Macro Final

1. Which of the following statements is normative?

High taxes tend to decrease saving

1. An increase in interest rates by the Federal Reserve is an example of ___ policy.

Monetary

1. Unemployment typically ___ during a recession.

Rises

1. Bank C promises to pay a compound annual interest rate of 6 percent, while Bank S pays an 8 percent simple annual interest rate on deposits. If you deposit $1,000 in each bank, after 10 years, your deposit in Bank C equals ___, while your deposit in Bank S equals ___.

a. $1,600; $1,800

1. Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process: Names of Company Revenues Cost of Purchased Inputs Citrus Growers Inc. $0.75 0 Florida Jam Company $2.00 $0.75 The Corner Store $2.50 $2.00 What is the value added of Florida Jam Company?

a. $1.25

1. Assume an economy produces only footballs and baseballs and the base year is 2016. Quantities Produced Prices Football 200 300 $20 $3.00 Baseball 500 600 $10 $1.50 Given the data in the table above, what is the value of real GDP in 2017?

a. $10,000

1. Jordan has the following liabilities: Two cars $10,000 House $200,000 Mortgage $100,000 Cash $1,000 Car loans $3,000 Checking account balance $2,000 Credit card balance $1,000 What is Jordan's wealth?

a. $109,000

1. The CPI equals 1.00 in year one and 1.15 in year two. If the nominal wage is $15 in year one and a contract calls for the wage to be indexed to the CPI, what will be the nominal wage in year two?

a. $17.25

1. If the Citrus Growers Association grows $1 million worth of oranges, sells $500,000 worth of oranges to consumers, uses the rest to make orange juice that is sold to consumers for $3 million, Citrus Grower's contribution to GDP is:

a. $3,500,000

1. In Macroland there is $10,000,000 in currency. The public holds half of the currency and banks hold the rest as reserves. If banks' desired reserve/deposit ratio is 10 percent, deposits in Macroland equal ___ and the money supply equals ___.

a. $50,000,000; $60,000,000

1. Supposed that the total production of an economy consists of 4 oranges and 10 candy bars, each orange sells for $0.25, and each candy bar sells for $0.50. What is the market value of production in this economy?

a. $6.00

1. The CPI in 1931 equaled 0.15. The CPI in 1932 equaled 0.14. The rate of inflation between 1931 and 1932 was ___ percent.

a. -6.7

Supposed that the total expenditures for a typical household in 2015 equaled $2,500 per month, while the cost of purchasing exactly the same items in 2017 was $3,000. If 2015 is the base year, the CPI for 2017 equals

a. 1.20

1. The consumer price index for Plant Econ consists of only two items: books and hamburgers. In 2015, the base year, the typical consumer purchased 10 books for $25 each and 25 hamburgers for $2 each. In 2017, the typical consumer purchased 15 books for $30 each and 30 hamburgers for $3 each. The consumer price index for 2017 on Planet Econ equals:

a. 1.45

1. If the real interest rate is 3 percent and the inflation rate is 7 percent, then the nominal interest rate equals:

a. 10 percent

1. The following table provides information about production at the XYZ-TV Company. Number of Workers TVs Produced Marginal Product Value of Marginal Product 0 0 --- --- 1 35 35 $35,000 2 68 33 $33,000 3 99 31 $31,000 4 128 29 $29,000 5 155 27 $27,000 How many workers will XYZ-TV Company hire if the going wage for TV production workers is $32,000?

a. 2

1. If real GDP equals 5,000, nominal GDP equals 10,000, and the price level equals 2, then what is velocity if the money stock equals 2,000?

a. 2.5

1. Suppose the following information describes the economy: GDP 2,000 Consumption 1,500 Government spending 300 Net taxes 40 Private saving equals ___; public saving equals ___; national saving equals ___.

a. 200; 100; 300

1. Based on the figure, if a union contract requires that workers be paid $25 per hour, there will be ___ unemployed workers.

a. 31

1. High Tech, Inc. produces plastic chairs that sell for $10 each. The following table provides information about how many plastic chairs can be produced per hour. Number of Workers Chairs Produced Per Hour 0 0 1 10 2 18 3 24 4 28 5 30 For simplicity, assume that labor is the only input. How many workers will be hired if the hourly wage for workers is $30?

a. 4

1. In a country with 200 million people aged 16 years and older, 120 million are in the labor force and 114 million are employed, what is the unemployment rate?

a. 5 percent

1. In Macroland, currency held by the public is 2,000 econs, bank reserves are 300 econs, and the desired reserve/deposit ratio is 10 percent. If the Central Bank prints an additional 200 econs and uses this new currency to buy government bonds from the public, the money supply in Macroland will increase from ___ econs to ___ econs, assuming that the public does not wish to change the amount of currency it holds.

a. 5,000; 7,000

1. Given the following data for the economy, compute the value of GDP Government purchases of goods and services 10 Consumption of Expenditures 70 Exports 5 Imports 12 Change in inventories -7 Construction of new homes and apartments 15 Sales of existing homes and apartments 22 Government payments to retirees 17 Business fixed investment 9

a. 83

1. The consumer price index measures the cost of:

a. A fixed basket of goods and services

1. When your grandfather keeps a bundle of $100 bills behind a brick in the basement, this is an example of dollars serving as:

a. A store of value

Saving done for the purpose of leaving an inheritance is called ___ saving.

a. Bequest

1. In Econland exports equal 15 percent of total output, while imports equal 20 percent of total output. Econland has a:

a. Budget deficit

1. In an open-market purchase the Federal Reserve ___ government bonds from the public and the supply of bank reserves ___.

a. Buys; increases

The payment of interest not only on the original deposit, but on all previously accumulated interest is called:

a. Compound interest

1. In the base year, real GDP ___ nominal GDP.

a. Could be greater than or less than

1. Assume that the share of population employed in all countries is 50 percent. Based on the information in the table, which country has the highest real GDP per person? Country Population (millions) Average Labor Productivity ($) A 100 2,000 B 150 10,000 C 75 25,000 D 250 50,000 E 95 60,000

a. Country E

1. Holding other factors constant, if computers allow factory workers to manufacture more products per hour, then the real wages of factory workers will ___ and employment of factory workers will ___.

a. Decrease; not change

1. When a worker learns how to use a new business-related software program, this is an example of investing in:

a. Human capital

1. Holding other factors constant, if new technology becomes available that allows machines to produce manufactured goods more quickly and with fewer defects, then the real interest rate will ___ and the equilibrium quantity of national saving and investment will ___.

a. Increase; decrease

1. If the price of motel rooms increases by 10 percent while the prices of other goods and services increase by 5 percent on average, the relative price of motel rooms has:

a. Increased

1. The value of unpaid work by a homemaker ___ included in GDP and the value of housekeeping services sold in a market ___ included in GDP.

a. Is not; is

1. When a government moves from a centrally planned economy to a market economy, this is an example of ___ policy.

a. Monetary

1. Which of the following is correct?

a. National saving equals private saving plus public saving

1. The standard living in an economy is best measured by:

a. Output per person

1. Which of the following is an example of the life-cycle motive for saving?

a. Pat puts $400 per month in his 401k retirement account

1. The wage paid to workers measured in terms of real purchasing power is called the:

a. Real wage

1. In the long run, countries with higher rates of money growth usually have:

a. Smaller budget deficits

1. The value of output was $1,000 billion in Northland and $2,000 billion in Southland. The population of Northland was 50 million and the population of Southland was 120 million. There were 30 million employed workers in Northland and 75 million employed workers in Southland. Average labor productivity was higher in ___ and the standard living was ___.

a. Southland; higher in Southland

1. If average labor productivity in two countries is the same, average living standards will be lower in the country with:

a. The larger population

1. The demand for labor depends on ___ and ___.

a. The marginal product of labor; the price of output produced

1. Long-run increases in living standards, as measured by real GDP per person, are primarily the result of increases in:

a. The money supply

1. If Country A and Country B have the same population size, then the standard of living in these two countries can still be different depending on:

a. The relative sizes of total output

1. Real GDP per person equals average labor productivity:

a. Times one minus the unemployment rate

1. ___ is/are the market value of final goods and services produced within a country during a given period of time.

a. Value added

1. The marginal product of labor is the additional:

a. Wage paid for an additional worker employed