MACRO PRACTICE FINAL
a policy mix that consists of an expansionary fiscal policy and a contractionary monetary policy would:
favor government purchases over investment spending
the natural rate of unemployment is generally thought of as the:
frictional unemployment and structural unemployment
when a radiologist quits her job at a hospital and starts looking for a better job in another hospital, she is:
frictionally unemployed
the PPI is a price index that tends to be a leading indicator of:
future inflation rates
in a period of ________ the fed would most likely ease monetary policy
high unemployment
a decresae in the level of aggregate output and the sale of government securities by the fed will have what effect on the equilibrium interest rate?
indeterminate effect on the interest rate
if the change in business inventories is positive, then final sales are _______
less than GDP
the interest rate is determined in the money market and influences the _______
level of planned investment
if interest rates increase to a very high level, people will most likely hold:
more bonds and less cash
as the interest rate falls, people hold _____ money instead of bonds because the opportunity cost of holding money has ______
more; fallen
a farmer buys a new tractor from john deere to use on her cotton farm. this tractor is included in GDP as:
part of gross private domestic investment
the economy goes through a recession between a _____ and _____
peak; trough
the __________ is considered to be a leading indicator of future inflation rates
producer price index
firms react to unplanned increases in inventories by:
reducing output
if the economy is operating below capacity, an increase in aggregate demand causes a _____ change in the price level and _____ change in output
small;big
tony has just graduated from college and has now applied for a full time position where he is currently working part-time. this caused the unemployment rate to _______ and the labor-force participation rate to _____
stay the same; stay the same
a price index is:
a measurement showing how the average price of bundle of goods changes over time
when calculating GDP, exports are _____ and imports are ______
added; subtracted
a market in which profit opportunities are eliminated almost instantaneously is:
an efficient market
aggregate demand _____ when the price level rises because the higher price level causes the demand for money to increase, causing interest rates to ____
falls; rise
during recessions, the number of discouraged workers _____ and this ______ the unemployment rate
decreases; increases
when supply is fixed or the product is unique, then price is:
demand determined
a rightward shift in the aggregate demand curve generates a ______ inflation and ______ output
demand-pull; higher
a increase in lump-sum taxes will shift the consumption function:
downward
the best overall indicator of inflationary pressures in the economy is the ________
GDP deflator
if the interest rate is higher than normal, people are most likely to hold:
bonds instead of money because the opportunity cost of money is high
when a government runs a surplus:
its debt decreases
transfer payments are the ________ in the governments budget
largest expenditure source
when differences between nominal GDP and real GDP result due to price changes and nothing else is compared, an index called the _______ is created
GDP deflator
if receipts of factor income from the rest of the world exceed payments of factor income to the rest of the world, then:
GNP is greater than GDP
if planned investment exceeds actual investment, there will be a:
decline in inventories
as the MPS increases, the multiplier will _____
decrease
assume that all commercial banks are loaned up. total deposits in the banking system are $200 million. the required reserve ratio is increased. the money supply will:
decrease
if interest rates are higher than what individuals consider normal, they will:
decrease their speculative money demand
dollar bank is currently loaned up. if the required reserve ratio is lowered,
dollar bank will have excess reserves that it can lend out
an increase in the money supply aimed at increasing aggregate output is referred to as:
expansionary monetary policy
many economists believe that sustained inflation is accomodated by a:
expansionary monetary policy
fixed weight indexes
generally become less accurate the farther in time they are from the base year
net investment is:
gross investment minus depreciation
a radiologist buys a new x-ray machine from general electric to use in her medical practice. this x-ray machine is included in GDP as:
gross private domestic investment
as the MPS decreases, the multiplier will:
increase
if the fed accompanies a fiscal expansion by decreasing the money supply so that the interest rate increases significantly, the crowding-out effect will:
increase
mike has just graduated from college and is now looking for a job, but has not yet found one. this causes the unemployment rate to _____ and the labor-force participation rate to ______
increase; increase
if the federal government is reducing net taxes to stimulate the economy at the same time the fed is buying bonds in the open market, the effectiveness of the expansionary fiscal policy will be:
increased, because the fed's actions will result in lower interest rates and a reduction in the crowding-out effect
if the government wants to reduce unemployment, government purchases should be _______ and/or taxes should be _______
increased; decresed
when income decreases, the money demand curve shifts to the ______ which ______ the interest rate with a fixed money supply
left; decreases
when the quantity of money supplied decreases, at any given price level the aggregate demand curve shifts _________
leftward
the price of bonds and the interest rate are _____ related
negatively
if the economy is operating on the relatively vertical segment of the aggregate supply curve, an increase in aggregate demand causes a small change in the _____ and a big change in _____
output; price level
if the federal government is reducing net taxes to stimulate the economy at the same time the fed is SELLING bonds in the open market, the effectiveness of the expansionary fiscal policy will be:
reduced, because the fed's actions will result in higher interest rates
capital, as economists use the term,:
refers to the things that have already been produced that are in turn used to produce other goods and services
if the united states were to pass legislation that would make it easier for people to emigrate to the united states, this would cause the short-run aggregate supply curve to shift to the _______
right
an individual who cannot find a job because his or her job skills have become obsolete is an example of:
structural unemployment
if the fed increases the money supply, there will be a _____ of money and the equilibrium interest rate will _____
surpulus; fall
the itnerest rate paid on bonds icnreases from 4% to 7%. this will cause:
the optimal balance of money to decrease because it raises the opportunity cost of holding money
the transaction demand for money increases when:
the price level rises
the quantity demanded of pepsi has decreased. the best explanation for this is that:
the price of pepsi has increased
the government purchases multiplier is:
the ratio of change in the equilibrium level of output to a change in the government purchases
a decrease in lump-sum taxes will shift the consumption function ______
upward
if the fed sets the money supply independent of the interest rate, then the money supply curve is:
vertical
among the factors of production are:
capital
the largest income component of GDP is:
compensation of employees
a policy mix of a _________ fiscal policy and a ______ monetary policy would cause output to decrease and interest rates to increase, decrease or remain unchanged
contractionary; contractionary