MACRO ECONOMICS FINAL EVA SCHAFFER TCC

Suppose the economy is closed with national saving of $3 trillion, consumption of $10 trillion, and government purchases of $4 trillion. What is GDP?

$17 trillion

Fine Edge manufactures lawn mowers. In 2014 it had $2 million worth of lawn mowers in inventory. In 2015 it sold $10 million worth of lawn mowers to consumers and had $1 million worth of lawn mowers in inventory. How much did the lawn mowers produced by Fine Edge add to GDP in 2015?

$9 million

Scenario 34-2. The following facts apply to a small, imaginary economy. • Consumption spending is $6,720 when income is $8,000.• Consumption spending is $7,040 when income is $8,500. Refer to Scenario 34-2. In response to which of the following events could aggregate demand increase by $1,500?

.A stock-market boom stimulates consumer spending by $550, and there is a small operative crowding-out effect.

If the local government imposed a minimum wage of $5 in Productionville, how many people would be unemployed?

0

Refer to Table 28-5. Suppose that the natural rate of unemployment is 5% for those under 55 and 3% for those 55 and older. The cyclical unemployment rate for those under 55 is

0.88% which is less than the cyclical unemployment rate for those 55 and older.

Refer to Table 4-3. If these are the only four buyers in the market, then the market quantity demanded at a price of $2 is

14 units.

The nominal interest rate is 3.5 percent and the inflation rate is 1.5 percent. What is the real interest rate?

2 percent

If the multiplier is 3, then the MPC is

2/3.

Refer to Table 4-10. If Alpine Springs and Dew Good are the only two suppliers in this market, by how much does the market quantity supplied change with each $3 increase in price?

200 cases

If the consumer price index was 96 in 2012, 100 in 2013, and 102 in 2014, then the base year must be

2013

Refer to Figure 2-10, Panel (a). The opportunity cost of one sofa is highest when the economy produces

24 sofas.

If the reserve ratio is 4 percent, then the money multiplier is

25

If the price level increased from 200 to 250, then what was the inflation rate?

25 percent

If a central bank reduced inflation by 3 percentage points and in the short run this made output fall by 3 percentage points for 3 years and the unemployment rate rise from 3 percent to 9 percent for three years, the sacrifice ratio is

3

The consumer price index was 120 in 2013 and 126 in 2014. The nominal interest rate during this period was 8 percent. What was the real interest rate during this period?

3 percent

Refer to Table 4-6. If these are the only four sellers in the market, then the market quantity supplied at a price of $10 is

44 units

Refer to Table 3-36. Assume that Antigua and Barbuda each has 60 minutes available. If each island spends all its time producing the good in which it has a comparative advantage, then total production is

5 towels and 6 umbrellas

Refer to Figure 2-9, Panel (a). The opportunity cost of one cup of coffee is highest when the economy produces

6 cups of coffee

Refer to Figure 4-3. If these are the only two consumers in the market, then the market quantity demanded at a price of $10 is

8.33 units.

An assumption an economist might make while studying international trade is

All of the above are possible assumptions.

Which of the following statements is correct?

Buyers determine demand, and sellers determine supply.

Refer to Table 4-3. Whose demand does not obey the law of demand?

Grover's

When the price level falls

None of the above are correct

Refer to Figure 30-1. When the money supply curve shifts from MS 1 to MS 2

None of the above is correct.

Suppose that an economy is currently experiencing 10 percent unemployment and 15 percent inflation. If in the process of bringing inflation down by 2 percentage points, real GDP falls by 6 percent for a year, the sacrifice ratio is

None of the above is correct.

Which of the following statements is correct for the long run?

Output is determined by the amount of capital, labor, and technology; the interest rate adjusts to balance the supply and demand for loanable funds; the price level adjusts to balance the supply and demand for money.

Refer to Figure 4-27. Which of the four panels illustrates a decrease in quantity supplied?

Panel (b)

Which of the following statements applies to economics, as well as to other sciences such as physics?

Real-world observations often lead to theories

Which of the following statements is an example of a positive, as opposed to normative, statement?

Reducing emissions reduces days missed from school due to asthma.

The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct?

The CPI reflects a fixed basket of goods and services; the GDP deflator reflects current production of goods and services.

An aide to a U.S. Congressman computes the effect on aggregate demand of a $20 billion tax cut. The actual increase in aggregate demand is less than the aide expected. Which of the following errors in the aide's computation would be consistent with an overestimation of the impact on aggregate demand?

The aide thought the tax cut would be permanent, but the actual tax cut was temporary.

What will happen in the gasoline market now if buyers expect higher gasoline prices in the near future?

The demand for gasoline will increase

What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce steamed milk, which is used to make lattés, and scientists discovered that lattés cause heart attacks?

The equilibrium price would decrease, and the effect on equilibrium quantity would be ambiguous.

If the stock market booms, then

The prices of food and the wages of farmers would adjust

Natural rate of unemployment - a × (Αctual inflation - Expected inflation) =

Unemployment rate.

Which of the following affected aggregate demand during the recession of 2008-2009?

a decline in residential construction and a decrease in lending

The first element of a financial crisis is

a large decline in some asset prices

Most financial assets other than money function as

a store of value, but not a unit of account nor a medium of exchange

Refer to Table 4-12. If both members and non-members are allowed to purchase tickets to this year's celebrity golf tournament and the country club sets the ticket price at $30, then there will be

a surplus of 300 tickets.

The CPI is a measure of the overall cost of the goods and services bought by

a typical consumer.

The long-run aggregate supply curve shifts right if

a. immigration from abroad increases. b. the capital stock increases. c. technology advances. d. All of the above are correct. <-

Expenditures on a nation's domestic production

are equal to its domestic production

Opponents of active stabilization policy

believe some effects of monetary policy may be long-lived

In the short run, policy that changes aggregate demand changes

both unemployment and the price level

Economists speaking like policy advisers make

claims about how the world should be

Other things the same, continued increases in the money supply lead to

continued increases in the price level but not continued increases in real GDP

The art in scientific thinking is

deciding which assumptions to make

Refer to Figure 4-10. The movement from Point A to Point B represents a(n)

decrease in the quantity supplied.

When taxes increase, the interest rate

decreases, making the change in aggregate demand smaller

Refer to Figure 30-1. If the current money supply is MS 1, then

equilibrium exists when the value of money is 2.

Pizza is a normal good if the demand

for pizza rises when income rises

Workers searching for jobs that best suit them is most closely associated with

frictional unemployment

In the circular-flow diagram,

income payments flow from firms to households, and sales revenue flows from households to firms.

If a decrease in income increases the demand for a good, then the good is a(n)

inferior good.

The long-run Phillips curve would shift to the left if

labor markets become more flexible but not if the money supply growth rate increased

Suppose the central bank pursues an unexpectedly tight monetary policy. In the short-run the effects of this are shown by

moving to the right along the short-run Phillips curve

Which of the following both shift aggregate demand right?

net exports rise for some reason other than a price change and government purchases rise.

An increase in which of the following would shift the supply curve for gasoline to the right?

number of producers of gasoline

When all market participants are price takers who have no influence over prices, the markets have

numerous buyers and sellers.

Refer to Figure 2-9, Panel (a). Production is

possible at points J, K, L, and M, but efficient only at points J, L, and M.

If the government repeals an investment tax credit and increases income taxes,

real GDP and the price level fall

The wealth effect helps explain the slope of the aggregate-demand curve. This effect is

relatively unimportant in the United States because money holdings are a small part of consumer wealth

In a fractional-reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million worth of bonds,

reserves increase by $100 million and the money supply increases by more than $100 million.

The law of supply states that, other things equal, when the price of a good

rises, the quantity supplied of the good rises.

If the tax revenue of the federal government is less than its spending, then the federal government necessarily

runs a budget deficit

Which of the following is included in M2 but not in M1?

savings deposits

If the Federal Reserve decided to raise interest rates, it could

sell bonds to lower the money supply

Suppose that the MPC is 0.7, there is no investment accelerator, and there are no crowding-out effects. If government expenditures increase by $30 billion, then aggregate demand

shifts rightward by $100 billion

A decrease in the money supply might indicate that the Fed had

sold bonds to decrease banks reserves

Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer's interest income was tax free. This would shift the

supply of loanable funds to the right, causing interest rates to fall.

Refer to Figure 4-22. At a price of $20, there is a

surplus of 4 units

According to the long-run Phillips curve, in the long run monetary policy influences

the inflation rate but not the unemployment rate

In 2009 President Obama and Congress increased government spending. Some economists thought this increase would have little effect on output. Which of the following would make the effect of an increase in government expenditures on aggregate demand smaller?

the interest rate rises and aggregate supply is relatively steep

Suppose the United States had a short-term shortage of farmers. Which mechanisms would adjust to remove the shortage?

the interest rate rises and aggregate supply is relatively steep

"Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises." This relationship between price and quantity demanded is referred to as

the law of demand

If the money supply is MS 2 and the value of money is 2, then

the quantity of money supplied is greater than the quantity demanded; the price level will rise.

If the actual price level is 165, but people had been expecting it to be 160, then

the quantity of output supplied rises, but only in the short run.

When production costs rise,

the short-run aggregate supply curve shifts to the left.

Wealth is redistributed from debtors to creditors when inflation is

unexpectedly low

Refer to Figure 4-25. All else equal, an increase in the use of laptop computers for note-taking would cause a move from

y to x.