Macro Exam 1-4 Questions
unemployment =
# of employed people/ labor force
Suppose a customer's WTP for a product is $5, and the seller's WTS is $2. If the negotiated price is $3, how much is the producer surplus?
$1
If you were not studyikng economics, you could be doing one of the following: sleeping in (which you value at $5), playing cards with your friends (which you value at $10), or working ( you would have earned an extra $8). The opportunity cost of studying economics is therefore:
$10
A bank has a reserve requirement of 15%. The bank currently has $1000 in bank vaults, $4000 in deposits at the Federal Reserve and $25000 in deposits. The bank has how many excess reserves?
$1250
If the MPC to consume is .75, by how much will government spending increase GDP?
$2,000
If Germany decided to produce skirts, what's Germany's opportunity cost? Sweaters Skirts Germany 6 12 Greece 4 20
.5 of a sweater
Suppose a market basket of goods costs $10,000 in 2009, the base period, and the same basket of goods now costs $11,200. What is the CPI for the current period?
11,200/ 10,000= 112.0
Last year the CPI was 115 while the CPI for this year is 125. The rate of inflation is?
115-125= -10/115= 8.7%
Nominal GDP in 2006 was $13458.2 billion. in 2006, the GDP deflator was 116.9. What was the real GDP for 2006 if the GDP deflator uses 2000 as the base year?
13458.2 / 1.169 = $11,512.6 billion
If the marginal propensity to consume is .6, then the multiplier is:
2.5
Mandatory spendign comprises nearly ____ of the federal budget
2/3
Unemployment rate is: Population 210 Military 30 employed 100 unemployed seeking work 30 discouraged workers 20 unpaid family members 10 retired 20
21.43%
the money multiplier is 4. What is the reserve requirement?
25%
If the reserve requirement is 20% and the new deposit of $400 leads to a potential increase in the money supply of
400/ .2 = $2000
Suppose that a bond has a face value (par value) of $1000 and a coupon rate of 10%. If the bond sells at a price of $2000, what is the yield?
5%
If disposable income is $5,000 and saving is $1,800, how much is consumption?
5,000-1,800= 3,200
If a person borrows $5000 at 10% interest and never makes any payment, how much will the loan balance be after 2 years?
6050
If an economy's GDP will double in 40 years, then its growth rate must be about
70 (always use 70)/ 40= 1.75%
If the growth rate in an economy is 10% then its GDP will double in about
70*.10= 7 years
Which of these would be MOST likely to cause the PPF to shift to the left? -a decrease in taxes -an increase in population -an advancement in technology -a decrease in the size of the labor force
A decrease in the size of the labor force
In the Keynesian Macroeconomic equilibrium:
AE=y and S=I
which of the following events cause a decrease in aggregate demand? a. improving consumer confidence b. increase in interest rates c. increasing government spending d. decrease in taxes
B
What's an explanation for aggregate demand curve to shift left? a. interest rates fall and boost investments b. government spending rises c. consumer confidence declines and consumption spending falls d. prices rise and reduce real wealth
C
which of the following is most liquid? a. house b. US treasury bond c. money in a checking account d. money in a savings account
C
Chris places $1000 from his savings account into his checking account at the same bank. Which is true? a. M1 is unchanged but M2 went down by $1000 b. M1 and M2 were reduced by $1000 c. M1 rose by $1000 and M2 fell by $1000 d. M2 is unchanged but M1 increases by $1000
D
The 12 federal reserve banks and their branches do all of the following except: a. distribute coins and currency b. serve as a banker for the US treasury c. regulate and supervise member banks d. accept deposits from US citizens
D
Which of the following statements is true? a. economic growth makes everyone better off. b. economic growth always leads to a more equitable distribution of income c. all countries have experienced positive economic growth over the past 200 years d. economic growth leads to increased consumption of goods and services
D
Which interest rate is the rate at which banks charge each other overnight loans?
Federal funds rate
If a country's population increases at a slower rate than the growth in its real GDP
GDP per capita has increased
Dave brags to his dad this his $45,000 starting salary as a computer programmer is much higher than his dad's $28,000 starting salary some years ago. If the CPI the year Dave begins work is 180.5 while the CPI the year his dad started work was 110.8, Dave is:
Incorrect; adjusting for price changes his salary is less than his dad's salary
An institution that enables buyers and sellers to interact and transact with each other is known as a(n):
Market
The expenditure category that accounts for the largest share of GDP is:
Personal consumption and expenditures
When production technology improves, supply increases and the equilibrium:
Q rises and the equilibrium P falls
Economic growth is most accurately measured using:
Real GDP per capita
The law of demand states:
The lower a products price, the more of that product consumers will purchase during a given period
The ______ shows the combination of two goods that are possible for a society to produce at full employment.
The productions possibilities frontier
Disposable income is equal to
Y-T
Scarcity refers to the fact that
a person must make choices given the resource limitations he or she faces
A PPF with constant opportunity costs is:
a straight line
If the government collects $3,400 in tax revenue and spends $2,600 it has:
a surplus if $800
A surplus is:
above equilibrium
If one country has a(n) _______ advantage in the production of one item, it can always produce more of the same item than another nation, given the same resources.
absolute
Marginal analysis would put an emphasis on:
additional costs and benefits
According to the textbook, what brought the US out of the Great Depression?
an increase in spending on WWII
Retirees and creditors:
are hurt by inflation because their purchasing power is reduced
When the supply curve shifts out (to the right) and the demand curve shifts in (to the left) the equilibrium Q will:
be indeterminate
Suppose the equil P for a gallon of milk is $2.50 but due to government price supports, the minimum legal is $2.75 per gallon. This price floor:
causes a surplus of milk in the market
MPC =
change in consumption/ change in income
What impact will a rising price level have on real GDP?
changes in the price level do not impact real GDP
GDP =
consumption + Investment + government spending + (exports- imports)
The best discretionary fiscal policy option is:
contradictory fiscal policy that leads to full employment
____ inflation occurs when a supply shock reduces aggregate supply .
cost-push
____ unemployment is the result of changes in the business cycle:
cyclical
A(n) ___ in market power and a(n) ___ in regulations will shift the short run aggregate supply curve to the right
decrease; decrease
Which scenario is the MOST likely to effect of an increase in the price of flashlights on the market for batters? -increased equilibrium P and increased equilibrium Q -Decreased equilibrium P and increased equilibrium Q -Decreased equilibrium P and decreased equilibrium Q -increased equilibrium P and decreased equilibrium Q
decreased equilibrium P and decreased equilibrium Q
in the US people are considered unemployed if they:
do not have a job but are available for work and have been actively seeing work
Wages set high to discourage employee turnover are called ___ wages
efficiency
In a simple circular flow diagram, total spending on goods and services in the product market:
equals the total income earned in the resource market
Net exports equal:
exports - imports
If the Fed reduces the supply of money in the market, bod prices will ____ and interest rates will ____
fall; rise
The US GDP is equal to the total market value of all:
final goods and services produced by resources in the US
In the Keynesian model, the price level is ___; in the aggregate demand and supply model, the price level is ___.
fixed; flexible
Natural rate of unemployment =
frictional + structural
Jennifer did not work during college. She obtained a degree in marketing and is now looking for a job. Jennifer is considered:
frictionally unemployed
Inflation is a:
general rise in prices
liquidity refers to
how quickly, easily and reliably an asset can be converted into a medium of exchange
As income increases, consumption ____
increases at a slower rate
What is a source of positive productivity growth?
increasing the quality of labor
Largest source of federal government revenues is
individual income taxes
Points that are obtainable but NOT efficient are:
inside the curve
Which pair does not relate: Entrepreneurial ability- profit labor-wages capital- interest land-revenue
land - revenue
When government spending decreases, the aggregate demand curve shifts to the ___ and the multiplier effect is dampened by a ___ in the aggregate price level
left; fall
The capital to labor ratio is:
low is poor countries
Corporate bonds generally have a ____ ROI than do stocks because bonds are ____
lower; less risky.
Producer surplus is the difference between the:
market price and the minimum price the seller is willing to accept
What is considered a land resource?
mineral deposits
On a graph short run economic growth:
moves points outward
on a graph, long run economic growth:
moves the entire curve outward
Which of the following is a tool of monetary policy?
open market operations
The high point of a business cycle is called the:
peak
The resource known as "labor" includes:
physical and mental skills and talents
A(n) ______ is the minimum legal price that can be charged for a product.
price floor
Production efficiency occurs when goods are:
produced with the lowest possible resource cost
Suppose that the price of a good is $650 and the equilibrium price is $675. Compared to the market equilibrium:
producer surplus is decreased and the DWL is increased
Other factors held constant, as the price of an iPad rises, the:
quantity demanded for iPads falls
___ government spending ___ transfer payments and ____ are all examples of expansionary fiscal policy
raising; increasing; reducing
The ___ lag is the time it takes for policymakers to confirm that the economy is trending in or out of a recession
recognition
A shift to the ____ of the ___ curve will cause the price level and employment to increase
right; aggregate demand
If oil prices fall, the SR aggregate supply curve will shift to the ___ and the price level will shift ___
right; down
If investment increases from $500 billion to $600 billion and the MPC is .75 then equilibrium income will:
rise by $400 billion
The supply curve for loanable funds represents ___ and is ___
savers; upward sloping
Economic growth is shown as a:
shift to the right of the long run aggregate supply curve
Which paid MOST likely includes substitute goods? -hot dogs and mustard -ramen noodles and water -pizza and chicken wings -soft drinks and lemonade
soft drinks and lemonade
Which of the following is not considered an automatic stabilizer
spending on research and development
If TV sellers expect the prices of TVs to fall in the future we are likely to see the:
supply of TVs increasse
the basic idea of opportunity cost is that:
the decision to use resources in one activity means that the resources cannot be used elsewhere
A good is a normal good if:
the demand curve shifts outward if income increases
If one person consumes a public good:
the others cannot be excluded from enjoying it
According to the law of supply, producers will supply more of their products when:
the price rises
Flu vaccinations provide external benefits. Thus:
too few flu vaccinations are given
Normative questions involve societal beliefs on what should or should not be done: true or false?
true
Production levels to the right of the PPF are:
unattainable
What are the primary functions of money?
unit of account, medium of exchange and store of value
The ___ effect is the reason for the negative slope of the aggregate demand curve
wealth
Microeconomics is concerned with issues such as: unemployment interest rates which job to take inflation
which job to take
