Macro Final
Assume the reserve ratio for all banks is 12.5 percent. If the Fed provides banks with $2,000 of additional reserves, then the money supply will increase by
$16,000
A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute
$250 to GDP
GDP = $5 trillion; consumption = $3.1 trillion; government purchases = $0.7 trillion; and taxes = $0.9 trillion. Refer to the above Scenario. For this economy, public saving is equal to (budget _ of)
0.2 trillion, surplus of 0.2 trillion
money multiplier formula
1 / required reserve ratio
GDP = $5 trillion; consumption = $3.1 trillion; government purchases = $0.7 trillion; and taxes = $0.9 trillion. Refer to the above Scenario. For this economy, private saving is equal to
1 trillion
GDP = $5 trillion; consumption = $3.1 trillion; government purchases = $0.7 trillion; and taxes = $0.9 trillion. Refer to the above Scenario. For this economy, investment amounts to
1.2 trillion
GDP = $5 trillion; consumption = $3.1 trillion; government purchases = $0.7 trillion; and taxes = $0.9 trillion. Refer to the above Scenario. For this economy, national saving is equal to
1.2 trillion
CPI Equation
100 (Basket in current prices/basket in nominal prices)
GDP deflator equaiton
100x (Nominal GDP / Real GDP)
If real GDP is $14 trillion dollars and nominal GDP is $16 trillion what is the GDP deflator?
100x(16 trillion/14 trillion)
Based on the quantity equation, if M = 150, V = 4, and Y = 300, then P =
2
Hit-It produces 320 baseball bats per day using 2 workers who each work 8 hours per day. What is HitIt's productivity?
20 baseball bats per labor hour
In the economy of Talikastan in 2015, consumption was $6000, exports were $1000, GDP was $10,000, government purchases were $1800, and imports were $1200. What was Talikastan's investment in 2015?
2400
If the reserve ratio is 4 percent, then the money multiplier is
25
If the real interest rate is 1% and the inflation rate is 2%, then the nominal interest rate is
3%
Assume the MPC is 0.72. The multiplier is
3.57
If the real interest rate is 3% and the nominal interest rate is 7%, then the inflation rate is
4%
If the nominal interest rate is 8% and the inflation rate is 3%, then the real interest rate is
5%
In an economy, the frictional unemployment rate is 3% and the structural unemployment rate is 2%, then the natural rate of unemployment is
5%
In June 2009 the Bureau of Labor Statistics reported an adult population of 234.9 million, unemployment of 12.4 million, and employment of 141.6 million. Based on these numbers the labor-force participation rate was
65.5%
In June 2009 the Bureau of Labor Statistics reported an adult population of 234.9 million, a labor force of 154 million and employment of 141.6 million. Based on these numbers the unemployment rate was
8%
Refer to Optimism. Which curve shifts and in which direction?
Aggregate demand shifts right
Purchasing power equation
Amount in today's dollars = amount in year T dollars x (Price level today/price level in year T)
Refer to Optimism. In the short run what happens to the price level and real GDP?
Both price level and real GDP rise
When the consumer price index (CPI) falls, the typical family
Can spend fewer dollars to maintain the same standard of living
What best reflects a country's change in total real output?
Change in Real GDP
To decrease money supply, the Fed could A Buy government bonds or lower discount rate B Sell government bonds or lower the reserve requirement C Increase the discount rate or lower the interest rate on bank deposits at the Fed D Increase the reserve requirement or increase the discount rate
D
The interest rate at which banks lend reserves to each other overnight is called
Federal Funds Rate
Private saving
Income - taxes - consumption
Quantity equation
M x V = P x Y
In which of the following cases does the aggregate-demand curve shift to the right? 1) The price level rises, causing the interest rate to fall. 2) The price level falls, causing the interest rate to fall. 3) The money supply increases, causing the interest rate to fall. 4) The money supply decreases, causing the interest rate to fall.
Money supply increases, causing the interest rate to fall
Real interest rate equation
Nominal interest rate - inflation rate
National saving
Private saving plus public saving
Public saving
Taxes - government spending
What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?
There would be an increase in the amount of loanable funds borrowed
If a US citizen buys a dress made in Napal by a Nepalese firm,
US concumtion increases, US net export decreases, US GDP is unaffected
Recessions in Canada and Mexico (in the short run) would cause
US price level and real GDP to fall
The money supply is 4,000, nominal GDP is 8,000, and real GDP is 2,000. Which of the following is 2? the price level and velocity. the price level but not velocity. velocity but not the price level. neither the price level nor velocity.
Velocity but not the price level
CPI is a measure of the overall cost of the goods and services bought by
a typical consumer
Which of the following would cause prices and real GDP to rise in the short run? short-run aggregate supply curve shifts right short-run aggregate supply curve shifts left aggregate demand curve shifts right aggregate demand curve shifts left
aggregate demand curve shifts right
From 1995 to 1999 there was a dramatic rise in stock prices. If this rise made people feel wealthier, then it would have shifted
aggregate demand curve to the right
Which of the following helps to reduce frictional unemployment? government-run employment agencies that provide information on job vacancies public training programs the Internet
all of the above
Which of the following is correct? 1) A higher price level shifts money demand rightward. 2) When money demand shifts rightward, the interest rate rises. 3) A higher interest rate reduces the quantity of goods and services demanded.
all of the above
Which of the following events shifts aggregate demand rightward? 1) an increase in government expenditures or a decrease in the price level 2) a decrease in government expenditures or an increase in the price level 3) an increase in government expenditures, but not a change in the price level 4) a decrease in the price level, but not an increase in government expenditures
an increase in government expenditures, but not a change in price level
In a system of 100-percent-reserve banking,
banks don't influence the money supply
Which of the following shifts the long-run aggregate supply curve to the right? both an increase in the capital stock and technological improvements an increase in the capital stock but not technological improvements an increase in the capital stock but not technological improvements neither an increase in the capital stock nor technological improvements
both an increase of capital stock and technological improvements
If the reserve requirement is 5 percent, a bank receives a new deposit of $10, then this bank
can make new loans up to a maximum of $9.50
Real GDP is the yearly production of final goods and services valued at
constant prices
Nominal GDP is the yearly production of final goods and services valued at
current prices
Which of the following government policies can potential promote economic growth? Provide debt-free college education Increase corporate income tax rate Cut investment in infrastructure
debt-free college education
Which of the following shifts short-run aggregate supply right? an increase in the price level an increase in the minimum wage a decrease in the expected price level a decrease in the capital stock
decrease in expected price level
To increase the money supply, the Fed could
decrease the discount rate
If government had an increase in budget deficit, the level of private investment in the economy would
fall
During periods of expansion, automatic stabilizers cause government expenditures to _ and taxes to _
fall, rise
During a recession the economy experiences
falling employment and income
If policymakers decrease aggregate demand, then in the short run the price level _ and unemployment _
falls, rises
Sometimes during wars, government expenditures are larger than normal. To reduce the effects this spending creates on interest rates,
federal reserve could increase the money supply buy buying bonds
According to liquidity preference theory, the money-supply curve would shift rightward
if the federal reserve chose to increase the money supply
Which of the following shifts short-run aggregate supply right? an increase in either technology or the human capital stock. an increase in human capital but not technology. an increase in technology, but not the human capital stock. neither an increase in technology nor the human capital stock.
increase in either technology or the human capital stock
Suppose an increase in interest rates causes rising unemployment and falling output. To counter this, the Federal Reserve would
increase money supply
When income tax decreases, consumption _ so aggregate _ shifts _
increases, so aggregate demand curve shifts right
When the overall level of price in the economy is increasing, economists say that the economy is experiencing
inflation
Other things the same, a country that increases its saving rate increases
its future productivity and future real GDP
Which of the following is an example of human capital? textbooks hand held power tools knowing how to repair cars
knowing how to repair cars
Which answer is not a way to promote economic growth? Providing good nutrition Minimum wage increase Funding research
minimum wage increase
If the Fed sells government bonds to the public, then
money supply decreases
During recessions, automatic stabilizers tend to make the government's budget
move toward deficit
If the reserve requirement is 10%, then a bank's reserve ratio should be
no less than 10%
What plays a role in determining productivity?
physical capital, natural resources, technological knowlege
Refer to Optimism. How is the new long-run equilibrium different from the original one?
price level is higher, GDP is the same.
Which of the following sequences best explains the negative slope of the aggregate-demand curve? Question options: price level ↑ ⇒ demand for money ↓ ⇒ equilibrium interest rate ↑ ⇒ quantity of goods and services demanded ↓ price level ↑ ⇒ demand for money ↑ ⇒ equilibrium interest rate ↓ ⇒ quantity of goods and services demanded ↓ price level ↓ ⇒ demand for money ↓ ⇒ equilibrium interest rate ↓ ⇒ quantity of goods and services demanded ↑ price level ↓ ⇒ equilibrium interest rate ↓ ⇒ demand for money ↑ ⇒ quantity of goods and services demanded ↑
price level ↓ ⇒ demand for money ↓ ⇒ equilibrium interest rate ↓ ⇒ quantity of goods and services demanded ↑
If there is a shortage of loanable funds, then
quantity demanded is greater than the quantity supplied and the interest rate
In the model of loanable funds, at the equilibrium level of interest rate,
quantity of loanable funds demanded equals the quantity of loanable funds
If Congress increases taxes to balance the federal budget, then to prevent unemployment and a recession the Fed will
reduce interest rates by increasing the money supply
In a fractional-reserve banking system, a bank
reserve ration is less than 100%
If policymakers expand aggregate demand, then in the long run prices will _ and unemployment _
rise, be unchanged
If Congress instituted an investment tax credit, the interest rate would _ and saving would _
rise, rise
The value of money falls as the price level _ beause the number of dollars needed to buy a representative basket of goods _
rises, , because the number of dollars needed to buy a representative basket of goods rises.
If the central bank increases the money supply, then in the short run prices _ and unemployment_
rises, falls
Refer to Optimism. In the long run, the change in price expectations created by optimism shifts
short-run aggregate supply left
Cyclical unemployment is closely associated with
short-run ups and downs (business cycle) of the economy.
Minimum-wage laws, unions, and efficiency wages keep wages above equilibrium level and cause a _, which results in _ unemployment
surplus of labor, which results in structural unemployment.
Which of the following is an example of physical capital? the computer a secretary uses rivers on which goods are transported the skills and knowledge of a doctor
the computer a secretary uses
Which of the following tends to make the size of a shift in aggregate demand resulting from an increase in government purchases smaller than it otherwise would be? 1) the multiplier effect 2) the crowding-out effect 3) the accelerator effect 4) All of the above are correct.
the crowding-out effect
Using the liquidity-preference model, when the Federal Reserve decreases the money supply,
the equilibrium interest rate increases
Which of the following tends to make aggregate demand shift further to the right than the amount by which government expenditures increase? 1) the crowding-out effect 2) the multiplier effect 3) the exchange-rate effect 4) the interest-rate effect
the multiplier effect
Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then
the nominal interest rate rises, but the real interest rate does not
A nation's standard of living is determined by
the productivity of its workers
A change in expected inflation shifts
the short-run Phillips curve but not the long-run Phillips curve
According to the principle of monetary neutrality, an increase in the money supply will not change nominal GDP. the price level. unemployment.
unemployment
