Macroeconomics Final
Using PPP prices, China's standard of living in 2010 is
$11,000
CPI = ______.
(Cost of CPI basket at current-period prices divided by ÷Cost of CPI basket at base-period prices) times ×100
In August 2017, the U.S. the unemployment rate was ______ the natural unemployment rate and in the second quarter of 2017 the output gap was ______.
. below; negative
Using PPP prices, China's ranks as the world's number ____ economy in 2010.
1
What events in the foreign exchange market could have brought this riserise in the value of the U.S. dollar?
1. World demand for U.S. exports increases. Y 2. World demand for U.S. exports decreases N 3. U.S. import demand increases N 4. U.S. import demand decreases Y 5. The U.S. interest rate differential rises Y 6. The U.S. interest rate differential falls N 7. The expected future exchange rate rises Y 8. The expected future exchange rate falls N
The CPI in 2001 was 177.1. The CPI in 2002 was 179.9. The inflation rate in 2002 was
1.6%
In August 2017, the real interest rate was ______. Between April 2017 and August 2017, the real interest rate ________.
1.7% increased
In a standard of living comparison, China ranks ______ in the world. This rank is ______.
105th; rising because physical capital and human capital growth and technological change are proceeding rapidly and China's real GDP is growing
How many jobs were added to private payrolls in February 2014?
139,000 jobs were added to private payrolls in February 2014.
In 2013 and in 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for Dexter's CPI is 2013 and 2013 is also the year of the Consumer Expenditure Survey. The CPI in 2014 is ______.
179.3
The unemployment rate peaked ______ after the 2001 recession. During the 2002-2008 recession, the unemployment rate reached its lowest point at the beginning of ______.
18 months; 2007
Over the past 100 years, the average growth rate of U.S. real GDP per person is 2 percent. Over the past 100 years, growth was most rapid during the ______ and slowest during the ______.
1960s; Great Depression
The CPI in 2003 was 184.0. The CPI in 2004 was 188.9. The inflation rate in 2004 was
2.7 percent
Suppose that in 2014 China's real GDP is growing at 1212 percent a year and its population is growing at 2.0 percent a year. If these growth rates continue, then China's real GDP per person in ______ will be twice what it is in 2014.
2021
If real GDP per person doubles in 20 years, then the annual growth rate of real GDP per person is ______ percent a year.
3.5%
Apparel comprises ______ percent of the CPI basket.
4
The table above and graph to the right provide information about the U.S. labor market in August, 2017. In August, 2017, the unemployment rate in the United States was
4.4%
Hyperinflation is an inflation rate of _____ or higher that grinds the economy to a halt and causes a society to collapse.
50 percent a month
When the Fed buys securities from a bank, a sequence of events begins. The events are listed below. Number each event in the order in which it occurs.
6. Some of the new money is a currency drain 3. The quantity of money increases. 8. Excess reserves decrease. 5. Some of the new money remains on deposit. 1. Banks have excess reserves. 2. Banks lend excess reserves. 7. Desired reserves increase because deposits have increased. 4. New money is used to make payments.
The table above and graph to the right provide information about the U.S. labor market in August, 2017. In August, 2017, the labor force participation rate in the United States was
62.9%
Choose the statement that is incorrect.
A country with a large population cannot have a high standard of living.
Choose the statement that is incorrect.
All unemployment at the natural unemployment rate is structural unemployment.
Choose the statement about the long-run Phillips curve that is incorrect.
An unexpected increase in aggregate demand shifts the long-run Phillips curve rightward.
Did the events you've described change the demand for U.S. dollars, the supply of U.S. dollars, or both demand and supply in the foreign exchange market?
Change in world demand for U.S.exports D Change in U.S.import demand S Change in U.S. interest rate differential B Change in expected future exchange rate B
What is the largest component of M1?
Checkable deposits
China's real GDP per person was 13,165 yuan in 2013 and 14,088 yuan in 2014. India's real GDP per person was 49,516 rupees in 2013 and 51,521 rupees in 2014. By maintaining their current growth rates, _______.
China will double its standard of living first.
Choose the correct statement.
Commercial banks are financial institutions that accept deposits, provide payment services, and make loans to firms and households.
Choose the statement that is incorrect.
Comparisons of real GDP between countries are most accurate when we use market prices.
Who in the following statements is a discouraged worker?
Dan is available to work but has not looked for a job in the past eight weeks because of repeated applications but no single offer.
Choose the statement that is incorrect.
Deposits are not money because you cannot settle a debt with a deposit.
Choose the correct statement.
Deposits are money, checks are not money, and credit cards are not money.
Does Europe's unemployment arise from cyclical or structural problems?
Europe's unemployment arises from both cyclical and structural problems.
How will the labor force change if the following events occur? 1. Sarah starts a second job 2. Pat finds a good job and is hired. 3. Mary takes a job at McDonald's while she waits to start her new job.
Events 1, 2, and 3 will not change the labor force.
The news article reports that China is the second largest economy in the world based on ______.
GDP converted to U.S. dollars at the current exchange rate
U.S. Workers World's Most Productive The article defines productivity as ______. Real GDP per person is ______.
GDP divided by the number of people employed; real GDP divided by the population
Choose the statement that is incorrect.
If a financial institution's net worth is positive, the institution must be solvent and liquid.
*Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis. The table shows the quantities of the components of M1 and M2 in August 2017.
In August 2017, M1 was $3,564.2 billion. In August 2017, M2 was $13,649.7 billion.
The table provides information about the money wage rate and the CPI in the United States for the past five years.
In July 2017, the nominal wage rate was $30.48 per hour. In July 2017, the CPI was 244. In July 2017, the real wage rate was $12.49 per hour.
The BLS reported that in July 2012, employment decreased by 195,000 to 142,220,000 and the unemployment rate increased from 8.2 percent to 8.3 percent. About 3.4 million people were marginally attached workers and 0.9 million of them were discouraged. Calculate the change in unemployment in July 2012.
In July 2012, the number of unemployed changed by 151528.
The Bureau of Labor Statistics reported that in October 2017, employment decreased by negative −484,000 to 153,861,000 and the unemployment rate decreased from 4.2 percent to 4.1 percent. About 1.6 million people were marginally attached workers and among the marginally attached workers, 0.6 million were discouraged workers. Calculate the change in unemployment in October 2017.
In October 2017, unemployment changed by −182,312.
If the natural unemployment rate is 5.5 percent, is there an output gap in the U.S. economy and is it a recessionary or an inflationary gap?
In October, 2017 the U.S. economy has an inflationary gap.
Choose the statement that is incorrect.
In a deflation, the inflation rate is positive but decreasing in consequent years.
The table provides information about three U.S. price indexes for AugustAugust each year from 2011 to 2017.
In the year to August 2017, the inflation rate measured by the CPI was 2 percent. In the year to August 2017, the inflation rate measured by the PCE was 1.4 percent. In the year to August 2017, the inflation rate measured by the PCE less food and fuel was 1.4 percent.
Shoppers Stimulate Discount Stores The ______ macroeconomic school of thought justifies the policy discussed in this news clip.
Keynesian
The Bureau of Labor Statistics reported the following data for September 2017. Labor force participation rate: 63.1 Employment to population ratio: 60.4 Working-age population: 255,562 Use the above data to calculate for September 2017:
Labor force: 161,260 Employment: 154,359 Unemployment rate: 4.3 percent
Choose the statement that is incorrect.
Labor hours are all equally productive.
Which of the following statements about the monetarist view of the macroeconomy is incorrect?
Left alone, the economy rarely operates at full employment.
Choose the statement that is incorrect.
Liquid assets have a higher interest rate than securities.
Which of the following statements illustrates structural unemployment?
Outsourcing resulted in many job losses in the mid 2000s
Choose the statement that is incorrect.
Over the business cycle, aggregate supply fluctuates around potential GDP.
The core inflation rate is the annual percentage change in the _____ price index _____ the prices of food and energy.
PCE; excluding
Use the data reported by the Current Population Survey in July 2014 to answer the following question. 1. Who does the BLS classify as being unemployed, a part-time worker, an employed person, a discouraged worker, and not in the labor force? Explain your classification. ______ are unemployed, ______ is a part-time worker, _____ is a discouraged worker, and _____ is not in the labor force.
Pat and Mary; Sarah; Kevin; Johnie
Choose the statement that is incorrect
Real GDP per person grows whenever real GDP grows.
Choose the statement that is incorrect.
Real GDP per person grows whenever real GDP grows.
Which of the following statements illustrates frictional unemployment?
Robin is quitting his current job to find another that has better prospects.
What is the largest component of M2?
Savings deposits
Choose the correct statements. 1. The unemployment that arises from normal labor turnover is frictional unemployment. 2. Frictional unemployment increases during a recession and decreases during an expansion. 3. The fluctuating unemployment over the business cycle is structural unemployment. 4. A worker who is laid off because of the recent recession is cyclically unemployed.
Statements 1 and 4 are correct.
Choose the correct statements. 1. The unemployment that arises when changes in technology or international competition change the skillsThe unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the locations of jobs is cyclical unemployment.needed to perform jobs or change the locations of jobs is cyclical unemployment. 2. The unemployment that arises from normal labor turnover is cyclical unemployment.The unemployment that arises from normal labor turnover is cyclical unemployment. nothing 3. Upper A worker who is laid off because of the recent recession is cyclically unemployed.A worker who is laid off because of the recent recession is cyclically unemployed. nothing 4. When a steel plant becomes more automated and workers lose their jobs comma the workers are structurally unemployed.When a steel plant becomes more automated and workers lose their jobs, the workers are structurally unemployed. nothing
Statements 3 and 4 are correct.
The Bureau of Labor Statistics reports six alternative measures of the unemployment rate. Choose the correct statements. a. U-3 adds discouraged workers to the official unemployment rate. b. U-2 measures the job losers. c. U-4 adds discouraged workers to the official unemployment rate. d. .U-4 is the official unemployment rate.
Statements b and c are correct
The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2014. The average household spent $60 on juice and $30 on cloth in 2014 when the price of juice was $2 a bottle and the price of cloth was $5 a yard. In the current year, 2014, juice is $4 a bottle and cloth is $6 a yard. Calculate the CPI basket and the percentage of the household's budget spent on juice in 2014.
The CPI basket is 30 bottles of juice and 6 yards of cloth. The percentage of the household's budget spent on juice in 2014 is 66.7 percent.
A typical family on Sandy Island consumes only juice and cloth. Last year, which was the base year, the family spent $2727 on juice and $66 on cloth. In the base year, juice was $33 a bottle and cloth was $22 a length. This year, juice is $77 a bottle and cloth is $77 a length. What is the CPI basket? What is the CPI and the inflation rate in the current year?
The CPI basket is 99 bottles of juice and 33 lengths of cloth. The CPI in the current year is 254.5 The inflation rate in the current year is 154.5 percent.
The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2013 (the reference base year). The average household spent $60 on juice and $30 on cloth in 2013 when the price of juice was $2 a bottle and the price of cloth was $5 a yard. In the current year, 2014, juice is $4 a bottle and cloth is $6 a yard. Calculate the CPI and the inflation rate in 2014.
The CPI in 2014 is 173.3. The inflation rate in 2014 is 73.3 percent.
Choose the statement about the Consumer Price Index that is incorrect.
The CPI is defined to equal 1.00 for a period called the reference base period.
What are the values of the M1 money multiplier and the M2 money multiplier in August 2017?
The M1 money multiplier is 1.1 The M2 money multiplier is 4.4
In the United Kingdomthe United Kingdom, the currency drain ratio is 38 percent of deposits and the reserve ratio is 2 percent of deposits.
The U.K. money multiplier is 3.45
The U.S. dollar exchange rate decreased fromdecreased from $1.33 Canadian in October, 2016 to $1.25 Canadian in October, 2017, and it increased from 103.91 Japanese yen in October, 2016 to 112.50 yen in October, 2017. Did the U.S. dollar appreciate or depreciate against the Canadian dollar? Did the U.S. dollar appreciate or depreciate against the Japanese yen?
The U.S. dollar depreciated against the Canadian dollar. The U.S. dollar appreciated against the Japanese yen.
Choose the statement that is incorrect.
The U.S. government cannot create jobs. Jobs are created by the private sector.
The IMF World Economic Outlook reports the price level data (2000 = 100) given in the table. The region with the highest inflation rate in 2010 is ______. The region with the highest inflation rate in 2011 is ______.
The United States; the United States
Choose the statement that is incorrect.
The bias in the CPI eliminates the need for people to shop in discount stores
Choose the statement that is incorrect.
The bias in the CPI increases government outlays
How can the change in U.S. wealth differ from U.S. saving?
The change in wealth includes changes in the prices of assets owned and saving excludes these items.
Choose the statement that is incorrect.
The core PCE is a broader measure than the CPI that attempts to overcome biases by placing extra emphasis on food and fuel, two goods which are large components of household expenditure.
In Japan, potential GDP is 600 trillion yen and the graph shows the aggregate demand curve, the short-run aggregate supply curve, and the long-run aggregate supply curve.
The graph shows that Japan has an output gap that is an inflationary gap. The size of the inflationary gap is yen ¥100 trillion.
BrazilBrazil's real GDP was 1,180 trillion reais in 2013 and 1,202 trillion reais in 2014. Brazil's population was 198 million in 2013 and 200 million in 2014. Calculate the growth rate of real GDP and the growth rate of real GDP per person in Brazil in 2014.
The growth rate of real GDP in Brazil in 2014 was 1.9 percent. The growth rate of real GDP per person in Brazil in 2014 was 0.9 percent. The approximate number of years it takes for real GDP per person in Brazil to double if the 2014 growth rate of real GDP and population growth rate are maintained is 78.
The table shows three years of CPI data. Calculate the inflation rate for the year ended June 2001 and for the year ended June 2002. Did inflation increase or decrease between June 2001 and June 2002?
The inflation rate for the year ended June 2001 is 3.2 percent. The inflation rate for the year ended June 2002 is 1.1 percent. Between June 2001 and June 2002, inflation decreased
The BLS reported the CPI data shown in the table to the right. Calculate the inflation rates for the years ended October 2016 and October 2017.
The inflation rate in the year ended October 2016 was 1.6 percent per year. The inflation rate in the year ended October 2017 was 2.0 percent per year. the inflation rate increased
Choose the correct statement.
The inflation rate is the annual percentage change in the price level.
The table shows the data reported by the Bureau of Labor Statistics in 2005. Calculate the labor force, employment, and the unemployment rate.
The labor force is 149 million. Employment is 142 million. The unemployment rate is 4.7 percent.
What is happening to the labor force participation rate?
The labor force participation rate is decreasing.
What was the reported level of jobless claims in the news article?
The level of jobless claims reported in the news article is 292,000.
In Australia, the quantity of M1 is $150 billion, the currency drain ratio is 33 percent of deposits and the reserve ratio is 8 percent.
The monetary base in Australia is $46.24 million.
Suppose an increase in the monetary base of $400,000 increases the quantity of money by $800,000. Calculate the money multiplier.
The money multiplier is 2.
What is the most recent level of jobless claims and did the number increase or decrease during the past month?
The most recent level of jobless claims is 238,000, and the number increased during the past month.
The table provides information about the U.S. CPI for August each year from 2011 to 2017.
The numbers in the table are price levels . The reference base year for the CPI is 1982−1984 . The CPI for August 2017 tells us that since the reference base year, the price level has increased by 145 percent. In the year to August 2017, the inflation rate measured by the CPI was 2 percent.
Choose the statement about the Fed that is incorrect.
The policy decisions of the Federal Open Market Committee are implemented each month by a different Federal Reserve Bank.
Choose the statement about an increase in the population that is incorrect.
The production function shifts upward.
Choose the correct statement.
The quantity of real GDP demanded is the sum of the real consumption expenditure, investment, government expenditure, and exports minus imports.
Choose the statement that is incorrect.
The size of an economy is irrelevant.
AD0 is the aggregate demand curve when investment is $1.0 trillion, and AD1 is the aggregate demand curve when investment is $1.5 trillion. What is the size of the multiplier in the short run?
The size of the multiplier in the short run is 4.
Describe what happened to the unemployment rate and the labor force participation rate during the most recent expansion, using the same data graphs.
The unemployment rate decreased to about 4 percent and the labor force participation rate decreased to about 63 percent during the most recent expansion.
What was the unemployment rate in December 2013?
The unemployment rate in December 2013 was 7 percent.
What is the unemployment rate in Europe, has it increased or decreased, and is it higher or lower than in the United States?
The unemployment rate in Europe is 12 percent. It has increased, and it is higher than in the United States.
What is the most recent reported unemployment rate and did it increase, decrease, or not change during the past month? How did it change over the past year?
The unemployment rate in October, 2017 was 4.1 percent and it decreased over the past month and decreased over the past year.
The table gives information about the labor market in July 2014 in the economy of Sandy Island. What is the unemployment rate and the employment-to- population ratio in July 2014? Calculate the number of people unemployed, the number employed, and the unemployment rate at the end of August 2014.
The unemployment rate is 14.3 percent. The employment-to-population ratio is 72 percent. At the end of August 2014: The number of people unemployed is 2,890. The number of people employed is 18,000. The unemployment rate is 13.8 percent.
The table gives information reported by the Bureau of Labor Statistics for 2007. What is the unemployment rate, the labor force participation rate, and the employment-to-population ratio?
The unemployment rate is 4.6 percent. The labor force participation rate is 66.0 percent. The employment-to-population ratio is 63.0 percent.
Choose the statement that is incorrect.
The unemployment rate is zero when the economy is at a business cycle peak.
Visit FRED to get the data and describe what happened to the unemployment rate and the labor force participation rate during the most recent recession.
The unemployment rate rose to about 10 percent and the labor force participation rate decreased to about 65 percent during the most recent recession.
Choose the statement that is incorrect.
The unemployment rate was lower during the recession in 1982 than it was during the recession of 1990-1991.
The bank plans to hold $44 for every $100 in deposits. The bank holds desired reserves of $9,000 and actual reserves of $15,000. What is the bank's desired reserve ratio and its excess reserves?
The bank's desired reserve ratio is 4 percent. The banks excess reservesexcess reserves are $6,000.
Choose the statement that is incorrect.
The employment-to-population ratio fluctuates less than the labor force participation rate.
The graph to the right shows the data on the differences between various unemployment rate measures. Match each variable with its correct description.
U6 dash- U5 "economic part-time workers" U3 dash- U1 "unemployed for less than 15 weeks" U5 dash- U3 "all marginally attached workers" U4 dash- U3 "discouraged workers"
Why does unemployment affect young people more than older people?
Unemployment affects young people more than older people because young people are mostly first-time job seekers, so a greater percentage of young than old are job seekers every year. Also, when firms fire workers, they usually fire last hired which often means the youngest.
The Bureau of Labor Statistics reported the following data for October 2017. Labor force: 160,381 Employed: 153,861 Working-age population: 255,766
Unemployment rate: 4.1 percent Labor force participation rate: 62.7 percent Employment to population ratio: 60.2 percent
The Bureau of Labor Statistics reported the following data for August 2017August 2017. Labor force: 160,571 Employed: 153,439 Working-age population: 255,357 Use the above data to calculate for August 2017August 2017:
Unemployment rate: 4.4 percent Labor force participation rate: 62.9 percent Employment to population ratio: 60.1 percent
Choose the statement that is incorrect.
When the quality of a good improves over time, the CPI does not include the portion of the price rise attributable to the higher quality in its calculation.
If an economy is at a full-employment equilibrium and a decrease in consumption expenditure occurs, the new short-run equilibrium is _____ and _____ gap emerges.
a below full-employment equilibrium; a recessionary
Read the news clip, then answer the following question. A bank's attempts to pursue profit can sometimes lead to bank failure because _______.
a combination of all of the above
A mortgage is _______.
a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments (repayments and interest)
The effect of the United States returning millions of workers to their countries of origin is _____ the U.S. PF and _____ in potential GDP.
a movement down along; a decrease
Deflation is _______.
a persistently falling price level
The best forecast available, which is based on all the relevant information is called _______.
a rational expectation
Classify each of the following into the appropriate category of unemployment. Your choices are: Frictional Cyclical Structural Seasonal Not unemployed a. An unemployed auto assembly line worker during a sales slump. b. A snow plow driver during the summer. c. A record player repairman who has not learned the latest laser disk player repair technology. d. A computer programmer who quits his job to look for a job with better benefits. e. A high school dropout with few skills who has been looking for a job unsuccessfully for weeks. f. A person who leaves their job to attend graduate school full time. g. A recent business school graduate looking for her first job. h. A person whose job has been automated out of existence. i. A vendor who sells beer at major league baseball games during the winter months. j. A welder who finds that robots have replaced most of the welding jobs on assembly lines. k. A top salesman for a computer company who quit because he did not like his boss. l. A parent who quit to care for his or her child at home. This person has removed themself from the labor force
a. cyclical b. seasonal c. structural d. frictional e. structural f. not unemployed g. frictional h. structural i. seasonal j. structural k. frictional l. not unemployed
If inflation is anticipated to be 5 percent per year and actual inflation for that year turns out to be 7 percent, identify whether each of the following groups would be helped or hurt by this, or if the effort is indeterminate. a. People who are living on fixed incomes. b. Banks that have made long-term fixed rate loans. c. People who have purchased bonds. d. A person who has purchased real estate with a bank loan. e. A recent college graduate with many loans to pay back. f. People who have purchased stock. g. Governments that have sold bonds. h. Savers with open passbook accounts. i. People who have purchased precious metals. j. Wage earners who are members of a strong union.
a. hurt b. hurt c. hurt d. helped e. helped f. helped g. helped h. hurt i. helped j. indeterminate
A person is in the labor force if any one of the following statements is true except that he or she is ______.
aged 16 and over and not in jail, hospital, or some other form of institutional care
Deflation occurs when _______.
aggregate demand increases at a persistently slower rate than aggregate supply
In the United States, the CPI basket consists of items that ______ . ______ has the greatest weight in the CPI basket.
an average urban household buys; Housing
The expansion of 2002-2008 created jobs at ______ rate. The first two years of the expansion created few jobs because ______.
an unusually slow; the expansion was very weak, so employment growth was weak
When labor productivity increases, there is _____ the production function and _____ in potential GDP.
an upward shift of; an increase
Over time, on average the demand for loanable funds ______, so the real interest rate ______.
and the supply of loanable funds increase at a similar pace; has no trend
At arrow 2, the economy is in ______ full-employment equilibrium and the intersection of the AD and SAS curves is to the ______ of the LAS curve.
an above; right
Suppose that Sara withdraws $1,000 from her savings account at the Lucky S&L, keeps $50 in cash, and deposits the balance in her checking account at the Bank of Illinois. The immediate change is ______ in M1 of $1,000 and ______ in M2.
an increase; no change
The natural unemployment rate is the unemployment rate when the economy is _____.
at full employment
The multiplier is the amount by which the change in ______ expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP. For every dollar increase in ______ expenditure, the multiplier determines the increase in real GDP.
autonomous; autonomous
The multiplier is the amount by which a change in ______ expenditure is magnified or multiplied to determine ______.
autonomous; the change in equilibrium expenditure and real GDP
A marginally attached worker is a person who does not have a job, is _____ and _____ to work, has _____ specific efforts to find a job within the previous _____ weeks, but has looked for work sometime in the recent past.
available; willing; not made; four
The price level is the _____.
average level of prices
The Consumer Price Index is a measure of the _____ of the prices paid by _____ consumers for a fixed market basket of consumption goods and services.
average; urban
A central bank is ______. The central bank in the United States is the ______.
a bank's bank and a public authority that regulates a nation's depository institutions and conducts monetary policy; Federal Reserve System
At arrow 1 in the graph, the economy is in ______ full- employment equilibrium and the intersection of the AD and SAS curves is to the ______ of the LAS curve.
a below; left
If the government increases its expenditure on goods and services and as a result, the money wage rate increases, the economy has experienced _______.
a demand-pull rise in the price level
A rise in the price of oil creates _______.
a one-time cost-push rise in the price level
Cyclical unemployment is the fluctuating unemployment over the business cycle that increases during _____ and decreases during _____.
a recession; an expansion
An increase in potential GDP increases ______.
both long-run aggregate supply and short-run aggregate supply
Inflation expectations "become self-fulfilling" because consumers decide to _____, which ______.
buy more goods and services at today's lower prices; increases aggregate demand
If the interest rate is 5 percent, people will ______.
buy bonds, bid up their price, and the interest rate will fall
The four price indexes that are alternatives to the CPI are ______.
chained CPI, personal consumption expenditure deflator, GDP deflator, and core PCE
A ______ macroeconomist believes that the economy is self-regulating and always at full employment. A ______ macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment.
classical; Keynesian
Changes in consumption spending play a large role in the business cycle because _______ accounts for approximately ______ percent of GDP.
consumption expenditure; 70
The slow job growth and rise in unemployment after mid-2007 is most likely ______.
cyclical
Full employment is when there is no _____ unemployment or, equivalently, when all the unemployment is _____ or _____.
cyclical; frictional; structural
A "credible business plan" for the government to adopt is a plan to ______.
decrease government expenditure
In August 2016, the U.S. unemployment rate was 4.9 percent. In August 2017, the unemployment rate was 4.4 percent. Assuming that the labor force remained constant between August 2016 and August 2017, then unemployment _______.
decreased
In October 2009, the U.S. unemployment rate was 10.0 percent. In October 2011, the unemployment rate was 8.9 percent. Assuming that the labor force remained constant between October 2009 and October 2011, then the number unemployed _______.
decreased
In October 2016, the U.S. unemployment rate was 4.8 percent. In October 2017, the unemployment rate was 4.1 percent. Assuming that the labor force remained constant between October 2016 and October 2017, then unemployment _______.
decreased
Describe the path of the price level in Japan. The price level ______.
decreased in both years
G-20 Leaders Look to Shake off Lingering Economic Troubles The requirement to hold more capital can make financial institutions safer because by using more of its own funds and less borrowed funds, a financial institution ______.
decreases its risk of insolvency
An increase in expected future income ________.
decreases the supply of loanable funds today because households with larger expected future income will save less today
The multiplier increases when the marginal propensity to import ______ or the income tax rate ______.
decreases; decreases
Shrinking U.S. Labor Force Keeps Unemployment Rate From Rising An increase in discouraged workers ______ the official unemployment rate and ______ U-4.
decreases; does not change
Aggregate demand increasesincreases if fiscal policy ______ taxes or ______ transfer payments.
decreases; increases
Aggregate demand increasesincreases if the exchange rate ______ or foreign income ______.
decreases; increases
An increase in the population ______ the real wage rate and ______ the equilibrium quantity of labor.
decreases; increases
Read the news clip, then answer the following questions. FDIC insurance helps to minimize bank failures and bring more stability to the banking system because _______.
depositors know that money they have deposited with a bank will be repaid
The ratio of reserves to deposits that a bank plans to hold is its ______. If a bank has $10 million in actual reserves and $8 million in desired reserves, then it has ______.
desired reserve ratio; excess reserves
Potential GDP is ______.
determined by the full-employment quantity of labor
What is unemployment and do the jobless claims numbers measure it? Unemployment is the number of people who _____ , so the initial jobless claim numbers _____ measure unemployment.
do not have work, are available for work, and have made specific efforts to find work or are waiting to return from layoff; do not
Does unemployment fall by the same number as jobs added? Unemployment _____ by the same number as jobs added, because _____ .
does not fall; unemployment also falls when an unemployed person stops looking for a job
The Rule of 70 states that the number of years it takes for the level of any variable to ______ is approximately ______.
double; 70 divided by the annual percentage growth rate of the variable
The components of the CPI basket that are experiencing price increases faster than the 12-month average include ______. And those components that are experiencing price increases below the 12-month average include ______.
energy, transportation and food; clothing
Interest rate parity means ______.
equal rates of return
Governor Plans to Boost Economy with Ecofriendly Jobs f these policies are successful, we would expect to see Oregon's natural unemployment rate ______.
fall
The consequences of deflation include all of the following except _______.
falling real wage rates for workers with long-term wage contracts
A government budget surplus occurs, which increases the supply of loanable funds. The real interest rate ______, household saving ______,
falls; decreases and investment increases
An economy at a full-employment equilibrium experiences an increase in aggregate demand. The unemployment rate ______ its natural rate, and to return to the long-run equilibrium, the money wage rate begins to ______.
falls below; rise
When the interest rate fallsfalls, other things remaining the same, the opportunity cost of holding money ______ and ______.
falls; the quantity of money demanded increases
Categorize the following statements as either true or false.
false- Congress can pass budget laws only once a year. false- For the United States budget comma the fiscal year runs from January 1 to December 31. true - Congress attempted to grant the President a line-item veto but the Supreme Court declared this unconstitutional. true - Congress debates and amends the President's budget proposals and enacts a budget before the start of the fiscal year on October 1.
The natural unemployment rate ______.
fluctuates because the frictions and the amount of structural change fluctuate.
A crawling peg exchange rate policy is one that _______.
follows a path determined by a decision of the government or the central bank and is achieved by central bank intervention in the foreign exchange market
The core CPI is the CPI excluding ______ prices.
food and fuel
The market in which the currency of one country is exchanged for the currency of another country is the ______. The price at which one currency exchanges for another currency is the ______.
foreign exchange market; exchange rate
Governor Plans to Boost Economy with Ecofriendly Jobs The main type of unemployment that Governor Kulongoski is using policies to avoid is ______.
frictional and structural
Out of a Job and Out of Luck at 54 Choose the statement that is incorrect. Older unemployed workers might become marginally attached workers or discouraged workers during a recession because _______.
given their long employment history, they are eligible for longer periods of unemployment benefits
The components of government outlays and receipts which have changed most to contribute to the huge budget deficits in 2011 and 2012 are ______.
government expenditure and transfer payments
Nation's Economic Pain Deepens The unemployment rate in May 2008 is ______ the estimated natural unemployment rate. This implies that real GDP is ______ potential GDP at this time.
greater than; less than
Shrinking U.S. Labor Force Keeps Unemployment Rate From Rising A discouraged worker ______.
has stopped looking for a job because of repeated failure to find one
Jobs Report: Hiring Up, Unemployment Down If the only change that occurred was that people gave up job searching, then the labor force would _______ and unemployment would _______.
have decreased; have decreased
Jobs Report: Hiring Up, Unemployment Down If the only change that occurred was that all the newly hired people had been unemployed in October, then the labor force would ______ and unemployment would _______.
have not changed; have decreased
With 1.6 million marginally attached workers and 0.6 million of them discouraged workers, what are the characteristics of the other 1.0 million marginally attached workers? The other 1.0 million marginally attached workers _______.
have stopped looking for work for reasons other than their inability to find a job
With 3.4 million marginally attached workers and 0.9 million of them discouraged workers, what are the characteristics of the other 2.5 million marginally attached workers? The other 2.5 million marginally attached workers _______.
have stopped looking for work for reasons other than their inability to find a job
The quantity of labor demanded is the number of labor hours during a given period. The quantity of labor supplied is the number of labor hours during a given period. The wage rate adjusts to bring the labor market to equilibrium.
hired by all the firms in the economy that all the households in the economy plan to work real
What are the three sources of global investment funds? (Separate with a comma, no plurals or abbreviations.)
household saving,government budget surplus,borrowing from rest of world
The aggregate production function is the relationship that tells us ______, when all other influences on production remain the same.
how real GDP changes as the quantity of labor changes
A person is not in the labor force if they are ______.
in the working-age population but neither employed nor unemployed
The multiplier matters because we can use it to determine by how much we should change autonomous expenditure to ______.
increase real GDP by a given amount
If speculation like that made by Mr. Reddy becomes widespread, the demand for U.S. dollars will ______ and the supply of U.S. dollars will ______.
increase; decrease The U.S. dollar exchange rate will rise
Aggregate demand increasesincreases if expected future income, inflation, or profits ______. And aggregate demand increasesincreases if fiscal policy ______ government expenditure.
increase; increases
What would likely happen to the official unemployment rate when jobs expand at a slower pace than the population growth rate, and why? It is likely that the official unemployment rate would _____ when jobs expand at a slower pace than the population growth rate, because _____.
increase; more people are entering the labor force than are finding jobs
What would likely happen to the number of discouraged workers when jobs expand at a slower pace than the population growth rate, and why? It is likely that the number of discouraged workers would _____ when jobs expand at a slower pace than the population growth rate, because _____.
increase; the possibility of repeated failure to find a job would increase
In October 2009, the U.S. unemployment rate was 10.0 percent. In October 2011, the unemployment rate was 8.9 percent. Assuming that unemployment remained constant between October 2009 and October 2011, then the labor force ______.
increased
In October 2016, the U.S. unemployment rate was 4.8 percent. In October 2017, the unemployment rate was 4.1 percent. Assuming that unemployment was constant between October 2016 and October 2017, then the labor force _______.
increased
The BLS reported the CPI data shown in the table to the right. Calculate the inflation rates for the years ended August 2016 and August 2017. The inflation rate in the year ended August 2016 was 1.1 percent per year. The inflation rate in the year ended August 2017 was 2 percent per year. How did the inflation rate change in the year ended August 2017August 2017? The inflation rate _____ .
increased
The multiplier increases when the marginal propensity to consume
increases
An increase in expected future income ______ aggregate demand. An increase in the expected future inflation rate ______ aggregate demand. An increase in expected future profits __________ aggregate demand.
increases increases increases
Starting from a position of long-run equilibrium, an increase in government expenditures ______ real GDP and ______ the price level.
increases real GDP and raises the price level
Starting from a position of long-run equilibrium, a world expansion ______, and an increase in expected future profits ______.
increases real GDP and raises the price level; increases real GDP and raises the price level
A government budget deficit occurs, which ______. The real interest rate ______.
increases the demand for loanable funds; rises Private saving increases and investment decreases
Aggregate demand increasesincreases if monetary policy ______ the quantity of money and ______ interest rates.
increases; decreases
Potential GDP ______ and potential GDP per hour of labor ______.
increases; decreases
A decrease in current income taxes ______ the supply of loanable funds today because it ______.
increases; increases disposable income, which encourages greater saving
People are more likely to accept a real wage cut that arises from an increase in the price level than a cut in their nominal wage rate because ______.
inflation decreases the real wage rate gradually and a cut in the nominal wage decreases the real wage rate suddenly.
In the short run, the quantity of real money and real GDP are given and the ______ adjusts to achieve equilibrium. In the long run, supply and demand in the loanable funds market determines the ______.
interest rate; real interest rate In the long run, the price level adjusts to make the quantity of real money supplied equal the quantity demanded.
Stagflation ______.
is a combination of recession and inflation
A flexible exchange rate is one that _______.
is determined by demand and supply in the foreign exchange market with no direct intervention by the central bank
A fixed exchange rate is one that _______.
is set by the government or the central bank and is achieved by central bank intervention in the foreign exchange market
Read the news clip, then answer the following questions. Barter ______ a means of payment. When trading on e-Bay, barter _______.
is; is not as efficient as money because barter requires a double coincidence of wants
Core CPI is a useful measure because ______. Core CPI is a misleading measure because ______.
it smooths out short-term fluctuations that arise from the volatility in food and fuel prices; it does not include food and fuel price rises
The unemployment rate is the percentage of the people in the _____ who are unemployed.
labor force
Suppose the Fed increases the quantity of money. In the long run, supply and demand in the ______ market determines the real interest rate. The ______ adjusts to make the quantity of real money supplied equal to the quantity demanded.
loanable funds; price level
The three main types of markets for financial capital are _______.
loan markets, bond markets, and stock markets
A Half-Year of Job Losses Read the news clip, then answer the following question. According to the news clip, the main source of increased unemployment might be ______, and the main type of increased unemployment is ______.
losses in manufacturing and construction jobs; cyclical
The exports effect is the result that the lower the exchange rate, other things remaining the same, the ______.
lower are the prices of U.S.-produced goods and services to foreigners and the greater is the volume of U.S. exports
The imports effect is the result that the higher the exchange rate, other things remaining the same, the ______.
lower are the prices of foreign-produced goods and services to Americans and the greater is the volume of U.S. imports
Nation's Economic Pain Deepens The unemployment rate in May, 2008 is ______.
lower than the unemployment rates that occurred in recessions since 1980
Inflation ______ the real wage rate, everything else remaining the same.
lowers
An increase in income taxes _______, everything else remaining the same.
makes the multiplier smaller
Which of the following is not a role played by the Budget Committees of the House of Representatives and the Senate in creating fiscal policy?
making the initial budget proposal in February
Why did the unemployment rate fall? The unemployment rate fell because _____.
many people are dropping out of the work force
The unemployment rate is supposed to ______. It is an imperfect measure because ______.
measure underutilized labor; it does not include marginally attached workers and part-time workers who want full-time jobs
Money serves as a ______.
medium of exchange, which means that it is generally accepted in exchange for goods and services
The money multiplier is the ratio of the change in the quantity of ______ to the change in the quantity of ______.
money; monetary base
When the economy goes into recession, the output gap is _______.
negative
If inflation is expected, _______.
neither a cost-push inflation nor a demand-pull inflation occur
The table shows three years of CPI data. The bias in these CPI numbers might arise from ______.
new goods bias, quality change bias, commodity substitution bias, and outlet substitution bias
The labor force is the number of people employed plus the _____.
number unemployed
Which of the people described in the table is unemployed because of labor market mismatching?
only Tory and David
Examples of physical capital are ______. Examples of financial capital are ______.
ovens used by Pizza Hut and lawn mowers used by Larry's Mowing; bonds issued by Wal-Mart and stocks issued by Boeing
The chained CPI ______.
overcomes the sources of bias in the CPI by incorporating substitutions and using current and previous period quantities
Rapid inflation in Brazil in the early 1990s caused the cruzerio to lose its ability to function as money. Which of the following commodities do you think would most likely have taken the place of the cruzeiro in the Brazilian economy?
packs of cigarettes because they are a good medium of exchange
Some unemployment is unavoidable because ______.
people are making transitions through the stages of life and businesses are making transitions
Unemployment arises for all of the following reasons except ______.
people leave the labor force
The working-age population is the total number of _____ aged _____ years and over who are not in jail, hospital, or some other form of institutional care or in the U.S. Armed Forces.
people; 16
The fundamental precondition for labor productivity growth is the incentive system created by all of the following except ______.
population growth
The output gap is real GDP minus _____ expressed as a percentage of _____.
potential GDP; potential GDP
The inflation rate is the percentage change in the _____ from one year to the next. Deflation is a situation in which the _____ is _____ and the inflation rate is _____.
price level; price level; falling; negative
When the real interest rate fallsfalls, the ______ because the ______ is the opportunity cost of loanable funds.
quantity of loanable funds demanded increases; real interest rate
The output gap is the gap between _______.
real GDP and potential GDP.
The demand for labor is the relationship between the quantity of labor demanded and the ______. The supply of labor is the relationship between the quantity of labor supplied and the ______.
real wage rate; real wage rate
How will the labor force participation rate change if Kevin starts creating football apps in his garage and they turn out to be very popular? The labor force participation will _____ Kevin starts creating football apps in his garage and they turn out to be very popular.
rise
How will the unemployment rate change if Sarah quits and starts to search for a full-time job? The unemployment rate will _____ if Sarah quits and starts to search for a full-time job.
rise
An increase in labor productivity ______.
shifts the demand for labor curve rightward and the production function upward
An increase in the population ______.
shifts the supply of labor curve rightward and creates a movement along the production function
An economy is at potential GDP when it experiences an increase in costs. The economy experiences _______.
stagflation
Out of a Job and Out of Luck at 54 Older workers are more prone to experience ______ unemployment. During a recession, the unemployment rate of older workers ______.
structural; increases
Some Firms Struggle to Hire Despite High Unemployment The 5 million workers who cannot find jobs because of mismatching in the labor market are counted as part of the economy's ______ unemployment because ______.
structural; there is a mismatch between their skills and the skills required for the available jobs
When the price level, the money wage rate, and other factor prices rise by the same percentage, there is a movement along ______. Potential GDP ______.
the LAS curve; does not change
When the price level rises but the money wage rate and other factor prices remain the same, there is a movement along ______. The quantity of real GDP supplied ______.
the SAS curve; increases
Mr. Reddy is investing in the U.S. real estate market because ______.
the U.S. dollar depreciated and the price of U.S. investment properties to foreign investors like Mr. Reddy decreased
Although luxury clothing prices have increased dramatically since the late 1990s, the clothing category of the CPI has actually declined by about 10 percent because ______.
the apparel component of the CPI is weighted more heavily toward moderately-priced clothing, and the price of moderately-priced clothing has decreased
The price level is ______.
the average level of prices, and the value of money
To calculate the multiplier, we divide ______ by ______.
the change in equilibrium expenditure; the change in autonomous expenditure
The quantity of U.S. dollars demanded in the foreign exchange market depends on many factors, the main ones being ______.
the exchange rate, world demand for U.S. exports, interest rates in the United States and other countries, and the expected future exchange rate
Economic growth is _______.
the expansion of production possibilities
Along the short-run Phillips curve, ______.
the expected inflation rate and the natural unemployment rate are constant
The U.S. interest rate differential rises if ______, and the larger the U.S. interest rate differential, the ______ is the demand for U.S. dollars in the foreign exchange market.
the foreign interest rate falls; greater
One of the Fed's main policy tools is ______.
the last resort loan, which means that if a bank is short of reserves, it can borrow from the Fed
A cost-push rise in the price level can arise from an increase in _______.
the money wage rate or money prices of raw materials
As we move up along the short-run aggregate supply curve, ______.
the money wage rate, the prices of other resources, and potential GDP remain constant
Nation's Economic Pain Deepens The unemployment rate tends to actually underestimate the unemployment problem, especially during a recession, because ______.
the number of marginally attached workers increases, but these workers are not included in the official unemployment rate
An open market operation is ______.
the purchase or sale of securities by the Federal Reserve System in the loanable funds market
A stagflation can turn into a cost-push inflation process when _______.
the quantity of money persistently increases
Everything else remaining the same, an increase in aggregate demand increases ______.
the quantity of real GDP supplied
As we move up along the long-run aggregate supply curve, ______.
the real wage rate remains constant
The two broad sources of potential GDP growth are growth of ______ and growth of ______.
the supply of labor; labor productivity
Along the long-run Phillips curve, _______.
the unemployment rate is constant at the natural unemployment rate
Some Firms Struggle to Hire Despite High Unemployment Choose the statement that is incorrect. If the labor market is working properly, there is still unemployment because ______.
there are always discouraged searchers
The price index with the greatest bias is ______ because ______.
the CPI; it isn't based on current period actual expenditure weights
When the Fed buys securities from a bank, ______.
the bank's reserves increase but its deposits do not change
G-20 Leaders Look to Shake off Lingering Economic Troubles The "capital" referred to in the news clip is ______. The financial institutions that the G-20 might require to hold more capital are ______.
the institutions' own funds; banks and insurance companies
If the natural unemployment rate increases and the expected inflation rate remains constant, then ______.
the long-run Phillips curve shifts rightward and the short-run Phillips curve shifts rightward
If the expected inflation rate increases and the natural rate of unemployment remains constant, then _______.
the short-run Phillips curve shifts upward and the long-run Phillips curve does not shift
Physical capital is ______. Financial capital is ______.
the tools, instruments, machines, buildings, and other items that have been produced in the past and that are used today to produce goods and services; the funds that firms use to buy physical capital
A movement ______ along the short-run Phillips curve occurs when there is an ______ increase in aggregate demand.
up; unexpected
An unemployed person ______.
wants work, has made specific efforts to find a job within the previous four weeks, or is waiting to be called back to a job from which he or she has been laid off, or is waiting to start a new job within 30 days
The table above provides information about the U.S. labor market in August, 2016, July, 2017, and August, 2017. The graph shows the unemployment rate since August, 2012. In August, 2017 the number employed decreased and the unemployment rate increased . Over the year since August, 2016 the number employed increased and the unemployment rate decreased . The change in the unemployment rate over the past year suggests that the U.S. economy ______.
was in expansion
The labor force participation rate is the percentage of the _____ who are members of the labor force.
working-age population
Growth rates are calculated in a similar manner for all variables. Real GDP growth rate = [(Real GDP in ______ yearminus−Real GDP in ______ year) divided by ÷Real GDP in ______ year ] times ×100.
current; previous; previous
