Econ Final

Even if GDP included these types of​ production, why would it still be an imperfect measure of economic​ well-being? GDP is not adjusted for crime or other social problems. B. GDP is not adjusted for pollution and it does not account for unequal income distribution. C. The value of leisure is not included in GDP. D. All of the above. Your answer is correct. E. A and C only.

All of the above

How does real GDPLOADING... deal with the problem inflation causes with nominal​ GDP? A. By keeping prices​ constant, we know that changes in real GDP represent changes in the quantity of output produced. B. Real GDP uses the prices of goods and services in the base year to calculate the value of goods in all other years. C. Real GDP separates price changes from quantity changes. D. All of the above. Your answer is correct. E. A and C only.

All of the above

Consider the figure to the right. Why does the​ short-run aggregate supply curve​ (SRAS) slope​ upward? A. Contracts keep wages​ "sticky". B. Firms and workers fail to predict changes in the price level. C. Prices of final goods rise more quickly than the prices of inputs. D. All of the above. Your answer is correct. E. A and B only.

All the above

We say that the economy as a whole is in macroeconomic equilibrium if aggregate expenditure equals total production. B. total spending equals GDP. C. aggregate expenditure equals GDP. D. total spending equals total production. E. all of the above.

All the above

The figure in the window on the right shows the​ per-worker production function as a graph. In the​ figure, we measure capital per hour worked along the horizontal axis and real GDP per hour worked along the vertical axis. Letting K stand for​ capital, L stand for​ labor, and Y stand for real​GDP, real GDP per hour worked is ​Y/L​, and capital per hour worked is ​K/L. The curve represents the production function. Use the figures to help determine which one of the following statements is​true: A. An increase in capital per hour worked from​ $30,000 to​ $40,000 decreases real GDP per hour worked from​ $475 to​ $350. B. Each​ $10,000 increase in capital per hour worked results in an equal increase in output per work. C. An increase in capital per hour worked from​ $20,000 to​ $30,000 increases real GDP per hour worked from​ $200 to​ $350. Your answer is correct. D. None of the statements listed above are true.

An increase in capital per hour worked from​ $20,000 to​ $30,000 increases real GDP per hour worked from​ $200 to​ $350.

The United Kingdom produces computers and sells them to Canada. At the same time Canada produces cars and sells them to the United Kingdom. Suppose there is an appreciation in the pound. This will​ cause:

An increase in imports into the United Kingdom and a decrease in exports to Canada​, which will cause a decrease in aggregate demand and real GDP.

Now consider the adjustment of the economy back to​ long-run equilibrium. ​3.) Use the line drawing tool to show the resulting​ long-run equilibrium on your diagram. Label any new aggregate demand or aggregate supply curve appropriately. ​4.) Use the point drawing tool to locate the new​ long- run equilibrium point. Label this point C. At the new short run​ equilibrium, the unemployment rate will be lower compared to the unemployment rate at the initial​equilibrium, prior to the increase in exports. Which of the following best explains how the economy will adjust back to​long-run equilibrium? At the new​ long-run equilibrium,

Be lower ​Short-run aggregate supply will decrease​ (shift leftward) as firms and workers adjust to the new price level. real GDP and the unemployment rate will remain the​ same, but price level will be higher compared to the initial​ equilibrium, prior to the increase in exports.

Which of the following is not an explanation for why firms keep​ inventories?

Because goods are produced in quantities that match the exact amounts consumers want to purchase at a given time.

Which groups tend to have​ above-average unemployment​ rates, and which groups tend to have​ below-average unemployment​ rates? Consider the following choices. Which one is not​ accurate?

Black teenagers as a group have lower unemployment rates than white teenagers.

Suppose the fixed interest rate on a loan is​ 5.75% and the rate of inflation is expected to be​ 4.25%. The real interest rate is​ 1.5%. Suppose now that instead of​ 4.25%, the inflation rate unexpectedly reaches​ 5.5%. Who gains and who loses from this unanticipated​ inflation? ​(Mark all that​ apply.) A. Borrowers gain from a lower real interest rate. Your answer is correct. B. Lenders lose from a lower real interest rate. Your answer is correct. C. Lenders gain from a lower real interest rate. D. Borrowers lose from a lower real interest rate.

Borrowers gain from a lower real interest rate. Lenders lose from a lower real interest rate.

Consider the following conditions​: ≻The exchange rate between the U.S. dollar and the British pound is £1.0=​$1. ≻The U.S. price level is 100 and the British price level is 100. The real exchange rate equals

1.00

During which period did the country experience zero​ inflation? During which period did the country experience an increasing rate of​inflation? During which period did the country experience a slow down in​ inflation, although the inflation rate remained​ positive? (This situation is called​"disinflation.") During which period did the country experience​ deflation?

2000-2005 1990-1995 1995-2000 2005-2010

Ron was vacationing in​ France, when his camera was stolen. As he walked into a camera​ store, Ron noticed that camera prices were in euros. If Ron was willing to pay ​$225 for a new digital camera and the exchange rate is ​$0.85 per​ euro, how much will Ron be paying in​ euros? Ron will be paying

264.71 euros

You are given the following two​ equations: QSL=22+r QDL=50 − 3.2r The equilibrium quantity of loanable funds is equal to

28.67

If the required reserve ratio is 17​% and the Fed injects ​$648 of reserves into a​ bank, what is the maximum amount the money supply could increase​by?

3811.76

Assume the required reserve ratio is 19​%, the amount of deposits in a bank are ​$1372​, and the bank is holding ​$653 in reserves. How many of those reserves are excess​ reserves?

392.32

According to the Freakonomics Podcast you were required to listen to titled How Deep Is the Shadow ​Economy?​, roughtly 1 in how many dollars in the world is part of the shadow​ economy?

5

Consider the following simple economy that produces only three​ goods: Real GDP in 2017 equals ​

6680

If the required reserve ratio is 10​% and you deposit ​$755 of cash into a​ bank, what is the maximum amount the money supply could increase​ by?

6795

If the simple deposit multiplier is 13.16​, what must the required reserve ratio​ be?

7.6

If the required reserve ratio is 13%, what is the value of the simple deposit multiplier?

7.69

If real GDP per capita grows at a rate of 7.4 percent per​ year, it will take 9.5 years to double. ​(Enter your response rounded to one decimal​ place.)

70/7.4=9.5

Suppose that a simple economy produces only the following four goods and​ services: shoes,​ hamburgers, shirts, and cotton. ​ Further, assume that all of the cotton is used in the production of shirts. Use the information in the following table to calculate Nominal Gross Domestic ProductLOADING... ​(Nominal GDP) for 2021. The nominal GDP for the year of 2021 is

7450

n an​ economy, the​ working-age population is 400 million. Of this​ total, 300.0 million workers are employed. 16.0 million workers are unemployed. 64.0 million workers are not available for work​ (homemakers, full-time​ students, etc.). 12.0 million workers are available for work but are discouraged and thus are not seeking work. 8.0 million workers are available for work but are not currently seeking work due to transportation or childcare problems. The labor force participation rate in this economy is

79%

Assume that a country​ has, on​ average, a deficit of $5.3 billion each year for 15 years. Assuming the debt was zero at the​ beginning, what is the total debt at the end of these 15 years?

79.5 billi

Consider the​ short-run aggregate supply curves in the graph at right. A movement from point A to point B on SRAS1 could be the result of a A movement from point A to point C could be the result of a change in

A change in price level The labor force

The graph to the right shows the aggregate demand curve for an economy. Use the line drawing tool to show the effect of a monetary policy change that causes a decrease in interest rates. Properly label this line. Carefully follow the instructions​ above, and only draw the required objec A _____ would cause a similar shift in the curve

A decrease in taxes would cause a similar shift in the aggregate demand curve.

Which of the following is an example of an expansionary fiscal​ policy?

A decrease in taxes.

Payroll taxes were temporary cut by Congress and the president. This is an example of

A discretionary fiscal policy

Suppose the economy is initially in​ long-run equilibrium. The Fed enacts a policy to decrease the required reserve ratio. In the​ short-run, this expansionary monetary policy will​ cause:

A shift from AD1 to AD2 and a movement to point​ B, with a higher price level and higher output.

Suppose the economy is initially in​ long-run equilibrium. The government enacts a policy to increase government spending. In the​ short-run, this expansionary fiscal policy will​ cause:

A shift from AD1 to AD2and a movement to point​ B, with a higher price level and higher output.

Suppose the economy is initially in​ long-run equilibrium. The Fed decides to increase the discount rate. In the short-run, the contractionary monetary policy will cause:

A shift from AD2 to AD1 and a movement to point​ D, with a lower price level and lower output.

Refer to the diagram. Suppose the economy is in a recession and the Fed pursues an expansionary monetary policy. Using the basic AD-AS model in the​ figure, this would be depicted as a movement from

A to B.

The LRAS curve is

determined by the number of​ workers, the amount of​ capital, and the available technology.

Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be relatively​ ________ and real GDP to be relatively​ ________.

higher ; higher

In the​ circular-flow diagram, who supplies factors of production in exchange for​ income?

households

Microeconomics is the study of

how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices.

Some economists argue that because increases in government spending crowd out private​ spending, increased government spending will reduce the​long-run growth rate of real GDP. a. This is most likely to happen if the private spending being crowded out is investment spending. b. In terms of its effect on the​ long-run growth rate of real​ GDP, it is likely to matter more if the additional government spending involves

increased spending on highways and bridges.

Expansionary fiscal policy is less effective in an open economy because

increases in government spending can increase interest​ rates, which increases the value of the dollar and crowds out net exports.

Government policy can increase the accumulation of knowledge capital in all the following ways except​ by:

investing in capital accumulation.

Which of the following would be most likely to induce the Federal Reserve to conduct expansionary monetary​ policy? A significant decrease in

investment spending

What is the rule of​ 70?

is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to double.

Firms are likely to underinvest in research and​ development, which slows the accumulation of knowledge​ capital, slowing economic​ growth, because

knowledge capital is both nonrival and​ nonexcludable; other firms can freely access the research and development of one particular firm.

The following questions refer to the video you watched on MR University titled Game of​ Theories: The Keynesians. Which of the following is a reason for sticky​ wages? What are some problems with Keynesian business cycle​ theory? A. It does not predict stagflation. B. Falling aggregate demand may be a​ symptom, not​ cause, of recession. C. Wages are only sticky during recessions. D. a​ & b only Your answer is correct. E. b​ & c only

long-term contracts a and b only

In the figure to the​ right, if the economy is at point A​, the appropriate monetary policy by the Federal Reserve would be to

lower interest rates.

The following questions are related to your required reading in the Wall Street Journal​ titled, The​ Fed's Point Man on Productivity. Since​ 2004, total facot productivity growth has been True or​ False: The technology boom of the 1990s did not help business become more efficient because the benefits of tech innovations flow more to leisure​activitys, such as social media and smartphone apps.

lower than​ 1% but greater than​ 0%. False

The level of total investment by firms in new machinery and equipment helps to determine how rapidly the economy grows. This is a macroeconomic issue. ​ However, to understand how much new machinery and equipment firms decide to​ purchase, one must analyze the incentives individual firms​ face, which is a microeconomic issue.

macro, micro

How does an increase in the price level affect the quantity of real GDP supplied in the long​ run?

Changes in the price level do not affect the level of GDP in the long run.

The appreciation of the dollar is represented as a movement from

D to C

Refer to the diagram to the right. Suppose that the U.S. government deficit causes interest rates in the United States to rise relative to those in the European Union. Assuming all else remains​ constant, how would this be​ represented?

Demand would increase and the economy moves from A to B.

Briefly explain whether you agree or disagree with the following​ statement: ​"I don't believe the government price statistics. The CPILOADING... for 2018 was 215​, but I know that the inflation rateLOADING... ​couldn't have been as high as 115 percent in​ 2018."

Disagree. The inflation rate is the percentage increase in the price level from the previous​ year, not the base year.

Technological progress is affected by ​(check all that​ apply) A. population growth B. investment in capital Your answer is correct. C. entrepreneurship Your answer is correct. D. private property rights Your answer is correct. E. new software developments

Everything except population growth

Consider the figures below. Determine which combination of fiscal policies shifted AD1 to AD2 in each figure and returned the economy to​ long-run macroeconomic equilibrium.

Example​ (A): Expansionary fiscal policy. Example​ (B): Contractionary fiscal policy.

Which of the following is not a main determinant of net​ exports? A. Expectations of future profitability in the United States. Your answer is correct. B. The exchange rate between the dollar and other currencies. C. The price level in the United States relative to price levels in other countries. D. The growth rate of GDP in the United States relative to the growth rates of GDP in other countries.

Expectations of future profitability in the United States.

Before the 2007 financial​ crises, we would say that the banking system has ample reserves.

False

Crowding out makes it easier to estimate the actual multiplier effect.

False

When the government starts running a larger​ deficit—which it does when it increases spending or decreases taxes​ (expansionary policy)—the supply curve shifts to the right and the interest rate increases.

False

b. Many​ economists, including former Fed Chairman Ben​ Bernanke, blame the Fed for causing a deflationary spiral during the Great Depression by keeping monetary policy far too loose.

False

What does the acronym FRED stand​ for?

Federal Reserve Economic Database

Suppose John Q. Worker is currently unemployed. Each​ day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of​ skills, abilities, and interests. If someone asks John Q. what he does for​ work, he tells them that he is currently​"in-between jobs." Which of the following best classifies John​ Q.'s unemployment​ status?

Frictionally unemployed

Which of the following is considered to be a problem in using GDP as a measure of national ​well-being​?

GDP is not adjusted to account for depletion of natural resources

Suppose that real GDP is currently ​$13.7 trillion and potential real GDP is​ $14.0 trillion, or a gap of ​$300 billion. The government purchases multiplierLOADING... is 5.0​, and the tax multiplier is 4.0. Holding other factors​ constant, by how much will government purchases need to be increased to bring the economy to equilibrium at potential​ GDP? Holding other factors​ constant, by how much will taxes have to be cut to bring the economy to equilibrium at potential​ GDP?

Government spending will need to be increased by ​$60 billion. Taxes will need to be cut by ​$75 billion.

Which of the following equals the amount of public​ saving? A. Government tax revenue minus the sum of government purchases and transfer payments to households. Your answer is correct. B. Government transfer payments to household minus the sum of government tax revenue and government purchases. C. The sum of government purchases and government tax​ revenue, minus transfer payments to households. D. The sum of government tax​ revenue, government​ purchases, and government transfer payments to households.

Government tax revenue minus the sum of government purchases and transfer payments to households.

Which of the following is a way in which governments can increase productivity through health and​ education?

Governments can promote vaccinations for children and improve access to clean water.

In the video under the Introduction to FRED page on​ Canvas, what data were being looked​ at?

Gross Domestic Product

During the expansion phase of the business​ cycle, production,​ employment, and income During the recession phase of the business​ cycle, production,​ employment, and income

Increase Decrease

The graph to the right shows a situation in which the economy was in equilibrium at potential GDP​ (at point​ A) when the demand for housing sharply declined. What actions can Congress and the president take to move the economy back to potential​ GDP? 1.) Using the line drawing tool​, show the results of these actions on your graph. Label your new​ line(s). ​2.) Using the point drawing tool​, identify the new equilibrium point and label it C. ​Note: Carefully follow the instructions​ above, and

Increase Government Spending or decrease taxes

Assume the tax multiplier is estimated to be 1.7 and the aggregate supply curve has its usual upward slope. Suppose the government lowers taxes by $92 million. Aggregate demand will

Increase by 156.4 million

n​ 2018, France had a current accountLOADING... deficit of €7.1 billion​ (approximately $8.3​ billion). ​Source: Banque de​ France, "France's Balance of​ Payments." This means that France experienced a net capital ______________ in 2018 This is​ because, ignoring the capital​ account, the sum of the current account balance and the financial account balance must be equal to zero. The current account deficit must be offset by the financial account surplus. The surplus in the financial account means that France is

Inflow selling more financial assets than it buys

Which of the following is not a lag in fiscal policy we spoke about this​ week?

Information

Indicate whether each of the following is a final​ good, an intermediate​ good, or neither. Coffee beans purchased by a coffee shop Intermediate good One share of Google stock Neither A new​ pick-up truck purchased by a consumer Final good A new home purchased by a family Final good

Intermediate Neither Final good Final good

When planned aggregate expenditure is less than real​ GDP, as in the diagram to the​ right, what happens to​ firms' inventories?

Inventories accumulate if production is not scaled back.

In the​ figure, the exchange rate between the Japanese yen and the U.S. dollar increased because demand increased by more than supply. As a​result, what happens to U.S. real​ GDP?

It decreases

Who is the current chair of the Federal​ Reserve?

Jerome Powell

_______________ is the percentage of the​ working-age population in the labor force. Suppose an economy is given​ by: Population​ = 241 million ​Working-age population​ = 138 million Labor force​ = 86 million The number of people employed​ = 79 million The number of people unemployed​ = 7 million The labor force participation rate for this economy is 62.3%. ​(Enter your response rounded to one decimal​ place.)

Labor Force Participation Rate

What are the largest asset and the largest liability of a typical​ bank?

Loans are the largest asset and deposits are the largest liability of a typical bank.

​,The general algebraic version of the aggregate expenditure modelLOADING... can be written as​ follows, where letters with​ "bars" represent fixed or autonomousLOADING... values. C = C + MPC (Y) I = I G = G NX = NX If you think of the aggregate expenditure function as a line on the​ 45°-line diagram, the intercept would be Cbar + i +Gbar+NXbar If you think of the aggregate expenditure function as a line on the​ 45°-line diagram, the slope would be

MPC (second question)

The following questions refer to the video you watched on MR University titled Game of​ Theories: The Austrians. According to the Austrian theory of business​ cycles, how does the boom part of the business cycle lead to the​ bust? What is the Austrian solution to business​ cycles?

Malinvestments made in response to distorted price signals fail when met with insufficient consumer demand. Limited government that​ doesn't interfere with market price signals.

A primary difference between macroeconomics and microeconomics is

Microeconomics examines individual markets while macroeconomics examines the economy as a whole.

Which of the following causes the​ short-run aggregate supply curve to shift to the​ right? A. a negative technological change B. a higher expected future price level C. a decrease in the capital stock D. All of the above E. None of the above.

None of the above

The problems below involve a fictitious country called Nittany Nation. Some useful economic data for Nittany Nation is provided in the table​ below: Nittany Nation Economic Data

Note: You should use a​ non-programmable calculator for these calculations. Round your answers to 2 decimal places. Do not enter dollar signs​($) or percentage signs​ (%) if needed. The fictitious country of Nittany Nation saw​ it's GDP​ per-capita increase from ​$35797 in 2014 to ​$37689 in 2015. What was the growth rate in​ 2015? ​Answer: 5.295.29​% The fictitious country of Nittany Nation saw​ it's GDP​ per-capita increase from ​$6106 in 1970 to ​$37689 in 2015. What was the average annual growth rate over this​ time? ​Answer: 4.134.13​%

Which of the following is the correct formula for calculating the unemployment​ rate?

Numbered of Employed/Labor Force *100

c. Who was the chair of the Federal Reserve Board of Governors that raised interest rates to​ 20% in the early 1980s to try and tame​ inflation?

Paul Volcker

The graph shown at right contains two aggregate expenditure functions. Consider a movement from point A to point​ B, and a movement from point B to point C. Which movement shows a change in autonomous​ expenditure? Which movement shows a change in induced​ expenditure?

Point A to point B because the change does not depend on the level of GDP. Point B to point C because the change depends on the level of GDP.

Which of the following statements about prices and inflation is not​ correct? A. Inflation represents a general rise in prices over periods of time. B. Prices generally increase at the same rate across most periods of time. Your answer is correct. C. The price level measures the average prices of goods and services across the economy. D. The inflation rate shows the percentage change in prices across periods of time.

Prices generally increase at the same rate across most periods of time.

In a closed​ economy, the values for​ GDP, consumption​ spending, investment​ spending, transfer​ payments, and taxes are as​ follows: Y​ = ​$11 trillion C​ = ​$8 trillion I​ = ​$2 trillion TR​ = ​$1 trillion T​ = ​$2 trillion Using the information​ above, what is the value of private saving and public​ saving?

Private saving equals ​$2 trillion and public saving equals ​$0 trillion.

Suppose the economy enters a recession. If government policymakers-​Congress, the​ president, and members of the Federal Reserve-do not take any policy actions in response to the​ recession, what is the likely​ result? Which of the following four possible outcomes best describes the likely effects on the unemployment rate and GDP in both the short run and the long​run? i. The unemployment rate will rise and remain higher even in the long​ run, and real GDP will drop below potential GDP and remain lower than potential GDP in the long run. ii. The unemployment rate will rise in the short run but return to the natural rate of unemployment in the long​ run, and real GDP will drop below potential GDP in the short run but return to potential GDP in the long run. iii. The unemployment rate will rise and remain higher even in the long​ run, and real GDP will drop below potential GDP in the short run but return to potential GDP in the long run. iv. The unemployment rate will rise in the short run but return to the natural rate of unemployment in the long​ run, and real GDP will drop below potential GDP in the short run and remain lower than potential GDP in the long run.

Statement ii is correct.

Bob Wesley believes that structural unemployment should be eliminated in order for an economy to be healthy. In making this​ argument, which of the following relevant issues is he​ ignoring? A. Structural unemployment is limited to​ capital-intensive industries. B. Structural unemployment is​ short-term unemployment that arises from the process of matching workers with jobs. C. Structural unemployment is often shorter than frictional unemployment. D. Structural unemployment will exist in an economy that is innovative. Your answer is correct. E. Structural unemployment is often a result of job dissatisfaction.

Structural unemployment will exist in an economy that is innovative.

Suppose that Sally J. Society recently lost her job as an underwater welder. In looking for a new​ job, she discovers that the only available jobs are for economists and that there are no openings for underwater welders because the trade is now obsolete. If Sally J. Society decides to return to school to earn an Economics​ degree, what is the best classification of her unemployment​ status?

Structurally unemployed

Refer to the diagram to the right. Currency speculators believe that the value of the Euro will increase relative to the dollar. Assuming all else remains​ constant, how would this be​ represented?

Supply would​ increase, demand would decrease and the economy moves from C to B to A.

Using the information below compute the M2 money supply.

The M2 money supply is ​$12810

Consider the data in the following table for the years 1969 and 1970​ (where the values for real GDP and potential GDP are in 2012​ dollars): In​ 1969, actual real GDP was greater than potential real GDP. Which of the following best explains​ this? Even though real GDP in 1970 was slightly greater than real GDP in​ 1969, the unemployment rate increased substantially from 1969 to 1970. Which of the following explains how unemployment could have increased even though output did not​ change? c. The table does not give the inflation rates for 1969 and 1970. If the inflation rate for 1970 is greater than the inflation rate for​ 1969, it is likely that the recession was caused by a negative supply shock rather than an increase in aggregate demand.

The economy can produce a level of GDP above potential GDP in the short run. Potential GDP increased​ significantly, but actual GDP did​ not, and thus there is unemployment.

Fiscal policy is conducted​ by:

The federal government controls fiscal policy.

Often the multiplier formula is considered to be too simple because it ignores some real world complications. Which of the following is not such a​reason?

The formula ignores the impact of an increase in GDP on consumption.

According to new growth​ theory, one way to create additional economic growth is by raising the level of​ firms' knowledge capital. Suppose government policymakers wanted to assist the country in the development of knowledge capital. Which of the following policies would lawmakers not want to use to help in the development of knowledge​ capital?

The government could reduce corporate tax rates for service and retail companies.

Use the graph to the right to help determine which of the following statements regarding the labor force participation rates of adult men and women since 1950 is false.

The labor force participation rates of adult men and adult women were equal in 1990.

Why might increasing taxes as a fiscal policy be a more difficult policy than the use of monetary policy to slow down an economy experiencing​inflation?

The legislative process experiences longer delays than monetary policy.

According to the Page One Economics article posted by the St. Louis Fed titled How Do Imports Affect GDP that you were required to read for this​week, addressed which of the following​ topic?

The misconceptions about how imports affect overall GDP.

3. The data we looked at from Our World in Data​ was:

The poverty gap

The nominal interest rate is 14​%. The inflation rate is 4​%.

The real interest rate is equal to 10​%.

c. According to this​ podcast, how did the rich Italians get so​ rich?

They charged interest on loans.

What should they change if they decide a contractionary fiscal policy is​ needed?

They should enact policies that decrease government spending and increase taxes.

If it is decided by Congress and the president that expansionary fiscal policy is​ needed,

They should enact policies that increase government spending and decrease taxes.

Why do few economists argue that it would be a good idea to balance the federal budget every​ year?

To keep a balanced budget during a​ recession, taxes would have to increase and government expenditures would have to​ decrease, which would further reduce aggregate demand and deepen the recession.

According to your required​ reading, On the Persistence of the​ Black-White Unemployment​ Gap, a recent study by the Brookings Institution found that the unemployment rate is even worse in many​ majority-African American metro areas.

True

Crowding​ out, with respect to fiscal​ policy, is when an increase in government purchases results in a decline in private expenditures.

True

Expansionary monetary policy results in lower interest rates.

True

Interest on reserves applies to both required reserves​ (IORR) and excess reserves​ (IOER).

True

Lower interest rates will increase economic activity.

True

Major health programs was the largest​ change, as a percentage of GDP from​ 1999-2019, out of all mandatory spending programs.

True

Net exports rises when interest rates fall because the dollar becomes weaker​ (depreciates).

True

The following questions are related to the Wall Stree Journal​ article/interactive titled, A Brief History of US Inflation Since 1775. a. From the US Revolutionary War to​ WWII, inflation swung around much more dramatically than it does today. True Your answer is correct. False

True

The reverse repurchasing rate is around because of primary dealers who are unable to hold deoposits at the Fed.

True

Open market purchases will add liquid assets to the system and cause interest rates to fall. True This is the correct answer. False Your answer is not correct. An increase in the discount rate makes it easier for banks to borrow from the Fed. True Your answer is not correct. False This is the correct answer. If the Fed raises the required reserve​ ratio, liquid assets become scarcer and interest rates fall. True False Your answer is correct. Before the Great​ Recession, almost all monetary policy in the U.S. was done through open market operations. True Your answer is correct. False

True False False True

Crowding​ out, with respect to fiscal​ policy, is when an increase in government purchases results in a decline in private expenditures. True Your answer is correct. False Crowding out is only when we see an increase in government​ purchases, not when we see a decrease. True Your answer is correct. False When the government starts running a larger​ deficit—which it does when it increases spending or decreases taxes​ (expansionary policy)—the supply curve shifts to the right and the interest rate increases. True False Your answer is correct. Crowding out makes it easier to estimate the actual multiplier effect. True False

True True False False

The current Federal Debt in the United States is greater than the level of GDP in the United States. True Your answer is correct. False The current Federal​ Debt, in total​ terms, is the highest it has ever been in the United States. True Your answer is correct. False For the first time in the Trump​ adminstration, the US ran a budget surplus in 2019 True Your answer is not correct. False This is the correct answer. Under the Trump​ administration, the total Federal Debt in the United States decreased. True False

True True False False

Indicate whether the following statement is true or false and why. ​"A wage rising slower than the rate of inflation is actually​ falling."

True. If wages are increasing slower than the average price of goods and​ services, purchasing power falls.

When we introduced employment in this​ lessons, we referenced Tweets by two US Politicians. Who were​ they? ​Currently, the unemployment rate​ is: The unemployment rate never reaches​ 0%

Trump and Biden Above 10% True

Consider the​ downward-sloping aggregate demand​ (AD) curve to the right. Which of the following results in a movement from point A to point B​(a movement up along the AD​ curve) or from point A to point C​ (a movement down along the AD​ curve)? ​(Mark all that​ apply.) Wealth effect Your answer is correct. B. Interest rate effect Your answer is correct. C. Multiplier effect D. Inflation effect

Wealth effect Your answer is correct. B. Interest rate effect Your answer is correct.

Where did your​ professor, James​ Tierney, get his undergraduate degree​ from? Where did your​ professor, James​ Tierney, get his graduate degree​ from?

Western New England U Cal Irvine

Why does inflation make nominal GDPLOADING... a poor measure of the increase in total production from one year to the​ next?

When nominal GDP increases from year to​ year, the increase is due partly to changes in prices and partly to changes in quantities.

In the aggregate expenditure​ model, when is planned investment greater than actual​ investment?

When there is an unplanned decrease in inventories.

Suppose that the inflation rateLOADING... turns out to be much lower than most people expected. In that​ case,

a borrower will lose from the situation while a lender will gain.

A government that collects more in taxes than it spends experiences

a budget surplus

The​ international-trade effect refers to the fact that an increase in the price level will result in

a decrease in exports and an increase in imports.

A recession occurs when an economy experiences a period in which there is

a decrease in total production.

When countries agree to keep the value of their currencies​ constant, there is

a fixed exchange rate system

d. In​ 1974, the economist Herbert Stein called​ inflation:

a hydra headed monster

Your university gives you an education each year in exchange for money in the future through student loans. This illustrates which function of​ money?

a standard of deferred payment.

If whole avocados were used as a​ society's money, which of the following functions would be the hardest to​ satisfy?

a store of value.

A supply shock is A. an increase in potential GDP caused by a government expenditure​ multiplier, resulting in a leftward shift of the AD curve. B. a sudden increase in the price of an important natural​ resource, resulting in a leftward shift of the SRAS curve. Your answer is correct. C. an increase in the rate of inflation as a result of expansionary fiscal​ policy, resulting in a leftward shift of the SRAS curve. D. an increase in both the inflation and the unemployment rates that may sometimes result in a rightward shift of the SRAS curve.

a sudden increase in the price of an important natural​ resource, resulting in a leftward shift of the SRAS curve.

Which of the following is usually the cause of​ stagflation?

a supply shock as a result of an unexpected increase in the price of a natural resource

The​ statement, "A burrito at the student center on campus is only​ $5!" represents​ money's function as

a unit of account.

Which of the following is the best example of human​ capital? a manager buys workers more personal computers B. a worker gets a college degree Your answer is correct. C. a manager devotes more spending to research and development D. a worker pays less taxes

a worker gets a college degree

Consider the variables that shift​ long-run aggregate supply and the variables that shift​ short-run aggregate supply. Match each of the following scenarios with one of the following three graphs of​ long-run aggregate supply and​ short-run aggregate supply.

a. A decrease in the expected future price level 3 b. Workers and firms adjust to having previously underestimated the price level 2 c. A positive technological change occurs 1

Match each of the following scenarios with the appropriate graph of the market for loanable funds.

a. An increase in the real interest rate results in little increase in private saving by households. 4 b. A decrease in the real interest rate results in a substantial increase in spending on investment projects by businesses. 1 c. The federal government eliminates​ 401(k) retirement accounts. 2 d. The federal government reduces the tax on corporate profits​ (assume no change in the federal budget deficit or budget​ surplus). 3

An article in the Wall Street Journal ​notes, "Productivity improvements are a key ingredient for the U.S. economy to maintain a​ 3% growth​ rate, a goal of the Trump​ administration." ​Source: Eric​ Morath, "U.S. Worker Productivity Advances at Best Rate since​ 2010," Wall Street Journal​, May​ 2, 2019. a. What economic variable was the Trump administration hoping would grow at a rate of 3 percent per​ year? b. What is the connection between productivity growth and growth in the variable you identified in part​ (a)? Productivity refers to​ ____________, and increases in productivity are a key determinant of this​ variable's growth rate.

a. Real GDP b. the quantity of goods and services that can be produced per worker or per hour of work

What would be the effect of an increase in government spending on a graph showing aggregate demand and short and​ long-run aggregate supply that is initially in​ long-run equilibrium? The ​short-run effect of an increase in government spending will be for the The new​ short-run equilibrium will be where

aggregate demand curve to shift up the new aggregate demand curve intersects the original​ short-run aggregate supply curve.

Assume the economy is in​ long-run equilibrium. Now assume that there is a large increase in demand for U.S. exports. As a result of increased demand for U.S.​ exports, the A. aggregate demand curve will shift right. This is the correct answer. B. aggregate demand curve will shift left. C. ​long-run aggregate supply curve will shift left. Your answer is not correct. D. ​short-run aggregate supply curve will shift left. The new​ short-run equilibrium will be A. where the new aggregate demand curve intersects the original​ short-run aggregate supply curve. This is the correct answer. B. where the original aggregate demand curve intersects the original​ short-run aggregate supply curve. Your answer is not correct. C. where the new aggregate demand curve intersects the original​ long-run aggregate supply curve. D. where the new aggregate demand curve intersects the original aggregate demand curve. At the new short run​ equilibrium, the unemployment rate will be lower compared to the unemployment rate at the initial​ equilibrium, prior to the increase in exports. Which of the following best explains how the economy will adjust back to​ long-run equilibrium? A. Aggregate demand will​ increase, restoring the original equilibrium price and quantity. B. Aggregate demand will​ decrease, restoring the original equilibrium price and quantity. Your answer is not correct. C. ​Short-run aggregate supply will increase​ (shift rightward) as firms and workers adjust to the new price level. D. ​Short-run aggregate supply will decrease​ (shift leftward) as firms and workers adjust to the new price level. This is the correct answer. At the new​ long-run equilibrium, A. real GDP and the price level will be higher but the unemployment rate will remain the same compared to the initial​ equilibrium, prior to the increase in exports. B. real​ GDP, the unemployment rate and the price level all will remain the same compared to the initial​ equilibrium, prior to the increase in exports. Your answer is not correct. C. real GDP and the unemployment rate will remain the​ same, but price level will be higher compared to the initial​ equilibrium, prior to the increase in exports. This is the correct answer. D. real GDP and price level will be higher and the unemployment rate will be lower compared to

aggregate demand curve will shift right.

The following questions refer to the WSJ video you were required to watch​ titled: How Interest Rates Are​ Set: The​ Fed's New Tools Explained. In the​ video, what does the WSJ use to demonstrate the new​ tools? The video is a tale of how many different kinds of​ banks?

an elevator inside a skyscraper 3

​Real-Time Data Analysis​ Exercise* In October 2020​, the exchange rate between the Japanese yen and the U.S. dollar expressed in terms of yen per dollar was ​¥105.21 ​= $1. The exchange rate expressed in terms of dollars per yen is . 0095.0095 dollars per yen. ​(Enter your response rounded to four decimal​ places.) ​*Real-time data provided by Federal Reserve Economic Data​ (FRED), Federal Reserve Bank of Saint Louis Suppose that the exchange rate between the dollar and the euro was €0.901 per dollar in January 2020 and €0.870 per dollar in July 2020. From January 2020 to July 2020​, the euro

appreciated against the dollar because fewer euros are needed to purchase one dollar

a. After the Dutch legalized interest and set up borrowing and lending​ areas, they

became the richest country in the world.

Some economies are able to maintain high growth rates despite diminishing returns to capital by using

better or enhanced​ technology, along with accumulating​ capital; these economies are growing because​ technology, unlike​ capital, is subject to increasing returns.

Look carefully at the following list. a. The coins in your pocket. b. The funds in your checking account. c. The funds in your savings account. d. The​ traveler's check that you have left over from a trip. e. Your Citibank Platinum MasterCard. Which of the things above are NOT included in the M1LOADING... definition of the money​ supply?

c & e

What index is used to measure the average prices paid by a typical​ family? An average of the prices of the goods and services purchased by a typical family is​ the: A. consumer price index​ (CPI). Your answer is correct. B. producer price index​ (PPI). C. inflation rate index. D. aggregate price level index. Suppose the​ economy's consumer price index​ (CPI) in 2008 was 185 and the CPI in 2009 was 196. The inflation rate over the period from​ 2008-2009 was equal to 5.95.9​%. ​(Enter your response rounded to one decimal​ place.)

consumer price index​ (CPI).

An increase in the interest rate should

decrease consumption spending.

A higher required reserve ratio​ _________ the value of the simple deposit multiplier.

decreases

An increase in the amount of excess reserves that banks keep​ _________ the value of the​ real-world deposit multiplier.

decreases

Which of the following will cause interest rates to​ fall?

open market purchases B. lowering the discount rate C. lowering the required reserve ratio D. all of the above This is the correct answer. E. ​B&C only Your answer is not correct.

Which of the following will cause interest rates to​ rise?

open market sales

Which of the following will cause interest rates to​ fall?

open market sales B. lowering the discount rate C. lowering the required reserve ratio D. all of the above Your answer is not correct. E. ​B&C only CORRECT

All of the following are problems in measuring the unemployment rate except that discouraged workers are not included in the labor force. B. lack of verification of​ people's responses in the household survey. C. ​part-time workers are included as employed. D. people on active military service are included as unemployed. When there are workers that drop out of the labor force​, the official BLS measure of the unemployment rate understatesunderstates the true degree of unemployment.

people on active military service are included as unemployed.

​Long-run economic growth in the United States is best measured using

real GDP per​ capita, which has been trending strongly upwards over the past century.

Expansionary monetary policy​ will:

shift the aggregate demand curve to the right.

An increase in the working population will cause the​long-run aggregate supply curve to

shift to the right

An increase in interest rates affects aggregate demand by

shifting the aggregate demand curve to the​ left, reducing real GDP and lowering the price level.

When interest rates​ fall, the aggregate expenditure​ function:

shifts up

Economic growth will

slow down or stop if more capital per hour is used because of diminishing returns to capital.

In calculating​ GDP, which levels of government spending are included in government​ purchases?

spending by​ federal, state, and local governments

The new growth theory differs from the growth theory developed by Robert​ Solow, since

the Solow growth theory focuses on technological change and the quantity of capital available to workers whereas the new growth theory states that accumulation of knowledge capital is a key determinant of economic growth.

The balance of payments is equal to

the current account plus the financial account.

This percentage change in real GDP is also known as

the economic growth rate

Macroeconomics is the study of

the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

Capital can be differentiated between physical capital and human capital. Human capital is A. the new developments in machinery and software. B. the energy use to bring together the factors of production to produce goods and services. C. the knowledge and skills workers acquire from education and training or from their life experiences Your answer is correct. D. the goods manufactured to produce other goods and services.

the knowledge and skills workers acquire from education and training or from their life experiences

Gross Domestic Product​ (GDP) is

the market value of all final goods and services produced in a country during a period of time.

The subtitle of a Wall Street Journal article about the economy in the eurozone​ (the 19 European countries that use the euro as their​ currency) stated​"Fourth-quarter output, lowest unemployment in seven​ years, higher inflation eases some​ concerns." ​Source: Paul Hannon and William​ Horobin, "Eurozone Economy on Pace with​ U.S.," Wall Street Journal​, January​ 31, 2017. Use an aggregate demand and aggregate supply graph to explain how the eurozone could experience both lower unemployment and higher inflation. Assume the eurozone is initially in​ long-run equilibrium. The aggregate demand curve will shift right. The new​ short-run equilibrium will be where

the new aggregate demand curve intersects the original​ short-run aggregate supply curve. According to the​ graph, prices are higher and GDP is higher .

The difference between the nominal interest rate and the real interest rate is A. the nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest rate divided by the inflation rate. B. the nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest rate plus the inflation rate. C. the nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest rate minus the inflation rate. Your answer is correct. D. the real interest rate is the stated interest rate whereas the nominal interest rate is the real interest rate minus the inflation rate.

the nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest rate minus the inflation rate.

The BLS collects price statistics from traditional​ full-price retail​ stores, which do not reflect the prices some consumers pay by shopping at discount stores or on the Internet. This is a description of which​ bias? A. the increase in quality bias B. the substitution bias C. the new product bias D. the outlet bias

the outlet bias

The federal funds rate​ is:

the overnight interest rate banks pay to borrow funds from each other.

The labor force participation rate is calculated by

the percentage of the​ working-age population that is in the labor force or (Labor force/Working−age population)×100.

The seven members of the Board of Governors of the Federal Reserve are appointed by

the president

Which of the following is included in the​ economist's definition of​ investment?

the purchase of new​ machines, factories, or houses

Which of the following sets a floor on the federal funds​ rate?

the reverse repo rate

Changes in the CPI overstate the true inflation rate due to four​ "biases." If apple prices rise rapidly during the month while orange prices​ fall, consumers will reduce their apple purchases and increase their orange purchases. Which of the four biases is concerned with this consumer​ behavior? A. the outlet bias B. the new product bias C. the substitution bias Your answer is correct. D. the increase in quality bias

the substitution bias

Shortly before the fall of the Soviet​ Union, the economist Gur Ofer of the Hebrew University of​ Jerusalem, wrote​ this: ​"The most outstanding characteristic of Soviet growth strategy is its consistent policy of very high rates of​ investment, leading to a rapid growth rate of​ [the] capital​ stock." ​Source: Gur​ Ofer, "Soviet Economic​ Growth, 1928-1985," Journal of Economic Literature​, December​ 1987, p.​ 1,784. This turned out to be a very poor growth strategy because

there were diminishing returns to capital.

What term describes the relationship between real GDP per hour worked and capital per hour​ worked, holding the level of technology​ constant?

the​ per-worker production function

When the economy is experiencing a recession automatic stabilizers will​ cause:

transfer payments to increase and tax revenues to decrease.

Member banks receive interest on reserves as they are able to hold deposits at the Fed.

true

Answer the following questions according to your required reading from The Wall Street Journal titled What Is​ Bitcoin? Not What You Think. What did a Florida programmer pay​ 10,000 bitcoins for in May​ 2010? This article says that Btcoin is a poor medium of exchange and store of value.

two pizzas true

Changes in interest rates affect aggregate demand.LOADING... Which of the following is affected by changes in interest rates​ and, as a​ result, impacts aggregate​ demand? ​(Mark all that​ apply.) A. Government spending B. The value of the dollar Your answer is correct. C. Consumption of durable goods Your answer is correct. D. Business investment projects

value of the dollar, consumption of durable goods, business investment projects

An important conclusion to draw from the​ circular-flow diagram is that

we can measure GDP by calculating the total value of expenditures on final goods and​ services, or we can measure GDP by calculating the value of total income.

The wealth effect refers to the fact that

when the price level​ falls, the real value of household wealth​ rises, and so will consumption.

Imagine a 45°​-line ​(Keynesian cross) diagram in which the​ upward-sloping aggregate expenditure curve intersects the 45°​-line at point A. In the​ graph, a point where inventories are falling would be plotted

on the AE line to the left of point A.

Suppose an economy is given by the​ following: Population​ = 291 million Labor force​ = 161 million The number of people employed​ = 148.1 million The number of people unemployed​ = 12.9 million Given the information​ above, the unemployment rate is 8.0%. ​(Enter your response rounded to one decimal​ place.)

8%

If the required reserve ratio is 8​% and the Fed injects ​$649 of reserves into a​ bank, what is the maximum amount the money supply could increase​by?

8112.5

Suppose the economy is initially at point A. The government decides to increase taxes. In the​ short-run, this contractionary fiscal policy will​ cause:

A shift from AD2 to AD1 and a movement to point​ D, with a lower price level and lower output.

The example we will be using in this course the most in about​ what? Inflation focuses on individual prices and not the price level as a whole. The​ _________ is the most​ well-known publisher for data on prices.

A t shirt factory False Bureau of Labor Statistics​ (BLS)

Which of the following will cause interest rates to​ rise?

A. lowering the required reserve ratio B. open market purchases Your answer is not correct. C. lowering the discount rate D. all of the above E. none of the above

Percent Change Formula

(X2-X1)/X1

Using the data calculate the balance on current account for this economy. The value of the current account​ is: ​

-1550

The graph below shows three production functions. PFo shows the current production function for the​ economy, and capital per worker is currently​ (K/L)o; thus ouput per worker is​ (Y/L)o. Suppose that there is a reduction in the level of technology. Which of the points on the graph could show the new capital per worker and output per​ worker?

1

Find equilibrium GDP using the following macroeconomic​ model: C ​= ​1,000 + 0.8Y Consumption function I ​= 500 Investment function G ​= 600 Government spending function NX ​= ​-100 Net export function Y ​= C ​+ I​ + G​ + NX Equilibrium condition

10,000

If the required reserve ratio is 10​%, what is the value of the simple deposit​ multiplier? Please round to 2 decimal places.

10.00

If the required reserve ratio is 9​% and you deposit ​$565 of cash into a​ bank, what is the maximum amount the money supply could increase​ by?

5712.78

If the simple deposit multiplier is 14.57​, what must the required reserve ratio​ be?

6.86

Suppose the government increases expenditures by ​$30 billion and the marginal propensity to consume is 0.60. By how much will equilibrium GDP​change? The change in equilibrium GDP​ is: ​$75 billion.

75

Net growth theory suggests that the accumulation of knowledge capital can be slowed because knowledge is both nonrival and nonexcludable. How does the federal government intervene in the market to increase the amount of knowledge​ capital? Patents B. Public education C. Subsidies D. All of the above Your answer is correct. E. A and B only

All of the above

Real GDP per capita is often used as a measure of general​ well-being. While increases in real GDP often do lead to increases in the​ well-being of the​population, why is real GDP not a perfect measure of​ well-being? GDP does not include crime rates or income distribution. B. The costs of pollution are not included. C. The value of leisure is not included. D. All of the above.

All of the above

Which of the following causes the​ short-run aggregate supply curve to shift to the​ left? A. an increase in the expected price of an important natural resource B. an decrease in the labor force C. an decrease in productivity D. All of the above

All of the above

The​ "normal" underlying level of unemployment in the economy is A the sum of structural unemployment and frictional unemployment. B. the​ full-employment rate of unemployment. C. the natural rate of unemployment. D. All of the above.

All of the above.

Which of the following categories was the largest for revenues in​ 2019?

Individual income taxes

Which of the following is not a limitation to monetary policy mentioned in the​ lesson?

The information lag

In an​ economy, the​ working-age population is 400 million. Of this​ total, 300.0 million workers are employed. 16.0 million workers are unemployed. 64.0 million workers are not available for work​ (homemakers, full-time​ students, etc.). 12.0 million workers are available for work but are discouraged and thus are not seeking work. 8.0 million workers are available for work but are not currently seeking work due to transportation or childcare problems.

The labor force participation rate in this economy is 79.0​%. ​

Use the figure to calculate the marginal propensity to consume​ (MPC) between point A and point B. MPC=

MPC=.75

Which of the following covers the study of topics such as inflation or​ unemployment?

Macroeconomics

Which of the following categories was the largest for outlays in​ 2019?

Mandatory spending

What are the names of your​ professor, James​ Tierney's, two rescue​ dogs?

Penny and Dakota

​Real-Time Data Analysis​ Exercise* Calculate the percentage changes in the price indices from January 2019 to January 2020 for the following cities ​(enter all values as percentages rounded to one decimal place and include a minus sign if ​necessary)​: The prices of homes changed the most during this year in Based on these​ numbers, can you determine which city had the most expensive homes in

Phoenix It is not possible to determine with the info provided

The discussion this week about the deficit and debts were centered around an infographic released by​ the:

Congressional Budget Office​ (CBO)

In this​ lesson, we introduced one way of measuring the price level. That was by using​ the: The inflation rate is equal​ to:

Consumer Price Index CPI the percentage change in the price level over the past year.

Refer to the graph. According to the economic concept of catch-up, which of the following is​ CORRECT?

Poorer countries should grow more quickly and will be at point A.

Along the​ per-worker production​ function, what happens to real GDP per hour worked as capital per hour worked​ increases?

Real GDP per hour worked increases at a decreasing rate.

How would an increase in interest rates affect​ investment?

Real investment spending declines.

Which celebrity did your​ professor, James​ Tierney, meet in the New Orleans​ Airport?

Snoop

Which Federal Reserve Bank hosts​ FRED?

St. Louis

Which of the following is not a limitation to fiscal policy we spoke about this​ week?

Term Limits

b. What movie is being filmd in New Orleans while this podcast is being​ recorded?

The Big Short

Consider the figures below and determine which is the best description of what causes the shift from AD1 to AD2.

Example A shows a contractionary monetary policy. The price level and real GDP both fall. B. Example B shows an expansionary monetary policy. The price level and real GDP both rise. C. Example A shows an expansionary monetary policy. The price level rises and real GDP falls. D. Both examples show expansionary monetary policy. The price level and real GDP both rise. E. Both A and B. this answer is correct

In most​ countries, political stability has little to do with economic growth.

False

Member banks cannot receive interest on reserves as they are unable to hold deposits at the Fed.

False

Suppose that currency traders expect that the value of British pound will fall in the future. How will this will affect the demand and supply of British pound in the foreign exchange​ market?

Demand for pounds will decrease and supply of pounds will increase

Which of the following is not a Federal Reserve​ district?

Denver

What is the general relationship between the business cycle and unemployment and​ inflation?

During an​ expansion, unemployment falls and inflation increases.

One definition of fiscal policy​ is:

Fiscal policy can be described as changes in government spending and taxes to achieve macroeconomic policy objectives.

What happens if we measure GDP by adding up the value of every good and service produced in the​ economy?

GDP is overestimated because of double counting.

The term​ "crowding out" refers to a situation​ where:

Government spending increases interest rates and decreases private investment.

GDP is an imperfect measure of economic​ well-being because it fails to measure what types of​ production?

Household production and the underground economy.

In the circular flow of expenditure and​ income, why must the total value of production in an economy equal the total value of​ income?

Every penny spent on a good or service must end up as​ someone's income.

Which committee sets the position of monetary​ policy?

The Federal Open Market Committee

In the Medium article Professor Tierney wrote titled GDP​ Doesn't Tell the Whole​ Story, which alternate to GDP was the artcle​ about?

The Gross National Happiness Index

Into which category of aggregate expenditures would the following transaction fail?

The Jones family buys a new house Investment expenditure

Using the information below compute the M1 money supply.

The M1 money supply is equal​ to: ​$1710

Which of the following events would cause a movement along the short−run aggregate supply curve​?

a decrease in price level

Suppose that you are available to go to work but have not looked for a job for at least the last four weeks because you believe that there​ aren't any jobs available. You would be counted as

a discouraged worker.

If the government cuts taxes in order to increase aggregate​ demand, the action is called

a discretionary fiscal policy

When a central bank intervenes into the foreign exchange market to set a​ country's exchange rate over long periods of​ time, it is called

a fixed exchange rate.

A country that allows demand and supply to determine the value of its currency has

a floating currency

When a local restaurant accepts your​ $20 bill when you purchase a​ to-go order of​ pasta, the​ $20 bill serves​ as:

a medium of exchange.

Which of the following is the definition of the new growth​ theory?

a model of​ long-run economic growth that emphasizes that technological change is influenced by economic incentives

Along the​ downward-sloping catch-up​ line, a country near the top of the line is

a poor country growing rapidly.

If the economy adjusts through the automatic​ mechanism, then a decline in aggregate demand causes

a recession in the short run and a decline in the price level in the long run.

How would it affect the unemployment rate if the Bureau of Labor Statistics counted as unemployed both​ (1) discouraged workers and​ (2) people who work​ part-time but would prefer to work​ full-time? A. The unemployment rate would increase. Your answer is correct. B. The annual unemployment rate would have been close to 50 percent in the last decade. C. The unemployment rate would decrease. D. The unemployment rate would remain the same because those people are already counted as unemployed.

The unemployment rate would increase.

The adjacent figure shows the effect of a reduction in equilibrium GDP when government purchases decline. Which of the following is not true about the multiplier effect of such a change in government purchases​ ?

The value of the multiplier is -$5 billion

Have poor countries been catching up to rich​ countries?

There has been​ catch-up by some poor but industrialized countries.

When interest rates​ rise, the dollar will become stronger​ (appreciate).

True

Our World in Data​ (ourworldindata.org) is maintained by researchers​ at:

University of Oxford

How do the banks​ "create money"?

When there is an increase in checking account​ deposits, banks gain reserves and make new​ loans, and the money supply expands.

Which equation represents the relationship between GDP and the four major expenditure​ components?

Y=C+I+G+NX

Which of the following factors does not cause the aggregate demand curve to​ shift? A. a change in foreign variables B. a change in the price level Your answer is correct. C. a change in government monetary or fiscal policies D. a change in the expectations of households and firms How can government policies shift the aggregate demand curve to the​ right? A. by increasing business taxes B. by increasing government purchases Your answer is correct. C. by increasing personal income taxes D. All of the above.

a change in the price level by increasing government purchases

If something is to be considered as​ money, it has to fulfil

all four functions

Which of the following events would cause the demand curve in the foreign exchange market to​ shift? A. Changes in expectations of the future value of U.S. currencies. B. Increased demand for U.S. goods and services. C. Increase in U.S. interest rates. D. All of the above.

all the above

Business cycles are

alternating periods of expanding and contracting economic​ activity, which are usually illustrated using movements in real GDP.

The revenue the federal government collects from the individual income tax declines during a recession. This is an example of

an automatic stabilizer

Total unemployment insurance increases during an recession. This is an example of

an automatic stabilizer

The multiplier effect is the process by​ which:

an increase in autonomous expenditure leads to a larger increase in real GDP.

From June 2009 to June​ 2019, the Standard​ & Poor's Index of 500 stock prices increased by more than 300​ percent, while the consumer price index increased by less than 18 percent. These changes would have caused

an increase in the real value of household​ wealth, which shifted the aggregate demand curve to the right.

If the economy is initially at​ full-employment equilibrium, then an increase in aggregate demand causes​ _____________ in real GDP in the short run and​ ___________ in the price level in the long run.

an​ increase; an increase

In the​ figure, the exchange rate equilibrium occurs at the point where the quantity demanded equals the quantity​ supplied, ¥120 = $1​ (point A). If the equilibrium exchange rate changed from ¥120 ​= $1 to ¥150 ​= $1, we would say that the dollar

appreciated against the yen

Currency​ ___________ occurs when the market value of a​ country's currency rises relative to the value of another​ country's currency, while currency​____________ occurs when the market value of a​ country's currency declines relative to value of another​ country's currency.

appreciation ; depreciation

Government spending and taxes that change without actions by the government are called

automatic stabilizers

The diagram to the right is an example of

a​ time-series graph.

Which of the following is true about the Federal Reserve and its ability to prevent​ recessions? The Federal Reserve

cannot realistically fine tune the​ economy, but seeks to keep recessions shorter and milder than they would otherwise be.

Unemployment data comes out the following month and is revised twice. GDP data takes several months to come out and also goes through revisions. Because of​ this, we see a​ ______ when it comes to monetary policy.

data lag

Consider the per-worker production function Equal increases in the quantity of capital per hour worked lead to diminishing increases in output per hour worked.

diminishing

If the government raises the amount of​ taxes, holding everything else​ constant, then

disposable income will decrease.

Monetary policy​ _______ are willing to sacrifice higher inlfation for lower levels of unemployment.

doves

Monetary policy​ _______ would shift aggregate demand to the right when an economy is experiencing stagflation.

doves

Whenever banks gain reserves and make new​ loans, the money supply​ ___________; and whenever banks lose​ reserves, and reduce their​ loans, the money supply​ __________.

expands; contracts

d. The base interest rate in the US is called​ the:

federal funds rate.

The financial system of a country is important for​ long-run economic growth because

firms need the financial system to acquire funds from households.

The new growth theory states that

firms will add to an​ economy's stock of knowledge capital by engaging in research and development or by contributing to technological change.

When the economy is at full​ employment, which types of unemployment​ remain?

frictional and structural

Monetary policy​ _______ are willing to sacrifice higher unemployment for lower levels of inflation.

hawks

Monetary policy​ _______ would shift aggregate demand to the left when an economy is experiencing stagflation.

hawks

The interest rate effect refers to the fact that a higher price level results in

higher interest rates and lower investment.

If the GDP deflator in 2012 has a value of​ 98.0, then

prices have decreased 2 percent between the base year and 2012.

A Penn State football fan with a Saquon Barkley football card wants to trade it for a Michael Jordan basketball​ card, but everyone the fan knows who has a basketball card​ doesn't want a football card. Economists characterize this problem as a failure of the

principle of a double coincidence of wants.

At point A in the graph to the​ right, planned aggregate expenditure is greater than GDP. At point B​, planned aggregate expenditure is equal to GDP. At point C​, planned aggregate expenditure is less than GDP. At point A​, the unintended change in inventories can be shown on the graph​ by:

the vertical distance between point A and the 45° line.

The business cycle exists because

total production experiences periods of increases and periods of decreases.

Suppose the​ per-worker production function was shaped as shown in the graph at right. If a country was accumulating increasing quantities of capital per hour​worked, this country would experience

increasing labor productivity and higher levels of economic growth.

Transfer payments are not included in GDP calculations because

transfer payments are simply transfers of income from one group to another and not a purchase of a new good or service.

From the US Revolutionary War to​ WWII, inflation swung around much more dramatically than it does today.

true

Stagflation is a combination of inflation and recession. Stagflation occurs when a supply shock shifts the SRAS to the left, increasing the price level and decreasing actual GDP.

truth

Expansionary monetary policy is more effective in an open economy because

interest rate decreases also reduce the value of the​ dollar, which increases net exports and further increases aggregate demand.

When aggregate expenditure is less than GDP​,

inventories rise, and GDP and employment decrease

On a 45°​-line diagram ​(or Keynesian Cross​), the horizontal axis measures real GDP​, while the vertical axis measures real aggregate expenditure. The aggregate expenditures line will be The macroeconomic equilibrium will be

upward sloping with a flatter slope than the 45 where the AE line intersects the 45

If the Fed believes the inflation rate is about to​ increase, it should

use a contractionary monetary policy to increase the interest rate and shift AD to the left.

If the Fed believes the economy is about to fall into​ recession, it should

use an expansionary monetary policy to lower the interest rate and shift AD to the right.

The balance of payments is negative since we spend much more on foreign goods and services than on domestic goods and services. B. is positive since we spend much more on foreign goods and services than on domestic goods and services. C. can be either positive or​ negative, depending on the statistical discrepancy. D. is always zero.

is always zero

At the​ macro-economy level,

knowledge capital exhibits increasing returns and physical capital exhibits decreasing returns.

The economic growth model predicts that the

level of per capita GDP in poor countries will increase faster than rich countries and the poor nations will catch up with the rich nations.

The following questions refer to the video you watched on MR University titled Game of​ Theories: Real Business Cycle. According to real business cycle​ theory, negative real shocks initially affect

long-run aggregate supply

Contractionary monetary policy will result​ in:

lower consumption. B. lower investment. C. higher imports. D. all of the above. Your answer is correct. E. A​ & B only.

If the Fed thinks there needs to be more economic​ activity, they will want​ to:

lower interest rates

​Sometimes, the inflation rate may be stable and the unemployment rate may be going up just slightly.​ It's tough to know if the economy is in a recession or not. This is an example of​ the:

recognition lag

The financial account records

only net capital flows.

Which one of the following is not a function of​ money?

open market operation

Stagflation occurs when the price level​ _____ and output​ _____.

rises ; falls

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls

scarcity

Complete the following table for a static​ AD-AS model:

see pic

Chinese businesses switch to an improved inventory method that increases output per worker worked. this will cause a

shift of china's per-worker production function

Higher interest rates​ will:

shift the aggregate demand curve to the left.

The unemployment rate

shows the percentage of the labor force that is considered unemployed.

The type of unemployment most likely to result in hardship for the people who are unemployed is

structural because this type of unemployment requires retraining to acquire new job skills.

When the exchange rate​ (measured as foreign currency per​ dollar) is above the equilibrium exchange​ rate, there is a​ ___________ of dollars​ and, consequently,​ ____________ pressure on the exchange rate.

surplus ; downward

The Federal Reserve is divided into two​ bodies:

the Board of Governors and 12 regional districts.

Which of the following does the aggregate expenditure macroeconomic model seek to​ explain?

the business cycle

Why do economists believe that setting a goal of zero percent unemployment is not feasible or​ desirable? Creating a goal of zero percent unemployment for an economy is not feasible nor is it desirable because

the economy needs some​ short-term unemployment in order to allow for better matching of jobs with workers that possess the proper skill sets.

The part of the balance of payments that records purchases of assets a country has made abroad and foreign purchases of assets in the country is called

the financial account

The simple deposit multiplier equals

the formula used to calculate the total increase in checking account deposits from an increase in bank reserves. B. the ratio of the amount of deposits created by banks to the amount of new reserves. C. the​ inverse, or​ reciprocal, of the required reserve ratio. D. All of the above.

Which of the following sets a ceiling on the federal funds​ rate?

the interest paid on reserves

Gross domestic product is best defined as

the market value of all final goods and services produced in a country during a period of​ time, typically one year.

When the economy is at full​ employment, unemployment is equal to

the natural rate of unemployment.

The slope of the aggregate expenditure line equals

the slope of the consumption function.

The LRAS is

vertical because in the long​ run, changes in the price level do not affect potential​ GDP, as potential GDP depends on the size of the labor​force, capital​ stock, and technology.

When are additions to knowledge capital subject to diminishing​ returns?

when we look only at their effect on an individual firm

Imagine a 45°​-line ​(Keynesian cross) diagram in which the​ upward-sloping aggregate expenditure curve intersects the 45°​-line at point A. The economy is currently in macroeconomic equilibrium at output level Yo. Suppose that investment decreases. If investment decreases​, the aggregate expenditures line will shift down. The new equilibrium levels of GDP and expenditures will be

where the new AE line intersects the 45

If inflation in the United States is lower than inflation in other​ countries, then U.S. exports​ ________ and U.S. imports​ ________, which​ _________ net exports.

​increase; decrease; increases

Assume you take ​$1706 from your savings account and transfer it to your checking account. Holding all else​ constant, how much will M1 change​ by?

+1706

Using the data calculate the balance on current account for this economy. The value of the current account​ is: ​

-$1950

Assume you take ​$1655 from your checking account and transfer it to your savings account. How much will M1 change​ by? Make sure you use a negative sign if it is a decrease. Please round to two decimal places and do not include the dollar sign. For​ example, if your answer is​ $5678.977 you would enter 5678.98.

-1655

Suppose the government increases taxes by ​$70 billion and the marginal propensity to consume is 0.90. By how will equilibrium GDP​ change? The change in equilibrium GDP​ is: ​

-630 billion

Complete the following table to indicate what effect a decrease in each of the consumption components will have on consumption.

.

Calculate the missing values in the table below by using the provided data collected in the household survey for

..

Assume you take ​$1037 from your checking account and transfer it to your savings account. How much will M2 change​ by?

0 -- doesn't change

Monetary policy in the US is conducted​ by:

The federal reserve

Which of the following is the formula for the​ multiplier?

1/(1-MPC)

Assume the required reserve ratio is 19​%, the amount of deposits in a bank are ​$1839​, and the bank is holding ​$510 in reserves. What is the maximum amount of additional loans this bank can​ make?

160.59

Assume that a country​ has, on​ average, a deficit of $9 billion each year for 18 years. Assuming the debt was zero at the​ beginning, what is the total debt at the end of these 18 years?

162

BLANK is unemployment caused by a recession. As output​ (GDP) is​ increasing, the amount of cyclical unemployment would

Cyclical Unemployment Decrease

What are the four main determinants of​ investment?

Expectations of future​ profitability, interest​ rates, taxes and cash flow.

Which of the following statements regarding net exports is not​ correct?

Net exports are typically one of the largest components of aggregate expenditure.

How is the GDP deflator​ calculated?

Nominal GDP/Real GDP. x100

Suppose that the inflation rate turns out to be much lower than most people expected. In that​ case,

The borrower will lose from the situation while a lender will gain

What is the difference between the federal budget deficit and federal government​ debt?

The federal budget deficit is the​ year-to-year short fall in tax revenues relative to government spending ​ (T < G​ + TR), financed through government bonds. The federal government debt is the accumulation of all past deficits.

When business taxes​ increase, the equilibrium interest rate decreases and the equilibrium quantity of loanable funds decreases. What will be the effect of an increase in business taxes on the quantity of investment by firms and the​ economy's capital stock in the​ future?

The quantity of investment will decrease and the​ economy's future capital stock will decrease.

Crowding out is only when we see an increase in government​ purchases, not when we see a decrease.

True

When incomes rise faster in the United States than in other​ countries,

U.S. net exports will fall.

Fiscal policy has a smaller effect on aggregate demand in an open economy.

a smaller

Indicate whether each of the following is primarily a microeconomicLOADING... issue or a macroeconomicLOADING... issue. a. The effect of higher cigarette taxes on the quantity of cigarettes sold. This is a microeconomic issue. b. The effect of higher income taxes on the total amount of consumer spending. This is a macroeconomic issue. c. The reasons for the economies of East Asian countries growing faster than the economies of​ sub-Saharan African countries. This is a macroeconomic issue. d. The reasons for low rates of profit in the airline industry. This is a microeconomic issue.

a. micro b. macro c. macro d. micro

A student says the​ following: ​"I understand why the Fed uses expansionary policy but I​ don't understand why it would ever use contractionary policy. Why would the government ever want the economy to​ contract?" The government would want the economy to contract when real GDP is

above potential GDP and the price level is rising.

Consider the two aggregate demand curves in the graph at right. A movement from point A to point B on AD1 could be the result of a A movement from point A to point C could be the result of a

change in the price level. a change in the expectations of households

Which of the following is not a government policy that will increase the accumulation of knowledge​ capital?

encouraging the growth of labor unions

In the​ graph, the economy is in​ long-run equilibrium at point A. ​Now, assume that there is an unexpected increase in the price of oil. ​1.) Use the line drawing tool to show the resulting​ short-run equilibrium on your diagram. Label any new aggregate demand or aggregate supply curve as AD2 SRAS2 or LRAS2 as appropriate. ​2.) Use the point drawing tool to locate the new​ short- run equilibrium point. Label this point B. Carefully follow the instructions​ above, and only draw the required objects. In the new​ short-run equilibrium, the unemployment rate is higher than the unemployment rate in the initial equilibrium prior to the increase in the price of oil.Which of the following best explains how and why the economy will adjust back to​ long-run equilibrium?A.Aggregate demand will​ increase, restoring the original equilibrium price and quantity.B.​Short-run aggregate supply will decrease​ (shift leftward) as firms and workers adjust to the​ new, higher price level.Your answer is not correct.C.​Short-run aggregate supply will increase​ (shift rightward) as the recession makes firms and workers willing to accept lower wages and prices.This is the correct answer.D.Aggregate demand will​ decrease, restoring the original equilibrium price and quantity.After the adjustment of aggregate supply is​ complete, the economy returns to equilibrium A.in between points A and B.B.at a point lower than​ (i.e., south-east​ of) A.Your answer is not correct.C.at point B.D.at point A.This is the correct answer.When the economy returns to​ long-run equilibrium​ again,A.real GDP and the unemployment rate will be the same but the price level will be higher compared to the initial equilibrium value prior to the increase in the price of oil.Your answer is not correct.B.real GDP will be lower and the unemployment rate and the price level will be higher compared to the initial equilibrium value prior to the increase in price of oil.C.real​ GDP, the unemployment​ rate, and the price level will be the same as the initial equilibrium values prior to the increase in the price of oil.This is the correct answer.D.the unemployment rate will be the​ same, but real GDP will be lower and the price level higher compared to the initial equilibrium value prior to the increase in the price of oil.

higher than . ​Short-run aggregate supply will increase​ (shift rightward) as the recession makes firms and workers willing to accept lower wages and prices. at point a . ​Short-run aggregate supply will increase​ (shift rightward) as the recession makes firms and workers willing to accept lower wages and prices.

According to your required reading​ titled, What full employment really means​, the phenomenon​ short-term unemployment coulse become​ long-term unempllyment is known​ as:

hysteresis

a. Match the following scenarios to the appropriate graph. b. Match one or more of the four graphs to each of the following​ scenarios:

i. An increase in the expected price level 1 ii. An increase in​ households' expectations of their future income 4 iii. A decrease in the price of an important natural resource 2 iv. A decrease in​ firms' expectations of the future profitability of investment spending 3 i. The economy experiences a recession 1, 3 ii. The economy experiences​ short-term inflation 1, 4 iii. The economy experiences stagflation 1

Even after it is decided to take on monetary​ policy, the FOMC will need to meet and hash out exactly what needs to be​ done, and that takes time. Because of​ this, we see a​ ______ when it comes to monetary policy.

implementation lag

All of the following are reasons the SRAS slopes upward except for one. Which one is​ that? A. in the short​ run, as prices of final goods and services​ increase, some firms are very slow to adjust their​ prices, thus their sales increase. B. in the short​ run, prices of final goods and services adjust slowly due to the existence of menu costs. C. in the short​ run, as prices of final goods and services​ increase, input prices react more slowly. D. in the short​ run, an unexpected change in the price of an important resource can change the cost to firms.

in the short​ run, an unexpected change in the price of an important resource can change the cost to firms.

Credit cards are

included in neither the M1 definition of the money supply nor in the M2 definition.

How would an increase in the growth rate of GDP in Canada and Mexico affect U.S. net​ exports? An increase in the growth rate of GDP in Canada and Mexico will

increase U.S. net exports by increasing exports to these countries.

Assume the tax multiplier is estimated to be 1.8 and the aggregate supply curve has its usual upward slope. Suppose the government lowers taxes by ​$78 million. Aggregate demand will increase by ​$140.4million. ​(Enter your response rounded to one decimal​ place.)

increase by 140.4 mil

The real interest rate A. is equal to the inflation rate minus the nominal interest rate. B. is the interest rate that adjusts GDP for changes in prices. C. is the interest rate that is quoted on a financial debt and a​ firm's assets. D. is equal to the nominal interest rate minus the inflation rate. Your answer is correct. Suppose an economy has an inflation rate of 2.1​% and a bank makes a loan with an interest rate of 7.3​%. In this​ case, the real interest rate is 5.2​%. ​(Enter your response rounded to one decimal​ place.)

is equal to the nominal interest rate minus the inflation rate.

The unemployment rate that includes discouraged workers and people working​ part-time who would prefer​ full-time jobs

is higher than the official unemployment​ rate, and the difference between the two grows larger in recessions.

If prices rise over​ time, then real GDP will be

larger than nominal GDP in years before the base year.

When the Fed takes​ action, if there are​ _______ reserves in the​ system, interest rates will​ ______.

more ; fall OR less ; rise

According to the multiplier effectLOADING...​, an initial increase in government purchases increases real GDP by _______ the initial increase in government purchases.

more than

The current account records

net​ exports, net investment​ income, and net transfers.

The Fed buys bonds. This is an example of

not a fiscal policy

The government increases gasoline mileage requirement for new cars to try and help with the environment. This is an example of

not a fiscal policy

he United States is divided into 12 Federal Reserve Districts. ​ The Federal Reserve was established in 19131. ​(enter a​ number, not a word​) If the Federal Reserve thinks there needs to be less economic activity due to higher levels of​ inflation, they can attempt to​ ________ interest rates to​______ the access to liquidity.

raise ; slow down

The natural rate of unemployment is

the sum of structural unemployment and frictional unemployment.

Consider the​ per-worker production function graph. If there is an increase in capital per hour​ worked, holding technology​constant, then If there is an increase in​ technology, holding constant the quantity of capital per hour​ worked, then

there is a movement from A to B. there is a movement from A to C.

If the price level​ increases, then

there will be a movement up along a stationary aggregate demand curve.

If a country pegs its exchange rate with the dollar below the equilibrium​ value,

there will be an excess demand for that​ country's currency.

When is the economy in a​ recession?

when the aggregate expenditure line intersects the 45o line at a level of GDP below potential GDP

A politician makes the following​ argument: ​"The economy would operate more efficiently if frictional unemployment were eliminated.​ Therefore, a goal of government policy should be to reduce the frictional rate of unemployment to the lowest possible​ level." Eliminating all frictional unemployment

will not be good for the economy since the presence of frictional unemployment increases economic efficiency.

A simple economy produces two​ goods, Corn Bread and Video Games. Price and quantity data are as​ follows: In Year​ 2, nominal GDP is equal​ to: and real GDP is ​(enter both responses rounded to the nearest penny​).

​$108562.50 ​$54375.00

If the CPI was 207 in 2009 and 225 in​ 2013, what wage would someone who earned a​ $50,000 income in 2009 have to earn in 2013 in order to keep her purchasing power​ constant?

​$54,348

If the marginal propensity to consume ​(MPC​) is​ 0.9, how much additional consumption will result from an increase of​ $100 billion of disposable​income?

​$90 billion

Use the following data to answer the​ question: Y ​= ​$8,000 C ​= ​$6,200 I ​= ​$1,500 G ​= ​$1,500 NX ​= ​-$500 The unplanned change in inventories is​ ________ and real GDP will​ ________.

​-$700; increase

There are​ ________ members of the Board of​ Governors, who the President of the United States appoints to​ ________. One of the Board members is appointed Chairman for​ ________.

​7; 14-year nonrenewable​ terms; a​ 4-year renewable term

What are the four major components of expenditures in​ GDP?

​Consumption, Investment, Government​ Purchases, and Net Exports

Indicate whether you agree or disagree with the following​ statement: ​"In years when people buy few shares of​ stock, investment will be low ​and, therefore, so will gross domestic product​(GDP)."

​Disagree: Investment as a component of GDP refers to the purchase of physical and human capital and​ inventory, not stock purchases.

The economic growth model predicts that poor countries will grow faster than rich countries. Which of the following best explains what is actually happening to real per capita GDPs of​ countries?

​Lower-income industrial countries are catching up with​ higher-income industrial countries.

​Long-run growth in GDP is determined by

​capital, labor​ productivity, and technology.

As the interest rate​ increases,

​consumption, investment, and net exports​ decrease; aggregate demand decreases.

The three types of unemployment are

​frictional, structural, and cyclical unemploment.