ECON FINAL
If you are estimating your total expenses for school next semester, you are using money primarily as:
a unit of account
GDP is the market value of:
all final goods and services produced in the economy in a given year
Refer to the diagram, in which Qf is the full-employment output. If the economy's current aggregate demand curve is AD3, it is experiencing:
an expansionary gap
Which of the following could cause consumption to shift up from C to C'?
an increase in asset values
Inflation is defined as:
an increase in the overall level of prices
The Federal Reserve Banks sell government securities to the public. As a result, checkable deposits:
and reserves of commercial banks both decrease.
The amount by which government expenditures exceed revenues during a particular year is the:
budget deficit
The recurring ups and downs in the level of economic activity extending over time are referred to as:
business cycle
If the Fed wants to lower the federal funds rate, it should:
buy government securities in the open market.
The multiplier is useful in determining the:
change in GDP resulting from a change in spending.
A movement along a consumption function is caused by:
change in disposable income
In the United States, the M1 money supply is comprised of:
coins, paper currency, and checkable deposits.
Inflation caused by a rise in the prices of inputs used in production is referred to as:
cost push inflation
A headline states "Real GDP Falls Again as the Economy Slumps." This condition is most likely to produce what type of unemployment?
cyclical
If the MPC in an economy is .8, government could shift the aggregate demand curve rightward by $100 billion by:
decreasing taxes by $25 billion
If the United States wants to increase its net exports in the short term, it might take steps to:
depreciate the dollar compared to foreign currencies.
In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are:
excluded from the labor force
Refer to the diagram, in which Qf is the full-employment output. The shift of the aggregate demand curve from AD1 to AD2 is consistent with:
expansionary fiscal policy
If, in the market for loanable funds, the amount of money supplied exceeds the amount of money households and businesses want to hold, the interest rate will:
fall, causing households and businesses to borrow more
Overnight loans from one bank to another for reserve purposes entail an interest rate called the:
federal funds rate
As it relates to Federal Reserve Bank activities, the acronym FOMC describes the:
federal open market committee
Core inflation refers to the inflation picture after stripping away the:
food and energy prices
Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer. What type of unemployment is Mollie experiencing?
frictional
The graph below depicts which likely economic situation?
full employment
Which of the following is a component of the Aggregate Demand curve?
gov. purchases
The crowding-out effect of expansionary fiscal policy suggests that:
government borrowing raises interest rates for firms
Which of the following would cause Investment to decline?
higher interest rates
In the 1920s, Germany after the First World War experienced an economic condition which can best be described as:
hyperinflation
If the MPC is .70 and investment increases by $3 billion, the equilibrium GDP will
increase by $10 billion
If government increases its purchases by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to:
increase by $45 billion
The total demand for money curve will shift to the right as a result of:
increase in nominal GDP
In a certain year, the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases. Full-employment GDP is $120 billion. To stabilize the economy under these conditions, the government should:
increase tax rates and/or reduce government spending.
If the price of Gatorade increases, the equilibrium price of Powerade, a substitute good, will ________ because of a shift in ________.
increase; demand
If a person's nominal income increases by 5% while the price level increases by 2%, then that person's real income:
increases by 3%
Supply factors in economic growth include the following, except:
increases in purchases of output
Refer to the diagram, in which Qf is the full-employment output. If the economy's current aggregate demand curve is AD3, it would be appropriate for the government to:
reduce government expenditures or increase taxes.
The prime interest rate usually:
rises when the federal funds rate rises.
An economist who favors smaller government would recommend:
tax cuts during recession and reductions in government spending during inflation.
The U.S. public debt is the amount of money that:
the federal government owes to holders of U.S. securities
A nation's real GDP was $250 billion in 2013 and $265 billion in 2014. It's population was 122 million in 2013 and 125 million in 2014. What was the growth rate in real GDP per capita?
3.4%
The purchase of government securities from the public by the Fed will cause:
the money supply to increase
Which one of the following is true about the U.S. Federal Reserve System?
there are 12 regional federal reserve banks
Which economic change will most likely happen given the economic situation depicted by point b in the graph below ?
unexpected deflationary pressure
Before the Industrial Revolution, living standards in the world:
were relatively stagnant for long periods of time
You are given the opportunity to invest in mobile dog washing units. The initial investment per unit is $5,000. After expenses, employee costs, etc. you estimate a profit of $400 for the first unit, $350 for the second unit, $300 for the third unit, and $200 for the next two units available. Your local bank offers a small business loan market rate of interest of 9% annually. What is your decision on this opportunity?
you will not invest
If 40,000 worker-hours produced a total output of $600,000 in the economy, then the labor productivity is:
$15/worker-hour
Your company sells two products represented by y=honey and x=tea. Your typical consumer's budget line, therefore, can be represented by y = 2 - .2x. The typical customer has $20 to spend. What is the price of tea?
$2
A nation's real GDP was $250 billion in 2017 and $265 in 2018. Its population was 120 million in 2017 and 125 million in 2018. What is its real GDP per capita in 2018?
$2,120 per person
Use the information below to determine the equilibrium point in this market. Quantity Demanded: 50, 40, 30, 20 Price $10, $20, $30, $40 Quantity Supplied 20, 40, 60, 80
$20
Suppose the reserve requirement is 20 percent. If a bank has checkable deposits of $4 million and actual reserves of $1 million, it can safely lend out:
$200,000
The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320); imports ($35); exports ($22); personal consumption expenditures ($2,460); and, government purchases ($470). What is GDP for this economy?
$3,237 billion
If real GDP in a year was $3,668 billion and the price index was 112, then nominal GDP in that year was approximately:
$4,108 billion
Refer to the below table. What was real GDP in Year 2? (Numbers are reported in billions of dollars.) -Year: 1/2/3 -Nominal GDP: 5,200/5,500/5,740 -Real GDP: 4,800/ /5,000 -Price Index: /112/
$4,911 billion
Use the graph below to answer the question: A binding price floor would occur at?
$8
The XYZ Commercial Bank has $5,000 in excess reserves and the reserve ratio is 30 percent. This information is consistent with the bank having:
$90,000 in checkable deposit liabilities and $32,000 in reserves.
Answer the question on the basis of the following consumption schedule: C = 50 + .75Y. The level of disposable income is $400. What is the MPC of this economy?
.75
Refer to the below table. Marginal Propensity to Consume is: Disposable Income: 200, 225, 250, 275, 300 Consumption: 205, 225, 245, 265, 285
.8
Answer the question on the basis of the following consumption schedule: C = 20 + .9Y. If disposable income totals $300, what is the level of consumption in the economy?.
290
Answer the question on the basis of the following sequence of events involving fiscal policy: (1) The composite index of leading indicators turns downward for three consecutive months, suggesting the possibility of a recession. (2) Economists reach agreement that the economy is moving into a recession. (3) A tax cut is proposed in Congress. (4) The tax cut is passed by Congress and signed by the president. (5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover. Refer to the information. The recognition lag of fiscal policy is reflected in events:
1 and 2
With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%. But if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate of:
10%
The Federal Reserve System was created in:
1913
Answer the question on the basis of the following consumption schedule: C = 20 + .9Y. What is autonomous consumption for this economy?
20
The economy has an annual inflation rate of 3.5%. It will take approximately how many years for the price level to double?
20
A nation's average annual real GDP growth rate is 2.5%. Based on the "rule of 70", the approximate number of years it would take the nation's real GDP to double is:
28 years
If the natural rate of unemployment is 4.5 percent and the actual unemployment rate is 6.5 percent, then Okun's Law indicates that the GDP gap would be:
4%
A nation has a population of 260 million people. Of these, 60 million are retired, in the military, institutionalized or under 16 years of age. There are 188 million people who are employed and 12 million who are unemployed. what is the unemployment rate?
6.0%
Which point on the below PPF graph is inefficient?
A
If government were to set a minimum price which may be charged in this market at $30, what would happen? Quantity Demanded: 50, 40, 30, 20 Price $10, $20, $30, $40 Quantity Supplied 20, 40, 60, 80
A binding price floor
Which of the following would not have an impact on the supply of auto tires?
A decrease in household incomes
A temporary disruption of oil supplies to the United States caused by geopolitical events would have which of the most likely impacts?
A short-run adverse supply shock
Which area on the graph depicts consumer surplus?
ABC
The e-cigarette company, Juul, has been criticized for misrepresenting their target audience. What evidence is there that the "number and composition" of consumers aged 40 and above is not their only target audience?
All of the listed items are evidence
The change in Juul vaping products occurring between the years 2015 to 2019, can best be described as:
An increase in demand caused by number and composition of consumers
Which of the following best describes the cause-effect chain of a expansionary monetary policy?
An increase in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP.
Which of the following is included in GDP?
Annual service fees received by stock brokers
Which of the following is an example of the law of demand?
At a price of $1, I'll buy 20 units, but at a price of $2, I'll buy 10 units
The National Income Product Accounts reporting Gross Domestic Product and the sub-accounts are compiled by the:
Bureau of Economic Analysis
The term indicating that all other influences, other than the observed determinants of a model, will be held as constant is known as:
Ceteris paribus
Households change their spending by $10 billion due to a decrease in net wealth. The country's marginal propensity to consume is 0.8. What impact will this have on real GDP?
Consumption spending will decrease by $50 billion
Inflation caused by an increase in aggregate demand spending is referred to as:
Demand pull inflation
The paper money used in the United States is:
Federal Reserve Notes
A friend is weighing the costs and benefits of going to college. She shows you the list of direct costs for her education and data regarding the possible salary earned from employment requiring the college degree she'll earn. From an economic perspective, what would be the best thing to say to her?
Great start but you should also include the opportunity cost of your education for a more accurate analysis. This is the earnings you'll give up by going to school rather than working
How is a reduction in the national unemployment rate (more people employed) represented in a nation's production possibilities frontier (PPF)?
It will move production outward, to a point closer to or on the PPF.
"Near-monies" are included in:
M2 only
If a $20 billion increase in government expenditures increases equilibrium GDP by $50 billion, then
MPC for this economy is .6
The GDP deflator (aka GDP price index) equals:
Nominal GDP divided by Real GDP
The largest spending component of GDP is:
Personal Consumption Expenditures
Which factor of production does AutoCAD software represent?
Physical capital
The aggregate expenditures model depicts short run aggregate supply (SRAS) as horizontal to the left of long run aggregate supply. What does this shape of SRAS convey?
Prices are "sticky" downward when the economy produces less than potential output
Which of the following actions by the Fed most likely increase commercial bank lending?
Reducing the interest paid on reserves held at the Fed.
If contracts for employee wages are renegotiated so that employees receive a raise, what happens initially to the aggregate expenditures model?
SRAS shifts leftward
As new technologies are invented and experience widespread use by businesses in their production of goods and services, what changes would we make to the Aggregate Expenditures model?
SRAS, then LRAS shift rightward
Government purchases in national income accounts would include payments for:
Salaries for current U.S. military officers
Select the best analogy representing the relationship of Microeconomics to Macroeconomics
Studying a species of tree vs. studying the forest ecosystem
What would happen to the equilibrium price and quantity of new cars if there is a recession where many people lose their jobs?
The equilibrium price and quantity would both fall as demand shifts to the left.
An economist observes that a fan is willing to pay $1000 for Taylor Swift concert tickets, but was able to purchase them on StubHub.com for $200. The economist would be able to state that
The fan's consumer surplus is $800
Refer to the graph below and answer the question: If an individual chooses to move from point B to point C, what has happened?
The individual experiences an increasing opportunity cost of lost academic success
Which statement is correct?
The production of nondurable consumer goods is more stable than the production of durable consumer goods
When inflation occurs:
The purchasing power of money decreases
A binding price ceiling will have which of the following consequences?
The quantity demanded will be larger than the quantity supplied.
Government increases spending by $50 billion and raises taxes by $50 billion to fund the spending. The economy's MPC is 0.75. What is the impact on the economy of these actions?
There is a $50 billion increase in real GDP
When price falls, which of the following happens?
There is a decrease in the quantity supplied.
If the price of solar panels decreases, what would you expect would happen in the market for solar panels?
There would be a movement to the right downward along the demand curve.
One of the key differences between the neoclassical viewpoint and Keynesian viewpoint for the economy is:
Wages are flexible to neoclassical economists and sticky to Keynesian economists
Which of the following represents the most expansionary fiscal policy?
a $10 billion increase in government spending
Which of the following would reduce GDP by the greatest amount?
a $20 billion decrease in government spending
In a command economy ________ make the decisions regarding what gets produced, how it gets produced, for whom it gets produced, and how to accommodate change. In a capitalistic society these decisions are made by ________.
a central authority; markets
An appropriate fiscal policy for a severe recession is:
a decrease in tax rates
Which of the options given would explain the change in demand shown in the below graph?
a decrease in the number of buyers in a market
The long-run aggregate supply curve is:
a depiction of the economy's full employment output
Net exports are a positive number when:
a nation's exports of goods and services exceed its imports
A contraction of the money supply:
increases the interest rate and decreases aggregate demand
Neoclassical economists believe that manipulation of the economy with interest rates, net taxes and government spending may work in the short run, but ultimately only causes
inflation
Discretionary fiscal policy refers to:
intentional changes in taxes and government expenditures made by Congress
Monetary policy is expected to have its greatest impact on:
investment
Expansionary fiscal policy is so named because it:
is designed to expand real GDP.
Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to real GDP?
it doesn't change
Which of the following shows the greatest level of confirmation through testing, observation and/or experimentation?
law
Assume there is a fixed rate of interest on contracts for borrowers and lenders. If unanticipated inflation occurs in the economy, then:
lenders are worse off, and borrowers better off
A bank that has assets of $85 billion and a net worth of $10 billion must have:
liabilities of $75 billion
Money is decreased when:
loans are repaid
the three statistics that are the main focus for those measuring maceconomic health are:
real GDP, inflation and unemployment
The model used in this unit of study mainly depicts the fine tuning of the economy through the "Keynesian perspective." Neoclassical economists, on the other hand, believe that government policies to support the economy should primarily focus on:
low inflation/taxes
If the Fed were to reduce the legal reserve ratio, we would expect:
lower interest rates, an expanded GDP, and a lower rate of unemployment
The transactions demand for money is most closely related to money functioning as a:
medium of exchange
Business inventories increase when firms produce:
more than they sell, and the inventory increase is added to GDP
In annual percentage terms, investment spending in the United States is:
more variable than real GDP
The full employment rate of unemployment is also called the:
natural rate of unemployment
Credits cards are:
not money, as officially defined as M1 or M2
A major advantage of automatic stabilizers is that they:
once enacted, require no legislative action by Congress to be made effective.
which of the following is a tool of monetary policy?
open market operations
If the monetary authorities want to reduce the monetary multiplier, they should:
raise the required reserve ratio
The discount rate is the interest:
rate at which the Fed lends to commercial banks.
Which of the following is a measure of growth that is most useful for comparing living standards?
real GDP per capita