Exam 4: Quizzes 15-17

If discouraged workers are included in the determination of the unemployment rate, what effect will it have on the computed rate? There is no relationship between discouraged workers and the unemployment rate determination. It will raise it because discouraged workers are not currently included in the official unemployment rate.. There will be a decrease in the unemployment rate. It will not impact the unemployment rate because the discouraged workers are already counted in the unemployment rate.

It will raise it because discouraged workers are not currently included in the official unemployment rate..

As inflation rises well past the target range the FED has set, the goal of the monetary policy implemented will be to decrease the administered rates. encourage consumer spending. raise its administered rates to stabilize the economy. lower the discount rate in an effort to encourage investment.

raise its administered rates to stabilize the economy.

In an AD/AS model, the money wage is shown on the vertical axis. real GDP is shown on the horizontal axis. the potential GDP always slopes downwards. the GDP deflator always slopes upwards.

real GDP is shown on the horizontal axis.

Fiscal policy can take much longer to act than monetary policy given there are lags that can occur in the process. The time that it takes to determine whether or not a recession has occurred is referred to as the implementation lag. structural lag. legislative lag. recognition lag.

recognition lag.

Prior to the Great Recession, monetary policy was conducted primarily through requiring banks to hold large reserve balances. the money demand. quantitative easing. the money supply.

the money supply.

___________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation. Standardized employment budgets Budget expenditures Discretionary fiscal policies Automatic stabilizers

Automatic stabilizers

Keynes' law says that "__________ creates its own ___________." Potential GDP ; demand Supply ; equilibrium Demand ; supply Supply ; demand

Demand ; supply

________________ results when an economy experiences high unemployment and high inflation at the same time. Reflation Stagflation Deflation Recession

Stagflation

According to the Keynesian framework, ________________________ may cause a recession, but not inflation. a decrease in a major trading partners export prices an increase in domestic investment a decrease in interest rates a major trading partner's economic slowdown

a major trading partner's economic slowdown

According to the Keynesian framework, which of the following may help a country reduce inflation, but will not help that country to get out of a recession? a decrease in the tax rate on consumer income increased spending by the government on health care an increase in military spending an increase in taxes on business investments

an increase in taxes on business investments

Bank A has reserves held with the FED. If the bank withdraws reserves from the FED where the interest rate was 2.5% and loans the funds to another bank for 3.0% instead, we would say that the bank has engaged in lost profits. arbitrage. advantage behavior. illegal activity.

arbitrage.

A ______________________ is created each time the federal government spends more than it collects in taxes in a given year. budget deficit regressive tax budget surplus corporate tax

budget deficit

If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a decrease in payroll tax. budget deficit. budget surplus. decrease in proportional taxes.

budget surplus.

Cyclical unemployment arises when the agriculture sector completes the cycle of planting, cultivating, and harvesting the nation's food supply. the business cycle enters an expansionary phase. business activity in the macroeconomy declines. labor unions strike for higher wages.

business activity in the macroeconomy declines.

The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ______________. seasons. business cycle labor supply natural rate of unemployment

business cycle

The marginal propensity to consume is the fraction of extra income that households consume rather than pay taxes on. pay taxes on rather than save. consume rather than save. save rather than consume.

consume rather than save.

A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes. contractionary discretionary expansionary standardized

contractionary

When the government passes a new law that explicitly changes overall tax or spending levels, it is enacting discretionary fiscal policy. non-discretionary fiscal policy. progressive fiscal policy. regressive fiscal policy.

discretionary fiscal policy.

Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing? financial policies fiscal policies monetary policies economic policies

fiscal policies

The development of a nationwide computerized job bank listing of all job openings would be most likely to reduce: seasonal unemployment. natural unemployment. frictional unemployment. cyclical unemployment.

frictional unemployment.

What term is used to describe the interest rate that is paid to banks on balances held on deposit at the FED? Prime rate IORB FFR Discount rate

IORB

During the Great Depression of the 1930s, the unemployment rate reached almost _________ of the labor force. 65% 25% 85% 15% 45%

25%

If the MPC = .75, the value of the expenditure multiplier is 1.33 .25 4 .75

4

The U.S. unemployment rate moves up and down as the economy moves in and out of recessions. But over time, the unemployment rate seems to return to a range of ____________. 2%-4% 6%-8% 8%-10% 4%-6%

4%-6%

Appleburg has a working-age population of 20 million. Of those, 11 million are employed and 1 million are unemployed. The unemployment rate is ________ and the labor force participation rate is __________. 8.3%; 55%. 5%; 60%. 5%; 55%. 8.3%; 60%. 9%; 60%. 9%; 55%.

8.3%; 60%.

_________________ refers to the total quantity of output firms will produce and sell at each price level. Say's Law Aggregate demand Aggregate supply Macroeconomic equilibrium

Aggregate supply

____________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate. Efficiency wage theory Equilibrium wage theory Employer wage theory Employee wage theory

Efficiency wage theory

The decision-making group that oversees the monetary policy of the U.S. is the Office of the Comptroller of the Currency Federal Open Market Committee Federal Deposit Insurance Corporation. Board of Governors

Federal Open Market Committee

______________________ occurs when the economy is producing at its potential and unemployment is at the natural rate of unemployment. The foreign price effect Stagflation The interest rate effect Full employment GDP

Full employment GDP

The central bank uses a ____________________ monetary policy to offset business related economic contractions and expansions. countercyclical competitive laissez faire contractionary

countercyclical

When the economy of a country is operating close to its full capacity cyclical unemployment is close to zero. unemployment is close to zero. the unemployment rate is less than the natural rate of unemployment. the unemployment rate is greater than the natural rate of unemployment.

cyclical unemployment is close to zero.

A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as: frictionally unemployed. cyclically unemployed. underemployed. naturally unemployed.

cyclically unemployed.

When prices in an economy become sufficiently high and production exceeds potential GDP, the resulting downward slope in aggregate supply curve will be short run. lower prices will lead to a lower quantity of demand. hyper-intense production will be unsustainable in the long run. higher wages will encourage workers to produce more at high prices.

hyper-intense production will be unsustainable in the long run.

Angela chooses to go to college full time rather than to work. Angela is considered employed. is not part of the labor force. is part of the labor force, but not actively seeking work. is part of the labor force and what economists call a discouraged worker.

is not part of the labor force.

In the AD/AS model, the LRAS curve shifting to the right illustrates higher inflation. increasing unemployment. long-run economic growth. short-run economic growth.

long-run economic growth.

A reservation rate is the ___________ that banks are willing to accept for loaning out their funds. lowest rate average fixed rate highest rate rate reserved in advance

lowest rate

Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment statistics, he is considered employed in the underground economy. unemployed. not in the labor force. underemployed.

not in the labor force.

In the Keynesian zone of the aggregate supply curve, macroeconomic policy intended to influence aggregate demand will be largely ineffective. macroeconomic policy will be needed to address rising inflation. policy directed at influencing aggregate demand will be most effective. equilibrium in the economy will be at a level of output above full employment.

policy directed at influencing aggregate demand will be most effective.

Given existing inputs, markets, and legal institutions, what term is used to describe the maximum quantity that an economy can produce in the AD/AS model? GDP deflator nominal GDP aggregate supply aggregate demand potential GDP

potential GDP

The term "full employment GDP" is synonymous with which of the following? potential GDP Keynesian zone aggregate GDP macroeconomic equilibrium

potential GDP

Potential GDP in the U.S. will be NOT be affected by ____________________. the current level of technology government institutions the amount of capital available the current unemployment rate

the current unemployment rate

If the economy is in recession with high unemployment and output below potential GDP, then the FED would increase unemployment compensation for workers seeking employment. the FED would hold steady with the interest rate range not wanting to increase or decrease it. the FED would lower the target interest rate range. the FED would increase the target interest rate range.

the FED would lower the target interest rate range.

The organization responsible for conducting monetary policy and ensuring a nation's financial system operates smoothly is known as the central bank. the treasury office. the office of the president or head of state. the ruling legislative body.

the central bank.

The most significant real economic cost of high unemployment is the money cost of unemployment insurance payments to the unemployed. the money cost of retraining persons to obtain new jobs. the potential goods and services that might have been produced but weren't. the lost tax revenue that might have been paid by persons if they had worked.

the potential goods and services that might have been produced but weren't.

If you work part-time when you would like to work full time, or have a full-time job that doesn't utilize all your skills and talents, then you are counted as a discouraged worker. structurally unemployed. underemployed. frictionally unemployed

underemployed.

Unemployment Rate Measures

unemployed workers as a percentage of the labor force.

Gomer loses his job as a road construction worker and cannot find another position with equivalent pay and benefits. As a result, he is still checking the want ads and reporting to the unemployment office on a weekly basis. He is considered to be: laid off. unemployed. not in the labor force. underemployed.

unemployed.

Frictional unemployment is unemployment that is due to normal turnover in the labor market. unemployment caused by lack of training and education. unemployment that is due to the friction of competing ideological systems. unemployment caused by automation in the workplace.

unemployment that is due to normal turnover in the labor market.

Say's Law argues that a given ____________________ must create an equivalent ________________________ somewhere else in the economy. potential GDP; value of supply natural rate of unemployment; full employment GDP total quantity of goods; price level for output value of supply; value of demand

value of supply; value of demand