Econ Final
In a standard of living comparison, China ranks ______ in the world. This rank is ______.
105th; rising because physical capital and human capital growth and technological change are proceeding rapidly and China's real GDP is growing
An economy has a consumption function of C = 10 + 0.8Y, investment of 6, government expenditure of 10, exports of 10, and an import function of M = 0.1Y. If government expenditure increases to 15, what is the increase in equilibrium expenditure?
16.65
The unemployment rate peaked ______ after the 2001 recession. During the 2002-2008 recession, the unemployment rate reached its lowest point at the beginning of ______.
18 months; 2007
Over the past 100 years, the average growth rate of U.S. real GDP per person is 2 percent. Over the past 100 years, growth was most rapid during the ______ and slowest during the ______.
1960s; Great Depression
Suppose an increase in the monetary base of $100,000 increases the quantity of money by $200,000. Calculate the money multiplier. The money multiplier is___.
2
Over the past 100 years, the average growth rate of U.S. real GDP per person is ____ percent.
2%
The inflation rate in the year ended December 2016 was ____ percent per year. The inflation rate in the year ended December 2017 was ____ percent per year. How did the inflation rate change in the year ended December 2017? The inflation rate _____ .
2.1% 2.1% didn't change
In the year to December 2017, the inflation rate measured by the CPI was ___ percent. In the year to December 2017, the inflation rate measured by the PCE was ____ percent. In the year to December 2017, the inflation rate measured by the PCE less food and fuel was ____ percent.
2.1% 1.7% 1.5%
If the monetary base increases by $1 million and the quantity of money increases by $2.5 million, then the money multiplier is _____.
2.5
Suppose that the velocity of circulation of money is constant and real GDP is growing at a constant 2 percent a year. To achieve an inflation target of 1 percent a year, the central bank grows the quantity of money at ____ percent a year.
3
If real GDP per person doubles in 20 years, then the annual growth rate of real GDP per person is ______ percent a year.
3.5
The table above and graph to the right provide information about the U.S. labor market in January, 2018. In, January, 2018, the unemployment rate in the United States was ____ percent. In, January, 2018, the labor force participation rate in the United States was ____ percent
4.1% 62.7%
Use the above data to calculate for March 2018March 2018: >>> Answer each to one decimal place. Unemployment rate_____ percent Labor force participation rate ______ percent Employment to population ratio ____ percent
4.1% 62.9% 60.4%
The Bureau of Labor Statistics reported the following data for January 2018. Labor force 161,115 Employed 154,430 Working-age population 256,780 Use the above data to calculate for January 2018: >>> Answer each to one decimal place. Unemployment rate ____ percent Labor force participation rate ____ percent Employment to population ratio ____ percent
4.1% 62.7% 60.1%
Suppose an increase in the monetary base of $300,000 increases the quantity of money by $1,500,000. Calculate the money multiplier.
5
An economy has a fixed price level, no imports, and no income taxes. MPC is 0.8, and real GDP is $150 billion. Businesses increase investment by $10 billion. The multiplier is ____. The increase in real GDP is $___ billion.
5 $50 billion
An economy is at potential GDP and the price level is 100 in the figure. If aggregate demand unexpectedly increases, the inflation rate is ______.
5 percent a year
If the annual interest paid on a $500 loan is $25, the nominal interest rate is _____ percent per year. If the nominal interest rate is 5 percent per year and the inflation rate is 2 percent a year, the real interest rate is _____ per year.
5; 3
The table gives information about the U.S. labor market in 2002. What is the employment-to-population ratio?
62.7%
The table gives information reported by the Bureau of Labor Statistics for April, 2010. What is the labor force participation rate?
65.4%
Calculate the growth rate of China's standard of living during 2013. The growth rate of China's standard of living during 2013 increased by ___ percent.
7.3%
Calculate China's real GDP growth rate and its population growth rate during 2013. China's real GDP growth rate during 2013 is ____ percent and its population growth rate during 2013 is ____percent.
7.8% 0.5%
In 2013 and in 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for Dexter's CPI is 2013 and 2013 is also the year of the Consumer Expenditure Survey. The CPI in 2014 is ______.
78.6
The real wage rate is $_____ when the money wage rate is $2,000 and the price level is $25.
80
2. The price of oil falls unexpectedly and aggregate supply increases by $50 billion. What type of output gap appears? If the central bank responds to close the output gap, does Shell Island experience inflation or deflation? _____ gap appears and the central bank closes the output gap, aggregate demand _____ and a _____ is created.
An inflationary; decreases; cost-push deflation
Choose the statement that is incorrect.
At full employment, the unemployment rate is zero.
______ is triggered by a decrease in autonomous expenditure and ______ is triggered by an increase in autonomous expenditure.
A recession; an expansion
What is the largest component of M1?
Checkable deposits
Consider the following statements and decide which is\are false I. Global saving glut is an increased saving in lower-income countries such as China and other developing countries II. As a result of global saving glut U.S.A became a net lender to many lower countries III. Global saving glut lead to a fall in global long-term interest rate IV. As a result of global saving glut China and other developing countries became net borrowers Which of the above sentences are false
II and IV
Choose the statement that is incorrect.
If a depository institution fails, its deposits are guaranteed up to a maximum of $25,000 per depositor per bank.
Choose the statement that is incorrect.
If a financial institution's net worth is positive, the institution must be solvent and liquid
Choose the statement that is incorrect.
If a financial institution's net worth is positive, the institution must be solvent and liquid.
If real GDP increases by $2 million and potential GDP increases by $3 million and the marginal propensity to import is 0.2, by how much do imports change?
Imports increase by $400,000
Choose the statement that is incorrect.
In a deflation, the inflation rate is positive but decreasing in consequent years.
The government of Canada cuts income taxes. Canada's aggregate demand _____.
Increases
The multiplier increases when the marginal propensity to consume _____.
Increases
Starting from a monetary equilibrium condition, an increase in money supply
Increases the bond price and decreases the interest rate
Based on this news clip, Barack Obama most likely follows the ______ school of thought and John McCain most likely follows the ______ school of thought.
Keynesian or new Keynesian; classical or new classical
In ______ cycle theory, fluctuations in investment driven by fluctuations in business confidence are the main source of fluctuations in aggregate demand. In ______ cycle theory, fluctuations in both investment and consumption expenditure, driven by fluctuations in the growth rate of the quantity of money, are the main source of fluctuations in aggregate demand.
Keynesian; monetarist
1. Who does the BLS classify as being unemployed, a part-time worker, an employed person, a discouraged worker, and not in the labor force? Explain your classification. ______ are unemployed, ______ is a part-time worker, _____ is a discouraged worker, and _____ is not in the labor force.
Pat and Mary; Sarah; Kevin; Johnie
Who does the BLS classify as being unemployed, a part-time worker, an employed person, a discouraged worker, and not in the labor force? Explain your classification. ______ are unemployed, ______ is a part-time worker, _____ is a discouraged worker, and _____ is not in the labor force.
Pat and Mary; Sarah; Kevin; Johnie
______ cycle theory would say that the rise in unemployment is not cyclical but is a change in the natural unemployment rate.
Real business
Choose the correct statements. 1. The unemployment that arises from normal labor turnover is frictional unemployment. 2. A worker who is laid off because of the recent recession is cyclically unemployed. 3. The unemployment that arises when changes in technology or international competition change the skills 4. Frictional unemployment usually lasts longer than structural unemployment.
Statements 1 and 2 are correct
Choose the correct statements. 1..Gum does not serve as money because it is not a good store of value. 2.Most people know the price of gum, so it could serve as money because it is a unit of account. 3.Because most people buy gum, it can be used as money because it is a useful tool in barter. 4.Gum does not serve as money because it is not generally accepted in exchange for goods and services.
Statements 1 and 4 are correct
Choose the correct statements. 1.A worker who is laid off because of the recent recession is cyclically unemployed. nothing 2. When a steel plant becomes more automated and workers lose their jobs comma the workers are structurally unemployed. 3. Structural unemployment increases during a recession and decreases during an expansion. 4. The unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the locations of jobs is cyclical unemployment.
Statements 2 and 2 are correct.
Choose the correct statements. 1. The president of the San Francisco Fed is always a member of the FOMC. 2. The Chicago Fed implements the policy decisions of the FOMC. 3. The chairman and the other six members of the Board of Governors are members of the FOMC. 4. The FOMC is the main policy-making organ of the Federal Reserve System.
Statements 3 and 4 are correct.
Choose the correct statements. 1. Frictional unemployment increases during a recession and decreases during an expansion. 2. Structural unemployment increases during a recession and decreases during an expansion. 3. A worker who is laid off because of the recent recession is cyclically unemployed. 4. When a steel plant becomes more automated and workers lose their jobs comma the workers are structurally unemployed.
Statements 3 and 4 are correct.
The Bureau of Labor Statistics reports six alternative measures of the unemployment rate. Choose the correct statements. a. .U-2 adds all marginally attached workers to the official unemployment rate. b. U-2 measures the job losers. c.U-6 adds the economic part-time workers to the official unemployment rate. d. U-6 measures those who are unemployed for 15 weeks or more.
Statements b and c are correct.
A typical family on Sandy Island consumes only juice and cloth. Last year, which was the base year, the family spent $10 on juice and $9 on cloth. In the base year, juice was $2 a bottle and cloth was $3 a length. This year, juice is $7 a bottle and cloth is $6 a length. What is the CPI basket? What is the CPI and the inflation rate in the current year?
The CPI basket is 5 bottles of juice and 3 lengths of cloth The CPI in the current year is 278.9 The inflation rate in the current year is 178.9 percent
Choose the statement about the Consumer Price Index that is incorrect.
The CPI is defined to equal 1.00 for a period called the reference base period.
A current account deficit means we must borrow more from abroad than we lend abroad or use our official reserves to cover the shortfall.
True
The real exchange rate is the relative price of _____ to _____.
U.S.-produced goods and services; foreign-produced goods and services
The effect of this decrease is ____ in the demand for labor, _____ in the supply of labor, _____ in employment, and _____ in the real wage rate.
a decrease a decrease a decrease a decrease
So, as the price level rises, there is ______.
a decrease in the quantity of real GDP demanded
A cost-push inflation begins with ______ as the result of an increase in the money wage rate or an increase in the money prices of raw materials.
a decrease in short-run aggregate supply
Which of the following events might cause a cost-push inflation?
an increase in the money wage rate or an increase in the money prices of raw materials
A monetarist is a macroeconomist who believes that the economy is self-regulating and that it will normally operate _____, provided that monetary policy is not erratic and that the pace of _____ is kept steady.
at full employment; money growth
The discount rate is the interest rateThe discount rate is the interest rate ______.
at which the Fed stands ready to lend reserves to depository institutions
The multiplier is the amount by which the change in ______ expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP. For every dollar increase in ______ expenditure, the multiplier determines the increase in real GDP.
autonomous; autonomous
The multiplier is the amount by which a change in ______ expenditure is magnified or multiplied to determine ______.
autonomous; the change in equilibrium expenditure and real GDP
A multiplier is the amount by which a change in any component of _____ is magnified or multiplied to determine the change in _____ and _____ that it generates.
autonomous expenditure; equilibrium expenditure; real GDP
The price level is the _____.
average level of prices
The Consumer Price Index is a measure of the _____ of the prices paid by _____ consumers for a fixed market basket of consumption goods and services.
average; urban
The velocity of circulation is the _____ number of times in a _____ that each dollar of money gets used to buy final goods and services.
average; year
A central bank is ______. The central bank in the United States is the ______.
a bank's bank and a public authority that regulates a nation's depository institutions and conducts monetary policy; Federal Reserve System
The Fed is the lender of last resort, which means that if _____ is short of reserves, it can borrow from the _____.
a bank; Fed
A type of _____ is a mortgage-backed security, which entitles _____ to the income from a package of mortgages.
a bond; its holder
A problem with using a commodity as money is ______.
a commodity's value changes over time
If the government increases its expenditure on goods and services and as a result, the money wage rate increases, the economy has experienced _______.
a demand-pull rise in the price level
A rise in the price of oil creates _______.
a one-time cost-push rise in the price level
Cyclical unemployment is the fluctuating unemployment over the business cycle that increases during _____ and decreases during _____.
a recession; an expansion
Reserves consist of the currency in the _____ plus the balance on its _____ account at _____.
bank's vaults; reserve; a Federal Reserve Bank
A ______ macroeconomist believes that the economy is self-regulating and always at full employment. A ______ macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment.
classical; Keynesian
The monetary base is the sum of _____, _____, and _____ at the Fed.
coins; Federal Reserve notes; banks' reserves
A stock market is a financial market in which shares of stocks of _____ are traded.
corporations
The news clip is describing _________ inflation.
cost-push
An inflation that is kicked off by an increase in _____ is called cost-push inflation.
costs
Stagflation occurs when _______.
costs increase
Depository institutions provide four benefits, which are ______.
creating liquidity, lowering the cost of borrowing, lowering the cost of monitoring borrowers, and pooling risk
The main components of money in the United States today are ______.
currency and deposits at banks and other depository institutions
We call the leakage of bank reserves into currency the currency drain, and we call the ratio of _____ to _____ the currency drain ratio.
currency; deposits
The ______ account records receipts from exports of goods and services sold abroad, payments for imports of goods and services from abroad, and ______.
current; net interest income paid abroad and net transfers
Growth rates are calculated in a similar manner for all variables. Real GDP growth rate = [(Real GDP in ______ year−Real GDP in ______ year) ÷Real GDP in ______ year ] ×100.
current; previous; previous
The slow job growth and rise in unemployment after mid-2007 is most likely ______.
cyclical
Full employment is when there is no _____ unemployment or, equivalently, when all the unemployment is _____ or _____.
cyclical; frictional; structural
In both sectors, output fell while labor productivity increased. The quantity of labor (aggregate labor hours) in the nonfarm sector _____.
decreased
Real-Time Data Analysis Exercise* In March 2017, the U.S. unemployment rate was 4.5 percent. In March 2018, the unemployment rate was 4.1 percent. Assuming that the labor force remained constant between March 2017 and March 2018, then unemployment _______.
decreased
Describe the path of the price level in Japan. The price level ______.
decreased in both years
U.S. household income has grown considerably since 1984. U.S. saving has ______ because wealth has ______.
decreased; increased due to capital gains
The quantity of labor (aggregate labor hours) in the manufacturing sector ______. And the percentage change in the quantity of labor was larger in the ______ sector.
decreased; manufacturing
The tables describe an economy's labor market and its production function in 2014. In 2015, the population increases and labor hours supplied increase by 40 at each real wage rate. The economy's standard of living ______ in 2015 because ______.
decreased; real GDP per person is smaller in 2015 than in 2014
The economy's standard of living ______ in 2015 because ______.
decreased; real GDP per person is smaller in 2015 than in 2014
The Fed cuts the quantity of money and all other things remain the same. In the short run, aggregate demand _______.
decreases
The following events have occurred at times in the history of the United States: 1. A deep recession hits the world economy 2. The world oil price rises sharply 3. U.S. businesses expect future profits to fall Event 1 ______. Event 2 ______. Event 3 ______.
decreases aggregate demand; decreases short-run aggregate supply; decreases aggregate demand
The requirement to hold more capital can make financial institutions safer because by using more of its own funds and less borrowed funds, a financial institution ______.
decreases its risk of insolvency
Starting from a position of long-run equilibrium, a deep recession ______, and a decrease in expected future profits ______.
decreases real GDP and lowers the price level; decreases real GDP and lowers the price level
Starting from a position of long-run equilibrium, a sharp increase in the world oil price ______.
decreases real GDP and raises the price level
An unexpected increase in aggregate demand ______ rate, which is shown by ______ the short-run Phillips curve.
decreases unemployment and increases the inflation; a movement up along
The multiplier increases when the marginal propensity to import ______ or the income tax rate ______.
decreases; decreases
A fall in the expected future exchange rate ______ the demand for U.S. dollars. A decrease in the U.S. demand for imports _______ the demand for U.S. dollars.
decreases; does not change
An increase in discouraged workers ______ the official unemployment rate and ______ U-4.
decreases; does not change
A decrease in U.S. demand for imports ______ the supply of U.S. dollars. A fall in the U.S. interest rate differential ______ the supply of U.S. dollars.
decreases; increases
Aggregate demand increases if the exchange rate ______ or foreign income ______.
decreases; increases
An increase in the population ______ the real wage rate and ______ the equilibrium quantity of labor.
decreases; increases
A government budget surplus _______ the real interest rate, decreases ______.
decreases; private saving and increases investment
Chinese Premier Wen Jiabao has warned Japan that its companies operating in China should raise the pay for their workers. A rise in wages in China _______ aggregate supply.
decreases China's short-run
The "average overall increase across the board" wage increase _______.
decreases short-run aggregate supply
An increase in current income taxes ______ the supply of loanable funds today because it ______.
decreases; decreases disposable income, which decreases saving
A fall in the expected future exchange rate ______ the demand for U.S. dollars. An increase in the U.S. demand for imports _______ the demand for U.S. dollars.
decreases; does not change
Aggregate demand increases if fiscal policy ______ taxes or ______ transfer payments.
decreases; increases
In the long run, the real exchange rate is determined by ______ and the nominal exchange rate is determined by ______.
demand and supply in the markets for goods and services; the quantities of money in two countries
A flexible exchange rate is an exchange rate that is determined by ______ in the foreign exchange market with no direct intervention by the _____.
demand and supply; central bank
An economy experiences _______ inflation when "wages tend to feed inflation."
demand-pull
"Wages typically track inflation, soaring higher when prices take off." In this situation, the economy is experiencing _______ inflation.
demand-pull
China is experiencing a ______ inflation caused by ______.
demand-pull; loose monetary policy, which increases aggregate demand
In new classical cycle theory, the rational expectation of the price level, which is determined by potential GDP and expected aggregate _____, determines the _____ and the position of the SAS curve.
demand; money wage rate
FDIC insurance helps to minimize bank failures and bring more stability to the banking system because _______.
depositors know that money they have deposited with a bank will be repaid
The required reserve ratio is the minimum percentage of _____ that _____ are required to hold as reserves.
deposits; depository institutions
If the Fed raised the interest rate while the Brazilian interest rate remained at 8.75 percent, the Brazilian real would ______.
depreciate by a smaller amount than if the Fed left the interest rate unchanged
If a euro deposit in a bank in Paris, France, earns interest of 4.1 percent a year and a yen deposit in Tokyo, Japan, earns 4.4 percent a year, other things remaining the same and adjusted for risk, what is the exchange rate expectation of the Japanese yen? The Japanese yen exchange rate is expected to _____ against the euro by ____percent.
depreciate; .3 percent
Real GDP per person is real GDP _____.
divided by the population
The Rule of 70 is the number of years it takes for the level of any variable to double. It is approximately 70 _____ by the annual percentage _____.
divided; growth rate of the variable
If the price level and the money wage rate rise by the same percentage, the quantity of real GDP supplied ______ and there is a movement up along the ______ aggregate supply curve.
does not change; long-run
3. The government of Shell Island announces an increase in spending of $50 billion a year and the central bank will increase the quantity of money to pay for the spending. Does the economy go into a boom? Will there be inflation? The economy _____ into a boom, real GDP _____ billion, and _____ arises.
does not go; remains at $600; inflation
The U.S. long-run Phillips curve ______ when the expected inflation rate rises. The U.S. long-run Phillips curve ______ when the natural unemployment rate increases.
does not shift; shifts rightward
Interest rate parity ___ hold between Brazil and the United States. The Brazilian real is expected to ____ by ____ percent.
does, depreciate, 8.75
Between 1960 and 2010, growth rates in real GDP per person in Hong Kong, Korea, Singapore, and China ______ the growth rate of real GDP in the United States. China's real GDP per person in 2010 is approximately equal to real GDP per person in Hong Kong in ______.
exceeded; 1976
When potential GDP _____ real GDP, the output gap is called a recessionary gap.
exceeds
An above full-employment equilibrium is an equilibrium when real GDP _____.
exceeds potential GDP
Economic growth is the _____.
expansion of production possibilities
In January 2010, the exchange rate was 91 yenyen per U.S. dollar. By September 2010, the exchange rate had fallen to 84 yen per U.S. dollar. As the exchange rate falls, prices of U.S.-produced goods and services to foreigners ______ and the volume of U.S. exports ______.
fall; increases (opposite for Americans)
A financial institution is a firm that operates on both sides of the markets for _____: It _____ in one market and _____ in another.
financial capital; borrows; lends
Bonds issued by _____ are traded in the bond market.
firms and governments
U.S. official reserves are the government's holding of _____.
foreign currency
The market in which the currency of one country is exchanged for the currency of another country is the ______. The price at which one currency exchanges for another currency is the ______.
foreign exchange market; exchange rate
The capital and financial account is the record of _____ minus U.S. investment abroad.
foreign investment in the United States
The official settlements account records the change in U.S. official reserves, which are the government's holdings of ______. If U.S. official reserves decrease, the official settlements account balance is ______.
foreign currency; positive
The main type of unemployment that Governor Kulongoski is using policies to avoid is ______.
frictional and structural
According to new growth theory, ______.
growth can persist indefinitely
According to the Ricardo-Barro effect, a government budget deficit ______ the real interest rate.
has no effect on
A discouraged worker ______.
has stopped looking for a job because of repeated failure to find one
If the only change that occurred was that people gave up job searching, then the labor force would _______ and unemployment would _______.
have decreased; have decreased
If "pricing pressures are weaker today," compared to the 1970s, then the expected inflation rate in the 1970s was _______ today.
higher than it is
Suppose that the business cycle in the United States is best described by RBC theory. An advance in technology increases productivity. The when-to-work decision depends on the real interest rate. The _____ the real interest rate, other things remaining the same, the _____ is the supply of labor today.
higher; larger
The quantity of labor demanded is the number of labor hours ______ during a given period. The quantity of labor supplied is the number of labor hours _____ during a given period. The ___ wage rate adjusts to bring the labor market to equilibrium.
hired by all the firms in the economy that all the households in the economy plan to work real
The quantity of labor demanded is the number of labor hours _____ during a given period. The quantity of labor supplied is the number of labor hours ____during a given period. The ____wage rate adjusts to bring the labor market to equilibrium.
hired by all the firms in the economy that all the households in the economy plan to work real
A mortgage is a legal contract that gives ownership of a _____ to the _____ in the event that the _____ fails to meet the agreed loan payments (repayments and interest).
home; lender; borrower
Explain the effect of the Bank of Japan's announcement on the demand for and supply of U.S. dollars. The Bank of Japan's announcement would _____ the demand for U.S. dollars and _____ the supply of U.S. dollars on June 2.
increase; decrease
Explain the effect of the Fed's announcement on the demand for and supply of U.S. dollars. The demand for U.S. dollars would _____ and the supply of U.S. dollars would _____ on June 2.
increase; decrease
Tax rebates ______ aggregate demand and the housing, credit, and financial crises ______ aggregate demand.
increase; decrease
If speculation like that made by Mr. Reddy becomes widespread, the demand for U.S. dollars will ______ and the supply of U.S. dollars will ______. The U.S. dollar exchange rate will ____.
increase; decrease rise
Between 2007 and 2012 the monetary base _______.
increased
In March 2007, the U.S. unemployment rate was 4.4 percent. In August 2008, the unemployment rate was 6.1 percent. Assuming that the labor force remained constant between March 2007 and August 2008, then the number unemployed _______.
increased
In March 2017, the U.S. unemployment rate was 4.5 percent. In March 2018, the unemployment rate was 4.1 percent. Assuming that unemployment was constant between March 2017 and March 2018, then the labor force _______.
increased
In October 2009, the U.S. unemployment rate was 10.0 percent. In October 2011, the unemployment rate was 8.9 percent. Assuming that unemployment remained constant between October 2009 and October 2011, then the labor force ______.
increased
According to this news clip, consumption expenditure _____ as household wealth decreased. This change in consumption expenditure could be attributed to ______ in disposable income or ______ in expected future income.
increased an increase; an increase
What happened to the quantity of saving and investment? The quantity of saving _____ and the quantity of investment _____.
increased; decreased
A government budget deficit ______ the demand for loanable funds.
increases
A government budget deficit ____ the demand for loanable funds.
increases
A government budget surplus _____ the supply of loanable funds
increases
A government budget surplus ____ the supply of loanable funds.
increases
The multiplier increases when the marginal propensity to consume _____.
increases
Private saving _____ and investment _____.
increases decreases
Suppose that the exchange rate falls from 80yen per U.S. dollar to 70yen per U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan to buy in the foreign exchange market? The quantity of U.S. dollars that people plan to buy in the foreign exchange market _______.
increases and a movement down along the demand curve for U.S. dollars occurs
When Mexico increases the quantity of money, Mexico's aggregate demand ______.
increases and its AD curve shifts rightward
In the news clip, productivity gains exceed pay increases because the demand for labor ______ than the ______ in the supply of labor.
increases by less; increase
Lowering the required reserve ratio ______, which ______ the quantity of loans that China's banks can make and the quantity of money created.
increases excess reserves; increases
A government budget deficit occurs, which ______. The real interest rate ______.
increases the demand for loanable funds; rises
A decrease in expected future income ______.
increases the supply of loanable funds today because households with smaller expected future income will save more today
Starting from a full-employment equilibrium, an increase in aggregate demand ______ real GDP, and creates ______ gap.
increases; an inflationary
Aggregate demand increases if monetary policy ______ the quantity of money and ______ interest rates.
increases; decreases
An open market purchase ______ the monetary base. An open market sale ______ the monetary base.
increases; decreases
Potential GDP ______ and potential GDP per hour of labor ______.
increases; decreases
Starting from a full-employment equilibrium, a decrease in short-run aggregate supply ______ the price level and ______ real GDP.
increases; decreases
The increase in investment ______ aggregate demand. The decrease in government spending _______ aggregate demand.
increases; decreases
The fall in the average weekly wage rate ______ short-run aggregate supply and ______ long-run aggregate supply.
increases; does not change
The increased labor productivity ______ the demand for labor and ______ the supply of labor.
increases; does not change
Aggregate demand increases if expected future income, inflation, or profits ______. And aggregate demand increases if fiscal policy ______ government expenditure.
increases; increases
An increase in the population ______ the equilibrium quantity of labor, ______ and potential GDP.
increases; increases
An increase in world demand for U.S. exports ______ the demand for U.S. dollars. A rise in the U.S. interest rate differential ______ the demand for U.S. dollars.
increases; increases
In real business cycle theory, an increase in productivity ______ the demand for labor by more than it ______ the supply of labor.
increases; increases
In the short run, an increase in business investment ______ real GDP and ______ the price level.
increases; increases
In the short run, an increase in consumer spending ______ real GDP and ______ the price level.
increases; increases
In the short run, an increase in exports ______ real GDP and ______ the price level
increases; increases
The fall in the minimum wage ______ short-run aggregate supply and ______ long-run aggregate supply.
increases; increases
The increase in the personal consumption expenditures ______ aggregate demand. The increase in exports ______ aggregate demand.
increases; increases
An increase in labor productivity ______ the real wage rate and ______ the equilibrium quantity of labor.
increases; increases;
The increased labor productivity ______ potential GDP, and ______ real GDP per person.
increases; increases;
M1 consists of currency held by _____ and _____, _____, and _____ owned by individuals and businesses.
individuals; businesses; traveler's checks; checkable deposits
People are more likely to accept a real wage cut that arises from an increase in the price level than a cut in their nominal wage rate because ______.
inflation decreases the real wage rate gradually and a cut in the nominal wage decreases the real wage rate suddenly
The short-run Phillips curve is a curve that shows the relationship between the _____ rate and _____ when _____ and the _____ remain constant.
inflation; the unemployment rate; the natural unemployment rate; expected inflation rate
The long-run Phillips curve is the relationship between _____ and _____ when the economy is at full employment. The long-run Phillips curve is a _____ line at the _____ unemployment rate.
inflation; unemployment; vertical; natural
When the Federal Reserve Bank increases the federal funds rate, other
interest rates rise, and consumption, firms' private investment and net exports decrease.
In the short run, the quantity of real money and real GDP are given and the ______ adjusts to achieve equilibrium. In the long run, supply and demand in the loanable funds market determines the ______.
interest rate; real interest rate
Balance of payments accounts are the accounts in which a nation records its _____.
international trading, borrowing, and lending
During times of uncertainty, it might be necessary for a bank to hold large cash reserves and to have a large percentage of its assets purchased by its own capital because ______.
its depositors may decide to make large withdrawals
The imports effect is the result that the higher the exchange rate, other things remaining the same, the ______.
lower are the prices of foreign-produced goods and services to Americans and the greater is the volume of U.S. imports
The unemployment rate in May, 2008 is ______.
lower than the unemployment rates that occurred in recessions since 1980
The MPS in the United States is _____ than the MPS in China, and the MPC in the United States is ____ than the MPC in China. A reason for the difference in the values between the countries may be ______.
lower; higher U.S. consumers are more confident about the future
The MPS in the United States is ______ today than it was before 1984, and the MPC in the United States is ______ today than it was before 1984. Possible reasons for the difference could be _______.
lower; higher a lower return to saving
An increase in the population ______ the real wage rate.
lowers
Inflation ______ the real wage rate, everything else remaining the same.
lowers
When the unemployment rate is greater than the natural unemployment rate, the output gap is _____. When the unemployment rate is less than the natural unemployment rate, the output gap is _____.
negative positive
In ______ cycle theory, the rational expectation of the price level, which is determined by potential GDP and expected aggregate demand, determines the money wage rate and the position of the SAS curve. In ______ cycle theory, past rational expectations of the current price level influence the money wage rate and the position of the SAS curve.
new classical; new Keynesian
The key idea of classical growth theory that leads to the dismal outcome is that ______.
no matter how much technological change occurs, real GDP per person is always pushed back toward the subsistence level
The demand for money is the relationship between the quantity of money demanded and the _____, when all other influences on the amount of money that people wish to _____ remain the same.
nominal interest rate; hold
The official settlements account is the record of the change in U.S. _____.
official reserves
Which of the people described in the table is unemployed because of labor market mismatching?
only Tory and David
To increase the money supply, the Fed may conduct
open market purchases or decrease the discount rate.
China was the world's largest economy until 1890 because ______.
people in all countries had approximately the same subsistence level of income
Unemployment arises for all of the following reasons except ______.
people leave the labor force
The inflation rate is the percentage change in the _____ from one year to the next. Deflation is a situation in which the _____ is _____ and the inflation rate is _____.
price level; price level; falling; negative
The sum of _____ is called national saving.
private saving and government saving
When the real interest rate rises, the ______ because the ______ is the opportunity cost of loanable funds.
quantity of loanable funds demanded decreases; real interest rate
The crowding-out effect is the tendency for a government budget deficit to ______ the real interest rate and decrease ______.
raise; investment
In the long run, an increase in the quantity of money _______.
raises the price level and lowers the value of money
A government budget deficit ______ the real interest rate because ______.
raises; the demand for loanable funds increases
The defining feature of the Keynesian view of macroeconomics is that the economy is ______.
rarely at full employment
A Keynesian macroeconomist believes that left alone, the economy would _____ operate at full employment and that to achieve and maintain full employment, active help from fiscal policy and monetary policy is required. A modern version of the Keynesian view, known as the new Keynesian view, holds not only that the money wage rate is _____ but also that prices of goods and services are _____.
rarely; sticky; sticky
The output gap is the gap between _______.
real GDP and potential GDP
The gap between ______ is the output gap. When _____, the output gap is called an inflationary gap.
real GDP and potential GDP; real GDP exceeds potential GDP
In the short run, ______ and ______ adjusts to achieve equilibrium.
real GDP determines the demand for money curve and the Fed determines the quantity of real money supplied; the nominal interest rate
When _____ there is a full-employment equilibrium.
real GDP equals potential GDP
By measuring ______, we can see that the economy of Singapore has caught up to and surpassed the economy of the United States, but that the economies of Central and South America have not.
real GDP per person
Neoclassical growth theory is the proposition that _____ grows because technological change induces saving and investment that make _____ grow.
real GDP per person; capital per hour of labor
Classical growth theory is the view that the growth of _____ is temporary and that when it rises above the subsistence level, a population explosion _____.
real GDP per person; eventually brings it back to the subsistence level
New growth theory holds that _____ grows because of the choices people make in the pursuit of profit and that growth will _____.
real GDP per person; persist indefinitely
The main criticisms of RBC theory include all of the following except ______.
real business cycle theory relies too heavily the role of money in the economy to make its predictions
As we move up along the LAS curve, the _______.
real wage rate is constant
The demand for labor is the relationship between the quantity of labor demanded and the ______. The supply of labor is the relationship between the quantity of labor supplied and the ______.
real wage rate; real wage rate
The ______ interest rate is the opportunity cost of loanable funds because ______.
real; the real interest paid on borrowed funds is the opportunity cost of borrowing and the real interest rate forgone is the opportunity cost of not saving or not lending those funds
The analysis of macroeconomic performance in the news clip reflects the ______ business cycle theory because it discusses ______.
real; factors that change potential GDP
The aggregate production function is a relationship that tells us how _____ changes as the quantity of _____ changes when all other influences on production remain the same.
real GDP; labor
Aggregate demand is the relationship between the quantity of _____ demanded and the _____ when all other influences on expenditure plans remain the same.
real GDP; price level
Short-run aggregate supply is the relationship between the quantity of _____ supplied and the _____ when the money wage rate, the prices of other resources, and potential GDP remain constant.
real GDP; price level
Short-run macroeconomic equilibrium occurs when the quantity of _____ demanded equals the quantity of _____ supplied at the point of intersection of the _____ curve and the _____ curve.
real GDP; real GDP; AD; SAS
The quantity of desired reserves depends on the level of deposits and is determined by the desired reserve ratio - the ratio of _____ to _____ that the _____ plan to hold.
reserves; deposits; banks
A bank's "balancing act" balances _______. The over-pursuit of profit or underestimation of risk can lead to bank failure because _______.
return against risk; some borrowers default and never repay, which can lead to bank insolvency
How will the labor force participation rate change if Kevin starts creating football apps in his garage and they turn out to be very popular? The labor force participation will _____ Kevin starts creating football apps in his garage and they turn out to be very popular.
rise
How will the unemployment rate change if Sarah quits and starts to search for a full-time job? The unemployment rate will _____ if Sarah quits and starts to search for a full-time job.
rise
As the price level rises, interest rates ______ and real wealth ______. People substitute goods in the ______ for goods in the ______.
rise; decrease future; present
In December 2007, the exchange rate was 0.97 Canadian dollars per U.S. dollar. By December 2008, the exchange rate had risen to 1.06 Canadian dollars per U.S. dollar. As the exchange rate rises, prices of U.S.-produced goods and services to foreigners ______ and the volume of U.S. exports ______.
rise; decreases
When the interest rate rises, other things remaining the same, the opportunity cost of holding money ______ and ______.
rises; the quantity of money demanded decreases
According to the Ricardo-Barro effect, when a government budget deficit occurs today, ______.
saving increases, the supply of loanable funds increases, and the real interest rate does not change
A means of payment is a method of _____ a debt.
settling
An increase in labor productivity ______.
shifts the demand for labor curve rightward and the production function upward
An increase in the population ______.
shifts the supply of labor curve rightward and creates a movement along the production function
If the natural unemployment rate increases, the long-run Phillips curve _______ and the short-run Phillips curve ______. The expected inflation rate ____.
shifts rightward; shifts rightward Does not change
If the natural unemployment rate increases, the long-run Phillips curve _______ and the short-run Phillips curve ______. The expected inflation rate ____.
shifts rightward; shifts rightward does not change
The U.S. short-run Phillips curve ______ when the expected inflation rate rises. The U.S. short-run Phillips curve ______ when the natural unemployment rate increases.
shifts upward; shifts rightward
When the money wage rate rises _______. When the price level in India increases _______.
short-run aggregate supply decreases; the quantity of real GDP supplied increases
The inflation and unemployment trends during the Great Depression can be explained by a movement along the ______ Phillips curve that ______.
short-run; lowers the inflation rate and increases the unemployment rate
A government budget surplus occurs, which increases the _____ loanable funds.
supply of
When it becomes obvious to everyone that the deflation is not going to occur, _______.
the money wage rate rises and the short-run aggregate supply curve returns to its original position
As we move up along the short-run aggregate supply curve, ______.
the money wage rate, the prices of other resources, and potential GDP remain constant
When cyclical unemployment increases and other things remain the same, ______.
the natural unemployment rate does not change
The supply of loanable funds is the relationship between _____ supplied and the _____ when all other influences on lending plans remain the same.
the quantity of loanable funds; real interest rate
A stagflation can turn into a cost-push inflation process when _______.
the quantity of money persistently increases
Requirements to hold more capital make banks safer because _______.
the requirement to hold more capital makes the possibility of failure less likely
The current account is the record of receipts from _____ other countries, minus _____ other countries, plus the net amount of _____ received from and paid to other countries.
the sale of goods and services to other countries; payments for goods and services bought from; interest and transfers
If the natural unemployment rate increases and the expected inflation rate remains constant, then ______.
the long-run Phillips curve shifts rightward and the short-run Phillips curve shifts rightward
If the expected inflation rate increases and the natural rate of unemployment remains constant, then _______.
the short-run Phillips curve shifts upward and the long-run Phillips curve does not shift
Physical capital is ______. Financial capital is ______.
the tools, instruments, machines, buildings, and other items that have been produced in the past and that are used today to produce goods and services; the funds that firms use to buy physical capital
A rise in the expected future exchange rate ______ the supply of U.S. dollars. An increase in the world demand for U.S. exports ______ the supply of U.S. dollars.
decreases; does not change
A new Classical view is that business cycle fluctuations are the _____ responses of a well-functioning market economy that is bombarded by shocks that arise from the uneven pace of _____.
efficient; technological change
This increase in expected profit _______ the demand for loanable funds and brings _______ the demand for loanable funds curve.
increases; a rightward shift of
Potential GDP ______ and potential GDP per hour of labor ______.
increases; increases
The US dollar exchange rate decreased from 81 Japanese Yen in June 2011 to 78 Japanese yen in June 2012. In June 2011, the value of 100 Japanese yen was ___ U.S. dollars. In June 2012, the value of 100 Japanese yen was ___ U.S. dollars.
$1.23; $1.28 (divide 100 by yen value)
If saving is $850 billion, investment is $500 billion, government expenditure on goods and services is $700 billion, net exports is $50 billion, and net taxes is $800 billion, then calculate government sector balance.
$100 billion
Using PPP prices, China's standard of living in 2010 is $____.
$11,000
An economy has a fixed price level, no imports, and no income taxes. MPC is 0.8, and real GDP is $200 billion. Businesses increase investment by $10 billion. The new level of real GDP is $____ billion. Real GDP increases by more than $1010 billion because the increase in investment _______.
$250 billion induces an increase in consumption expenditure
In December 2017, the nominal wage rate was $____ per hour. In December 2017December 2017, the CPI was ____ In December 2017, the real wage rate was $____ per hour.
$30.74 248 $12.4
The marginal propensity to consume is 0.8, the marginal tax rate is 0.25, and the marginal propensity to import is 0.2. The government raises autonomous taxes and government expenditure by $100 million each. The resulting change in equilibrium expenditure is _______.
$33.3 million
If saving is $850 billion, investment is $500 billion, government expenditure on goods and services is $600 billion, and net exports is $100 billion, then calculate private sector balance.
$350 billion
If the US interest rate is 1.5 percent, Canada's interest rate is 1 percent, the US inflation rate is 1.2 percent, and Canada's inflation rate is 0.70 percent, then calculate the US interest rate differential.
.5 percent
The U.K. pound is trading at 1.50 U.S. dollars per U.K. pound. There is purchasing power parity at this exchange rate. The interest rate in the United States is 1 percent a year and the interest rate in the United Kingdom is 0.5 percent a year. What is the U.S. interest rate differential? What is the U.K. pound expected to be worth in terms of U.S. dollars one year from now? The U.S. interest rate differential is ____ percent. A year from now, the U.K. pound is expected to _____ by ____ percent. Which country more likely has the lower inflation rate?
.5 percent appreciate; .5 percent United Kingdom
If equilibrium expenditure changes by $50 billion that results from an increase in autonomous taxes by $80 billion, find the autonomous tax multiplier.
.625
If disposable income increases from $4 trillion to $7 trillion, consumption expenditure increases from $3.5 trillion to $5.5 trillion, and nothing else changes, the marginal propensity to consume is _____.
.67
In an economy, when disposable income increases from $400 to $500, consumption expenditure increases from $450 billion to $525. The marginal propensity to consume is ____. The marginal propensity to save is ___.
.75 .25
Choose the correct statement.
"Slowing growth" can reduce inflationary pressure if aggregate demand growth slows.
You can purchase a laptop in Tokyo for 88,000 Japanese yen. If the exchange rate is 80.00 Japanese yen per U.S. dollar and if purchasing power parity prevails, at what price can you buy an identical computer in Dallas, Texas?
$1,100
The U.S. dollar exchange rate increased from $0.89 Canadian in June 2009 to $0.96 Canadian in June 2010, and it decreased from 83.8 euro cents in January 2009 to 76.9 euro cents in January 2010. In June 2009, the value of the Canadian dollar was $______U.S. In June 2010, the value of the Canadian dollar was $_____U.S.
$1.11; $1.04
If real GDP is $1,000,000, exports are $200,000, imports are $300,000, and aggregate labor hours are 100,000, labor productivity is _____.
$10 per hour
CNN agreed to pay its workers $36 an hour in 1999 and $45 an hour in 2001. The CPI in 1999 was 166 and in 2001 it was 180. Calculate the real wage rate in each year (to the nearest cent). Did these workers really get a pay raise between 1999 and 2001? The real wage rate in 1999 was ___. The real wage rate in 2001 was ___. Because the real wage rate in 2001 is _____ the real wage rate in 1999, the workers _____ really get a raise between 1999 and 2001.
$21.96 $25.00 Greater than; did
The value of M1 is $_____ billion. The value of M2 is $____billion.
$235 $1,015
In December 2017, M1 was $____ billion. In December 2017, M2 was $____ billion.
$3600 $13833.1
On January 1, 2014, Sophie's Sunlounge owned 4 tanning beds valued at $20,000. During 2014, Sophie's bought 3 new beds at a total cost of $12,000, and at the end of the year the market value of all of Sophie's beds was $24,000. What was Sophie's net investment?
$4,000
In Australia, the quantity of M1 is $150 billion, the currency drain ratio is 33 percent of deposits and the reserve ratio is 8 percent. The monetary base in Australia is $____ million
$46.24
Using a Federal grant of $150,000, a research lab buys equipment for $75,000 that has depreciated by $11,000 after two years. Calculate gross investment and net investment.
$75,000; $64,000.
CPI = ______.
(Cost of CPI basket at current-period prices divided by ÷Cost of CPI basket at base-period prices) times ×100
Net exports equals ______.
(T − G) + (S − I)
If disposable income increases from $4 trillion to $7 trillion, saving increases from $1.5 trillion to $2 trillion, and nothing else changes, the marginal propensity to save is _____.
.17
The price level in the Eurozone is 111.2, the price level in the United States is 109.1, and the nominal exchange rate is 0.85 euros per U.S. dollar. What is the real exchange rate expressed as Eurozone real GDP per unit of U.S. real GDP? The real exchange rate expressed as Eurozone real GDP per unit of U.S. real GDP was _____.
.83
An economy with no income taxes or imports has a marginal propensity to consume of 0.75. The multiplier in the long run is _______.
0
Using PPP prices, China's ranks as the world's number ____ economy in 2010.
1
What are the values of the M1 money multiplier and the M2 money multiplier in December 2017? The M1 money multiplier is ____. The M2 money multiplier is ____.
1.2 4.4
The CPI in 2012 was 229.6. The CPI in 2013 was 233.0. The inflation rate in 2013 was ___ percent.
1.5%
In February 2018, the real interest rate was ____ percent. decimal places. Between October 2017 and February 2018, the real interest rate _____.
1.68% increased
In Canada, the currency drain ratio is 11 percent of deposits and the reserve ratio is 0.03 percent of deposits. The Canadian money multiplier is _____.
10.06
Over the past 100 years, growth was most rapid during the ______ and slowest during the ______.
1960s; Great Depression
Suppose that in 2014 China's real GDP is growing at 1010 percent a year and its population is growing at 3.03.0 percent a year. If these growth rates continue, then China's real GDP per person in ______ will be twice what it is in 2014.
2024
Suppose that in 2014 China's real GDP is growing at 7 percent a year and its population is growing at 0.5 percent a year. If these growth rates continue, then China's real GDP per person in ______ will be twice what it is in 2014.
2025
The CPI in 2006 was 201.6. The CPI in 2007 was 207.3. The inflation rate in 2007 was ____ percent.
3.2%
What was the inflation rate in 2005 and 2009? How do you know? The inflation rates in 2005 and 2009 were _____ percent and _____ percent respectively because the inflation rate equals _____ .
3; 0; nominal interest rate minus real interest rate
An economy has a fixed price level, no imports, and no income taxes. An increase in autonomous expenditure of $11 trillion increases equilibrium expenditure by $44 trillion. The multiplier is ____. The marginal propensity to consume is _____. If an income tax is introduced in this economy, the multiplier _______.
4 .75 decreases
Apparel comprises ______ percent of the CPI basket.
4%
Hyperinflation is an inflation rate of _____ or higher that grinds the economy to a halt and causes a society to collapse.
50 percent a month
The U.S. price level is 120, the Japanese price level is 95.4, and the real exchange rate is 105.4 Japanese real GDP per unit of U.S. real GDP. What is the nominal exchange rate?
83.79
The table gives information reported by the Bureau of Labor Statistics for 2009. What is the unemployment rate, the labor force participation rate, and the employment-to-population ratio? The unemployment rate is ____ percent. The labor force participation rate is ____ percent. The employment-to-population ratio is ____ percent.
9.3% 65.4% 59.3%
If the growth rate of China's standard of living during 2013 is maintained, how many years will it take to double? If the growth rate of China's standard of living during 2013 is maintained, it will double in ____ years.
9.6
Consider the following events. Event 1: Growth in the world economy slows. Event 2: The world price of oil rises. Event 3: U.S. labor productivity declines. Choose the statement that is correct.
A classical macroeconomist and a monetarist recommend that taxes be kept low to avoid disincentive effects for all of the events and a Keynesian recommends active fiscal policy and monetary policy to offset all events.
Choose the statement that is incorrect.
A country with a large population cannot have a high standard of living.
Choose the statement about a crawling peg that is incorrect.
A crawling peg makes the exchange rate fluctuate wildly.
Choose the correct statement.
A credit card is not a means of payment.
Choose the statement that is incorrect.
A government budget surplus competes with investment for funds.
Choose the statement that is incorrect about the Eurozone economy.
A rise in the expected inflation rate shifts the short-run Phillips curve rightward.
Choose the statement that is incorrect.
A wage contract linked to the CPI gives the workers less real income than the firm intended.
Choose the correct statement about interest rate parity.
Adjusted for risk, interest rate parity always prevails.
Choose the statement about the long-run Phillips curve that is incorrect.
An unexpected increase in aggregate demand shifts the long-run Phillips curve rightward.
Starting at point A, the initial effect of a cost-push inflation is a move to point ______. As a cost-push inflation spiral proceeds, it follows the path ______.
B; E, G, I
A cost-push rise in the price level will initially move the economy to point ______ and to point ______.
C when the money prices of raw materials rise; D when aggregate demand increases
Starting at point A, the initial effect of a demand-pull inflation is a move to point ______. As a demand-pull inflation spiral proceeds, it follows the path ______.
C; E, H, I
Choose the statement that is incorrect.
Changes in relative prices lead consumers to change the items they buy, and the CPI reflects this substitution.
Using the news clip's definition of productivity, choose the statement that is incorrect.
Changing the number of hours employed changes the growth of productivity.
Which of the following is money?
Charlie's checking account deposit at the Bank of America.
China's real GDP per person was 13,165 yuan in 2013 and 14,088 yuan in 2014. India's real GDP per person was 49,516 rupees in 2013 and 51,521 rupees in 2014. By maintaining their current growth rates, _______.
China will double its standard of living first
Choose the correct statement.
Commercial banks are financial institutions that accept deposits, provide payment services, and make loans to firms and households.
Choose the statement that is incorrect.
Comparisons of real GDP between countries are most accurate when we use market prices.
The debtor nation status of the United States would be a concern if the borrowed funds were used to finance ______.
Consumption
Which of the following fiscal policies combats inflation?
Decreasing government spending
Choose the statement that is incorrect.
Deposits are not money because you cannot settle a debt with a deposit.
Choose the correct statement.
Deposits are money, checks are not money, and credit cards are not money.
Starting at point A, the initial effects of an expected inflation is a movement to point ______. As an expected inflation proceeds, it follows the path ______.
E; I
How will the labor force change if the following events occur? 1. Sarah starts a second job 2. Pat finds a good job and is hired. 3. Mary takes a job at McDonald's while she waits to start her new job.
Events 1, 2, and 3 will not change the labor force.
Stagflation is anathema to the Phillips curve.
False
The central bank of the United States is the ______.
Federal Reserve System
The monetary base is the sum of _______. The monetary base is equal to _______.
Federal Reserve notes, coins, and depository institution deposits at the Fed; the liabilities of the Fed plus coins issued by the Treasury
U.S. official reserves are the government's holding of _____.
Foreign currency
The news article reports that China is the second largest economy in the world based on ______.
GDP converted to U.S. dollars at the current exchange rate
The article defines productivity as ______. Real GDP per person is ______.
GDP divided by the number of people employed; real GDP divided by the population
Choose the statement that is incorrect.
Growth in average hours per worker increase labor productivity.
Choose the correct statement about purchasing power parity.
If purchasing power parity does not prevail, the demand for U.S. dollars changes and the supply of U.S. dollars changes.
Choose the statement that is incorrect.
If the demand for Treasury bonds increases, the interest rate on the Treasury bond rises.
Choose the statement that is incorrect.
In the long run, China manages its exchange rate to keep its export prices low and to make it easier to compete in world markets
Choose the statement that is incorrect.
In the long run, China manages its exchange rate to keep its export prices low and to make it easier to compete in world markets.
Canada sets new environmental standards that require power utilities to upgrade their production facilities. Canada's aggregate demand _____.
Increases
The United States experiences strong economic growth. Canada's aggregate demand _____.
Increases
An increase in world demand for U.S. exports ______ the demand for U.S. dollars. A rise in the U.S. interest rate differential ______ the demand for U.S. dollars.
Increases; Increases
The ______ macroeconomic school of thought justifies the policy discussed in this news clip.
Keynesian
Based on this news clip, Paul Krugman most likely follows the ______ school of thought and Ben Bernanke most likely follows the ______ school of thought.
Keynesian or new Keynesian; Keynesian or new Keynesian
Choose the statement that is incorrect.
Labor hours are all equally productive.
Which of the following statements about the monetarist view of the macroeconomy is incorrect?
Left alone, the economy rarely operates at full employment.
Choose the statement that is incorrect.
Liquid assets have a higher interest rate than securities.
The two main official measures of money in the United States today are ______. The two main official measures of money in the United States ______ really money.
M1 and M2; are
M2 consists of _____ plus _____ and _____ deposits, _____, and other deposits.
M1; savings deposits; small time; money market funds
The equation of exchange is ______ and it is true ______.
MV = PY; by definition
Choose the statement that is incorrect.
Malthusian growth theory holds that real GDP per person growth slows as the opportunity cost of women in the labor force increases.
Mexico trades with the United States. When the U.S. economy goes into an expansion, ______.
Mexico's exports to the United States increase, Mexico's aggregate demand increases, and Mexico's AD curve shifts rightward
Long-run aggregate supply is the relationship between the quantity of real GDP supplied and the price level when the _____ changes in step with the price level to maintain full employment.
Money wage rate
Choose the statement that is incorrect.
Most economists believe that the Ricardo-Barro effect holds in the loanable funds market.
Which of the following statements illustrates structural unemployment?
Outsourcing resulted in many job losses in the mid 2000s.
Choose the statement that is incorrect.
Over the business cycle, aggregate supply fluctuates around potential GDP.
The core inflation rate is the annual percentage change in the _____ price index _____ the prices of food and energy.
PCE; excluding
An exchange rate is the _____ at which one currency exchanges for another in the foreign exchange market
Price
The numbers in the table are _____. The reference base year for the CPI is _____. The CPI for December 2017 tells us that since the reference base year, the price level has increased by ____ percent. In the year to December 2017, the inflation rate measured by the CPI was ___ percent.
Price levels 1982-1984 148% 2.1%
Choose the statement that is incorrect.
Quantitative easing decreased bank reserves.
Defenders of RBC theory claim all of the following except _______.
RBC theory is consistent with a negligible intertemporal substitution effect
Which of the following is an example of financial capital?
Rachel has taken a loan to buy a new home.
Choose the statement that is incorrect.
Real GDP per person grows whenever real GDP grows.
Which of the following statements illustrates frictional unemployment?
Robin is quitting his current job to find another that has better prospects.
In developing countries with less developed capital markets, which of the following monetary policy rule works the best
Ruired reserve ratios
A change in the actual inflation rate brings a movement along the ______. A change in the expected inflation rate brings ______.
SRPC; a shift of the SRPC
What is the largest component of M2?
Savings deposits
Choose the statement that is incorrect.
Slower economic growth is always better than rapid economic growth because of reduced environmental damage.
Choose the correct statements. 1. If $ 1 buys 100 yen, then the exchange rate is 100 yen per dollar 2. The foreign exchange market is made up of thousands of people including international tourists and foreign 3. The foreign exchange market is a place. 4. Foreign currency is always in the form of notes or coins
Statements 1 and 2 are correct
The Bureau of Labor Statistics reports six alternative measures of the unemployment rate. Choose the correct statements. a. U-5 measures the job losers. b. U-1 measures those who are unemployed for 15 weeks or more. c. U-2 measures the job losers. d. U-2 adds all marginally attached workers to the official unemployment rate.
Statements b and c are correct.
______ bring business cycle turning points.
Swings in autonomous expenditure
Which of the following economies is facing a stagflation?
The European economy is experiencing a decrease in real GDP for three quarters and a rise in the price level.
Which of the following statements illustrate monetary policy?
The Fed has raised the federal funds rate by 0.3 percent.
Choose the statement that is incorrect.
The U.S. government cannot create jobs. Jobs are created by the private sector.
Which of the following statements illustrate fiscal policy?
The US government has proposed a hike in the corporate tax rate.
The bank plans to hold $7 for every $100 in deposits. The bank holds desired reserves of $4,000 and actual reserves of $18,000. What is the bank's desired reserve ratio and its excess reserves?
The bank's desired reserve ratio is 7% The banks excess reserves are $14,000
Choose the statement that is incorrect.
The bias in the CPI eliminates the need for people to shop in discount stores.
How can the change in U.S. wealth differ from U.S. saving?
The change in wealth includes changes in the prices of assets owned and saving excludes these items.
Choose the statement that is incorrect.
The core PCE is a broader measure than the CPI that attempts to overcome biases by placing extra emphasis on food and fuel, two goods which are large components of household expenditure.
Choose the statement that is incorrect.
The greater the default risk, the greater is the supply of loanable funds.
Choose the statement concerning firms' investment decisions that is incorrect.
The higher the real interest rate, the greater is the demand for loanable funds, other things remaining the same.
Labor productivity is rising at a rapid rate in China and wages are rising at a similar rate. Choose the statement that is incorrect.
The increase in labor productivity has no effect on short-run aggregate supply.
Choose the correct statement.
The inflation rate is the annual percentage change in the price level.
Choose the statement that is incorrect.
The nominal interest rate is the real interest rate adjusted to remove the effects of inflation on the buying power of money.
Choose the statement about the Fed that is incorrect.
The policy decisions of the Federal Open Market Committee are implemented each month by a different Federal Reserve Bank.
Choose the statement that is incorrect.
The presence of a banking system in Britain in the middle 1700s started the Industrial Revolution.
Choose the statement about an increase in the population that is incorrect.
The production function shifts upward.
Choose the correct statement.
The quantity of real GDP demanded is the sum of the real consumption expenditure, investment, government expenditure, and exports minus imports.
What influences consumption decisions and shifts the consumption function?
The real interest rate, wealth, and expected future income
Choose the statement that is incorrect.
The unemployment rate is zero when the economy is at a business cycle peak.
Choose the statement that is incorrect.
The unemployment rate was lower during the recession in 1982 than it was during the recession of 1990-1991.
Choose the statement that is incorrect.
The "Mexican peso is gaining on the greenback" because the demand for pesos is increasing at a slower pace than the supply of pesos is increasing.
Choose the statement that is incorrect.
The employment-to-population ratio fluctuates less than the labor force participation rate.
Choose the statement that is incorrect.
Treasury Secretary Timothy Geithner most likely follows the monetarist school of thought if he thinks that a falling money wage rate will respond quickly to changes in government tax policy.
Choose the statement that is incorrect.
Trends around which the exchange rate fluctuates are impossible to predict.
The Economist magazine uses the price of a Big Mac to determine whether a currency is undervalued or overvalued. In July 2012, the price of a Big Mac was $4.33 in New York, 15.65 yuan in Beijing, and 6.50 Swiss francs in Geneva. The exchange rates were 6.37 yuan per U.S. dollar and 0.98 Swiss francs per U.S. dollar. The yuan was ______ relative to purchasing power parity and the Swiss franc was ______ relative to purchasing power parity. The price of a Big Mac in different countries _______ provide a valid test of purchasing power parity because _______.
Undervalued; overvalued does not; purchasing power parity is determined by the price level not by individual prices
Choose the correct statement.
When the price of an asset rises, the interest rate falls, everything else remaining the same.
According to the quantity theory of money, in the long run an increase in the quantity of money of 5 percent, brings _____ in the price level.
a 5 percent increase
If an economy is at a full-employment equilibrium and a decrease in consumption expenditure occurs, the new short-run equilibrium is _____ and _____ gap emerges.
a below full-employment equilibrium; a recessionary
Suppose the economy had been operating at a full- employment equilibrium. After the fall in consumer confidence, the economy moves to ______ equilibrium and ______ gap emerges.
a below full-employment; a recessionary
The quantity theory of money tells us that _______.
a change in the money growth rate brings an equal change in the inflation rate
A bank's attempts to pursue profit can sometimes lead to bank failure because _______.
a combination of all of the above
A fixed exchange rate is an exchange rate that is determined by ______ and is achieved by central bank intervention in the foreign exchange market to block _____.
a decision of the government or the central bank; the unregulated forces of demand and supply
The effect of this decrease is ____ in investment demand, _____ in the demand for loanable funds, and _____ in the real interest rate
a decrease a decrease a decrease
With the strengthening of the yen against the U.S. dollar in 2012, Japan's central bank did not take any action. A Japanese politician called on the central bank to take actions to weaken the yen, saying it will help exporters in the short run and have no long-run effects. Japan's current exchange rate policy is ______. The politician wants a ______ in the short run. This policy would have no effect on the exchange rate in the long run because in the long run ______.
a flexible exchange rate crawling peg; the price level and the nominal exchange rate are determined together
A rise in the money wage rate with no change in potential GDP creates ______.
a leftward shift of the SAS curve and no change in the LAS curve
A mortgage is _______.
a legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments (repayments and interest)
The effect of the United States returning millions of workers to their countries of origin is _____ the U.S. PF and _____ in potential GDP.
a movement down along; a decrease
A very high unemployment rate can be accounted for by the Phillips curve model by all of the following except_______.
a movement up along the long-run Phillips curve if the natural unemployment rate increases
The United States is ______.
a net borrower and a debtor nation
Deflation is _______.
a persistently falling price level
The best forecast available, which is based on all the relevant information is called _______.
a rational expectation
Excess reserves are a bank's _____ reserves minus its _____ reserves.
actual; desired
A person is in the labor force if any one of the following statements is true except that he or she is ______.
aged 16 and over and not in jail, hospital, or some other form of institutional care
An inflation that starts because _____ is called demand-pull inflation.
aggregate demand increases
Deflation occurs when _______.
aggregate demand increases at a persistently slower rate than aggregate supply
A macroeconomic equilibrium in which real GDP exceeds potential GDP is _____ equilibrium. And one in which real GDP is less than potential GDP is _____ equilibrium.
an above full-employment; a below full-employment
In a demand-pull inflation spiral, the economy moves from _____ to _____.
an above full-employment equilibrium; a full-employment equilibrium
Mexican goods might become more expensive to U.S. consumers because ______.
an appreciation of the Mexican peso against the U.S. dollar means that the U.S. dollar depreciates against the Mexican peso
In the United States, the CPI basket consists of items that ______ . ______ has the greatest weight in the CPI basket.
an average urban household buys; Housing
Which of the following events would not cause an expected inflation?
an expected increase in taxes
A demand-pull inflation begins with _______.
an increase in aggregate demand
Examples of fiscal policy that increase aggregate demand include ______.
an increase in government expenditure, a decrease in taxes, and an increase in transfer payments
On March 30, 2012 the U.S. dollar was trading at 82 yen per dollar on the foreign exchange market. On August 30, 2012, the U.S. dollar was trading at 79 yen per dollar. The events in the foreign exchange market, everything else remaining the same that could have resulted in this change in the value of the U.S. dollar include _______.
an increase in the Japanese interest rate and a fall in the expected future exchange rate of the U.S. dollar
The expansion of 2002-2008 created jobs at ______ rate. The first two years of the expansion created few jobs because ______.
an unusually slow; the expansion was very weak, so employment growth was weak
When labor productivity increases, there is _____ the production function and _____ in potential GDP.
an upward shift of; an increase
Over time, on average the demand for loanable funds ______, so the real interest rate ______.
and the supply of loanable funds increase at a similar pace; has no trend
The growth rate is the _____ of a variable - the change in the level expressed as a percentage of the initial level.
annual percentage change
Suppose that Sara withdraws $1,000 from her savings account at the Lucky S&L, keeps $50 in cash, and deposits the balance in her checking account at the Bank of Illinois. The immediate change is ______ in M1 of $1,000 and ______ in M2.
an increase; no change
If aggregate demand grows faster than potential GDP, ______ gap emerges and if it grows more slowly than potential GDP, ______ gap emerges.
an inflationary; a recessionary
Explain the effect of the two announcements on the U.S. dollardash-yen exchange rate: Would the U.S. dollar appreciate or depreciate? The two announcements on the U.S. dollar-yen exchange rate would _____ the U.S. dollar.
appreciate
The U.S. dollar exchange rate increased from $0.89 Canadian in June 2009 to $0.96 Canadian in June 2010, and it decreased from 83.8 euro cents in January 2009 to 76.9 euro cents in January 2010. Between June 2009 and June 2010, the U.S. dollar ______ against the Canadian dollar. Between January 2009 and January 2010, the U.S. dollar ______ against the euro.
appreciated; depreciated
The natural unemployment rate ______.
arises from the existence of frictional and structural unemployment
Categorize the following items as either an asset of the Fed or a liability of the Fed. U.S. government securities Federal Reserve notes Loans to depository institutions Depository institution deposits
asset liability asset liability
A Classical macroeconomist believes that the economy is self-regulating and always _____.
at full employment
The natural unemployment rate is the unemployment rate when the economy is _____.
at full employment
When aggregate planned expenditure is greatergreater than real GDP, inventories are _______, so production ______ and inventories return to their target level as the economy moves to equilibrium expenditure.
below target; increases
In January 2018, the U.S. the unemployment rate was ______ the natural unemployment rate and in the fourth quarter of 2017 the output gap was ______.
below; zero
A debtor nation is a country that during its entire history has _____ the rest of the world than it has _____ the rest of the world.
borrowed more from; lent to
A depository institution creates liquidity by ______.
borrowing short and lending long;
An increase in potential GDP increases ______.
both long-run aggregate supply and short-run aggregate supply
Inflation expectations "become self-fulfilling" because consumers decide to _____, which ______.
buy more goods and services at today's lower prices; increases aggregate demand
Arbitrage is the practice of seeking to profit by _____ in one market and _____ in another related market.
buying; selling for a higher price
If the interest rate is 5 percent, people will ______.
buy bonds, bid up their price, and the interest rate will fall
During 2008, the inflation rate increased and the unemployment rate increased. These events ______.
cannot be explained by a movement along the SRPC because along this curve the inflation rate and unemployment rate move in opposite directions
The ______ account records ______ U.S. investment abroad.
capital and financial; foreign investment in the United States minus
The Federal Reserve System (the Fed) is the _____ of the United States.
central bank
The four price indexes that are alternatives to the CPI are ______.
chained CPI, personal consumption expenditure deflator, GDP deflator, and core PCE
The Fed's policy tools include all of the following except ______.
changing government expenditure
The components of aggregate expenditure that are influenced by real GDP are ______.
consumption expenditure and imports
Aggregate planned expenditure is the sum of planned _____.
consumption expenditure, investment, government expenditure, and exports minus imports
Changes in consumption spending play a large role in the business cycle because _______ accounts for approximately ______ percent of GDP.
consumption expenditure; 70
Households preferred to buy corporate equities rather than bonds because ______.
corporate equities deliver capital gains, which increases wealth
Pakistan is experiencing ______ inflation
cost-push
The news clip refers to ______ inflation when it discusses rising production costs. "Rising labor productivity" can neutralize the effect on the inflation rate of "higher input costs" because ______.
cost-push; it increases short-run aggregate supply and long-run aggregate supply with no slowdown in aggregate demand growth
If the government sector deficit increases, with no change in the private sector surplus, net exports ______.
decrease
If real GDP and aggregate expenditure are less than equilibrium expenditure, firms' inventories _____. Firms ______ production, and real GDP ______.
decrease increase; increases
In January 2017, the U.S. unemployment rate was 4.8 percent. In January 2018, the unemployment rate was 4.1 percent. Assuming that the labor force remained constant between January 2017 and January 2018, then unemployment _______.
decreased
In March 2007, the U.S. unemployment rate was 4.4 percent. In August 2008, the unemployment rate was 6.1 percent. Assuming that unemployment remained constant between March 2007 and August 2008, then the labor force ______.
decreased
The ratio of reserves to deposits that a bank plans to hold is its ______. If a bank has $10 million in actual reserves and $8 million in desired reserves, then it has ______.
desired reserve ratio; excess reserves
Potential GDP is ______.
determined by the full-employment quantity of labor
Did the change in the government budget deficit crowd out some investment? The change in the government budget deficit _____ crowd out some investment because the _____.
did; real interest rate rose
Planned saving + Planned consumption expenditure = ______.`
disposable income
The consumption function is the relationship between consumption expenditure and _____, other things remaining the same.
disposable income
The relationship between saving and _____, other things remaining the same, is called the saving function.
disposable income
For three years, there was no technological change in Longland but capital per hour of labor increased from $10 to $20 to $30 and real GDP per hour of labor increased from $3.80 to $5.70 to $7.13. Then, in the fourth year, capital per hour of labor remained constant but real GDP per hour of labor increased to $10. Longland ______ experience diminishing returns because ______.
does; as capital per hour of labor increases, real GDP per hour of labor increases but by smaller amounts
If the growth rates of 2010 are maintained in future years, real GDP per person in Sudico will ______.
double by 2019
The Rule of 70 states that the number of years it takes for the level of any variable to ______ is approximately ______.
double; 70 divided by the annual percentage growth rate of the variable
A rational expectation is a forecast that results from the use of all the relevant data and _____.
economic science
The components of the CPI basket that are experiencing price increases faster than the 12-month average include ______. And those components that are experiencing price increases below the 12-month average include ______.
energy, transportation and food; clothing
Interest rate parity means ______.
equal rates of return
Interest rate parity, which means _____ across currencies, means that for risk free transactions, there is _____ gain from choosing one currency over another.
equal rates of return; no
Arbitrage in the foreign exchange market and international loans market achieves all of the following except _______.
equal real exchange rates across the major currencies
Long-run macroeconomic equilibrium occurs when real GDP _____ potential GDP - equivalently, when the economy is on its _____ curve.
equals; LAS
The quantity theory of money is the proposition that when real GDP _____ potential GDP, an increase in the quantity of money brings _____ percentage increase in the _____.
equals; an equal; price level
The government expenditure multiplier equals the change in _____ that results from a change in government expenditure divided by the change in government expenditure.
equilibrium expenditure and real GDP
A below full-employment equilibrium is an equilibrium in which potential GDP _____ real GDP.
exceeds
Households make saving decisions by considering all of the following factors except _______.
expected profit
Could the change in the exchange rate on June 2 have resulted from the two announcements or must some other influence have changed too? If so, what might that influence have been? On June 2, the U.S. dollar depreciated rather than appreciated because a fall in U.S. _____ decreased the demand for U.S. dollars or an increase in U.S. _____ increased the supply of U.S. dollars.
exports; imports
Net exports is _____ of goods and services minus _____ of goods and services.
exports; imports
Choose the statement that is incorrect. Starting from a long-run equilibrium, _______.
f the percentage change in the money wage rate equals the percentage change in the unemployment rate, the economy remains at full employment.
If these policies are successful, we would expect to see Oregon's natural unemployment rate ______.
fall
If all (or most) prices have increased in the United States and not increased in Japan, then people will generally expect that the foreign exchange value of the dollar will ______. The demand for dollars ______.
fall; decreases and the supply of dollars increases
The consequences of deflation include all of the following except _______.
falling real wage rates for workers with long-term wage contracts
The real interest rate ______, household saving ______,
falls; decreases and investment increases
A country has a higher inflation rate than all other countries, and it has slower economic growth. The central bank does not intervene in the foreign exchange market. To preserve purchasing power parity, the exchange rate ______. If investment from foreigners decreases due to the low economic growth, the current account balance is becoming more ______. It is expected that in the future the exchange rate will ______. The interest rate differential is ______.
falls; positive fall; positive
If the interest rate is less than 4 percent a year, the price of a bond ______, and the interest rate ______.
falls; rises
The price of a bond ______ and the interest rate ______.
falls; rises
An economy at a full-employment equilibrium experiences an increase in aggregate demand. The unemployment rate ______ its natural rate, and to return to the long-run equilibrium, the money wage rate begins to ______.
falls below; rise
The loanable funds market is the aggregate of all the individual _____ markets.
financial
In the 1950s and 1960s, the United States operated a ______. Now the United States operates a ______ . The Fed "counters disorderly conditions in exchange markets" by doing all of the following except ______. A currency can experience short-run fluctuations because ______.
fixed exchange rate; flexible exchange rate selling foreign reserves, which raises the U.S. exchange rate when the supply of dollars dramatically decreases the currency can fluctuate based on beliefs about the future exchange rate
According to RBC theory, the source of the business cycle is _______, which result mainly from _______.
fluctuations in productivity; fluctuations in the pace of technological change
A crawling peg exchange rate policy is one that _______.
follows a path determined by a decision of the government or the central bank and is achieved by central bank intervention in the foreign exchange market
The core CPI is the CPI excluding ______ prices.
food and fuel
Choose the statement that is incorrect. Older unemployed workers might become marginally attached workers or discouraged workers during a recession because _______.
given their long employment history, they are eligible for longer periods of unemployment benefits
The balanced budget multiplier equals the change in equilibrium expenditure and real GDP that results from equal changes in _____ divided by the change in government expenditure.
government expenditure and lump-sum taxes
An open market operation is the purchase or sale of _____ - _____ - by the _____ in the open market.
government securities; U.S. Treasury bills and bonds; New York Fed
When the unemployment rate is less than the natural unemployment rate, real GDP is ______ than potential GDP and the output gap is ______.
greater; positive
The unemployment rate in May 2008 is ______ the estimated natural unemployment rate. This implies that real GDP is ______ potential GDP at this time.
greater than; less than
What are the three sources of global investment funds? (Separate with a comma, no plurals or abbreviations.)
household saving, government budget surplus, borrowing from rest of world
A depository institution is a financial firm that takes deposits from _____.
households and firms
The aggregate production function is the relationship that tells us ______, when all other influences on production remain the same.
how real GDP changes as the quantity of labor changes
The Fed is the lender of last resort, which means _______.
if depository institutions are short of reserves, they can borrow from the Fed
A person is not in the labor force if they are ______.
in the working-age population but neither employed nor unemployed
A bank manager tells you that she doesn't create money. She just lends the money that people deposit. The bank manager is ______ because ______.
incorrect; every new loan creates a new deposit
The changes in exports and imports reported here ______. Of the two quarters reported, exports and imports make the greater contribution to aggregate demand growth in the _____ quarter.
increase aggregate demand and have no effect on the quantity of real GDP demanded Second
The multiplier matters because we can use it to determine by how much we should change autonomous expenditure to ______.
increase real GDP by a given amount
An increase in expected future income _____ aggregate demand. An increase in the expected future inflation rate_____ aggregate demand. An increase in expected future profits_____ aggregate demand.
increases; increases; increases
A government budget deficit _______ the real interest rate, increases ______.
increases; private saving and decreases investment
If the price level rises and the money wage rate remains constant, the quantity of real GDP supplied ______ and there is a movement up along the ______ aggregate supply curve.
increases; short-run
Deflation can be ended by _______.
increasing the growth rate of the quantity of money
The federal funds rate is the _____ rate on _____ loans.
interest; interbank
A creditor nation is a country that during its entire history has _____ the rest of the world than other countries have _____ it.
invested more in; invested in
In monetarist cycle theory, fluctuations in both _____, driven by fluctuations in the growth rate of the quantity of money, are the main source of fluctuation in aggregate demand.
investment and consumption expenditure
In Keynesian cycle theory, fluctuations in _____ driven by fluctuations in business confidence - summarized by the phrase "animal spirits" - are the main source of fluctuations in _____.
investment; aggregate demand
Stagflation ______.
is a combination of recession and inflation
A flexible exchange rate is one that _______.
is determined by demand and supply in the foreign exchange market with no direct intervention by the central bank
FOMC members are predicting that the U.S. economy ______.
is on a short-run Phillips curve to the right of the LRPC and will move leftward up along the SRPC
A fixed exchange rate is one that _______.
is set by the government or the central bank and is achieved by central bank intervention in the foreign exchange market
Arbitrage _______.
is the practice of seeking to profit by buying in one market and selling for a higher price in another related market
Read the news clip, then answer the following questions. Barter ______ a means of payment. When trading on e-Bay, barter _______.
is; is not as efficient as money because barter requires a double coincidence of wants
A central bank performs all of the following functions except ______.
it provides safety deposit boxes for citizens with assets over $ 200 million
Core CPI is a useful measure because ______. Core CPI is a misleading measure because ______.
it smooths out short-term fluctuations that arise from the volatility in food and fuel prices; it does not include food and fuel prices price rises
The key proposition of new growth theory that makes growth persist is that ______ is not subject to diminishing returns.
knowledge capital
RBC theorists believe the when-to-work effect is
large
To increase its assets to $2.3 trillion in 2008, the Fed used ______.
last resort loans
Net worth is the total market value of what a financial institution has _____ minus the market value of what it has _____.
lent; borrowed
Deflation will be created if the growth rate of the quantity of money is _______.
less than 2 percent a year
Suppose the Fed increases the quantity of money. In the long run, supply and demand in the ______ market determines the real interest rate. The ______ adjusts to make the quantity of real money supplied equal to the quantity demanded.
loanable funds; price level
The three main types of markets for financial capital are _______.
loan markets, bond markets, and stock markets
According to the news clip, the main source of increased unemployment might be ______, and the main type of increased unemployment is ______.
losses in manufacturing and construction jobs; cyclical
The exports effect is the result that the lower the exchange rate, other things remaining the same, the ______.
lower are the prices of U.S.-produced goods and services to foreigners and the greater is the volume of U.S. exports
The Federal Open Market Committee is the Fed's _____ committee.
main policy making
An increase in income taxes _______, everything else remaining the same
makes the multiplier smaller
Banks create money by ______.
making loans
Depository institutions pool risk because they use funds obtained from ______ depositors to make loans to ______ borrowers.
many; many
The unemployment rate might underestimate the underutilization of labor resources because it does not include ______.
marginally attached workers and part-time workers who want full-time jobs
Money is any commodity or token that is generally acceptable as a ______.
means of payment
The unemployment rate is supposed to ______. It is an imperfect measure because ______.
measure underutilized labor; it does not include marginally attached workers and part-time workers who want full-time jobs
Money serves as a ______.
medium of exchange, which means that it is generally accepted in exchange for goods and services
The money multiplier is the ratio of the change in the quantity of ______ to the change in the quantity of ______.
money; monetary base
Purchasing power parity is equal value of _____ - a situation in which _____ buys the same amount of goods and services in different currencies.
money; money
The multiplier is greater than 1 because the change in autonomous expenditure leads to _______.
more induced expenditure
A net borrower is a country that is borrowing _____ from the rest of the world _____ it is lending to the rest of the world.
more; than
A net lender is a country that is lending _____ to the rest of the world _____ it is borrowing to the rest of the world.
more; than
When the economy goes into recession, the output gap is _______.
negative
If inflation is expected, _______.
neither a cost-push inflation nor a demand-pull inflation occur
The bias in these CPI numbers might arise from ______.
new goods bias, quality change bias, commodity substitution bias, and outlet substitution bias
The ______ growth theory best corresponds to the explanation given by Mr. Greenspan because Mr. Greenspan's explanation shows ______.
new; the economy as a perpetual motion machine
The table to the right shows the values of disposable income and consumption expenditure for each of the past four quarters. Could these levels of disposable income and consumption expenditure be on the same consumption function? ___ because consumption expenditure changed by _____ than disposable income in _______ .
no; more; 2017, Q4
If the only change that occurred was that all the newly hired people had been unemployed in October, then the labor force would ______ and unemployment would _______.
not have changed; have decreased
Currency consists of _____.
notes (dollar bills) and coins
Saving is the amount of income that is _____ in net taxes or spent on _____ goods and services.
not paid; consumption
When the Federal Reserve Bank increases the federal funds rate, other
nterest rates rise, and consumption, firms' private investment and net exports decrease.
Choose the option that is incorrect. Equilibrium expenditure _______.
occurs when all expenditure is induced expenditure
Foreign currency is the money _____ regardless of whether that money is in the form of notes, coins, or bank deposits.
of other countries
The U.S. dollar exchange rate fluctuates in part because a change in the U.S. interest rate differential changes the demand for U.S. dollars and the supply of U.S. dollars in ______ and a change in the expected future exchange rate changes the demand for U.S. dollars and the supply of U.S. dollars in ______.
opposite directions; opposite directions
Examples of physical capital are ______. Examples of financial capital are ______.
ovens used by Pizza Hut and lawn mowers used by Larry's Mowing; bonds issued by Wal-Mart and stocks issued by Boeing
The chained CPI ______.
overcomes the sources of bias in the CPI by incorporating substitutions and using current and previous period quantities
The exports effect is the result that the lower the exchange rate, other things remaining the same, the ______.
ower are the prices of U.S.-produced goods and services to foreigners and the greater is the volume of U.S. exports
Wealth is the value of all the things that people _____.
own
A stock is a certificate of _____ and claim to the _____ that a firm makes.
ownership; profits
Rapid inflation in Brazil in the early 1990s caused the cruzerio to lose its ability to function as money. Which of the following commodities do you think would most likely have taken the place of the cruzeiro in the Brazilian economy?
packs of cigarettes because they are a good medium of exchange
The new Keynesian cycle theory emphasizes the fact that today's money wage rates were negotiated at many past dates, which means that _____ rational expectations of the _____ price level influence the money wage rate and the position of the SAS curve.
past; current
Some unemployment is unavoidable because ______.
people are making transitions through the stages of life and businesses are making transitions
Depository institutions balance risk and return by _______.
placing some funds into safe low interest-earning assets and other funds into high-interest risky assets
Keynesian macroeconomists recommend ______.
policies that actively offset changes in aggregate demand that bring recession
Monetarist macroeconomists recommend ______.
policies that keep taxes low to avoid disincentive effects that decrease potential GDP
Classical macroeconomists recommend ______.
policies that minimize the disincentive effects of taxes on employment, investment, and technological change
The fundamental precondition for labor productivity growth is the incentive system created by all of the following except ______.
population growth
A recessionary gap eventually emerges even if aggregate demand remains constant because over time ______.
potential GDP increases
The mainstream business cycle theory is that ______ grows at a steady rate while ______ grows at a fluctuating rate.
potential GDP; aggregate demand
The output gap is real GDP minus _____ expressed as a percentage of _____.
potential GDP; potential GDP
The combination of a rising _____ and decreasing _____ is called stagflation.
price level; real GDP
The newest theory of the business cycle, known as real business cycle theory (or RBC theory), regards random fluctuations in _____ as the main source of economic fluctuations.
productivity
Workers in developing Asian economies who work more hours than Americans are not the world's most productive workers because ______.
productivity depends on how much real GDP each hour of labor can produce
According to RBC theory, the main source of economic fluctuations is a decrease in ______
productivity growth
The functions of depository institutions include all of the following except ______.
providing debt counseling
The Federal Reserve (usually called the Fed) is the central bank of the United States, a _____ authority whose main role is the regulation of _____.
public; banks and money
A central bank is a banks bank and a _____ authority that regulates a nation's depository institutions and conducts _____ policy, which means that it adjusts the _____ and influences _____.
public; monetary; quantity of money in circulation; interest rates;
A central bank is a bank's bank and a _____ authority that regulates a nation's depository institutions and conducts _____ policy, which means that it adjusts the _____ and influences _____.
public; monetary; quantity of money in circulation; interest rates;
The crowding-out effect is the tendency for a government budget deficit to raise the _____ and _____ investment.
real interest rate; decrease
The sources of labor productivity growth include all of the following except ______.
real wage rate growth
Over the last several decades, the gap between real GDP per person in the United States and CanadaCanada ______. The gap between real GDP per person in the United States and JapanJapan ______.
remained nearly constant or widened a small amount; narrowed
What happened to the price of a bond between 2005 and 2009? How do you know? The price of a bond _____ between 2005 and 2009 because the _____.
remained unchanged; nominal interest rate remained unchanged
Stagflation is a combination of a ______ in the price level and ______ in real GDP.
rise; a decrease
1. An unexpected increase in exports increases aggregate demand by $50 billion. What happens to the price level and real GDP? Has Shell Island experienced inflation or deflation and what type of output gap does it now have? The price level _____ and real GDP _____ billion. Shell island has experienced _____ .
rises to 130; increases to $625; a one-time change in the price level and has an inflationary gap
The demand for loanable funds increases and the supply of loanable funds increases. As a result, the equilibrium real interest rate ______ and the equilibrium quantity of loanable funds ______.
rises, falls, or remains the same; increases
In the long run, the money wage rate ______, short-run aggregate supply ______, and the economy returns to a full-employment equilibrium.
rises; decreases
If the interest rate is greater than 4 percent a year, the price of a bond ______, and the interest rate ______.
rises; falls
The demand for loanable funds increases and the supply of loanable funds decreases. As a result, the equilibrium real interest rate ______ and the equilibrium quantity of loanable funds ______.
rises; increases, decreases, or remains the same
The defining feature of the classical view of macroeconomics is that the economy is ______.
self-regulating and always at full employment
The defining feature of the monetarist view of macroeconomics is that the economy is______.
self-regulating and that it will normally operate at full employment, provided that monetary policy is not erratic and that the pace of money growth is kept steady
In the short run, when the Fed decreasesdecreases the quantity of money, people enter the loanable funds market and ____ bonds.
sell
Growth rates over the past few decades indicate that gaps in real GDP per person around the world are ______.
shrinking between some countries and growing or staying the same between other countries
Potential sources for faster economic growth in India suggested in this news clip include all of the following except ______.
slowing population growth
A bond is a promise to pay _____ sums of money on _____ dates.
specified; specified
An economy is at potential GDP when it experiences an increase in costs. The economy experiences _______.
stagflation
In mainstream business cycle theory, the money wage rate is
sticky
The unemployment that arises when changes in technology or international competition change the skills needed toThe unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the location of jobs isperform jobs or change the location of jobs is ______ unemployment.
structural
Older workers are more prone to experience ______ unemployment. During a recession, the unemployment rate of older workers ______.
structural; increases
The 5 million workers who cannot find jobs because of mismatching in the labor market are counted as part of the economy's ______ unemployment because ______.
structural; there is a mismatch between their skills and the skills required for the available jobs
The long-run historical evidence and international evidence show us that the relationship between money growth and the inflation rate ______.
supports the quantity theory, but the correlation is not perfect
According to neoclassical growth theory, the fundamental cause of economic growth is ______.
technological change, which induces saving and investment that make capital per hour of labor grow
When the price level, the money wage rate, and other factor prices rise by the same percentage, there is a movement along ______. Potential GDP ______.
the LAS curve; does not change
When the price level rises but the money wage rate and other factor prices remain the same, there is a movement along ______. The quantity of real GDP supplied ______.
the SAS curve; increases
Mr. Reddy is investing in the U.S. real estate market because ______.
the U.S. dollar depreciated and the price of U.S. investment properties to foreign investors like Mr. Reddy decreased
If a U.K. bank deposit earns 4 percent a year and a U.S. bank deposit earns 5 percent a year, then people expect that ______.
the U.S. dollar will depreciate by 1 percent a year
The region with the highest inflation rate in 2010 is ______. The region with the highest inflation rate in 2011 is ______.
the United States; the United States
The loanable funds market is ______.
the aggregate of all the individual financial markets
Although luxury clothing prices have increased dramatically since the late 1990s, the clothing category of the CPI has actually declined by about 10 percent because ______.
the apparel component of the CPI is weighted more heavily toward moderately-priced clothing, and the price of moderately-priced clothing has decreased
The price level is ______.
the average level of prices, and the value of money
A lower required reserve ratio increases bank profits because ______.
the banks hold fewer reserves
In 1890, the United States surpassed China to become the world's largest economy because ______.
the benefits of the Industrial Revolution were greater in the United States than in China
Net taxes are taxes paid to the government minus _____.
the cash transfers received from government
To calculate the multiplier, we divide ______ by ______.
the change in equilibrium expenditure; the change in autonomous expenditure
The marginal propensity to import is equal to _______.
the change in imports divided by the change in real GDP, other things remaining the same
In the short run, the nominal exchange rate is determined by ______. And in the short run ______.
the demand for U.S. dollars and the supply of U.S. dollars in the foreign exchange market; a change in the nominal exchange rate brings an equivalent change in the real exchange rate
Aggregate demand will increase if ______.
the effect of the tax rebates and the change in the foreign exchange rate outweigh the effect of the housing, credit, and financial crises
The quantity of U.S. dollars supplied in the foreign exchange market depends on many factors, the main ones being ______.
the exchange rate, U.S. demand for imports, interest rates in the United States and other countries, and the expected future exchange rate
The quantity of U.S. dollars demanded in the foreign exchange market depends on many factors, the main ones being ______.
the exchange rate, world demand for U.S. exports, interest rates in the United States and other countries, and the expected future exchange rate
Economic growth is _______.
the expansion of production possibilities
Along the short-run Phillips curve, ______.
the expected inflation rate and the natural unemployment rate are constant
All of the following statements are included in new growth theory except ______.
the forces of competition destroy incentives to make new discoveries
The supply of U.S. dollars changes when there is a change in any of the following except ______.
the foreign exchange rate
The U.S. interest rate differential rises if ______, and the larger the U.S. interest rate differential, the ______ is the demand for U.S. dollars in the foreign exchange market.
the foreign interest rate falls; greater
The marginal propensity to save is _______.
the fraction of a change in disposable income that is saved
The marginal propensity to consume is ______.
the fraction of a change in disposable income that is spent on consumption
Economic growth results when there are increases in ______.
the full-employment quantity of labor
The velocity of circulation is the average number of times a dollar of money is used annually to buy ______. The formula used to measure the velocity of circulation, V, is ______, where P is the price level, Y is real GDP, and M is the quantity of money.
the goods and services that make up GDP; V = (P ×Y) ÷M
One of the Fed's main policy tools is ______.
the last resort loan, which means that if a bank is short of reserves, it can borrow from the Fed
When real GDP increases, the change in consumption expenditure equals _______.
the marginal propensity to consume times ×the increase in real GDP
An economy has a zero marginal tax rate. When real GDP increases, the change in consumption expenditure equals _______. When real GDP increases, the change in imports equals _______.
the marginal propensity to consume times ×the increase in real GDP the marginal propensity to import times ×the increase in real GDP
When real GDP increases, the change in imports equals _______.
the marginal propensity to import times ×the increase in real GDP
The quantity of money that the banking system can create is limited by _______.
the monetary base, desired reserves, and desired currency holdings
All of the following events except an increase in ______ might cause a demand-pull inflation.
the money wage rate
A cost-push rise in the price level can arise from an increase in _______.
the money wage rate or money prices of raw materials
The unemployment rate tends to actually underestimate the unemployment problem, especially during a recession, because ______.
the number of marginally attached workers increases, but these workers are not included in the official unemployment rate
In the long run, ____adjusts to make the quantity of real money supplied equal the quantity demanded.
the price level
The aggregate demand curve shows the relationship between the quantity of real GDP demanded and ______, when everything else remains the same.
the price level
A movement along the aggregate demand curve occurs if _______.
the price level changes and all other factors remain unchanged
An open market operation is ______.
the purchase or sale of securities by the Federal Reserve System in the loanable funds market
At the equilibrium exchange rate _______.
the quantity of dollars demanded equals the quantity of dollars supplied
The demand for loanable funds is the relationship between _____ demanded and the _____ when all other influences on borrowing plans remain the same.
the quantity of loanable funds; real interest rate
Inflation results when ______.
the quantity of money increases rapidly
Everything else remaining the same, an increase in aggregate demand increases ______.
the quantity of real GDP supplied
The main influences on the quantity of money that people and businesses plan to hold include all of the following except ______.
the quantity of reserves
The demand for loanable funds is determined by ______. The demand for loanable funds changes when ______ changes.
the real interest rate and expected profit; expected profit
As we move up along the long-run aggregate supply curve, ______.
the real wage rate remains constant
The two broad sources of potential GDP growth are growth of ______ and growth of ______.
the supply of labor; labor productivity
Gross investment is ______. Net investment is ______.
the total amount spent on new capital; the change in the value of capital
Along the long-run Phillips curve, _______.
the unemployment rate is constant at the natural unemployment rate
Depository institutions have made innovations that have changed the composition of money in all of the following ways except ______.
the use of currency has fallen significantly
If most prices increase in Japan and other countries but remain constant in the United States, ______.
then for purchasing power parity to hold, the demand for U.S. dollars increases and the supply of U.S. dollars decreases
Choose the statement that is incorrect. If the labor market is working properly, there is still unemployment because ______.
there are always discouraged searchers
European banks need more capital because _______. The "capital" that is referred to in the news clip is _________.
they risk failing if loans they hold are not repaid or if other assets lose value; owners' investment in the bank
The price index with the greatest bias is ______ because ______.
the CPI; it isn't based on current period actual expenditure weights
The monetary base is equal to ______.
the Fed's liabilities together with coins issued by the Treasury
When the Fed buys securities from a bank, ______.
the bank's reserves increase but its deposits do not change
The foreign exchange market is the market in which _____ of one country is exchanged for _____ of another.
the currency; the currency
The "capital" referred to in the news clip is ______. The financial institutions that the G-20 might require to hold more capital are ______.
the institutions' own funds; banks and insurance companies
Disoposable income is aggregate income minus taxes plus _____.
transfer payments
A movement ______ along the short-run Phillips curve occurs when there is an ______ increase in aggregate demand.
up; unexpected
Depository institutions minimize the cost of monitoring borrowers by ______.
using specialized resources that have a much lower cost than what households would incur if they had to undertake the activity individually
An unemployed person ______.
wants work, has made specific efforts to find a job within the previous four weeks, or is waiting to be called back to a job from which he or she has been laid off, or is waiting to start a new job within 30 days
The change in the unemployment rate over the past year suggests that the U.S. economy ______.
was in an expansion
The marginal propensity to consume is equal to ______, and the marginal propensity to save is equal to ______.
ΔC ÷ΔYD; ΔS ÷ΔYD