Mankiw Macroeconomics Chapters 1-5

If the monetary base equals $400 billion and the money multiplier equals 2, then the money supply equals:

$800 billion

what is the leverage ratio?

Deposits/Equity

The percentage of government revenue raised by printing money has usually accounted for:

less than 3 percent of government revenue in the US

To increase the money multiplier, the Fed can:

lower the interest rate paid on reserves

Real GDP is a better measure of economic well-being than nominal GDP, because real GDP:

measures changes in the quantity of goods and services produced by holding prices constant.

If the ratio of currency to deposits (cr) increases, while the ratio of reserves to deposits (rr) is constant and the monetary base (B) is constant, then

money supply decreases

In equilibrium, total investment equals:

national saving

The general demand function for real balances depends on the level of income and the:

nominal interest rate

An economy's factors of production and its production function determine the economy's:

output of goods and services

The panel of economists appointed by the Senate Finance Committee estimated that the CPI ___ inflation by approximately ____ percentage points per year.

overestimates; 1

The rate of inflation is the:

percentage change in the level of prices

A competitive, profit-maximizing firm hires labor until the:

price of output multiplied by the marginal product of labor equals the wage

If the transactions velocity of money remains constant while the quantity of money doubles, the:

price of the average transaction multiplied by the number of transactions must double.

Assume that an increase in consumer confidence raises consumers' expectations of future income and thus the amount they want to consume today for any given income. This shift, in a neoclassical economy, will:

raise the interest rate and lower investment

If the demand for real money balances is proportional to real income, velocity will:

remain constant

In a 100-percent-reserve banking system, if a customer deposits $100 of currency into a bank, then the money supply:

remains the same.

To prevent banks from using excess reserves to make loans that would increase the money supply, the Federal Reserve could conduct open-market ______ and _____ the interest rate paid on bank reserves.

sales; raise

When the demand for money parameter, k, is large, the velocity of money is ______ and money is changing hands ______

small; infrequently

Think about the first loanable funds model presented in Chapter 3. If the quantity of saving exceeds the quantity of investment desired by firms:

the interest rate will fall

The ratio of the money supply to the monetary base is called:

the money multiplier

If you hear in the news that the Federal Reserve conducted open-market purchases, then you should expect ______ to increase.

the money supply

During a particular quarter, the Fed decreased the interest rate paid on reserves and the ratio of currency to deposits decreased. The monetary base was constant. Based on these facts,

the money supply increased

If velocity is constant and, in addition, the factors of production and the production function determine real GDP, then:

the price level is proportional to the money supply

In a Cobb-Douglas production function the marginal product of labor will increase if:

the quantity of capital increases.

If an earthquake destroys some of the capital stock, the neoclassical theory of distribution predicts:

the real wage will fall and the real rental price of capital will rise

Financial intermediation is the process of:

transferring funds from savers to borrowers

In a fractional-reserve banking system, banks create money when they:

make loans

According to the neoclassical theory of distribution, total output is divided between payments to capital and payments to labor depending on their:

marginal productivities.

GNP equals GDP ___ income earned domestically by foreigners ___ income that nationals earn abroad.

minus; plus

When prices of different goods are increasing by different amounts, the price index that will usually rise the fastest is:

the CPI

An increase in the price of imported goods will show up in:

the CPI but not in the GDP

If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657, investment is $741, and net exports are -$1,910, then government purchases are:

$5,465= $3,657 (C)+$741(I)-$1,910(NX)+G G= $2,977

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $1.50 in 2009. If 4 apples were produced in 2002 and 5 in 2009, whereas 3 oranges were produced in 2002 and 4 in 2009, then real GDP (in 2002 prices) in 2009 was:

$6.50

If currency held by the public equals $100 billion, reserves held by banks equal $50 billion, and bank deposits equal $500 billion, then the money supply equals:

$600 billion

If the money supply increases 12 percent, velocity decreases 4 percent, and the price level increases 5 percent, then the change in real GDP willl be approximately ______ percent.

3

If there are 100 transactions in a year and the average value of each transaction is $10, then if there is $200 of money in the economy, transactions velocity is ______ times per year.

5

According to the quantity theory, a 5 percentage point increase in money growth raises the inflation rate by ___ percentage points. According to the Fisher equation, a 5 percentage point increase in the rate of inflation increases the nominal interest rate by _____ percentage points.

5; 5

Consumption depends positively on ____ and investment depends negatively on ____.

Disposable income' the real interest rate

According to the quantity theory of money, ultimate control over the rate of inflation in the United States is exercised by:

The Federal Reserve

Other things equal, an increase in the interest rate leads to:

a decrease in the quantity of investment goods demanded

When a firm sells a product out of inventory to a household, investment expenditures ___ and consumption expenditures ____.

decrease; increase

Liabilities of banks include:

demand deposits

All of the following are measures of GDP except the total:

expenditures of all businesses in the economy

Money that has no value other than as money is called ______ money.

fiat

Most hyperinflations end with _____ reforms that eliminate the need for _____.

fiscal; seigniorage

An estimate of the number of unemployed workers in the economy can be obtained from:

from the household survey, but not from the establishment survey

The market value of all final goods and services produced within an economy in a given period of time is called:

gross domestic product

Using average rates of money growth and inflation in the United States over many decades, Friedman and Schwartz found that decades of high money growth tended to have ______ rates of inflation and decades of low money growth tended to have ______ rates of inflation.

high; low

An example of an imputed value in GDP is the:

housing services enjoyed by homeowners.

Which of the following is a flow variable?

income

National saving refers to:

income minus consumption minus government spending

The demand for real money balances is generally assumed to:

increase as real income increases

In 1932, the U.S. government imposed a two-cent tax on checks written on deposits in bank accounts. This action would be expected to ______ the currency-deposit ratio and ______ the money supply.

increase; decrease

In the neoclassical model with fixed income, if there is a decrease in government spending with no change in taxes, then public saving ______ and private saving ______.

increases; does not change

Suppose the money stock is growing 10 percent per year and real output is growing 3 percent per year. If velocity is steadily rising over time due to financial innovation, the quantity theory of money would predict the rate of inflation would be:

increasing

According to the model developed in Chapter 3, when government spending increases without a change in taxes:

investment decreases

When bread is baked but put away for later sale, this is called:

investment in inventory

At any particular point in time, the output of the economy:

is fixed because the supplies of capital and labor and the technology are fixed.

In the United States, the money supply is determined:

jointly by the Fed and by the behavior of individuals who hold money of banks in which money is held

In 2013, the GDP of the United States totaled about:

$16.8 trillion

Assume that the adult population of the United States is 191.6 million, total employment is 117.6 million, and 9.4 million are unemployed. Then the unemployment rate, as normally computed, is approximately ___ percent.

(unemployed)/(employment+unemployed)= unemployment rate (9.4)/(117.6+9.4) million

If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then C increases by:

0.85 units

In a country on a gold standard, the quantity of money is determined by the:

amount of gold

Checking account balances that are linked to debit cards are included in:

both M1 and M2

The value of banks' owners' equity is called bank:

capital

Demand deposits are funds held in:

checking accounts

When a pizza maker lists the price of a pizza as $10, this is an example of using money as a:

unit of account

If the number of employed increases while the number of unemployed does not change, the unemployment rate:

will decrease

According to the neoclassical theory of distribution, in an economy described by a Cobb-Douglas average labor productivity is growing rapidly:

workers will experience high rates of real wage growth