THE ULTIMATE
compound growth
GDP*(1.0+percent increase)^amount of years
autonomous expenditure does not depend on what factor
GDP/output
the most liquid source of money is
M1
suppose an economy is defined by the following C=150+.7(Yd)
MPC
Darnell is a skilled dancers, makes 44,000, she is giving up her work to join a touring dance company, she will make 24,000 a year, her decision results in
a two year opportunity cost of 40,000 after leaving her teaching position, 44k-24k=20kx2
which of the following institutional structures is most likely to promote growth
a well enforced system of patents and copyrights
a key part of the income expenditure model is understanding that as GDP rises, so does
aggregate expenditure
to find the macro equilibrium in a table, the numbers for ___ and __ should equal each other
aggregate expenditure, GDP/national income
what is the best explanation for the relatively horizontal area of the short run aggregate supply curve
an increase in aggregate demand when the economy is operating below potential output causes real output to grow, with littler or no effect on the price level
the multiplier effect means that
an increase in investment can cause GDP to change by a larger amount
other things equal, which of the following would increase the rate of economic growth, as measured by changes in real gdp
an increase in the size of the working age population
if for some reason household become increasingly thrifty, we could this by
an upward shift of the saving schedule
as disposable income increases, consumption
and saving both increase
where is the macro equilibrium found in the income-expenditure model graphically
at the level of GDP where national income equals aggregate expenditure
when describing the economy's aggregate expenditure components impacted bu the real level of income, which of the following terms is excluded from that description
autonommous expenditure
which is inaccurate about banks deposits
banks lend out all of their deposits to earn income
cigarettes can be used as a form of
barter
how would the equation where x=3 and y-4 be represented on a graph
beginning y=4 on the y axis as a horizontal line, vertical straight line for x=3
which of the following is true about export and imports as function of national income
both are horizontal lines with imports being negative as it related to real GDP
silicon is used for manufacturing of semiconductor chips, price of silicon has decrease by 15%, what has happened to the supply and demand curves?
both the demand and supply of semi chips will increase shifting the curves to the right with the equilibrium quantity increasing but is impossible to pinpoint the equilibrium price chanfe
when potential gap is reached, aggregate supply becomes vertical for
both the income expenditure model and the traditional AD-AS model
what tool might the Fed use to boost the economy during a recession
buying govt securities
because of our limited money, time and effort, we are best off when we allocate thinfs
by constantly assessing the opportunity costs of our choices
a positive statment is
can be shown to be correct or incorrect
when tasks involved with producing a good or service are divided among different workers, business
can produce a greater quantity of those good or services
which of the following statements is correct
central bank intervention reflects its goals for inflation, unemployment and economic growth
the M2 money supply consists of everything in the M1 money supply, savings deposits and which of the following
certificates of deposit
the multiplier is useful in determining the
change inGDP resulting from a change in spending
self interest is not necessarily selfish, some say. in fact, self interest likely includes an individuals consideration for
close friends and family
if the economy's real GDP doubles in 18 years, we can
conclude that its average annual rate of growth about 3.9 percent
suppose an economy is defined by the following: C=210+.8(Yd), this equation represents the
consumption function
tessas break even income is 10,000 and her mpc is .75, if her actual disposable income is 16,000, her level of
consumption spending will be 14,500
which type of deposits institutions are considered the safest
credit unions
if the marginal propensity to consume is .9, then the marginal propensity to save must be
.1
which criticism of the 0% inflation target is best supported by the economic literature?
0% inflation target could lead to deflation
what inflation target is most advisable
1-2%
during an inflationary gap due to overly sufficient aggregate demand, the govt should ___ spending by an amount determined bu the spending multiplier in an attempt to return the economy to potential GDP/full employment
decrease
online mortgage companies have been growing in numbers and size, if all other things are equal, as a result of this growth, traditional banks have had to
decrease the interests on their mortgage loans as the demand for traditional mortgage loans decreases
some highways have commuter or express pass lanes...
drivers who call speed and convenience more than those in the stoop and go lanes are willing to pay additional express pass fees for the option of avoiding traffic jams
economic growth is best defined as an increase in
either real GDP or real GDP per capita.
all of the following contribute to low investment spending in DVC's except
expensive labor
capital flight refers to the fact that many DVC must use their export earnings to pay interest on their outstanding external debts
false
the intense competition of free trade prevents the investment that generates economic growth
false
the population of the developing nations are growing
faster than those of the industrially advanced nations
wesley lives in a country with little protection under the law for conducting business or bringing ideas about a revolutionary new car tire to the market with patent production
find a country where he can develop his tire ideas and have it protected under strong patent laws
gpa question
follow the ****in formula
rapid population growth can be an obstacle to economic development
for all of these reasons
the country of zanabar produces computers and in a large quantity, while abathana expertly produces cell phones
freely trade computer and cellphone to improve allocative efficiency
which of the following is included in GDP
government purchases of labors, goods, and services
which of the following is NOT true about government spending as function of national income
govt soending will fluctuate
the slope of a budge constraint line is influenced by
how much one product costs compared to the other
after getting her degree in economics, jeanie went to work for the BLS. she compiles data on the unemployment rate, which serves as an economic indicator. what does this data help jeanie understand
how well the economy is doing at a macro level
with a marginal propensity to save of .4, the marginal propensity to consume will be
1.0-.4
wakanda has GDP 2018 of 555 billion, 2 million workers, average of 1400 hours a year, what is the value of the output per worker per hour of work
198$
in the last few decades the car manufacturing sector has found it difficult to compete with foreign car imports. high labor costs is one of the main reasons economist site as lack of competitiveness for the car manufacturing industry. if there was modest inflation, how could it possibly help the car manufacturing industry in the US compete with foreign car manufacturing?
it could allow real wages to downwardly adjust more easily
most of the dvc find it difficult to accumulate capital goods b/c
it is very difficult to restrict consumption and thus to free resources for capital goods production
this year the economy is strong and there is every expectation that it will continue to be strong over the next few years. with this confidence in the economy, what would most likely happen to the consumption function
it will shift the consumption function upward
read graphs properly
just read them
which of the following scenarios would be most beneficial to a bank
kim and micah decide to move most of their money from a checking account into a savings account
what are the factors of production
land, economic capital, labor, entrepreneurship
it is important to remember when calculating the spending multiplier to determine govt spending, the ___ in the income expenditure model is found at the point where the level of GDP/national income equals expenditure
macro equilibrium
a bank is more likely to face bank runs by deposition if it
makes risky loans to investors
in 1985 inflation in israel reached a record 500%, how did this period of high inflation affect market adjustments towards equilibrium price and quantity
markets adjusted to equilibrium more erratically and slowly
charlie is researching the relationship between the number of hours he spends on social and his success in his classes. he sets up an equation to better understand the implications of this relationship. this describes a
math function
what will we never do in a world of scarcity
meet all of society's wants
small loans to entrepreneurs and small business owners in DVC are referred to as
microfinance
macroeconomic polices that focus on credit and interest rates or controlling the money supply are called
monetary polices
how does monetary policy affect the market
monetary policy has an indirect impact on aggregate demand
the M2 measure of money includes
money market funds
from an initial equilibrium, suppose there's an increase in demand, once the market reaches its new equilibrium there will be
more transaction, and they will take a place at a higher price
one can determine the amount of any level of total income that is consumed by
multiplying total income by the APC
in order to satisfy as many wants as possible, it is necessary to achieve allocative efficiency,
since others output may go to where it is less valued
a liability in a banks T-account is
something owned by the bank
if trents MPC is .8, this means that he will
spend 8/10 of any increase in disposable income
if the demand for home gaming system games has drastically increased in the last month, what scenario is most likely to have happened
the holidays and new years are around the corner
the most important determinant of consumer spending is
the level of income
a restaurant chain sponsored a charity that provides support to the parents of children being treated for cancer. how would the use of company funds for this purpose be justified by a business whose goal is to maximize profit?
the money spent is worth the boost it gives to corporate image
a local bank sponsors a charity run that raises funds for a nonprofit building wells and schools in mali, africa. how would the use of the bank's funds for this fundraise be justified when its goal is to maximize profit?
the money spent is worth the public relations boost it gives the banks image
what will happen to the money supply if the fed increases the reserve requirement
the money supply will decrease
all of the following are resources of increasing returns and economies of scale except
the multiplier effect
if nations labor forces receives a significant influx of young workers
the natural rate of unemployment is likely to increase
to find unemployment, you need to calculate
the number of unemployed workers divided by the labor force
of these statements about the potential gap line, which is incorrect
the potential GDP line makes the assumption that it is at less than full employment of its physical capital and labor
scarcity is imposed on individual households in the form of income and
the price of goods that person may purchase
money creation in the US results from which of the following
the process of multiple banks lending out deposits
the GDP deflator is
the ratio of nominal GDP to real GDP
when quantity demanded decreases in response to a change in price
there is a moment from one point to another along the demand curve
the supply curve will shift to the right if which of the following occurs
there is an improvement in production tech
as an economist George is analyzing a consumption graph and notices that the slope has flattened
there was a decrease in the MPC
according to the growth accounting studies, if you lived in a country where illiteracy was high and 40% of the children left school early and did not complete their education what would probably be the results for that country?
there would be both a human and economic loss
frictional unemployment occurs because in a world of imperfect information, it takes ____ for people to find jobs
time
given the annual rate of economic growth, the rule of 70 allows one
to calculate the number of years required for real GDP to double
1-MPC=MPS
true
the greater the mpc, the greater the multiplier
true
the multiplier shows the relationship between changes in a component of spending investment and the consequent changes in real income and output
true
which of the following institutional arrangements is most likely to promote growth
unrestricted trade between nations
what combination of model characteristics are frequently used in the most effective models
useful and simple
normative statements are based upon
value judgements
many countries remain poor because they are currently poor, this statement summary the
vicious circle of poverty
underemployment occurs
when workers are working fewer hours than they desire or when they are working less productivity than they are capable
if ali grows hot peppers in his garden for his own consumption, the value of his production
will not be included in GDP and understate the value of the production in his country
nice that total spending for a household will have a base of $1000, we can predict total spending with the y=mx+b
y represent total spending
id the fed raises reserves requirements, the interest rates will__ and the money supply will___
rise; decrease
the consequences of unemployment are likely more serious in DVC
DVC are more likely to lack unemployment assistance programs
the theory of rational behavior
is an assumption that economists make to have a useful model for how decisions are made
if a technological advance expands output and requires a smaller investment in capital goods, this technological advance
is capital-saving
GDP deflator
(Nominal GDP/ deflator) x100
with a real gap of 100bil in 2016 and 140bil in 2017, the death growth would be?
40%, (real GDP 2017-real 2016)/real GDP 2016
miriam owns a small shop selling custom headband, she sold 335 for 10, based on law of demand, what quantity will she sell with 6
415
at the point where the consumption schedule intersects the 45 degree line
APC is 1.0
suppose a family's consumption exceeds its disposable income, this means that
APC is greater than 1
other thing equal, which of the following would decrease the rate of economic growth, as measured by changes in real gdp
a decrease in the labor force participation rate
a highly active role by govt may be needed to promote economic growth in low income DVC due to
a lack of infrastructure
which of the following is a characteristic of a DVC
a large percentage of labor force is in agriculture
GDP is a __ measurement of standard of living because
imperfect, not all important determinants of standard of living are incorporated
all of the following are components of the aggregate expenditure model except
import spending
the consumption schedule is drawn on the assumption that as income increases, consumption will
increase absolutely but decline as a percentage of income
as the info tech advances and consumer buy the products requiring more and more technology, the wages of people with high level programming and other tech skills
increase as the demand for high tech skills increases
for the GDP to change when the AS curve is horizontal, means it must change through
increases or decrease in aggregate demand
an expansionary monetary policy affects aggregate demand
indirectly, by lowering interest rates and increasing the availability quantity of loans which stimulates spending
if 100% of any change in income is spent, the multiplier will be
infinitely large
when a central bank decides to make a policy intervention it must be mindful of the trade off between
inflation and unemployment
two common ways to discourage tobacco use are taxes and info, which one causes a shift in the demand curve for smoking
info campaign on hazards of tobacco
consumers must choose whether they prefer to consume goods, including money, now or in the future,
intertemporal decision making
consider the A.E=C+I+G+(X-M), which function is drawn as horizontal
investment
reading budget constraint models
negative because of scarcity and the limited amount of money available
rapid technological change is likely to increase which problem MOST for CPI as an accurate measure of cost of living changes
new good bias
the money multiplier defines the amount of
only that the banking systems can create
the budget constraint model differs from ppt model in that, typically
only the ppt model demonstrates diminishing returns
if the govt sets floor prices for wheat or corn that guarantee farmers an above market price for that product, the most probable result would be what
overproduction
strong property rights are important for modern economic growth because
people are more likely to incest if they don't fear that others can taker their on investment without compensation
an interest rate is the ___ and the reward for lending money
price of borrowing money
henry accepted a new position at a ball bearing manufacturing plant after graduation from college. with his macroeconomic education, henry has been asked to advise the best way to measure inflation for the company to be able to accurately adjust its prices. what would henry advise the comment to use?
producer price index
a contractionary monetary policy reduces GDP by
raising interest rates and discouraging investments and consumption spending
chart questions
read the chart
for a nations real GDP per capita to rise during a year
real GDP must increase more rapidly than population
the size of the multiplier is equal to the
reciprocal of the slope of the consumption schedule
a contraction or tight monetary policy
reduces borrowing
in contrast to investment, consumption is
relatively stable
corporate stock
represents ownership in a firm
the relationship between the price in a market and the amount that producer collective make available for sale, is referred to as,
supply
which economics principle is present in financial markets
supply and demand
investment in kind refers to the possibility that
surplus labor in agriculture can be diverted to the production of a simple capital goods such as earthen dams
inflation makes certain things less valuable in real terms, including
the dollar
the current economic policy being implemented by the Key economist in got is moving the economy back toward potential gap through increased taxation, knowing this policy what would you say is the current state of the economy
the economy is experiencing an inflationary gap
if the fed reserve did not regulate monetary policy, monitor banks and provide services for banks, what would most likely be the economic conditions to transact business in the US
the economy would be less efficient and transactions most likely more costly
identify the normative statement
the federal govt spends too much, statement has an opinion rather than plain facts
which of the following is unlikely to affect labor productivity
the frequency of business cycles
a free market is described by which of the following statements
the govt does not set or influence market prices in any way
capital flight refers to
the high international mobility of speculative funds caused by variation in exchange rates