Macro Final Exam

In the figure below, when the price falls from $45 to $35, consumer surplus:

increase by $350

Starting from the initial equilibrium point, if the government now reduces the additional tax incentives for saving, as discussed in the problem above,then, ceteris paribus, it follows that the equilibrium interest rate will ______; while investment will ________.

increase; decrease

The so-called Taylor rule links the Federal Reserve's target interest rate to two key variables. These are the:

inflation rate and real GDP

Which of the following is most likely result of the Fed buying government securities on the "open market," ceteris paribus?

the money supply will increase.

Ceteris paribus, goods with "positive externalities" tend to be ______ by the free-market private sector; thus, in modern developed economies these goods are often ________ by the government.

under-supplied; supplied or otherwise subsidized

In 1968, Billy Casper led the Professional Golfer's Association of America (PGA) in (nominal) winnings; he earned $205,169. In 2016, Dustin Johnson was the leader with $9,365,185 in 2016. The CPI was 34.8 in 1968 and 240.0 in 2016. What were the 1968 winnings in 2016 dollars?

$1,414,959 (205,169 / 34.8) = ( ? / 240.0 )

The price of a soft drink from a vending machine in 2014 is $1.25. Which of the following is correct to find the price of a soft drink in 2014 in 1965 dollars?

$1.25 x (CPI 1965 / CPI 2014) $1.25/CPI 2014 x ? / CPI 1965

Suppose a bond pays a 4 percent annual coupon, has a $1,000 face value, two years to maturity, and a 6 percent discount rate. Ceteris paribus, it follows that the present value (or market price) of the bond today should be:

$963.34

Refer to the table above. Assume the market basket for the consumer price index has two products - shrimp and grits. Assume the Base Year quantities are also the market basket quantities for calculating the Consumer Price Index. It follows that the Consumer Price Index for 2016 equals:

133.33 100(12) + 200(4) / 100(11) + 200(2)

Suppose that currently the money supply is $500 billion, nominal GDP is $10 trillion, and real GDP is $5 trillion. Ceteris paribus, it follows that the price level is ______, and the velocity of money is ________?

2, 20 Price level = $10 trillion / $5 trillion V*500 billion = 10 trillion

To answer questions 14 and 15 refer to the following information. Suppose that the Bureau of labor Statistics (BLS) announces that in January 2013, of working age Americans, 143,322,000 were employed, 12,332,000 were unemployed, and 89,008,000 were not in the labor force. What are the working age population, and the size of the labor force, respectively?

244,662,000 and 155,654,000

Consider a small economy composed of six people: One is employed, two are not employed but are actively seeking work; two are not actively seeking employment; and one is under the age of 16. It follows that the Labor Force Participation Rate is _______, and the Unemployment rate is ______.

60%; 66.67% 3/5; 2/3

To answer questions 14 and 15 refer to the following information. Suppose that the Bureau of labor Statistics (BLS) announces that in January 2013, of working age Americans, 143,322,000 were employed, 12,332,000 were unemployed, and 89,008,000 were not in the labor force. What are the labor force participation rate, and the unemployment rate, respectively?

63.62% and 7.92%

Consider two bonds: X and Y, which are issued by two nation states. Ceteris paribus, we would expect the yield on Bond X to be lower than the yield on Bond Y if the two bonds have identical characteristics except that:

Bond Y was issued by a country plagued by inflation; whereas Bond X was issued by a country with price stability.

Consider two bonds: X and Y. Ceteris paribus, we would expect the yield on Bond X to be lower than the yield on Bond Y if the two bonds have identical characteristics except that:

Bond Y was issued by a financially weak corporation; whereas bond X was issued by a financially strong corporation.

Suppose an American consumer purchases a pair of tennis shoes manufactured in Italy. Ceteris Paribus, which of the following best explains the impact of this transaction on the U.S. national income and product accounts?

Net exports decrease; while GDP is unchanged

Because consumers can often substitute cheaper goods for those that have increased in price, ceteris paribus, it follows that:

The CPI overstates inflation

Ceteris paribus, which of the scenarios below will lead to a decrease in real GDP?

The production of goods and services decrease.

Ceteris paribus, which of the following would put downward pressure on the money supply - i.e. which would represent a "contractionary" monetary policy?

an increase in the required reserve ratio

Starting from the initial equilibrium point, if the government provides additional tax incentives for saving, then, ceteris paribus, it follows that the equilibrium interest rate will ______; while investment will ______.

decrease; increase

Refer back to the previous problem. Suppose that between 2000 and 2016 your annual salary increased from $100,000 to $125,000. It follows that your real income _______.

decreased (100,000 / 100) x ( ? / 133.33)

Suppose following the election of Donald Trump, the U.S. business community becomes more optimistic about the profitability of capital. Ceteris paribus, it follows that the ______ loanable funds would ______, putting ______ pressure on the equilibrium interest rate.

demand for; increase; upward

The substitution bias problem associated with the CPI systematically ______ inflation; the introduction of new goods problem associated with the CPI systematically ______ inflation; and the unmeasured quality change problem associated with the CPI systematically _____ inflation when the good's quality improve.

overstates; understates; overstates

It is safe to characterize "public goods" as goods with _______ externalities that also have special characteristics. These special characteristics are referred to as ______ and ________.

positive; non-rival; non-exclusive