macro exam 2 birkeland

Lucy quit her job because she was unhappy at work. Genevieve was fired because she frequently surfed the Internet rather than working on her assigned tasks. Who is eligible for unemployment insurance benefits?

neither Lucy nor Genevieve

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basket's cost was $80; in 2014, the basket's cost was $86; and in 2015, the basket's cost was $90. The value of the CPI in 2015 was

104.6 and the inflation rate was 4.6%.

what is inflation?

a general increase in prices and fall in the purchasing value of money.

what is the consumer price index ?

measures the cost of a typical consumer's basket of goods in the current year relative to the base year

Commodity money is

money with intrinsic value.

If an economy is closed and if it has no government, then

national saving = private saving.

The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.

$0.55, so golf balls were cheaper in 1975.

If the reserve ratio is 5 percent, then $500 of additional reserves can create up to

$10,000 of new money.

If the reserve ratio is 10 percent, $1,400 of additional reserves can create up to

$14,000 of new money.

The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much do excess reserves change?

$528

Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in Charlieville is 90. Refer to Scenario 24-4. The Charlieville salary in Wrexington dollars is

$66,666.67.

If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as

$75,000.

how is inflation calculated ?

(CPI this year - CPI last year / CPI last year) x 100

In the special case of the 100 percent-reserve banking, the money multiplier is

1 and banks do not create money

Allied Business Consultants employs five researchers that each work 8 hour days. In one day the researchers prepared 10 reports for its 2 largest clients. What was Allied Business Consultants' productivity?

1/4 report per hour

Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government purchases equal 4,000 and taxes equal 3,000. What are private saving, public saving, and national saving?

2,000, -1,000, and 1,000, respectively

In 2012, the imaginary nation of Platland had a population of 10,000 and real GDP of 42,000,000. During the year its real GDP per person grew by about 1.94%. Which of the following sets of growth rates is consistent with this growth in real GDP per person?

3% population growth and 5% real GDP growth

The price index was 170 in the first year, 180 in the second year, and 195 in the third year. The inflation rate was about

5.9 percent between the first and second years, and 8.3 percent between the second and third years.

Which of the following changes in the price index produces the greatest rate of inflation: 80 to 100, 100 to 120, or 150 to 170?

80 to 100

A survey showed that in each of the past 12 months there was one person who was unemployed who worked in all other months. There were also two people who were unemployed for all 12 months. What percentage of the unemployment spells during the year was short term, and what percentage of the unemployment in a given month was long term?

85.7% was short term; 66.7% was long term

Which of the following statements about inputs is correct? a) A forest is an example of a natural resource; it is also an example of a renewable resource. b) There is no distinction between human capital and technological knowledge. c) Human capital is a non-produced factor of production. d) Physical capital is a non-produced factor of production.

A forest is an example of a natural resource; it is also an example of a renewable resource.

what is structural unemployment ?

A worker's job skills do not match those necessary to get a job so they need education or training Example: A construction worker wants to work in an office- so they quit their job and get computer training

what is measurement of inflation ?

Consumer Price Index (CPI), which measures the percentage change in the price of a basket of goods and services consumed by households.

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:

Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.

Which of the following statements is correct? a) In the late 1800s, real GDP per person was higher in the United Kingdom than in the United States. b) In 2014, real GDP per person was higher in the United Kingdom than in the United States. c) The average annual growth rate of real GDP was higher in the United Kingdom than in the United States between the late 1800s and 2014. d) All of the above are correct.

In the late 1800s, real GDP per person was higher in the United Kingdom than in the United States

Money market mutual funds are included in

M2 but not M1.

Which of the following is correct? a) The Bureau of Labor Statistics uses data collected from those applying for unemployment insurance to compute the unemployment rate. b) The labor force includes all adults who are able to work. c) Unpaid homemakers are counted as "employed" by the Bureau of Labor Statistics. d) People working part time are counted as "employed" by the Bureau of Labor Statistics.

People working part time are counted as "employed" by the Bureau of Labor Statistics.

Which of the following is not correct? a) Unions are exempt from U.S. antitrust laws. b) The Wagner Act of 1935 prevents U.S. employers from interfering when workers try to organize unions. c) The National Labor Relations Board is the U.S. government agency that enforces workers' right to unionize. d) Right-to-work laws prevent firms from hiring permanent replacements for workers who are on strike.

Right-to-work laws prevent firms from hiring permanent replacements for workers who are on strike.

In which of the following countries has economic growth been sufficiently high that income would double every ten years?

Singapore

Which of the following is an example of financial intermediation?

Susan makes a deposit at a bank and the bank uses this money to make an auto loan to Ferguson.

Which of the following is correct? a) The amount of unemployment that a country typically experiences is a determinant of that country's standard of living, and some degree of unemployment is inevitable in a complex economy. b) The amount of unemployment that a country typically experiences is a determinant of that country's standard of living, and a complex economy can achieve zero unemployment. c) The amount of unemployment that a country typically experiences is not a determinant of that country's standard of living, and a complex economy can achieve zero unemployment. d) The amount of unemployment that a country typically experiences is not a determinant of that country's standard of living, and some degree of unemployment is inevitable in a complex economy.

The amount of unemployment that a country typically experiences is a determinant of that country's standard of living, and some degree of unemployment is inevitable in a complex economy.

Which of the following is true? a) Kremer argued that with greater population, society would generate more ideas so that growth of real GDP per person could continue. Malthus argued that increasing population would outstrip agricultural production. b) Kremer argued that increases in population would reduce the amount of human and physical capital per worker so that eventually the standard of living would decline. Malthus argued that increases in technology would allow increased output growth so that even with population growth, society would enjoy a higher standard of living.

a

A basic principle of economics is that a country's standard of living depends on its

ability to produce goods and services.

If a newly elected government takes actions that makes its country's courts more efficient and less corrupt, then ) producers will have greater confidence that they will benefit from their efforts. b) producers are likely to be more specialized. c) buyers and sellers will be more likely to honor contracts. d) All of the above are correct.

all of the above

what is economic growth

an increase in the amount of goods and services produced per head of the population over a period of time.

Minimum-wage laws

and firms paying wages above equilibrium to reduce worker turnover both create structural unemployment.

Which of the following includes everyone in the adult population that the Bureau of Labor Statistics counts as "unemployed"?

anyone who is not employed, is available for work, has looked for work in the past four weeks, and anyone who is waiting to be recalled from a job from which they have been laid off

what changes will occur in the equilibrium when loanable funds change ?

anything besides the interest rate changes supply/demand shifts and supply/demand curve

In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the smallest?

apparel

The members of the Federal Reserve's Board of Governors

are appointed by the president of the U.S. and confirmed by the U.S. Senate.

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes, a) M1 increases by $2,500 and M2 decreases by $2,500. b) M1 increases by $2,500 and M2 stays the same. c) M1 and M2 stay the same. d) M1 decreases by $2,500 and M2 increases by $2,500.

b

Which of the following statements is correct? a) A large, well-known corporation such as Proctor and Gamble would generally use financial intermediation to finance expansion of its factories. b) On average, indexed funds outperform managed funds. c) Unlike corporate bonds and stocks, checking accounts are a store of value. d) Financial intermediaries are institutions through which savers can directly provide funds to borrowers. Chapter 15

b

According to 2014 data on the U.S. population, which of the following groups of teenagers (ages 16-19) had the highest unemployment rate?

black males

In the 1990's Ireland made unemployment benefits less generous. This change would likely have reduced

both frictional unemployment and the natural rate of unemployment.

Which of the following is an example of physical capital?

bulldozers, backhoes and other construction equipment

how is the consumer price index measured ?

by taking the 100 x cost of basket in the current year/ cost of basket in base year

The primary difference between commodity money and fiat money is that

commodity money has intrinsic value but fiat money does not.

Which list ranks assets from most to least liquid?

currency, demand deposits, money market mutual funds

Higher education subsidies in the form of the federal government's student loan program a) induce more people to attend colleges and universities. b) keep interest rates low on student loans. c) cause lenders to take on more risk. d) All of the above are correct.

d

Which of the following is correct? a) Once adjustment is made for inflation, the prices of most natural resources have been about steady or falling. b) Technological progress has allowed us to substitute renewable resources for some nonrenewable resources. c) Technological progress has made once-crucial natural resources less necessary. d) All of the above are correct.

d

In 2010, Acme Foods produced 300,000 bags of pretzels, employing 12,000 hours of labor. In 2011, it produced 322,000 bags of pretzels, employing 14,000 hours of labor. Acme Foods productivity

decreased by 8%.

A national chain of grocery stores wants to finance the construction of several new stores. The firm has limited internal funds, so it likely will

demand the required funds by selling bonds

If a firm sells a total of 100 shares of stock, then

each share represents ownership of 1 percent of the firm.

what limitations does economic growth have?

fast growth can create negative externalitites.

If an American-based firm opens and operates a factory in China, then it is engaging in

foreign direct investment.

All Fed purchases and sales of

government bonds are conducted at the New York Fed's trading desk.

Jim transfers money from his money market account to his savings account. This action

has no effect on M1 or M2.

Which famous company executive introduced an innovative pay system that is consistent with the theory of efficiency wages?

henry ford

Perry accumulated a lot of mathematical skills while in high school, college, and graduate school. Economists include these skills as part of Perry's

human capital.

The source of the supply of loanable funds

is saving and the source of demand for loanable funds is investment.

Which of the following is not a reason economies experience structural unemployment?

job search

​After a couple of months searching for a job, Sofia is hired. Which of the following increases?

neither the labor force nor the labor force participation rate

Suppose a country repealed its investment tax credit. The effects of this are represented by shifting the a) demand for and the supply of loanable funds to the right. b) demand for and the supply of loanable funds to the left. c) supply of loanable funds to the right and the demand for loanable funds to the left. d) None of the above is correct.

none are correct

For the Bureau of Labor Statistics to place someone in the "unemployed" category, that person must a) have worked no more than 10 hours during the past week.. b) have tried to find employment during the previous year. c) not have been laid off. d) None of the above is correct.

none of the above are correct

Economist Robert Fogel focused on which of the following factors as one determinant of long-run economic growth?

nutrition

A high demand for a company's stock is an indication that

people are optimistic about the company's future.

what factors influence economic growth

physical capital human capital natural resources technological knowledge population law

what factors influence productivity ?

physical capital per worker human capital natural resources technological knowledge

how is growth in productivity measured ?

real GDP / quantity of labor

A budget surplus

reduces the government's debt.

what is the relationship between savings, investment and capital formation ?

savings - investment - capital -

You saved $500 in currency in your piggy bank to purchase a new laptop. The $500 you kept in your piggy bank illustrates money's function as a _______. The laptop's price is posted as $500. The $500 price illustrates money's function as a _____. You use the $500 to purchase the laptop. This transaction illustrates money's function as a ______.

store of value, unit of account, medium of exchange

The length of time until a bond matures is called the

term

One of the differences between the GDP deflator and the consumer price index is

the GDP deflator reflects prices for all goods and services produced domestically and the consumer price index reflects prices for some goods and services bought by consumers.

In a closed economy, private saving is

the amount of income that households have left after paying for their taxes and consumption.

what is productivity ?

the average quantity of goods and services produced per unit of labor input

what are the parts of the federal reserve system ?

the board of governors reserve banks federal open market comittee

what does consumer price index measure ?

the cost of living

Suppose that over the past year, the real interest rate was 5 percent and the inflation rate was 3 percent. It follows that

the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 5 percent.

how does the FED use open market operations to impact the money supply ?

the fed loans to banks increasing their reserves. the more banks borrow the more reserves they have for funding new loans and increase the money supply.

In the long run the unemployment rate equals

the natural rate of unemployment.

As long as prices are rising over time, then

the nominal interest rate exceeds the real interest rate.

Suppose the price index was 105 in 2017, 126 in 2018, and the inflation rate was lower between 2018 and 2019 than it was between 2017 and 2018. This means that

the price index in 2019 was lower than 151.2.

To calculate the CPI, the Bureau of Labor Statistics uses

the prices of some consumer goods.

When computing the cost of the basket of goods and services purchased by a typical consumer, which of the following changes from year to year?

the prices of the goods and services

what are open market operations ?

the purchase and sales of U.S. government bonds by the Fed.

What is frictional unemployment?

the unemployment which exists in any economy due to people being in the process of moving from one job to another.

People hold $400 million of bank deposits but no currency. Banks have made $380 million dollars of loans and only hold enough reserves to satisfy reserve requirements. Because of uncertainty, banks choose to hold $10 million more in reserves. The Fed takes no action. What happens to bank loans?

they fall $200 million

how is the price index used ?

to compare different price of items in a basket at different times

how does deposit creation happen in a fractional reserve banking system ?

when a person makes a deposit it uses a little as reserves and the rest to make loans

why increase in productivity cause economic growth ?

when productivity grows rapidly the living standards in country rises as well as the real GPD and incomes.