. This implies that real GDP is​ ______ potential GDP at this time.

greater​ than; less than

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

According to new growth​ theory, ______.

growth can persist indefinitely

In neoclassical growth​ theory, ______.

growth will stop if technology stops advancing

According to the​ Ricardo-Barro effect, a government budget deficit​ ______ the real interest rate. According to the​ Ricardo-Barro effect, when a government budget deficit occurs​ today, ______.

has no effect on saving​ increases, the supply of loanable funds​ increases, and the real interest rate does not change

A discouraged worker​ ______. An increase in discouraged workers​ ______ the official unemployment rate and​ ______ U-4.

has stopped looking for a job because of repeated failure to find one ​decreases; does not change

The quantity of labor demanded is the number of labor hours ▼ during a given period. The quantity of labor supplied is the number of labor hours ▼ hired by all the firms in the economy that all the households in the economy plan to work during a given period. The ▼ real money wage rate adjusts to bring the labor market to equilibrium.

hired by all firms in econ that all the households inn the econ plan to work real

A mortgage is a legal contract that gives ownership of a​ _____ to the​ _____ in the event that the​ _____ fails to meet the agreed loan payments​ (repayments and​ interest).

home; lender; borrower

A depository institution is a financial firm that takes deposits from​ _____.

households and firms

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

The aggregate production function is the relationship that tells us​ ______, when all other influences on production remain the same.

how real GDP changes as the quantity of labor changes

The fundamental source of labor productivity growth is​ ______.

human capital

Read the news​ clip, then answer the following questions. Choose the statement that is incorrect. Starting from a​ long-run equilibrium,​ _______.

if the percentage change in the money wage rate equals the percentage change in the unemployment​ rate, the economy remains at full employment.

Choose the statement that is incorrect.

in 2012 about 700 banks operated in US

A government budget surplus ▼ the supply of loanable funds.

inc

Canada trades with the United States. Explain the effect of each of the following events on​ Canada's aggregate demand. The government of Canada cuts income taxes. ​Canada's aggregate demand ___ .

inc

In February 2017​, the U.S. unemployment rate LOADING... was 4.7 percent. In February 2018​, the unemployment rate was 4.1 percent. Assuming that unemployment was constant between February 2017 and February 2018​, then the labor force​ _______.

inc

Use the​ (approximate) facts about the U.S. economy to answer the following questions. What happened to the demand for loanable funds between 2005 and​ 2009? How do you​ know? Between 2005 and​ 2009, the government budget deficit​ increased, so the demand for loanable funds​ _____ between 2005 and 2009.

inc

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

inc dec

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

increase by​ $50 million; increase by​ $50 million

As the average income in China continues to​ increase, we would expect the demand for beef to​ _______ and the demand for rice to​ _______.

increase if beef is a normal​ good; decrease if rice is an inferior good

The multiplier matters because we can use it to determine by how much we should change autonomous expenditure to​ ______.

increase real GDP by a given amount

In March 2007​, the U.S. unemployment rate was 4.4 percent. In August 2008​, the unemployment rate was 6.1 percent. Assuming that the labor force remained constant between March 2007 and August 2008​, then the number unemployed​ _______.

increased

Ann currently produces at point A in the figure. If Ann moves from point A to point C​, her opportunity cost of a brownie ​_______.

increases

The multiplier increases when the marginal propensity to consume

increases

The multiplier increases when the marginal propensity to consume ▼ increases decreases . The multiplier increases when the marginal propensity to import​ ______ or the income tax rate​ ______.

increases ​decreases; decreases

When Mexico increases the quantity of​ money, Mexico's aggregate demand​ ______. When the price level in Mexico rises​, ▼

increases and its AD curve shifts rightward the quantity of real GDP demanded decreases .

Read the news​ clip, then answer the following questions. In real business cycle​ theory, an increase in productivity​ ______ the demand for labor by more than it​ ______ the supply of labor. A. ​increases; decreases B. ​increases; increases Your answer is correct.C. ​increases; increases D. ​decreases; increases In the news​ clip, productivity gains exceed pay increases because the demand for labor​ ______ than the​ ______ in the supply of labor.

increases by​ less; increase

Read the news​ clip, then answer the following question. Lowering the required reserve ratio​ ______, which​ ______ the quantity of loans that​ China's banks can make and the quantity of money created.

increases excess​ reserves; increases

A government budget deficit​ occurs, which​ ______. The real interest rate​ ______. Private saving ▼ increases decreases and investment ▼ decreases increases .

increases the demand for loanable​ funds; rises inc dec

Unanticipated deflation does all of the following except​ _______.

increases the velocity of circulation

Why does the PPF bow outward and what does that imply about the relationship between opportunity cost and the quantity​ produced? 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

An open market purchase​ ______ the monetary base. An open market sale​ ______ the monetary base.

increases; decreases

During wedding​ season, the demand for gold​ ________ and the supply of gold​ _______. Expectations of a rising gold price during wedding season in India​ ______ the supply of gold and​ ______ the demand for gold prior to wedding season. When the wedding season​ begins, the price rises by less than it would have done if the wedding season was a surprise.

increases; does not change decrease; increase true

Geithner Urges Action on Economy Treasury Secretary Timothy Geithner is reported as having said that the United States can no longer rely on consumer spending to be the growth engine of recovery from recession. Washington needs to plant the seeds for business investment and exports.​ "We can't go back to a situation where​ we're depending on a near​ short-term boost in consumption to carry us​ forward," he said. ​Source: The Wall Street Journal​, September​ 12, 2008 In the short​ run, an increase in consumer spending​ ______ real GDP and​ ______ the price level. In the short​ run, an increase in business investment​ ______ real GDP and​ ______ the price level. In the short​ run, an increase in exports​ ______ real GDP and​ ______ the price level.

increases; increases ​increases; increases ​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

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.

increases​; increases

An increase in world demand for U.S. exports​ ______ the demand for U.S. dollars. A rise in the U.S. interest rate differential​ ______ the demand for U.S. dollars.

increases​; increases

Aggregate demand increases if expected future​ income, inflation, or profits​ ______. And aggregate demand if fiscal policy​ ______ government expenditure.

increase​; increases

Deflation can be ended by​ _______.

increasing the growth rate of the quantity of money

The ​short-run Phillips curve is a curve that shows the relationship between the​ _____ rate and​ _____ when​ _____ and the​ _____ remain constant.

inflation; the unemployment​ rate; the natural unemployment​ rate; expected inflation rate

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, ▼ financial innovation the price level adjusts to make the quantity of real money supplied equal the quantity demanded.

interest​ rate; real interest rate the price level

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 along the AE curve occurs

A creditor nation is a country that during its entire history has​ _____ the rest of the world than other countries have​ _____ it.

invested more​ in; invested in

In monetarist cycle theory​, fluctuations in both​ _____, driven by fluctuations in the growth rate of the quantity of​ money, are the main source of fluctuation in aggregate demand.

investment and consumption expenditure

A supply curve​ _______.

is a minimum-supply-price-curve

A demand curve​ _______.

is a willingness-and-ability-to-pay curve

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

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

A demand curve that illustrates the law of demand​ ______.

is downward sloping

The opportunity cost of economic growth​ _______.

is fewer consumption goods today

When the unemployment rate​ ______ the natural unemployment​ rate, real GDP​ ______ potential GDP.

is greater than​; is less than

Read the news​ clip, then answer the following question. FOMC members are predicting that the U.S. economy​ ______.

is on a​ short-run Phillips curve to the right of the LRPC and will move leftward up along the SRPC

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

Arbitrage​ _______.

is the practice of seeking to profit by buying in one market and selling for a higher price in another related market

The natural unemployment rate​ _______.

is the unemployment rate at full employment

The firm that printed your textbook bought the paper from XYZ Paper Mills. This purchase of paper​ ______ part of GDP because the paper is​ ______ good. The value of the paper is counted in GDP as​ ______.

is​ not; an intermediate part of the value of the textbook

Brazil faces a tradeoff on its PPF because if it increases the quantity of food produced​ _______.

it decreases the quantity of ethanol that it produces

During times of​ uncertainty, it might be necessary for a bank to hold large cash reserves and to have a large percentage of its assets purchased by its own capital because​ ______.

its depositors may decide to make large withdrawals

The key proposition of new growth theory that makes growth persist is that​ ______ is not subject to diminishing returns.

knowledge capital

According to new growth​ theory, ______ experience diminishing returns.

knowledge is capital that does not

A dog trainer is an example of the factor of production​ _______.

labor

The unemployment rate is the percentage of the people in the​ _____ who are unemployed.

labor force

Factors of production are grouped into four​ categories, which are​ _______.

land, labor,​ capital, and entrepreneurship

RBC theorists believe the​ when-to-work effect is large .

large

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 the quantity demanded.

loanable​ funds; price level

The three main types of markets for financial capital are​ _______.

loan​ markets, bond​ markets, and stock markets

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 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

Read the news​ clip, then answer the following question. The unemployment rate in​ May, 2008 is​ ______.

lower than the unemployment rates that occurred in recessions since 1980 This is the correct answer.D.

Inflation​ ______ the real wage​ rate, everything else remaining the same. People are more likely to accept a real wage cut that arises from an increase in the price level than a cut in their nominal wage rate because​ ______.

lowers inflation decreases the real wage rate gradually and a cut in the nominal wage decreases the real wage rate suddenly

The Federal Open Market Committee is the​ Fed's _____ committee.

main policy making

A decrease in the marginal propensity to import​ _______, everything else remaining the same.

makes the multiplier larger

An increase in income taxes​ _______, everything else remaining the same.

makes the multiplier smaller

Banks create money by​ ______.

making loans

The marginal benefit curve is a curve that shows the relationship between the​ _____.

marginal benefit from a good and the quantity consumed of that good

Money is any commodity or token that is generally acceptable as a​ ______. Choose the correct statements. 1. Most people know the price of gum comma so it could serve as money because it is a unit of account. 2. Gum does not serve as money because it is not a good store of value. 3. Gum does not serve as money because it is not generally accepted in exchange for goods and services. 4. Because most people buy gum comma it can be used as money because it is a useful tool in barter.

means of payment Statements 2 and 3 are correct.

The unemployment rate is supposed to​ ______. It is an imperfect measure because​ ______.

measure underutilized​ labor; it does not include marginally attached workers and​ part-time workers who want​ full-time jobs

The quantity demanded of a good or service is​ ______.

measured as an amount per unit of time

Money serves as a​ ______.

medium of​ exchange, which means that it is generally accepted in exchange for goods and services

The inflation rate in 2014 ​______.

might be​ higher, lower, or the same as in 2013

An increase in the demand for tank tops together with an increase in the supply of tank tops ​______ create a surplus or a shortage of tank tops at the original price. The price of tank tops ​______.

might; might​ fall, rise, or not change

​Long-run aggregate supply is the relationship between the quantity of real GDP supplied and the price level when the ​ _____ changes in step with the price level to maintain full employment.

money wage rate

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

money; monetary base

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

more induced expenditure

A net lender is a country that is lending​ _____ to the rest of the world​ _____ it is borrowing to the rest of the world.

more; than

Monday Island produces only potatoes and bananas. The marginal cost of a potato is the number of bananas that​ ______ to get one more​ ______.

must be​ forgone; potato

Choose the statement that is incorrect.

n a​ deflation, the inflation rate is positive but decreasing in consequent years.

Between 1960 and​ 2010, the gap between real GDP per person in the United States and real GDP per person in Japan​ ______.

narrowed

When the economy goes into​ recession, the output gap is​ _______.

negative

If inflation is​ expected, _______.

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

​China, Japan, and Saudi Arabia are ▼ net borrowers net lenders . The United States is a ▼ net lender net borrower .

net lenders 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 ▼ debtor nation net borrower .

net​ borrower; debtor nation debtor nation

A country that is lending more to the rest of the world than 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​ ______.

net​ lender; creditor nation

The main sources of bias in the CPI are​ ______. The bias in the CPI is a problem because​ ______ .

new goods​ bias, quality change​ bias, commodity substitution​ bias, and outlet substitution bias it distorts wage agreements linked to the CPI

The table shows three years of CPI data. The bias in these CPI numbers might arise from​ ______. Choose the statement that is incorrect.

new goods​ bias, quality change​ bias, commodity substitution​ bias, and outlet substitution bias The core PCE is a broader measure than the CPI that attempts to overcome biases by placing extra emphasis on food and​ fuel, two goods which are large components of household expenditure.

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 uneven pace of technological change. 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 and the position of the SAS curve.

new​ classical; new Keynesian

The key idea of classical growth theory that leads to the dismal outcome is that​ ______.

no matter how much technological change​ occurs, real GDP per person is always pushed back toward the subsistence leve

The demand for money is the relationship between the quantity of real money demanded and the ▼ nominal interest rate inflation rate 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

Read the news​ clip, then answer the following questions. If the only change that occurred was that all the newly hired people had been unemployed in​ October, then the labor force would​ ______ and unemployment would​ _______. If the only change that occurred was that people gave up job​ searching, then the labor force would ​ _______ and unemployment would​ _______.

not have​ changed; have decreased have​ decreased; have decreased

Indicate whether the following items are money or not money in the United States today. Cash in Citibank's cash machines ▼ Your loan to pay for school fees ▼ Coins inside a vending machine ▼ Your Visa card ▼

not money not money money not money

Currency consists of​ _____.

notes​ (dollar bills) and coins

Saving is the amount of income that is​ _____ in net taxes or spent on​ _____ goods and services.

not​ paid; consumption

​Long-run macroeconomic equilibrium​ ______.

occurs when real GDP equals potential​ GDP, and the LAS​, SAS​, and AD curves intersect

Foreign currency is the money​ _____ regardless of whether that money is in the form of​ notes, coins, or bank deposits.

of other countries

The official settlements account is the record of the change in U.S.​ _____.

official reserves

Which of the people described in the table is unemployed because of labor market​ mismatching?

only Tory and David

A bakery uses flour to produce bread. When calculating​ GDP, we include​ ______, because when we add the value of the flour to the value of the loaf of bread to calculate​ GDP, the result is​ ______.

only the value of the bread sold in a​ store; double counting

If the CPI rises from 120 to​ 126, then​ ______.

on​ average, the price paid by urban consumers for a fixed basket of consumer goods and services rises by 5 percent

The marginal cost of a good or service is the​ _____.

opportunity cost of producing one more unit of it

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 U.S. dollar exchange rate fluctuates in part because a change in the U.S. interest rate differential changes the demand for U.S. dollars and the supply of U.S. dollars in​ ______ and a change in the expected future exchange rate changes the demand for U.S. dollars and the supply of U.S. dollars in​ ______.

opposite​ directions; opposite directions

Wealth is the value of all the things that people​ _____.

own

The equilibrium price is the best deal available for both buyers and sellers because buyers​ ______ and sellers​ ______.

pay the highest price they are willing to​ pay; receive the lowest price at which they are willing to sell

China was the largest economy for centuries because everyone had the same type of economylong dashsubsistencelong dashand so the country with the most people would be economically biggest. Then the Industrial Revolution sent the West on a more prosperous path. Now the world is returning to a common​ economy, this time​ technology-and information-based, so once again population triumphs. China was the​ world's largest economy until 1890 because​ ______. In​ 1890, the United States surpassed China to become the​ world's largest economy because​ ______.

people in all countries had approximately the same subsistence level of income the benefits of the Industrial Revolution were greater in the United States than in China

Unemployment arises for all of the following reasons except​ ______. Some unemployment is unavoidable because​ ______.

people leave the labor force people are making transitions through the stages of life and businesses are making transitions

Depository institutions balance risk and return by​ _______.

placing some funds into safe low​ interest-earning assets and other funds into​ high-interest risky assets

Following the change in aggregate​ demand, the new equilibrium is at​ ______. If potential GDP is​ $1 trillion, the economy has moved to ▼ a full-employment a below full-employment an above full-employment equilibrium.

point C an above full-employment

The initial​ short-run aggregate supply curve is SAS0 and the initial aggregate demand curve is AD0. Some events change aggregate demand from AD0 to AD1​, and​ short-run aggregate supply from SAS0 to SAS1. The new macroeconomic equilibrium is at​ ______.

point D

Keynesian macroeconomists recommend​ ______.

policies that actively offset changes in aggregate demand that bring recession

Monetarist macroeconomists recommend​ ______.

policies that keep taxes low to avoid disincentive effects that decrease potential GDP

Classical macroeconomists recommend​ ______.

policies that minimize the disincentive effects of taxes on​ employment, investment, and technological change

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

The fundamental precondition for labor productivity growth is the incentive system created by all of the following except​ ______.

population growth

Indicate whether each of the following news items is a positive or a normative statement. 1. Nuclear energy is cleaner than coal and oilNuclear energy is cleaner than coal and oil based energybased energy. 2. More police on inner dash city streets willMore police on inner-city streets will lower the crime ratelower the crime rate. 3. Flat screen is better than traditionalFlat screen is better than traditional televisiontelevision. 4. The PlayStation has a larger range of gamesThe PlayStation has a larger range of games than the XBoxthan the XBox. Statement 1 is a​ ______ statement, and statement 2 is a​ ______ statement. Statement 3 is a​ ______ statement, and statement 4 is a​ ______ statement.

positive;positive normative;positive

A recessionary gap eventually emerges even if aggregate demand remains constant because over time​ ______.

potential GDP increases

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 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 ▼ not sticky sticky .

potential​ GDP; aggregate demand Sticky

The output gap is real GDP minus​ _____ expressed as a percentage of​ _____.

potential​ GDP; potential GDP

An exchange rate is the​ _____ at which one currency exchanges for another in the foreign exchange market.

price

Read the news​ clip, then answer the following question. A shortage in the market for oil implies that​ ______.

price adjustments are being prevented from playing their role as the regulator of buying and selling plans

The inflation rate is the percentage change in the​ _____ from one year to the next. Deflation is a situation in which the​ _____ is​ _____ and the inflation rate is​ _____.

price​ level; price​ level; falling; negative

The combination of a rising​ _____ and decreasing​ _____ is called stagflation.

price​ level; real GDP

The sum of​ _____ is called national saving.

private saving and government saving

For 50​ years, Cuba has had a centrally planned economy in which government makes the big decisions on how resources will be allocated. We would expect​ Cuba's production possibilities​ (per person) to be smaller than those of the United States because Cuba​ _______. _______ is the social institution that helps the U.S. economy achieve allocative efficiency that Cuba might lack.

produces a greater proportion of consumption goods than capital​ goods, so its PPF does not shift outward as quickly as the PPF in the United States Property rights

All points on the PPF are points of​ ______ efficiency. When we produce at the point on the PPF that we prefer above all other points we achieve​ ______ efficiency.

production; allocative

The newest theory of the business​ cycle, known as real business cycle theory ​(or RBC​ theory), regards random fluctuations in​ _____ as the main source of economic fluctuations.

productivity

Read the news​ clip, then answer the following question. Workers in developing Asian economies who work more hours than Americans are not the​ world's most productive workers because​ ______.

productivity depends on how much real GDP each hour of labor can produce

According to RBC​ theory, the main source of economic fluctuations is a decrease in​ ______

productivity growth

The functions of depository institutions include all of the following except​ ______.

providing credit ratings

A demand curve shows the relation between the​ _____ and​ _____ when all other influences on buying plans remain the same.

quantity demanded of a​ good; its price

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

quantity of real GDP demanded

A supply curve shows the relationship between the​ ______ and​ _____ when all other influences on selling plans remain the same.

quantity supplied of a​ good; its price

Which of the following is an example of consumption expenditure​?

rachel buying a tv

In the long​ run, an increase in the quantity of money​ _______.

raises the price level and lowers the value of money

In real business cycle​ theory, _______ are the main source of economic fluctuations.

random fluctuations in productivity

The defining feature of the Keynesian view of macroeconomics is that the economy is​ ______.

rarely at full employment

The output gap is the gap between​ _______.

real GDP and potential GDP

The gap between​ ______ is the output gap. When​ _____, the output gap is called an inflationary gap.

real GDP and potential​ GDP; real GDP exceeds potential GDP

In the short​ run, ______ and​ ______ adjusts to achieve equilibrium.

real GDP determines the demand for money curve and the Fed determines the quantity of real money​ supplied; the nominal interest rate

When​ _____ there is a​ full-employment equilibrium.

real GDP equals potential GDP

Real GDP per person grows when​ ______.

real GDP grows at a faster rate than the population grows

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

Neoclassical growth theory is the proposition that​ _____ grows because technological change induces saving and investment that make​ _____ grow.

real GDP per​ person; capital per hour of labor

Classical growth theory is the view that the growth of​ _____ is temporary and that when it rises above the subsistence​ level, a population explosion​ _____.

real GDP per​ person; eventually brings it back to the subsistence level

New growth theory holds that​ _____ grows because of the choices people make in the pursuit of profit and that growth will​ _____.

real GDP per​ person; persist indefinitely

The main criticisms of RBC theory include all of the following except​ ______.

real business cycle theory relies too heavily the role of money in the economy to make its predictions

The ​crowding-out effect is the tendency for a government budget deficit to raise the​ _____ and​ _____ investment.

real interest​ rate; decrease

The sources of labor productivity growth include all of the following except​ ______.

real wage rate growth

The demand for labor is the relationship between the quantity of labor demanded and the​ ______. The supply of labor is the relationship between the quantity of labor supplied and the​ ______.

real wage​ rate; real wage rate

The aggregate production function is a relationship that tells us how​ _____ changes as the quantity of​ _____ changes when all other influences on production remain the same.

real​ GDP; labor

Aggregate demand is the relationship between the quantity of​ _____ demanded and the​ _____ when all other influences on expenditure plans remain the same.

real​ GDP; price level

Short-run aggregate supply is the relationship between the quantity of​ _____ supplied and the​ _____ when the money wage​ rate, the prices of other​ resources, and potential GDP remain constant.

real​ GDP; price level

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

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

Over the last several​ decades, the gap between real GDP per person in the United States and Canada ​______. The gap between real GDP per person in the United States and Africa ​______.

remained nearly constant or widened a small​ amount; widened

Read the news​ clip, then answer the following questions. A​ bank's "balancing​ act" balances​ _______. The​ over-pursuit of profit or underestimation of risk can lead to bank failure because​ _______.

return against​ risk; some borrowers default and never​ repay, which can lead to bank insolvency

USe the data reported by the Current Population Survey in July 2014 to answer the following question. 3. How will the unemployment rate change if Sarah quits and starts to search for a​ full-time job? The unemployment rate will​ _____ if Sarah quits and starts to search for a​ full-time job. How will the labor force participation rate change if Kevin starts creating football apps in his garage and they turn out to be very​ popular? The labor force participation will​ _____ Kevin starts creating football apps in his garage and they turn out to be very popular.

rise rise

On average in the United​ States, the inflation rate and the money growth rate minus the real GDP growth rate​ ______.

rise and fall together

As the price level​ rises, interest rates ▼ rise fall and real wealth ▼ decreases increases . People substitute goods in the ▼ future present for goods in the ▼ future present .

rise dec future present

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

rises above the subsistence level

The table shows the aggregate demand and​ short-run aggregate supply schedules of Shell Island in which potential GDP is​ $600 billion. The economy is at​ full-employment. 1. An unexpected increase in exports increases aggregate demand by​ $50 billion. What happens to the price level and real​ GDP? Has Shell Island experienced inflation or deflation and what type of output gap does it now​ have? The price level​ _____ and real GDP​ _____ billion. Shell island has experienced​ _____ .

rises to​ 130; increases to​ $625; a​ one-time change in the price level and has an inflationary gap

The table shows the aggregate demand and​ short-run aggregate supply schedules of Shell Island in which potential GDP is​ $600 billion. The economy is at​ full-employment. An unexpected increase in exports increases aggregate demand by​ $50 billion. What happens to the price level and real​ GDP? Has Shell Island experienced inflation or deflation and what type of output gap does it now​ have? The price level​ _____ and real GDP​ _____ billion. Shell island has experienced​ _____ .

rises to​ 130; increases to​ $625; a​ one-time change in the price level and has an inflationary gap

The demand for loanable funds increases and the supply of loanable funds increases. As a​ result, the equilibrium real interest rate​ ______ and the equilibrium quantity of loanable funds​ ______. The demand for loanable funds increases and the supply of loanable funds decreases. As a​ result, the equilibrium real interest rate​ ______ and the equilibrium quantity of loanable funds​ ______.

rises, falls, or remains the​ same; increases ​rises; increases,​ decreases, or remains the same

A country has a lower inflation rate than all other​ countries, and it has more rapid economic growth. The central bank does not intervene in the foreign exchange market. To preserve purchasing power​ parity, the exchange rate​ ______. If investment from foreigners increases due to the rapid economic​ growth, the current account balance is becoming more​ ______.

rises​; negative

It is expected that in the future the exchange rate will​ ______. The interest rate differential is​ ______.

rise​; negative

In​ 1998, the price of a barrel of oil was​ $20. In​ 2012, the price of a barrel of oil was​ $106. In​ 1998, the price of a loaf of bread was​ $0.86. In​ 2012, the price of a loaf of bread was​ $2.32. Between 1998 and​ 2012, the relative price of a barrel of oil with respect to a loaf of bread​ _______ and the relative price of a loaf of bread with respect to a barrel of oil​ _______.

rose;fell

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

In the short​ run, when the Fed decreases the quantity of​ money, people enter the loanable funds market and ▼ buy sell bonds.

sell

The Fed​ "counters disorderly conditions in exchange​ markets" by doing all of the following except​ ______.

selling foreign​ reserves, which raises the U.S. exchange rate when the supply of dollars dramatically decreases

A means of payment is a method of ​ _____ a debt.

settling

A rise in the price level​ _______.

shifts the AE curve downward and brings a movement up along the AD curve

An increase in labor productivity​ ______.

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

An increase in the population​ ______.

shifts the supply of labor curve rightward and creates a movement along the production function

If the natural unemployment rate​ increases, the​ long-run Phillips curve​ _______ and the​ short-run Phillips curve​ ______.

shifts​ rightward; shifts rightward

The U.S.​ short-run Phillips curve​ ______ when the expected inflation rate rises. The U.S.​ short-run Phillips curve​ ______ when the natural unemployment rate increases.

shifts​ upward; shifts rightward

The table sets out the demand and supply schedules for roses on a normal weekend. 1. If the price of a rose is​ $6, describe the situation in the rose market. Explain how the price adjusts. If the price of a rose is​ $6, there is a​ _____ of roses and the price of a​ rose_____.

shortage; rises

A supply curve that illustrates the law of supply​ _______.

shows that the quantity supplied decreses as the price falls

Read the news​ clip, then answer the following question. Growth rates over the past few decades indicate that gaps in real GDP per person around the world are​ ______.

shrinking between some countries and growing or staying the same between other countries

Read the news​ clip, then answer the following question. Potential sources for faster economic growth in India suggested in this news clip include all of the following except​ ______.

slowing population growth

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

A government budget surplus​ occurs, which increases the ▼ supply of demand for loanable funds. The real interest rate​ ______, household saving​ ______,

supply of ​falls; decreases and investment increases

The​ long-run historical evidence and international evidence show us that the relationship between money growth and the inflation rate​ ______.

supports the quantity​ theory, but the correlation is not perfect

If the price of a rose is​ $9, describe the situation in the rose market. Explain how the price adjusts. If the price of a rose is​ $9, there is a​ _____ of roses and the price of a rose​ _____. What is the market​ equilibrium? At the market​ equilibrium, the price of a rose is​ ______ and ​ _____ roses per week are bought and sold.

surplus; falls 7;100

According to neoclassical growth​ theory, the fundamental cause of economic growth is​ ______.

technological​ change, which induces saving and investment that make capital per hour of labor grow

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

If a U.K. bank deposit earns 4 percent a year and a U.S. bank deposit earns 5 percent a​ year, then people expect that​ ______.

the U.S. dollar will depreciate by 1 percent a year

The region with the highest inflation rate in 2010 is​ ______. The region with the highest inflation rate in 2011 is​ ______. Describe the path of the price level in Japan. The price level​ ______.

the United​ States; the United States decreased in both years

The loanable funds market is​ ______.

the aggregate of all the individual financial markets

The quantity supplied of a good or service is​ ______.

the amt producers plan to sell during a given time period

Dress for Less Since​ 1998, the price of the Louis Vuitton​ "Speedy" handbag has more than​ doubled, to​ $685, while the price of Joe​ Boxer's "licky​ face" underwear has dropped by nearly​ half, to​ $8.99. As luxury fashion has become more​ expensive, mainstream apparel has become markedly less so. Clothing is one of the few categories in the CPI in which overall prices have declinedlong dashabout 10 percentlong dashsince 1998. Apparel comprises​ ______ percent of the CPI basket. Although luxury clothing prices have increased dramatically since the late​ 1990s, the clothing category of the CPI has actually declined by about 10 percent because​ ______.

the apparel component of the CPI is weighted more heavily toward​ moderately-priced clothing, and the price of​ moderately-priced clothing has decreased

The price level is​ ______.

the average level of​ prices, and the value of money

Read the news​ clip, then answer the following question. A lower required reserve ratio increases bank profits because​ ______.

the banks hold fewer reserves

Net taxes are taxes paid to the government minus​ _____.

the cash transfers received from governments

To calculate the​ multiplier, we divide​ ______ by​ ______.

the change in equilibrium​ expenditure; the change in autonomous expenditure

The marginal propensity to import is equal to​ _______.

the change in imports divided by the change in real​ GDP, other things remaining the same

Choose the statement that is incorrect.

the congressional advisory commison on the cpi in 1996 said that the cpi overstates inflation

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

Read the news​ clip, then answer the following questions. Aggregate demand will increase if​ ______.

the effect of the tax rebates and the change in the foreign exchange rate outweigh the effect of the​ housing, credit, and financial crises

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

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​ _______. Growth rates are calculated in a similar manner for all variables. Real GDP growth rate​ = [(Real GDP in​ ______ yearminusReal GDP in​ ______ ​year) divided by Real GDP in​ ______ year ​] times 100.

the expansion of production possibilities current; previous; previous

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. Aggregate expenditure is equal to​ ______.

the factors of production​ used; C​ + I​ + G​ + ​(Xminus−​M)

All of the following statements are included in new growth theory except​ ______.

the forces of competition destroy incentives to make new discoveries

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

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 marginal propensity to consume is​ ______.

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

The velocity of circulation is the average number of times a dollar of money is used annually to buy​ ______. The formula used to measure the velocity of​ circulation, V​, is​ ______, where P is the price​ level, Y is real​ GDP, and M is the quantity of money.

the goods and services that make up​ GDP; V​ = ​(P times Y​) divided by M

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

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

You can spend the evening studying or you can go to see a movie You have an incentive to spend the evening studying if​ ______.

the marginal benefit of spending the evening studying is greater than the marginal cost of spending the evening studying

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

the marginal propensity to consume times the increase in real GDP

When real GDP​ increases, the change in imports equals​ _______.

the marginal propensity to import times the increase in real GDP

Gross domestic product is​ ______.

the market value of all the final goods and services produced within a country in a given time period

The quantity of money that the banking system can create is limited by​ _______.

the monetary​ base, desired​ reserves, and desired currency holdings

The relative price of a gallon of gasoline in terms of a pound of bananas is​ ______.

the money price of a gallon of gasoline divided by the money price of a pound of bananas

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.

the money wage rate

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

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 cyclical unemployment increases and other things remain the​ same, ______.

the natural unemployment rate does not change

Read the news​ clip, then answer the following question. The unemployment rate tends to actually underestimate the unemployment​ problem, especially during a​ recession, because​ ______.

the number of marginally attached workers​ increases, but these workers are not included in the official unemployment rate

The table shows some of​ Brazil's production possibilities for ethanol and food crops. Marginal cost of a good is​ _______.

the opportunity cost of producing one more unit of it

The aggregate demand curve shows the relationship between the quantity of real GDP demanded and​ ______, when everything else remains the same.

the price level

A movement along the aggregate demand curve occurs if​ _______.

the price level changes and all other factors remain unchanged

The CPI tells us​ ______.

the price level in a given period expressed as a percentage of the price level in the base​ period, which is by definition equal to 100

Firms are institutions that organise​ _____ of goods and services.

the production

An open market operation is​ ______.

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

The equilibrium price is the price at which​ _____ and the equilibrium quantity is the​ _____.

the quantity demanded equals the quantity​ supplied; the quantity bought and sold at the equilibrium price

The quantity of DVD players that firms plan to sell this month depends on all of the following except​ _______ because​ ______.

the quantity of DVD players that consumers plan to buy this​ month; a change in the quantity of DVD players that consumers plan to buy this month changes the quantity supplied

At the equilibrium exchange rate​ _______.

the quantity of dollars demanded equals the quantity of dollars supplied

The demand for loanable funds is the relationship between​ _____ demanded and the​ _____ when all other influences on borrowing plans remain the same.

the quantity of loanable​ funds; real interest rate

The supply of loanable funds is the relationship between​ _____ supplied and the​ _____ when all other influences on lending plans remain the same.

the quantity of loanable​ funds; real interest rate

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

the quantity of money persistently increases

The flows in the market economy that go from firms to households are​ _______. The flows in the market economy that go from households to firms are​ _______.

the real flows of goods and services and the income flows of​ wages, rent,​ interest, and​ profit; the real flows of​ labor, land,​ capital, and entrepreneurship and the flow of expenditure on goods and services

The demand for loanable funds is determined by​ ______. The demand for loanable funds changes when​ ______ changes.

the real interest rate and expected​ profit; expected profit

Demand is​ _____, when all other influences on buying plans remain the same.

the relationship between the quantity demanded of a good and the price of the good

Supply is​ _____, when all other influences on buying plans remain the same.

the relationship between the quantity supplied of a good and the price of the good

The relative price of a jar of pasta sauce is an opportunity cost because​ ______.

the relative price tells us how many packs of frozen burritos we must give up to get a jar of pasta sauce

All of the following statements are correct except​ _______.

the return to full employment in an expansion phase of the business cycle is economic growth

The current account is the record of receipts from​ _____ other​ countries, minus​ _____ other​ countries, plus the net amount of​ _____ received from and paid to other countries.

the sale of goods and services to other​ countries; payments for goods and services bought​ from; interest and transfers

The two broad sources of potential GDP growth are growth of​ ______ and growth of​ ______.

the supply of​ labor; labor productivity

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

Depository institutions have made innovations that have changed the composition of money in all of the following ways except​ ______.

the use of currency has fallen significantly

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 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

Read the news​ clip, then answer the following question. Choose the statement that is incorrect. If the labor market is working​ properly, there is still unemployment because​ ______.

there are always discouraged searchers

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

People specialize and trade for all of the following reasons except​ _______.

they can obtain an absolute advantage

Read the news​ clip, then answer the following questions. European banks need more capital because​ _______. The​ "capital" that is referred to in the news clip is​ _________. Requirements to hold more capital make banks safer because​ _______.

they risk failing if loans they hold are not repaid or if other assets lose​ value; owners' investment in the bank the requirement to hold more capital makes the possibility of failure less likely

When the Fed buys securities from a​ bank, ______.

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

The foreign exchange market is the market in which​ _____ of one country is exchanged for​ _____ of another.

the​ currency; the currency

​G-20 Leaders Look to Shake off Lingering Economic Troubles The​ G-20 aims to take stock of the economic recovery. One achievement in Pittsburgh could be a deal to require that financial institutions hold more capital. ​Source: USA Today​, September​ 24, 2009 The​ "capital" referred to in the news clip is​ ______. The financial institutions that the​ G-20 might require to hold more capital are​ ______. The requirement to hold more capital can make financial institutions safer because by using more of its own funds and less borrowed​ funds, a financial institution​ ______.

the​ institutions' own​ funds; banks and insurance companies decreases its risk of insolvency

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 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

Physical capital is​ ______. Financial capital is​ ______. Examples of physical capital are​ ______. Examples of financial capital are​ ______.

the​ tools, instruments,​ machines, buildings, and other items that have been produced in the past and that are used today to produce goods and​ services; the funds that firms use to buy physical capital ovens used by Pizza Hut and lawn mowers used by​ Larry's Mowing; bonds issued by​ Wal-Mart and stocks issued by Boeing

Disoposable income is aggregate income minus taxes plus ​ _____.

transfer payments

The CPI basket consists of items that __ households buy. The CPI places more weight on​ _______ than on​ _______.

transportation; medical care

The United States is a debtor​ nation, and since 1980 it has piled up trade deficits that total​ $9 trillion. At its peak in​ 2006, the current account deficit was almost 6 percent of GDP. To pay for the​ $9 trillion of goods and services​ we've imported in excess of our​ exports, we have borrowed from the rest of the world. Foreigners have purchased large amounts of U.S. assets. A current account deficit means we must borrow more from abroad than we lend abroad or use our official reserves to cover the shortfall.

true

If we count marginally attached workers as unemployed​ ______.

unemployment rate rises

Allocative efficiency is a situation in which the quantities of goods and services produced are those that people​ _____ - it is not possible to produce more of a good or service​ _____ some of another good that people​ _____.

value most​ highly; without giving​ up; value more highly

An unemployed person​ ______.

wants​ work, has made specific efforts to find a job within the previous four​ weeks, or is waiting to be called back to a job from which he or she has been laid​ off, or is waiting to start a new job within 30 days

The graph shows a production possibilities frontier. Production efficiency is achieved at points A​, B​, and C because to increase the production of x as we move from A to B to C​, ​ _______ .

we are giving up the minimum amount of y possible to increase the production of x

Allocative efficiency occurs when​ ______.

we are producing at a point on the PPF that we prefer above all other points

1.1 The what​, how​, and for whom questions in economics are questions about​ ______.

what goods and services do we​ produce, how do we use the factors of production to produce these​ goods, and who consumes the goods and services that are produced

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

The labor force participation rate is the percentage of the​ _____ who are members of the labor force.

working age pop

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

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

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

If saving is​ $850 billion, investment is​ $500 billion, government expenditure on goods and services is​ $700 billion, net exports is​ $50 billion, and net taxes is​ $800 billion, then calculate government sector balance.

​$100 billion

The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.20, and the marginal propensity to import is 0.14. The government increases government expenditure and autonomous taxes each by​ $50 billion. What is the resulting change in equilibrium​ expenditure?

​$20 billion

An economy has no imports and no taxes. The marginal propensity to save is 0.4. A​ ______ increase in autonomous expenditure increases equilibrium expenditure by​ $60 billion. The multiplier is​ ______.

​$24 ​billion; 2.50

The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.25, and the marginal propensity to import is 0.2. The government raises autonomous taxes and government expenditure by​ $100 million each. The resulting change in equilibrium expenditure is​ _______.

​$33.3 million

In an​ economy, there is ​$75 million in currency held outside​ banks, ​$150 million in​ traveler's checks, ​$275 million in currency held inside the​ banks, ​$200 million in checking​ deposits, ​$400 million in savings​ deposits, ​$1 comma 400 million in time​ deposits, and ​$1 comma 000 million in money market mutual funds and other deposits. The value of M1 is​ ______ and the value of M2 is​ ______.

​$425 ​million; ​$3 comma 225 million

The table gives the aggregate expenditure schedule. Equilibrium expenditure is equal to​ _______. A. ​$ 6 trillion B. ​$3 trillion C. ​$5 trillion D. ​$4 trillion Y C I G X M ​(trillions of 2009​ dollars) 1.0 1.00 0.5 0.7 0.45 0.05 2.0 1.65 0.5 0.7 0.45 0.10 3.0 2.30 0.5 0.7 0.45 0.15 4.0 2.95 0.5 0.7 0.45 0.20 5.0 3.60 0.5 0.7 0.45 0.25 6.0 4.25 0.5 0.7 0.45 0.30

​$5 trillion

Using a Federal grant of​ $150,000, a research lab buys equipment for​ $75,000 that has depreciated by​ $11,000 after two years. Calculate gross investment and net investment.

​$75,000; $64,000.

The personal consumption expenditure deflator is calculated as​ _______.

​(Nominal C divided by Real C​) times 100

Net exports equals​ ______. If the government sector deficit​ increases, with no change in the private sector​ surplus, net exports​ ______.

​(T minus G​) ​+ ​(S minus I​) decrease

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

​-1 percent a year

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.

​5; 3

______ 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 33 ​caps, ______.

​;sue both Sue and Tessa gain

Starting at point A​, the initial effect of a​ cost-push inflation is a move to point​ ______. As a​ cost-push inflation spiral​ proceeds, it follows the path​ ______.

​B; E,​ G, I

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​ ______.

​C; E,​ H, I

Which of the following is money​?

​Charlie's checking account deposit at the Bank of America.

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.

Starting at point A​, the initial effects of an expected inflation is a movement to point​ ______. As an expected inflation​ proceeds, it follows the path​ ______.

​E; I

Once a​ month, the Bureau of​ ______ Statistics calculates the Consumer Price​ Index, which is a measure of the​ ______ consumers for a fixed basket of consumer goods and services.

​Labor; average of the prices paid by urban

Mexico trades with the United States. When the U.S. economy goes into an expansion​, ​______.

​Mexico's exports to the United States increase​, ​Mexico's aggregate demand increases​, and​ Mexico's AD curve shifts rightward

The core inflation rate is the annual percentage change in the​ _____ price index​ _____ the prices of food and energy.

​PCE; excluding

The real exchange rate is the relative price of​ _____ to​ _____.

​U.S.-produced goods and​ services; foreign-produced goods and services

A choice on the margin is a choice that is made by comparing all the relevant​ _____ systematically and​ _____. Marginal cost is the​ _____ that arises from one unit​ _____ in an activity. Marginal benefit is the​ _____ that arises from one unit​ _____ in an activity.

​alternatives; incrementally; opportunity​ cost; increase; ​benefit; increase

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

The U.S. dollar exchange rate increased from ​$0.97 Canadian in 2007 to ​$1.06 Canadian in 2008​, and it decreased from 115 Japanese yen in 2007 to 107 Japanese yen in 2008. Between 2007 and 2008​, the U.S. dollar​ ______ against the Canadian dollar. Between 2007 and 2008​, the U.S. dollar​ ______ against the Japanese yen.

​appreciated; depreciated

The multiplier is the amount by which the change in​ ______ expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP. For every dollar increase in​ ______ expenditure, the multiplier determines the increase in real GDP.

​autonomous; autonomous

The multiplier is the amount by which a change in​ ______ expenditure is magnified or multiplied to determine​ ______.

​autonomous; the change in equilibrium expenditure and real GDP

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

A marginally attached worker is a person who does not have a​ job, is​ _____ and​ _____ to​ work, has​ _____ specific efforts to find a job within the previous​ _____ weeks, but has looked for work sometime in the recent past.

​available; willing; not​ made; four

The Consumer Price Index is a measure of the​ _____ of the prices paid by​ _____ consumers for a fixed market basket of consumption goods and services.

​average; urban

Reserves consist of the currency in the​ _____ plus the balance on its​ _____ account at​ _____.

​bank's vaults;​ reserve; a Federal Reserve Bank

Arbitrage is the practice of seeking to profit by​ _____ in one market and​ __ in another related market

​buying; selling for a higher price

Production efficiency is a situation in which the economy is getting all that it can from its resources and​ _____ produce more of one good or service without producing​ _____ of something else.

​cannot; less

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 is the sum of​ _____, _____, and​ _____ at the Fed.

​coins; Federal Reserve​ notes; banks' reserves

Read the news​ clip, then answer the following question. Pakistan is experiencing​ ______ inflation.

​cost-push

Read the news​ clip, then answer the following questions. The news clip refers to​ ______ inflation when it discusses rising production costs. ​"Rising labor​ productivity" can neutralize the effect on the inflation rate of​ "higher input​ costs" because​ ______.

​cost-push; it increases​ short-run aggregate supply and​ long-run aggregate supply with no slowdown in aggregate demand growth

We call the leakage of bank reserves into currency the currency​ drain, and we call the ratio of​ _____ to​ _____ the currency drain ratio.

​currency; deposits

The​ ______ account records receipts from exports of goods and services sold​ abroad, payments for imports of goods and services from​ abroad, and​ ______.

​current; net interest income paid abroad and net transfers

Full employment is when there is no​ _____ unemployment​ or, equivalently, when all the unemployment is​ _____ or​ _____.

​cyclical; frictional; structural

In a speech at the CFA Society of Nebraska in February​ 2007, William​ Poole, former Chairman of the St. Louis Federal Reserve​ said: Over most of the​ post-World War II​ period, the personal saving rate averaged about 6​ percent, with some higher years from the mid 1970s to mid 1980s. The negative trend in the ... saving rate started in the mid​ 1990s, about the same time the stock market boom started. Thus it is hard to dismiss the hypothesis that the decline in the measured saving rate in the late 1990s reflected the response of consumption to large capital gains from corporate equity​ [stock]. Evidence from panel data of households also supports the conclusion that the decline in the personal saving rate since 1984 is largely a consequence of capital gains on corporate equities​ [stocks]. U.S. household income has grown considerably since 1984. U.S. saving has​ ______ because wealth has​ ______. Households preferred to buy corporate equities rather than bonds because​ ______.

​decreased; increased due to capital gains corporate equities deliver capital​ gains, which increases wealth

The tables describe an​ economy's labor market and its production function in 2014. In​ 2015, the population increases and labor hours supplied increase by 40 at each real wage rate. The​ economy's standard of living​ ______ in 2015 because​ ______.

​decreased; real GDP per person is smaller in 2015 than in 2014

The gap between real GDP per person in the United States and Hong Kong has​ ______ since 1960. During this​ period, the growth rate of real GDP per person in the United States has been​ ______ than in Hong Kong.

​decreased; slower

The table shows the demand and supply schedules for boxes of chocolates. The price of chocolates is​ $17.00 a box. To reach​ equilibrium, the quantity supplied​ ______, the quantity demanded ​ ______. The price​ ______ until the​ ______ is eliminated.

​decreases; increases ​falls; surplus

Read the news​ clip, then answer the following questions. An economy experiences​ _______ inflation when​ "wages tend to feed​ inflation."

​demand-pull

​"Wages typically track​ inflation, soaring higher when prices take​ off." In this​ situation, the economy is experiencing​ _______ inflation.

​demand-pull

Read the news​ clip, then answer the following question. China is experiencing a​ ______ inflation caused by​ ______.

​demand-pull; loose monetary​ policy, which increases aggregate demand

In new classical cycle theory​, the rational expectation of the price​ level, which is determined by potential GDP and expected aggregate​ _____, determines the​ _____ and the position of the SAS curve.

​demand; money wage rate

The required reserve ratio is the minimum percentage of​ _____ that​ _____ are required to hold as reserves.

​deposits; depository institutions

For three​ years, there was no technological change in Longland but capital per hour of labor increased from​ $10 to​ $20 to​ $30 and real GDP per hour of labor increased from​ $3.80 to​ $5.70 to​ $7.13. ​Then, in the fourth​ year, capital per hour of labor remained constant but real GDP per hour of labor increased to​ $10. Longland​ ______ experience diminishing returns because​ ______.

​does; as capital per hour of labor​ increases, real GDP per hour of labor increases but by smaller amounts

The Rule of 70 states that the number of years it takes for the level of any variable to​ ______ is approximately​ ______. If real GDP per person doubles in 20​ years, then the annual growth rate of real GDP per person is​ ______ percent a year.

​double; 70 divided by the annual percentage growth rate of the variable 3.5

The components of the CPI basket that are experiencing price increases faster than the​ 12-month average include​ ______. And those components that are experiencing price increases below the​ 12-month average include​ ______. The core CPI is the CPI excluding​ ______ prices. Core CPI is a useful measure because​ ______. Core CPI is a misleading measure because​ ______.

​energy, transportation and​ food; clothing food and fuel it smooths out​ short-term fluctuations that arise from the volatility in food and fuel​ prices; it does not include food and fuel prices price rises

Between 1960 and​ 2010, growth rates in real GDP per person in Hong​ Kong, Korea,​ Singapore, and China​ ______ the growth rate of real GDP in the United States. ​China's real GDP per person in 2010 is approximately equal to real GDP per person in Hong Kong in​ ______.

​exceeded; 1976

Could the change in the exchange rate on June 2 have resulted from the two announcements or must some other influence have changed​ too? If​ so, what might that influence have​ been? On June​ 2, the U.S. dollar depreciated rather than appreciated because a fall in U.S.​ _____ decreased the demand for U.S. dollars or an increase in U.S.​ _____ increased the supply of U.S. dollars.

​exports; imports

Net exports is​ _____ of goods and services minus​ _____ of goods and services.

​exports; imports

Net exports of goods and services is the value of​ _____ of goods and services​ _____ the value of​ _____ of goods and services.

​exports; minus; imports

The night before an economicsan economics ​test, you decide to watch televisionwatch television instead of working your MyEconLab study planworking your MyEconLab study plan. You get 8585 percent on your test compared with the 9090 percent that you normally score. You​ ______ a tradeoff​ ______, and the opportunity cost of your evening watching televisionwatching television was​ ______.

​faced; between a higher test score and an evening watching televisionwatching television​; the 55 percent fall in your grade

If all​ (or most) prices have increased in the United States and not increased in​ Japan, then people will generally expect that the foreign exchange value of the dollar will​ ______. The demand for dollars​ ______.

​fall; decreases and the supply of dollars increases

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

Gross domestic product ​(GDP​) is the market value of all the​ _____ goods and services produced​ _____ a country in a given time period.

​final; within

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

​greater; positive

Suppose that the business cycle in the United States is best described by RBC theory. An advance in technology increases productivity. The​ when-to-work decision depends on the real interest rate. The​ _____ the real interest​ rate, other things remaining the​ same, the​ _____ is the supply of labor today.

​higher; larger

Read the news​ clip, then answer the following question. The news clip states that huge trade deficits​ "seem like a pretty good indication that the dollar was overvalued in global currency markets and needed to come​ down". This statement is​ ______ because​ ______.

​inaccurate; the current account balance is determined by the private sector balance and the government sector balance

A bank manager tells you that she​ doesn't create money. She just lends the money that people deposit. The bank manager is​ ______ because​ ______.

​incorrect; every new loan creates a new deposit

Explain the effect of the Bank of​ Japan's announcement on the demand for and supply of U.S. dollars. The Bank of​ Japan's announcement would​ _____ the demand for U.S. dollars and​ _____ the supply of U.S. dollars on June 2.

​increase; decrease

Explain the effect of the​ Fed's announcement on the demand for and supply of U.S. dollars. The demand for U.S. dollars would​ _____ and the supply of U.S. dollars would​ _____ on June 2.

​increase; decrease

Use the information provided to answer the following questions. 1. Explain the effect of the​ Fed's announcement on the demand for and supply of U.S. dollars. The demand for U.S. dollars would​ _____ and the supply of U.S. dollars would​ _____ on June 2.

​increase; decrease

Starting from a​ full-employment equilibrium, an increase in aggregate demand​ ______ real​ GDP, and creates​ ______ gap.

​increases; an inflationary

The increase in investment​ ______ aggregate demand. The decrease in government spending​ _______ aggregate demand.

​increases; decreases

Starting from a​ full-employment equilibrium, a decrease in​ short-run aggregate supply​ ______ the price level and​ ______ real GDP. ▼ is created.

​increases; decreases A stagflation

Read the news​ clip, then answer the following questions. The fall in the average weekly wage rate​ ______ short-run aggregate supply and​ ______ long-run aggregate supply.

​increases; does not change

The first table describes an​ economy's labor market in 2014 and the second table describes its production function in 2014. Suppose that labor productivity increases in 2014. The increased labor productivity​ ______ the demand for labor and​ ______ the supply of labor. The increased labor productivity​ ______ potential​ GDP, and​ ______ real GDP per person.

​increases; does not change ​increases; increases;

Read the news​ clip, then answer the following questions. In real business cycle​ theory, an increase in productivity​ ______ the demand for labor by more than it​ ______ the supply of labor.

​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

The fall in the minimum wage​ ______ short-run aggregate supply and​ ______ long-run aggregate supply.

​increases; increases

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

​increases; increases; increases; increases

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

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

M1 consists of currency held by​ _____ and​ _____, _____, and​ _____ owned by individuals and businesses.

​individuals; businesses;​ traveler's checks; checkable deposits

The ​long-run Phillips curve is the relationship between​ _____ and​ _____ when the economy is at full employment. The​ long-run Phillips curve is a​ _____ line at the​ _____ unemployment rate.

​inflation; unemployment;​ vertical; natural

The federal funds rate is the​ _____ rate on​ _____ loans.

​interest; interbank

In Keynesian cycle theory​, fluctuations in​ _____ driven by fluctuations in business confidence​ - summarized by the phrase​ "animal spirits"​ - are the main source of fluctuations in​ _____.

​investment; aggregate demand

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

Net worth is the total market value of what a financial institution has​ _____ minus the market value of what it has​ _____.

​lent; borrowed

The opportunity cost of catching a pound of tunatuna is​ ______ for JimJim than for DavidDavid​, and the opportunity cost of picking a pound of orangesoranges is​ ______ for JimJim than for DavidDavid. So​ ______ has a comparative advantage in producing​ ______.

​lower; higher Jim​; tuna

Purchasing power parity is equal value of​ _____ - a situation in which​ _____ buys the same amount of goods and services in different currencies.

​money; money

A net borrower is a country that is borrowing​ _____ from the rest of the world​ _____ it is lending to the rest of the world.

​more; than

Read the news​ clip, then answer the following question. The​ ______ growth theory best corresponds to the explanation given by Mr. Greenspan because Mr.​ Greenspan's explanation shows​ ______.

​new; the economy as a perpetual motion machine

A stock is a certificate of​ _____ and claim to the​ _____ that a firm makes.

​ownership; profits

The new Keynesian cycle theory emphasizes the fact that​ today's money wage rates were negotiated at many past​ dates, which means that​ _____ rational expectations of the​ _____ price level influence the money wage rate and the position of the SAS curve.

​past; current

The ​working-age population is the total number of​ _____ aged​ _____ years and over who are not in​ jail, hospital, or some other form of institutional care or in the U.S. Armed Forces.

​people; 16

The Federal Reserve​ (usually called the​ Fed) is the central bank of the United​ States, a​ _____ authority whose main role is the regulation of​ _____.

​public; banks and money

A central bank is a banks bank and a​ _____ authority that regulates a​ nation's depository institutions and conducts​ _____ policy, which means that it adjusts the​ _____ and influences​ _____.

​public; monetary; quantity of money in​ circulation; interest​ rates;

The​ crowding-out effect is the tendency for a government budget deficit to​ ______ the real interest rate and decrease​ ______. A government budget deficit​ ______ the real interest rate because​ ______.

​raise; investment ​raises; the demand for loanable funds increases

Convergence between real GDP per person in the United States and Japan was relatively​ ______ during the​ 1960s; convergence has recently been​ ______.

​rapid; decreasing

A Keynesian macroeconomist believes that left​ alone, the economy would​ _____ operate at full employment and that to achieve and maintain full​ employment, active help from fiscal policy and monetary policy is required. A modern version of the Keynesian​ view, known as the new Keynesian​ view, holds not only that the money wage rate is​ _____ but also that prices of goods and services are​ _____.

​rarely; ​sticky; sticky

The​ ______ interest rate is the opportunity cost of loanable funds because​ ______.

​real; the real interest paid on borrowed funds is the opportunity cost of borrowing and the real interest rate forgone is the opportunity cost of not saving or not lending those funds

Read the news​ clip, then answer the following question. The analysis of macroeconomic performance in the news clip reflects the​ ______ business cycle theory because it discusses​ ______.

​real; factors that change potential GDP Your answer is correct.C.

The quantity of desired reserves depends on the level of deposits and is determined by the desired reserve ratio ​- the ratio of​ _____ to​ _____ that the​ _____ plan to hold.

​reserves; deposits; banks

Stagflation is a combination of a​ ______ in the price level and​ ______ in real GDP.

​rise; a decrease

In the long​ run, the money wage rate​ ______, short-run aggregate supply​ ______, and the economy returns to a​ full-employment equilibrium.

​rises; decreases

If the interest rate is greater than 4 percent a​ year, the price of a bond​ ______, and the interest rate​ ______ If the interest rate is less than 4 percent a​ year, the price of a bond​ ______, and the interest rate​ ______.

​rises; falls ​falls; rises

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

The defining feature of the classical view of macroeconomics is that the economy is​ ______.

​self-regulating and always at full employment

The defining feature of the monetarist view of macroeconomics is that the economy​ is______.

​self-regulating and that it will normally operate at full​ employment, provided that monetary policy is not erratic and that the pace of money growth is kept steady

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

The business cycle is actually a continuous series of different​ ______.

​short-run macroeconomic equilibriums

​Recession? Maybe.​ Depression? Get Real. The unemployment rate during the Great Depression peaked at nearly 25 percent in​ 1933, after an initial spike from 3 percent in 1929 to nearly 8.7 percent in 1930. The unemployment rate is just 5​ percent, only up from 4.5 percent a year ago. Also during the Great Depression there was​ deflation, which is not happening today. ​Source: CNN, May​ 28, 2008 The inflation and unemployment trends during the Great Depression can be explained by a movement along the​ ______ Phillips curve that​ ______.

​short-run; lowers the inflation rate and increases the unemployment rate

If the price of a rose is​ $6, describe the situation in the rose market. Explain how the price adjusts. If the price of a rose is​ $6, there is a​ _____ of roses and the price of a​ rose_____. If the price of a rose is​ $9, describe the situation in the rose market. Explain how the price adjusts. If the price of a rose is​ $9, there is a​ _____ of roses and the price of a rose​ _____. What is the market​ equilibrium? At the market​ equilibrium, the price of a rose is​ ______ and ​ _____ roses per week are bought and sold.

​shortage; rises surplus; falls 7;100 $8 $9

A bond is a promise to pay​ _____ sums of money on​ _____ dates.

​specified; specified

Read the news​ clip, then answer the following question. The 5 million workers who cannot find jobs because of mismatching in the labor market are counted as part of the​ economy's ______ unemployment because​ ______.

​structural; there is a mismatch between their skills and the skills required for the available jobs

In​ 2013, the price of corn fell and in 2014 some corn farmers will switch from growing corn to growing soybeans. This statement illustrates the law of​ _________because the fall in the price of corn results in​ _________. A corn farmer would grow soybean because​ _______.

​supply; a decrease in the quantity of corn supplied soybean is a substitute in production for​ corn, and when the relative price of corn​ falls, farmers plant more soybeans

When the Chips are Down The Economist magazine uses the price of a Big Mac to determine whether a currency is undervalued or overvalued. In July​ 2012, the price of a Big Mac was​ $4.33 in New​ York, 15.65 yuan in​ Beijing, and 6.50 Swiss francs in Geneva. The exchange rates were 6.37 yuan per U.S. dollar and 0.98 Swiss francs per U.S. dollar. ​Source: The Economist​, July​ 22, 2010 The yuan was​ ______ relative to purchasing power parity and the Swiss franc was​ ______ relative to purchasing power parity.

​undervalued; overvalued

A movement​ ______ along the​ short-run Phillips curve occurs when there is an​ ______ increase in aggregate demand.

​up; unexpected


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