Macroeconomics

Now assume you are examining a new economy. You learn that the mpc of this new economy is 0.75 and that the government wants to increase the level of output by $3000. What change in G achieves this desired change in Y?

$750

What phrase most closely describes economics?The study of how...

...people make decisions.

Consider the following simple economy: There are 9,000 employed workers. There are 1,000 unemployed workers. You also learn that there are 2,000 part-time workers who would like full-time employment. What is the unemployment rate after adjusting for the involuntary part-time workers?

2,000/10,000 x 100

In an economy, there is a total population of 50 million. Of the 50 million citizens, 20 million people are employed and 5 million are unemployed. There are 15 million additional citizens who would like to work but are not part of the labor force. What is the unemployment rate adjusting for the discouraged workers? (Do not consider the part-time workers from the previous question.)

20 million/40 million x 100%

Now assume you are examining a new economy. You learn that the mpc of this new economy is 0.75 and that the government wants to increase the level of output by $3000. What change in T achieves this desired change in Y?

-$1000

(2) Which of the following is an example of fiscal policy?

A change in taxes

Which of the following is an example of monetary policy?

A change in the money supply

Between 2020 and 2021, prices for gasoline decreased, while the quantity of gasoline bought also decreased. Which of the following shocks could explain this observation?

A decrease in demand

Which of the following is most likely to cause a decrease in the aggregate expenditure (AE) curve?

A decrease in wealth

Which of the following is an example of fiat money?

A dollar bill

Developers have the option of building free-standing homes or apartment buildings. The government decides to tax anyone who builds an apartment building (the government requires developers to send them a check for each apartment that is built). What panel best describes what will happen to the market for homes (not apartment buildings) immediately after the apartment tax?

Panel A (S curve moves right)

The interest rate (cost of borrowing money) on 30-year mortgages for potential home buyers increases. Which panel best describes what will happen to the housing market?

Panel D (D curve moves left)

Which of the following Government agents are responsible for carrying out Fiscal Policy?

The Congress and President.

The sale of which of the following would directly appear in the calculation of GDP using the expenditure approach?

Maid services

Which of the following statements best describes the difference between monetary and fiscal policy?

Monetary policy can be enacted more quickly than fiscal policy because there are fewer people deciding on monetary policy than fiscal policy.

Between 2002 - 2005 we saw an increase in the construction of new homes in the US. During the same time period we also observed significant rises in the demand for homes. We know that during that time period both price and the number of homes bought and sold increased. Based on that information what most likely happened in the market?

The increase in demand was larger than the increase in supply.

Which of the following best describes the Federal Funds rate?

The interest rate targeted by the Federal Reserve when executing monetary policy; The interest rate charged in short-term, bank-to-bank loans; and The interest rate that is meant to influence other interest rates such as mortgage rates, car loan rates, etc.

Which of the following best describes the Consumer Price Index?

The normalized price of a representative basket of goods and services bought by the average households.

Which of the following goods/services are included in the GDP Deflator but not the CPI?

The price of a tractor bought by a commercial farm

Which of the following would be included in the consumer price index, but not the GDP deflator?

The price of a used car.

Which of the following transactions is considered an intermediate good?

Tires sold by Goodyear to Toyota that are put on a new Toyota Camry.

You are examining the market for Tesla electric cars and observe that over time, fewer Teslas are purchased for a higher price than in the past. Which of the following events could cause this outcome?

Workers who produce Teslas demand higher wages.

Which of the following scenarios is a serious concern for macroeconomist assessing the health of the economy?

a government employee is laid off because of budget cuts due to the recession of 2007−2009.

Investment, as defined by economists in the calculation of GDP, would include the purchase of a

a new office desk bought by Google for their headquarters.

Which of the following transactions are counted towards investment (I) by the BEA?

a new oven, bought by a restaurant.

Which of the following is an example of a worker experiencing structural unemployment?

a worker who loses a job because they become unqualified for the position.

A(n).........is represented by a lefttward shift of the demand curve while a(n)........is represented by a movement along a given demand curve.

decrease in demand; increase in quantity demanded

Which of the following best describes policy makers implementing a Dove Policy?

responding to a negative aggregate demand shock by buying bonds

Which of the following best describes policy makers implementing a Hawk Policy?

responding to a negative aggregate demand shock by selling bonds

Frictional unemployment is the result of

the search process of matching workers with jobs.

Suppose, in 2018, you purchased a used 2010 car from a private ad on Craigslist. Which of the following would be included in the gross domestic product for 2018?

there is no change to the GDP in 2018

In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the Bureau of Economic Analysis

values final goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.

Consider the following simple economy: There are 9,000 employed workers. There are 1,000 unemployed workers. What is the official unemployment rate (according to the BLS)?

1,000/10,000 x 100

What is the base year CPI?

100

Consider the market for $200 bonds. If the price of the bond is $175, what is the interest rate on bonds?

14.3%

Consider the following simple economy: There are 9,000 employed workers. There are 1,000 unemployed workers. You also learn that there are 2,000 discouraged workers. What is the unemployment rate after adjusting for the discouraged workers? (Do not include the involuntary part-time workers from the previous question in your analysis.)

3,000/12,000 x 100

In an economy, there is a total population of 50 million. Of the 50 million citizens, 20 million people are employed and 5 million are unemployed. What is the official (BLS) unemployment rate?

5 million/25 million x 100%

In an economy, there is a total population of 50 million. Of the 50 million citizens, 20 million people are employed and 5 million are unemployed. There are 8 million part-time workers who would prefer full-time work. What is the unemployment rate adjusting for the involuntary part-time workers?

9 million/25 million x 100%

Which of the following scenarios best represents structural unemployment?

A group of workers are fired because a new employee is hired and created a computer program that did the same exact job as the fired workers.

Which of the following events is most responsible for the Great Recession of 2007 to 2009?

A large crash in the housing market (following a large run-up in prices).

(7)After the Federal Reserve takes actions that decrease the interest rate, the consequence is

Autonomous consumption and planned investment spending will increase, which will increase aggregate expenditures

Assume the economy is initially in a full-employment equilibrium. The Federal Reserve decides to decrease the money supply. Output will be ........ the full-employment level of output and prices will ........

Below; Decrease

Which of the following transaction counts towards GDP?

Buying a new car from a dealer.

Which of the following transactions count towards GDP?

Buying a newly constructed condo.

Which of the following is an example of fiscal policy?

Changing G or changing T.

Assume the economy is initially in a full-employment equilibrium. The Federal Reserve decides to decrease the money supply. The aggregate demand curve will

Decrease

Assume the economy is initially in a full-employment equilibrium. The Federal Reserve decides to decrease the money supply. The aggregate expenditure curve will

Decrease

Short-run macroeconomic equilibrium is when (Hint: Be careful! Be sure to return to the general definition of equilibrium):

Firms have no incentive to change how much they produce

Which of the following statements about gross domestic product (GDP) and gross national product (GNP) is most correct?

GDP captures production inside a country, GNP captures production by a country's citizens

The government decides to increase taxes on buyers of ELECTRIC CARS. In other words, if you purchase an electric car, the government requires you to send them a check. Which panel best describes what will happen to the market for SUVs?

Graph C (Demand curve moves right)

What group spends the most in the economy?

Households

Assume the economy is initially in a full-employment equilibrium. The Federal Reserve decides to decrease the money supply. What will happen to the equilibrium interest rate?

Increase

Which of the following is likely to increase measured GDP?

Marijuana becomes legal to grow and sell.

The economy is in a recession due to a negative aggregate supply shock. The policy response of policy makers is to implement a "Hawk" policy instead of a "Dove" policy. This means that

Policy makers are willing to keep prices stable and the risk of increasing unemployment.

Which of the following answers best describes how policy makers should respond to negative aggregate demand (AD) shocks relative to negative aggregate supply (AS) shocks.

Policy makers should respond to a negative AD shock with a positive AD shock. There is no best response to a negative AS shocks.

You are examining the market for the newest iPhone, iPhone Z. You learn that the cost of batteries for the iPhone just increased. What is the impact of the more expensive battery on the market for iPhone Z?

Prices increase and the amount bought/sold decrease

(8) Consider your answers to questions 6 and 7. Assume that after the Federal Reserve decreased the interest rates, the economy returned to the full-employment level of equilibrium. Which of the following statements is most accurate?

Prior to enacting monetary policy, the level of Y was below the full-employment level of Y (Y-bar) and the Fed's actions increased Y back to Y-bar.

Which of the following goods or services would be considered part of consumption (C) by the BEA?

Rent on an apartment.

Who decides and enacts monetary policy?

The Federal Reserve

Imagine that an earthquake hits southern California and destroys a significant number of homes. At the same time, potential homebuyers believe that housing prices will decrease in the future. Considering only the aforementioned facts on a demand and supply graph, how will the equilibrium of homes change today?

The equilibrium will be at A before the shocks and at E after the shocks (curve moves left)

Assume that the market for single family homes in southern California is initially in equilibrium. Then two events occur. First, a new study is published concluding that many firms in southern California are hiring workers for high-paying jobs. Second, there is a decrease in the cost of materials (inputs) used to build homes.

The equilibrium will be at E before the events and A after the events. (the curve moves to the right)

Assuming that the gasoline market is in equilibrium in year 1. In year 2, the price of oil drills increases and consumer incomes increase. How will the equilibrium of gasoline change?

The equilibrium will be at point C before the change in expectations and point B after the change (Curve goes up)

Which of the following states is equivalent to saying that we are in a short-run equilibrium?

There is no unplanned changes in inventories, Investment (I) is equal to Planned Investment Spending (Ip), and Income is equal to aggregate expenditures.

What happens to the demand curve if price increases?

There will be a decrease in the supply.

Next year, SUV manufacturers sell more SUVs at a lower price. Which of the following events would have this effect?

an increase in the number of manufacturers of SUVs.

(6)Assume that the Federal Reserve wants to decrease the interest rate. Their best course of action is

buy bonds

John recently completed his college degree and is entering the labor market for the first time. He has been submitting applications and has been interviewed twice in the last two weeks, but so far has not found a job. John would be classified as

frictionally unemployed

In 2017, $1000 worth of shirts are produced by Calvin Klein. That same year, $1300 worth of shirts are sold. This means that consumption spending in 2017.............by...........and private inventories.............by............ Overall GDP in 2017.............by...............

increased; 1300; decreased; 300; increased; 1000

In 2019, $4200 worth of cars are produced by Honda. That same year, $3000 worth of cars are sold. This means that consumption spending in 2019.............by...........and private inventories.............by............ Overall GDP in 2019.............by...............

increased; 3000; increased; 1200; increased; 4200

The GDP Deflator reflects

the prices of all final goods and services currently produced domestically, while the CPI reflects the price of a fixed basket of goods and services purchased by a typical consumer.