Econ 362 quiz questions
In the Keynesian-cross model, if the MPC= 0.75, then a $1 billion decrease in taxes increases planned expenditures by ____ and increases the equilibrium level of income by _____. -$0.75 billion; more than $0.75 billion -$1 billion; more than $1 billion -$0.75 billion; $0.75 billion -$1 billion; $1 billion
$.075 billion; more than $0.75 billion (HW7)
In the Keynesian-cross model, if the MPC equals 0.75, then a $1 billion increase in government spending increases planned expenditures by ____ and increases the equilibrium level of income by ___. -$0.75 billion; $0.75 billion -$1 billion; $1 billion -$1 billion, more than $1 billion -$0.75 billion; more than $0.75 billion
$1 billion; more than $1 billion (HW 7)
If the currency held by the public equals $100 billion, reserves held by banks equal $50 billion, and bank deposits equal $500 billion, then the monetary base equals:
$150 billion (3)
Assume that a rancher sells McDonalds a quarter-pound of meat for $1 and that McDonalds sells you a hamburger made from that meat for $2. in this case, the value included in GDP shoud be:
$2 (1)
If the average price of goods and services in the economy equals $10 and the quantity of money in the economy equals $200,000, then real balances in the economy equal:
$200,000/$10= $20,000 (4)
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 apples in 2009, where as 3 oranges were produced in 2002 and 4 in 2009, then real GDP (in 2002 prices) in 2009 was:
$6.50 (1)
If the monetary base equals $400 billion and the money multiplier equals 2, then the money supply equals
$800 billion (3)
A bank balance sheet consists of only the following items: Deposits $1,000 Reserves $100 Securities $400 Debt $500 Loans $2000 What is the value of bank capital?
+$1000 (3)
In a Solow model with technological change, if population grows at a 2% rate and the efficiency of labor grows at a 3% rate, then in the steady state, output per effective worker grows at a ____ % rate
0 (6)
Assume that equilibrium GDP (Y) is 5,000. Consumption (C) is given by the equation C=500 +0.6Y. No government exits. In this case, equilibrium investment is
1,500 (2)
The nominal interest rate is 1% and the inflation rate is 5%, then the real interest rate is:
1-5= -4% (4)
Bank Balance Sheet Assets: Reserves- $10,000 Loans- 100,000 Securities- 40,000 Liabilities and Net Worth: Deposits- $100,000 Debt- 20,000 Equity- 30,000 Bases on the table, what is the reserve-deposit ration at the bank?
10% (3)
According to the Keynesian-cross analysis, if the marginal propensity to consume is 0.6, and government expenditures and autonomous taxes are both increased by 100, equilibrium income will rise by:
100 (HW7)
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.
100 transactions x $10=$1000/$200= 5 (4)
If the money supply increases 12%, velocity decreases 4%, and the price level increases 5%, then the change in real GDP must be____ %
12-4=5+Y 8=5+Y Y=3 (4)
If nominal GDP grew by 5% and real GDP grew by 3% then the GDP deflator grew by __%
2
Recessions typically, but not always include at least ___ consecutive quarters of declining real GDP.
2 (7)
If nominal GDP grew by 5% and real GDP grew by 3%, then the GDP deflator grew by approximately ____%
2% (1)
If the currency-deposit ratio equals -.5 and the reserve-deposit ratio equals 0.1, then the money multiplier equals
2.5 (3)
All of the following transactions that took place in 2009 would be incouded in GDP for 2009 except the purchase of a -2001 Jeep Cherokee -ticket to see the movie 2001 -book printed in 2009, entitled The Year 3000 -year 2010 calendra printed in 2009
2001 Jeep Cherokee (1)
If the capital stock equals 200 in year 1 and the depreciation rate is 5% per year, then in year 2, assuming no new or replacement investment, the capital stock would equal ___ units.
200x.005=10 200-10=190 (5)
If the consumption function is given by C=500+0.5(Y-T), and Y is 6,000 and T is given by T=200+0.2Y, then C equals
2800 (2)
In a Solow model with technological change, if population grows at a 2% rate and the efficiency of labor grows at a 3% rate, then in the steady state, output per actual worker grows at a ___ % rate.
3 (6)
If the U.S. production function is Cobb-Douglas with capital share 0.3, output growth is 3 % per year, depreciation is 4% per year, and the golden rule steady-state capital-output ratio is 4.29, to reach the Golden Rule steady state, the saving rate must be:
30% (5)
If disposable income is 4,000, consumption is 3,500, government spending is 1,000, and taxes minus transfers are 800, national savings is equal too
300 (2)
If MPC=0.75 (and there are no income taxes) when G increases by 100, then the IS curve for any given interest rate shifts to the right by
400 (8)
Bank Balance Sheet Assets: Reserves- $10,000 Loans- 100,000 Securities- 40,000 Liabilities and Net Worth: Deposits- $100,000 Debt- 20,000 Equity- 30,000 Bases on the table, what is the leverage ration at the bank?
5 (3)
In a Solow model with technological change, if population grows at a 2% rate and the efficiency of labor grows at a 3% rate, then in the steady state, total output grows at a ___% rate.
5 (6)
Assume that the money demand function is (M/P)^d= 2,200-200r, where r is the interest rate in percent. The money supply M is 2,000 and the price level P is 2. The equilibrium interest rate is ___%.
6 (HW7)
In the Keynesian cross analysis, if the consumption function is given by C=100 +0.6(Y-TT), and planned investment is 100, G is 100, and T is 100, then equilibrium Y is:
600 (HW7)
If the per-worker production function is given by y=k^1/2, the saving ratio is 0.3, and the depreciation rate is 0.1, then the steady-state ration of capital to labor is:
9 (5)
According to the Institutions Theory of economic growth, which of the following is essential for a country's economic development?
A fair legal system which protects property rights
According to the quantity theory of money, ultimate control over the rate of inflation in the US is exercised by the
Fed
the quantity of money in the US is essentially controlled by the
Federal REserve
How does the distinction between flexible and sticky prices impact the study of the macro economy?
Flexible prices are typically assumed in the study of long run, while stick prices are assumed in the study of the short run
An increase in consumer saving for any given level of income will shift the: -LM curve downward and to the right -IS curve downward and to the left -IS curve upward and to the right -LM curve upward and to the left
IS curve downward and to the left (9)
The U.S. recession of 2001 can be explained in part by a declining stock market and terrorist attacks. Both of these shocks can be represented in the IS-LM model by shifting the ___ curve to the ___
IS; left (9)
Which of the following is the best example of structural unemployment?
Kirby is seeking a job as an airline pilot, but the high union wages in the industry have limited the number of jobs available
A decrease in the money supply would shift the
LM curce to the left (8)
The increase in income in response to a fiscal expansion in the IS-LM is: -less than in the Keynesian-cross model unless the LM curve is horizontal -less than in the Keynesian-cross model unless the IS curve is vertical -always less than in the Keynesian-cross model -less than in the Keynesian cross model unless the LM curve is vertical
Less than in the Keynesian-cross model unless the LM curve is horizontal (HM7)
Consider the money demand function that takes the form (M/P)^d=kY, where M is the quantity of money, P is the price level, k is a constant, and Y is real output. If the money supply is growing at a 10% rate, real output is growing at a 3% rate, and k is constant, what is the average inflation rate in this economy?
M=10, Y=3 P=M-Y =10 -3= 7% (4)
which of the following individuals would economists consider unemployed
a factory worker is temporarily laid off but expects to be called back to work soon
Assume that a country experiences a reduction in productivity that shifts the labor demand curve downward and to the left. If the labor market were always in equilibrium, this would lead to:
a lower real wage and no change in unemployment
The ex post real interest rate will be greater than the ex ante real interest rate when the
actual rate of inflation is less than the expected rate of inflation
The labor force participation rate is the percentage of the:
adult population that is in the labor force
Economic profit is zero if
all factors are paid their marginal products and there are constant returns to scale
If bread is produced by using a constant returns to scale production function, then if the:
amounts of equipment and workers are both doubled, twice as much bread will be produced
If the rate of separation is 0.02 and the rate of job finding is 0.08 but the current unemployment rate is ____ the equilibrium rate, and in the next period it will move ____ the equilibrium rate
below; toward
If the Fed announces that it will raise the money supply, in the future but does not change the money supply today,
both the nominal interest rate and the current price level will increase
Based on the graph for the market for real money balances, if the interest rate is above equilibrium, then people will ____ bonds and the interest rate will____.
buy; fall (HW7)
The inflation tax is paid
by all holders of money
The two most important factors of production are
capital and labor
If output is described by the production function Y=AK^0.2L^0.8, then the production function has:
constant returns to scale (2)
In the national income accounts, the purchase of durables, nondurables, and services by households are classified as:
consumption
In the IS-LM model, changes in taxes initially affect planned expenditures through: -consumption -investment -government spending -the interest rate
consumption (8)
In the US bank reserves consist of
currency and demand deposits
The money supply will decrease if the
currency-deposit ratio increases
If a larger share of national output is devoted to investment, then living standards will
decline in the short run and may not rise in the long run
If a larger share of national output is devoted to investment, then living standards will: -rise in the short run but may not rise in the long run -decline in the short run and may not rise in the long run -always rise in both the short run and long run -always decline in the short run but rise in the long run
decline in the short run and may not rise in the long run (6)
Assume that a war reduces a country's labor force but does not directly affect its capital stock. If the economy was in a steady state before the war and the saving rate does not change after the war, then, over time, capital per worker will ____ and output per worker will ____ as it returns to the steady state.
decline; decline (6)
If wage rigidity holds the real wage above the equilibrium level, an increase in the demand for labor will ___ the number of unemployed
decrease
According to the IS-LM model, if congress raises taxes but the Fed wants to hold income constant, then the Fed must ____ the money supply.
decrease (9)
If the Fed wishes to increase the money supply, it should:
decrease the discount rate
An increase in the supply of capital will:` -Decrease the real rental rate -decrease the real rental price of capital -increase the real rental price of capital -increase the productivity of capital
decrease the real rental price of capital (2)
In the IS-LM model, a decrease in government purchases leads to a(n) ____ in planned expenditures, a(n) ____ in money demand, and a(n)_____ in the equilibrium interest rate.
decrease; decrease; decrease; decrease (8)
When a firm sells a product out of inventory, investment expenditures ___ and consumption expenditures ____
decrease; increase
If there is an increase in government spending that shifts the IS curve to the right, then in order to keep output constant, the Fed should ___ the money supply to __.
decrease; left (9)
Other things equal, when the interest rate rises, demand for goods and services
decreases (7)
When the Fed makes an open-market sale, it:
decreases the monetary base (B)
In the neoclassical model with fixed income, if there is a decrease in taxes with no change in government spending, the public saving ___ and private saving ___
decreases; increases
Liabilities of a bank include
demand deposits
In the Solow growth model with population growth and technological change, the breakeven level of investment must cover: -depreciating capital -depreciating capital and capital for new effective workers -depreciating capital, capital for new workers, and capital for new effective workers -depreciating capital and capital for new workers
depreciating capital, capital for new workers, and capital for new effective workers (6)
According to the definition used by the U.S. Bureau of Labor Statistics, people are considered to be unemployed if they:
do not have a job, but have looked for work in the past 4 weeks (1)
When a firm sells a product out of inventory, GDP: -increases or decreases, depending on the year the product was produced -decreases -increases -does not change
does not change (1)
A decrease in the price level, holding nominal money supply constant, will shift the LM curve:
downward and to the right (HW7)
The short run refers to a period: -during which prices are sticky and unemployment may occur -during which capital and labor are fully employed -of several days -during which there are no fluctuations
during which prices are sticky and unemployment may occur (7)
If the national saving rate increases, the
economy will grow at a faster rate, until a new, higher, steady state capital- labor ratio is reached
The fact tat the Soviet Union's input was the same as the US but produced only 1/3 of the US GDP highlights the importance of what factor in growth?
efficiency
Imputed values included in GDP are the
estimated value of goods and services that are not sold in the market place (1)
When a person purchases a 90 day Treasury bond, he cannot know the
ex post real interest rate
When a person purchases a 90-day Treasury bill, he or she cannot know the: -ex post real interest rate -ex ante real interest rate -expected rate of inflation -nominal interest rate
ex post real interest rate (4)
In the Keynesian Cross, if firms are producing at a level below equilibrium, then inventories will ___, inducing firms to ___ production.
fall; increase (HW7)
In the IS-LM model when M rises but P remains constant, in the short-run equilibrium, in the usual case the interest rate ____ and output____. -rises; falls -rises; rises -falls; rises -falls; falls
falls; rises (8)
Money that has no value other than as money is called
fiat money
the compute the value of GDP
goods and services are valued at market prices
When the Federal Reserve increase the money supply, at a given price level the amount of output demanded is ___ and the aggregate demand curve shifts ____.
greater; outward (7)
Assume that a bakery hires more workers and pays them wages and that the workers produce more bread. GDP increases in all of the following cases except when the bread: -grows stale and is thrown away -is sold to other firms -is sold to households -is stored away for later use
grows stale and is thrown away (1)
The efficiency of labor is a term that does not reflect the:
high output that comes from labor cooperating with a large amount of capital
The efficiency of labor is a term that does not reflect the -high output that comes from labor cooperating with a large amount of capital -health of the labor force -skills of the labor force acquired though on-the-job training -education of the labor force
high output that comes from labor cooperating with a large amount of capital (6)
If there is an increase in government spending that shifts the IS curve to the right and the Fed does not change the money supply the new equilibrium will have a ___ income and ____ interest rate.
higher; higher (9)
An example of an imputed value in the GDP is the:
housing services enjoyed by homeowners
In the classical model with fixed income, an increase in the real interest rate could be the result of a(n): -decrease in desired investment -increase in taxed -increase in government spending -decrease in government spending
increase in government spending (2)
In the IS-LM model, a decrease in the interest rate would be the result of a(n): -increase in government purchases -increase in money demand -decrease in taxes -increase in the money supply
increase in the money supply (9)
According to the theory of liquidity preference, tightening the money supply will ____ nominal interest rates in the short run, and, according to the Fisher effect, tightening the money supply will ___ nominal interest rates in the long run.
increase; decrease (HW 7)
According to the theory of liquidity preference, holding the supply of real money balances constant, an increase in income will ____ the demand for real money balances and will ___the interest rate.
increase; increase (HW7)
An increase in investment demand for any given level of income and interest rates- due, for example, to more optimistic 'animal spirits'- will, within the IS-LM framework, ____ output and ___ interest rates. -lower; raise -increase; lower -increase; raise -lower; lower
increase; raise (9)
An increase in government spending shifts the IS curve to the right. In order to keep the interest rate constant. the Fed should ___ the money supply shifting the LM curve to the ___.
increase; right (9)
Which of the following changes would bring the U.S. capital stock, currently below the Golden Rule level, closer to the steady-state, consumption-maximizing level? -increasing the saving rate -increasing the rate of technological progress -increasing the rate of capital depreciation -increasing the population growth rate
increaseing the saving rate (6)
If the price of a bond decreases, then its interest rate
increases (7)
Starting from a steady-state situation, if the saving rate increases, the growth of capital per worker will: -decrease until the new steady state is reached -increase until the new steady state is reached -decrease and continue to decrease unabated -increase and continue to increase unabated
increse until the new steady state is reached (5)
If congress passed a tax increase at the request of the president to reduce the budget deficit, but the Fed held the money supply constant, then the 2 policies together would generally lead to ____ income and a ____ interest rate. -no change in; lower -no change in; higher -lower; lower -lower; higher
lower; lower (9)
An increase in the demand for money, at any given income level and level of interest rates, will, within the IS-LM framework, ____ output and ___ interest rates.
lower; raise (9)
Assume 2 economies are identical in everyway except one has a higher population growth rate. According to the Solow Model, in the steady state the country with the higher population growth rate will have a __ level of output per person and ____rate of growth of output per worker as rhw country with the lower population growth rate
lower; the same
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
The cost of reprinting catalogs and price lists because of inflation are called: -shoeleather costs -menu costs -variable yardstick costs -fixed costs
menu costs (4)
Money's liquidity refers to the ease with which:
money can be converted into goods and services
Not included in M1
money market deposit accounts
An example of a nominal variable is the
money supply
In the Solow growth model of an economy with population growth but no technological change, if population grows at rate n, total output grows at rate __ and output per worker grows at rate __
n; 0 (5)
Okun's law is the ___ relationship between real GDP and the ____. -positive; inflation rate -negative; unemployment rate -positive; unemployment rate -negative; inflation rate
negative; unemplyment rate (7)
Equilibrium levels of income and interest rates are ___ related in goods and services market, and equilibrium levels of income and interest rates are ___ related in the market for real money balances.
negatively; positively (HW7)
credit card balances at included in
neither M1 nor M2
The opportunity cost of holding money is the
nominal interest rate
If the short-run aggregate supply curve is horizontal and the long-run aggregate supply curve is vertical, then a change in the money supply will change ____ in the short run and change ____ in the long run. -only output; only prices -both prices and output, both prices and out put -both prices and output, only prices -only prices; only output
only output; only prices (7)
discourages workers are counted as
out of the labor force
Assume that the economy starts from the long-run equilibrium. If the Federal Reserve increases the money supply, then ___ increase(s) in the short run and ___ increases(s) in the long run. -output; output -prices; prices -prices; output -output; prices
output, prices (7)
In the national income accounts, all of the following are classified as government purchases except
payments made to social security recipients
The rate of inflation is the:
percentage change in the level of prices
Consumption depends ____ on disposable income, and investment depends ___ on the real interest rate
positively; negatively
The right of seigniorage is the right to:
print money (4)
The supply of supply and demand for loanable funds determines the: -nominal interest rate -real rental price of capital -real wage -real interest rate
real interest rate (2)
efficiency-wage theories suggest that affirm may pay workers more than the market-clearing wage for all of the following reasons except
reduce the firm's wage bill
Any policy aimed at lowering the natural rate of unemployment must either __ the rate of job sepatation or __ the rate of job finding
reduce; increase
In the Solow growth model, the economy end sup with a steady state level of capital:
regardless of the starting level
In a 100% reserve banking system, if a customer deposits $100 of currency into a bank, then the money supply:
remains the same
In the IS-LM model when M remains constant but P rises, in short-run equilibrium, in the usual case the interest rate ____ and output_____. -falls; rises -falls; falls -rises; rises -rises; falls
rises; falls (8)
Othere things being equal, all of the following government policies are likely to increase national saving except
running a budget deficit
If the marginal product of capital net depreciation =8%, the rate of growth of population= 2% and the efficiency growth equals 2%, to reach the Golden Rule level of capital stock, the ___ rate in this economy must be ____
saving; increased
In the IS-LM model when the Federal Reserve decreases the money supply, people ____ bongs and the interest rate____, leading to a(n) in investment and income. -sell, falls, decrease -buy; rises; decrease -sell; rises; decrease -buy; rises; increase
sell; rises; decrease (8)
The inconvinence associated with reducing money holdings to avoids the inflation tax is
shoe leather costs
Using the IS-LM analysis, if the LM curve is not horizontal, the multiplier for an increase in government spending is ___ for an increase in government purchases using the Keynesian-cross analysis. -the same as the multiplier -sometimes larger and sometimes smaller than the multiplier -smaller than the multiplier -larger than the multiplier
smaller than the multiplier (8)
If an economy is in a steady state with no population growth or technological change and the marginal product of capital is less than the depreciation rate: -steady-state consumption per worker would be higher in a steady state with a lower saving rate -the economy is following the Golden Rule -the depreciation rate should be decreased to achieve the Golden Rule level of consumption per worker
steady state consumption per worker would be higher in a steady state with a lower saving rate (5)
The amount of capital in an economy is a ___ and the amount of investment is a __
stock; flow
An increase in the price of goods bought by firms and government will show up in:
the GDP deflator but not the CPI
A decrease in government spending shifts
the IS curve to the left (8)
Bass on the IS-LM graph, starting from equilibrium, a decrease in government spending would shift:
the IS curve to the left (HW7)
A tax cut shifts
the IS curve to the right (8)
In the Keynesian Cross, the equilibrium levels of income and expenditure occur where
the actual expenditure curve crosses the planned expeniture curve (HW7)
If the nominal interest rate increases, then
the demand for money decreases
Based on the Keynesian model, one reason to support government spending increases over ta cuts as measures to increase output is that: -increases in government spending increase planned spending, but tax cuts reduce planned spending -government spending increases the MPC more than tax cuts -government spending increases do not lead to unplanned changes in inventories, but tax cuts do -the government spending multiplier is larger than the tax multiplier
the government spending multiplier is larger than the tax multiplier (HW7)
If you hear the news that the Fed conducted open-market purchases, then you should expect the ___ to increase: -the reserve-deposit ratio -reserve requirement -the discount rate -the money supply
the money supply (3)
The vertical long-run aggregate supply curve satisfies the classical dichotomy because the natural rate of output does not depend on: -the money supply -the labor supply -the supply of capital -technology
the money supply (7)
If the ratio of reserves to deposits (rr) increases, while the ration of currency to deposits (cr) is constant and the monetary base (B) is constant, then: -the money supply increases -the money supply does not change -it cannot be determined whether the money supply increases or decreases -the money supply decreases
the money supply decreases (3)
In the Solow growth model with population growth but no technological progress, in the Golden Rule steady state, the marginal product of capital minus the rate of depreciation will equal: -output per worker -the saving rate -0 -the population growth rate
the population growth rate (6)
In a simple model of the supply and demand for pizza, the endogenous variables are:
the price of pizza and the quantity of pizza sold
In the long run, according to the quantity theory of money and the classical macroeconomic theory, if velocity is constant, then ___ determines real GDP and ___ determined nominal GDP
the productive capability of the economy; the money supply
The real wage will increase if: -the supply of labor increases -the price of output increases -the supply for capital decreases -the productivity of labor increases
the productivity of labor increases (2)
In the classical model what adjusts to eliminate any unemployment of labor in the economy
the real wage
If a war destroys a large portion of a country's capital stock but the savings rate is unchanged, the Solow model predicts that output will grow and that the new steady state will approach
the same level of output as before
If a war destroys a large portion of a countries capital stock but the saving rate is unchanged, the solow model predicts that output will grow and that the new steady state will approach: -a lower level of output per person that before -the Golden Rule level of output per person -a higher level of output per person -the same level of output per person
the same level of output per person (5)
Based on the graph of the market for real money balances, the equilibrium levels of interest rates and real money balances occurs at the intersection of ____. On the y axis: ____ on the x axis:_____.
the supply and demand curves; interest rate, r; real money balances, M/P (HW 7)
Assume that a war reduces a country's labor force but does not directly affect its capital stock. Then the immediate impact will be that: -both total output and output per worker will fall -total output will fall, but output per worker will rise -both total output and output per worker will rise -total output will rise, but output per worker will fall
total output will fall, but output per worker will rise (5)
All of the following are reasons for frictional unemployment except
unemployed workers accept the first job they are offered
All of th efollowing are causes of structural unemployment except:
unemployment insurance
When a pizza maker lists the price of pizza as $10, this is an example of using money as a
unit of account
When a pizza maker lists the price of a pizza as $10, this is an example of using money as a: -flow of value -unit of account -medium of exchange -store of value
unit of account (3)
the real wage is the return to labor measured in: - dollars -units of labor -units of output -units of capital
unites out output (2)
Which of the following is a stock variable? -consumption -investment -wealth -income
wealth (1)
The Golden Rule level of steady-state consumption per worker is
where the slope of the f(k*) curve= the slope of the depreciation k* curve at that point, the distance between the 2 curves. (5)
If 2 economies are identical (including having the same saving rates, population growth rates, and efficiency of labor), but one economy has a smaller capital stock, then the steady-state of income per worker in the economy with the smaller capital stock: -will be at a lower level than in the steady state of high capital economy -will be at the same level as in the steady state of the high capital economy -will be proportional to the ration of the capital stocks in the 2 economies -will be at a higher level in the steady state of the high capital economy
will be at the same level as in the steady state of high capital economy (6)
If two economies are identical (including having the same saving rates, population growth rates, and efficiency of labor) but one economy has a smaller capital stock, then the steady state level of income per worker in the economywith the smaller capital stock
will be at the same level in the steady state of the high capital economy
All of the following actions are investments in the sense of the term used by macroeconomists except
Sandra buying 100 shares of IMB stock
An increase in the print of imported goods will show up in: -the GDP deflator but not in the CPI -the CPI but not in the GDP deflator -neither the CPI nor GDP deflator -both the CPI and the GDP deflator
The CPI but not in the GDP deflator (1)
According to the quantity theory of money, ultimate control over the rate of inflation in the United States is exercised by:
The Fed (4)
Based on the IS-LM graph, starting from equilibrium, a tax cut would shift
The IS curve to the right (HW7)
Based on the IS-LM graph, starting from an equilibrium, a decrease in the money supply would shift
The LM curve to the left (HW7)
In the national income accounts, government purchases are goods and services purchased by
The federal state and local governments
The property of diminishing marginal product means that, after a point, when additional quantities of
a factor are added when another factor remains fixed, the marginal product of that factor diminishes
The golden rule level of steady-state investment per worker is:
Where the slopes of f(k*)=depreciation k* distance from depreciation k* curve to origin (5)
Assume that the consumption function is given by C=200+0.5(Y-T) and the investment function is I=1,000-200r, where r is measured in percentage, G= 100, and T=200. The IS curve can be represented by the equation
Y=2,800-400r (HW7)
Other things equal, and increase in the interest rate leads to
a decrease in th equantity of investment goods demenaded (2)
Other things equal an increase in the interest rate leads to
a decrease in the quantity of investment goods demanded
To make a trade in a barter economy requires
a double coincidence of wants
To make a trade in a barter economy requires:
a double coincidence of wants (3)
If the real interest rate and real national income are constant, according to the quantity theory and the Fisher effect, a 1% increase in money growth will lead to rises in: -inflation of 1% and nominal interest of 1% -inflation of 1% and nominal interest of less that 1% -both inflation and nominal interest rate of less than 1% -inflation of 1% and the nominal interest rate of more than 1%
inflation of 1% and the nominal interest rate of 1% (4)
___ causes the capital stock to rise, while ___ causes the capital stoke to fall
investment; depreciation
Over the business cycle, investment spending ____ consumption spending. -has about the same volatility as -is less volatile -is inversely correlated with -is more volatile that
is more volatile than (7)
Assets of banks include:
loans to customers
According to the Solow Model, what are the 3 main reasons why some countries are poorer than otheres
low saving and human capital, slow technological progress, and low efficiency
Consider the impact of an increase in thriftiness in the Keynesian cross analysis. Assume that the marginal propensity to consume is unchanged, but the intercept of the consumption function is made smaller so that at every income level saving is greater. This will: -lower equilibrium by the decrease in the intercept multiplied by the multiplier -raise the income by the decrease in the intercept multiplied by the multiplier -lower equilibrium income by the decrease in the intercept -raise equilibrium income by the decrease in the intercept
lower equilibrium income by the decrease in the intercept multiplied by the multiplier (HW7)
