Macro UNL
If the marginal propensity to consume is 0.75, by how much will $250 of government spending increase GDP?
$1000 (1/(1-0.75)) = 4; 4x$250= $1000
A bank has a reserve requirement of 15%. The bank currently has $1,000 in bank vaults, $4,000 in deposits at the Federal Reserve, and $25,000 in deposits. The bank has how many excess reserves?
$1250 (25000x0.15=3750) 5000-3750= $1250
If an economy's GDP will double in 17.5 years, then its growth rate must be about
4% (70/4=17.5)
Normative questions involve societal beliefs on what should or should not be done.
True
Wages set high to discourage employee turnover are called:
Turnover minimization wages
Which of the following statements is true?
Economic growth leads to increased consumption of goods and services.
How to calculate GDP
GDP = C(consumption) + I(private investment) + G(gov purchases) +NX(exports-imports)
Inflation is a:
General Rise in Prices
Chris places $1,000 from his savings account into his checking account at the same bank. Which is true?
M2 is unchanged, but M1 increases by $1000
Physical capital includes
Manufactured products that are used to produce other goods and services.
Which phase of the business cycle occurs immediately after a recovery?
Peak
The expenditure category that accounts for the largest share of GDP is:
Personal consumption expenditures
Economic growth is most accurately measured using
Real GDP per capita
_____ unemployment is caused by changes in consumer demands or technology.
Structural
How to find a reserve ratio
Vault Cash and Fed deposits/Total deposits
The _______ effect is a reason for the negative slope of the aggregate demand curve.
Wealth
Average Propensity to Consume
What is spent divided by total earnings
A $20 minimum fare in a market for taxi service is an example of:
a price floot
What is considered a labor resource?
a trainee
The 12 Federal Reserve banks and their branches do all of the following EXCEPT:
accept deposits from U.S. citizens
Which event will cause an increase in the supply of yogurt?
an increase in the number of sellers in the yogurt market
Retirees and creditors:
are hurt by inflation because their purchasing power is reduced
Suppose the equilibrium price for a gallon of milk is $2.50, but due to government price supports, the minimum legal price is $2.75 per gallon. This price floor:
causes a surplus of milk in the market
The mortgage crisis caused a lot of consumers to stop spending money. The decrease in spending led to a decrease in production. Which type of unemployment resulted?
cyclical
Legislators debate for six months on which spending programs to utilize to manipulate the business cycle. This is an example of the
decision lag
If the Fed reduces the supply of money in the market, bond prices will ______ and interest rates will ________.
fall; rise
In the Keynesian model, the price level is _______; in the aggregate demand and supply model, the price level is _______.
fixed; flexible
Consumer surplus is defined as the:
gap between the demand curve and the market price.
In the simple circular flow model:
income is equal to spending.
Which of the following events causes a decrease in aggregate demand?
increase in interest rates
Ceteris paribus, a decrease in the number of businesses selling pizza will cause a(n):
increase in the equilibrium price of pizza.
In the long-run, attempts to expand beyond an economy's natural rate of unemployment tend to result in
increase inflation
Gasoline is produced from crude oil. Ceteris paribus, if the supply of crude oil falls, the equilibrium price of gasoline will _____ and the equilibrium quantity will _____.
increase; decrease
The crowding-out effect can _____ interest rates, which _____ business investment.
increase; reduces
Corporate bonds generally have a _____ return on investment than do stocks because bonds are _____.
lower; less risky
An institution that enables buyers and sellers to interact and transact with one another is known as a(n):
market
Which of these would be considered a public good?
national defense
The _____ of parking at school includes the amount of time a person has to search for a parking space.
opportunity cost
Suppose that a customer's willingness to pay for a product is $1,480, and the seller's willingness to sell is $1,210. If the negotiated price is $1,479:
producer surplus is greater than consumer surplus.
Suppose that the economy is expanding. To reduce demand using discretionary fiscal policy, the government can
raise taxes or reduce government spending
If investment increases from $500 billion to $550 billion and the marginal propensity to consume is 2/3, then equilibrium income will
rise by $150 billion (1/(1-(2/3))=3) 50x3=150
Holding other expenditures constant, if imports fall by $20 billion and exports fall by $10 billion, then GDP:
rises by $10 billion
Janet is receiving a 5% pay raise. If the rate of inflation is 2%, then Janet's purchasing power is:
rising.
Which action will NOT shift a production possibilities frontier curve outward?
shifting preferences of consumers to cheaper products
A production function
shows the output that is produced using different combinations of inputs combined with existing technology
Suppose the government implements a policy increasing the rewards earned by savers. In this case, the _____ loanable funds shifts _____.
supply of; right
A good is a normal good if:
the demand curve shifts outward if income increases
Flu vaccination shots provide external benefits. Thus:
too few flu vaccination shots are given
Zach has been laid off from his job as an aircraft worker . He has been actively looking for a job but has had no luck for the past six weeks. According to the Bureau of Labor Statistics, Zach is:
unemployed
What are the primary functions of money?
unit of account, medium of exchange, store of value
The money multiplier is 3. What is the reserve requirement?
1/3
If the growth rate in an economy is 2%, then its GDP will double in about
35 years (70/2=35)
Which interest rate is the rate at which banks charge each other for overnight loans?
Federal Funds Rate
GDP Deflator calculation:
Nominal GDP/Real GDP
Which question is NOT an example involving marginal analysis?
Should K-Mart rebrand all its stores to using the Sears name?
Which of the following is a tool of monetary policy?
open market operations
The _____ is the sum of past _____.
public debt; budget deficits
A point to the right of the production possibilities frontier is:
unattainable
If disposable income is $4000 and saving is $1800, how much is consumption?
$2200
In the Keynesian Macroeconomic Equilibrium:
AE=Y and S=I
The real GDP that firms will produce at varying price levels is
aggregate supply
The production possibilities frontier shows:
all possible combinations of two goods an economy can produce, given its available factors of production and technology.
When the individuals who get a good or service are the ones who desire that product the most, the economy is experiencing:
allocative efficiency
Gross domestic product is a measure of:
an economy's total output.
If both the supply and the demand curves shift to the right:
equilibrium quantity increases and the effect on equilibrium price is indeterminate.
Consumption
is the largest component of total spending
The resource known as "labor" includes:
physical and mental skills and talents
The supply curve for loanable funds represents ______ and is ______.
savers; upward sloping
The opportunity cost of buying a ticket to a major league baseball game and then going to the game is:
the next best alternative that could have been undertaken.
According to the law of demand, people buy more of a good when:
the price falls
Consumer surplus is located in:
the top triangle of the graph
Scarcity is BEST defined as when:
unlimited wants exceed limited resources.
Economists refer to the payment to labor as:
wages
If a person borrows $5,000 at 8% interest and never makes any payment, how much will the loan balance be after two years?
$5832
GDP is $10 trillion in 2001. If the GDP deflator is 100 in 2000 and is 110 in 2001, what is real GDP?
$9.09 trillion
Suppose an economist breaks the unemployment rate into the following components: frictional (2%), structural (1%), and cyclical (4%). Based on these estimates, the natural rate of unemployment is:
3% (frictional and structural)
Marginal Propensity to consume
Change in Consumption/Change in Y
What impact will a rising price level have on real GDP?
Changes in the price level do not impact real GDP
A decrease in the incomes of the other countries will cause a(n) _______ in the ________ US-made products.
Decrease; aggregate demand for
Which factor would NOT change the demand for sea kayak tours?
a decrease in the price of a sea kayak tour
Which factor would cause a decrease in the demand for coffee?
a decrease in the price of tea (a substitute for coffee)
Most trade is based on specialization, according to:
comparative advantage
In the United States, people are considered unemployed if and when they:
do not have a job but are available for work and have been actively seeking work.
Which topic is MOST likely to be studied in a microeconomics course?
energy policy
The law of supply states that, if prices:
fall, producers will offer fewer products to the market.
Liquidity refers to
how quickly, easily, and reliably an asset can be converted into a medium of exchange
Which is a source of positive productivity growth?
increasing the quality of labor
The largest source of federal government revenues is:
individual income taxes
Suppose that the price of a good is $650 and equilibrium price is $675. Compared to market equilibrium:
producer surplus is decreased and deadweight loss is increased.
Economic growth is shown as a
shift to the right of the long-run aggregate supply curve
If a government collects $5400 in tax revenue and spends $5000, it has
surplus of $400
If you were not studying 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
If the reserve requirement is 40%, a new deposit of $400 leads to a potential increase in the money supply of
$1000
Suppose a market basket of goods costs $10,000 in 2009, the base period, and that same basket of goods now costs $11,200. What is the consumer price index for the current period?
112.0
If the marginal propensity to consume is 0.6, then the multiplier is
2.5 (multiplier effect - (1/(1-0.6) = 2.5)
Mandatory spending comprises nearly _____ of the federal budget.
2/3
Suppose that 10 cooks work 5 hours each to produce 1,000 hamburgers. What is the productivity of these cooks?
20 burgers per hour (1000/50=20)
Suppose that a bond has a face value (par value) of $1,000 and a coupon rate of 10%. If the bond sells at a price of $2,000 what is the yield?
5%
An economy has a population of 226,500, of whom 12,500 are unemployed and actively seeking work, and 35,000 have given up looking for a job. Also, 28,000 people work part-time, and 151,000 people work full-time. This economy's unemployment rate is _____.
6.5% because 35,000 people have given up looking for a job
Last year, the consumer price index (CPI) was 115 while the consumer price index for this year is 125. The rate of inflation is:
8.7%
______ inflation occurs when aggregate demand expands so much that equilibrium output exceeds full employment output and the price level rises.
Demand-pull