ECON 203 Final Exam - Assignment Essays

question

Macroeconomists study?

answer

Economy Wide phenomena

question

Which of the following statistics is the best single measure of an economy's well being?

answer

GDP

question

The 3 main concerns of Macro are?

answer

Inflation, Unemployment and output growth

question

According to the Classical Model, excessive unemployment

answer

could not persist because wages would fall to eliminate the excess supply of labor

question

According to the Keynesian model, excessive unemployment

answer

is caused by sticky wages that do not adjust as fast as prices.

question

Which of these is a quote by John Maynard Keyes

answer

We are all dead in the long run

question

Which of the following is counted in GDP?

answer

None of the above

question

Expenditures equal income because

answer

for every sale there is a buyer and a seller

question

Over the last few decades Americans have chosen to cook less at home and eat more at resturants. This change in behavior, by itself,

answer

increased measured in GDP

question

Darla, a Canadian citizen, only works in the US. The value added to production from her employment is

answer

included in US GDP, but not US GNP

question

Grapes are

answer

counted as an intermediate good only if they are used to produce another good like wine

question

A period during which aggregate output falls is known as a(n)

answer

recession

question

The single largest expenditure component in GDP is

answer

consumption

question

Using year 1 as the base year, what is real GDP in year 3

answer

$183.00

question

Using year 1 as the base year, the real GDP growth rate in year 3 was

answer

2.81%

question

Using year 1 as the base year, the GDP deflator in year 3 was

answer

115.85

question

Using year 1 as the base year, the rate of inflation in year 3 was

answer

6.05%

question

Which US gov agency estimates GDP

answer

BEA

question

US GNP is calculated from US GDP by

answer

including income earned by US citizens abroad and excluding income earned by foreigners in the US

question

Real GDP

answer

evaluates current production at the prices that prevailed in some specific year in the past

question

Which of the following statements about GDP is most accurate

answer

Nominal GDP values production at current prices, while real GDP values production at constant prices

question

When economists talk about growth in the economy, they measure that growth with the

answer

percentage change in real GDP

question

Inflation is a(n)

answer

increase in the overall price level

question

From a historical perspective, since 1987, inflation has been

answer

low and steady

question

Which of the following is a cost of anticipated high inflation

answer

the menu cost of inflation and the shoe leather of inflation

both A and B

question

Which US government agency calculates the CPI

answer

BLS

question

The CPI stands for

answer

the Consumer Price Index

question

An unanticipated increase in inflation will

answer

benefit debtors

question

The natural rate of unemployment is generally thought of as the

answer

sum of frictional unemployment and structural unemployment

question

Some workers are unemployed because the manufacturing sector is shrinking and the health care sector is growing. This is an example of

answer

structural unemployment

question

Which of the following will lead to a long-run growth

answer

Increases in capital stock and increases in the level of technology

both A and B

question

Which of the following will lead to long-run growth in the productivity of labor (Y/L)

answer

Increases in capital stock and Increases in level of technology

both A and B

question

Using year 1 as the base year, find CPI in year 2

answer

108

question

Using year 1 as the base year, find the rate of inflation in year 3

answer

3.70%

question

In the consumption function C=100+0.8Yd, 100 represents?

answer

The autonomous level of consumption

question

In the consumption function C=100+0.8Yd, .08 represents?

answer

The MPC

question

The difference between planned investment and actual investment is

answer

are unplanned changes in inventories

question

45 line on a graph with AE and Y is where

answer

planned Aggregate Expenditure is equal to output

question

If planned aggregate expenditure is equal to output then

answer

inventories will shrink causing firms to increase output

question

At equilibrium output (Y*), which of the following must be true

answer

S+T=I+G

question

The government buys a bridge. The owner of the company that builds the bridge pays her workers. The workers increase their spending. Firms that the workers buy goods from increase their output. This type of effect on spending illustrates

answer

the multiplier effect

question

The MPC is defined as the fraction of

answer

additional income that a household consumes rather than saves

question

Assume the MPC is 0.75. Assuming only the multiplier effect matters, an increase in government purchases of $200 billion will

answer

increase the equilibrium output by $800 billion

question

Assume that the MPC is 0.75. Assuming only the multiplier effect matters, an increase in taxes of $100 billion will

answer

None of the above

question

During recessions, automatic stabilizers tend to make the governments budget

answer

move toward cyclical deficit

question

If the federal government is currently running a budget surplus, the federal debt is

answer

decreasing

question

Fiscal policy involves

answer

government purchases of new goods and services , and tax policies

question

(Figure)The equilibrium output (Y*) is

answer

175

question

(Figure)At the equilibrium output, disposable income is

answer

170

question

At the equilibrium output, household consumption is

answer

163

question

At the equilibrium output, household saving is

answer

question

Current US currency is

answer

fiat money with no intrinsic value

question

Which of the following is included in M2 but not in M1

answer

Savings deposits

question

The agency responsible for regulating the money supply in the United States is

answer

The Federal Reserve

question

The Fed does all except

answer

Convert Federal Reserve Notes into gold

question

The Fed can increase the money supply by conducting open market

answer

purchases of T-Bills and lowering the discount rate

question

Suppose a bank has 10 percent reserve ratio, $5,000 in deposits, and it loans out all it can given the reserve requirement

answer

it has $500 in reserves and $4,500 in loans

question

If the required reserve ratio is 20 percent, the money multiplier is

answer

question

Which list contains only actions that decrease the money supply

answer

Raise the discount rate, and make open market sales of T-Bills

question

When the Fed conducts open market purchases of T-BIlls, bank reserves

answer

increase and banks can increase lending

question

The interest rate the Fed charges on overnight loans of reserves to banks who fall below their required reserves is called

answer

the discount rate

question

Monetary policy is determined by

answer

the FOMC

question

People own or hold money primarily because it

answer

can directly be used to buy goods and services

question

When the interest rate increases, the opportunity cost of holding money

answer

increases, so the quantity of money demanded decreases

question

(Figure)If the interest rate is 2% on the graph, people will desire to

answer

sell interest-bearing assets causing interest rates to increase

question

Which of the following shifts money demand to the right

answer

an increase in the price level

question

When the money market is drawn with the interest rate on the vertical axis, an increase in the money supply shifts the money supply curve to the

answer

right, lowering interest rates

question

If real output is expanding and the Federal Reserve holds the money supply steady, then interest rates should

answer

rise

question

Who is the current Chair of the Federal Reserve

answer

Janet Yellen

question

The money market and aggregate expenditure are linked through the impact of interest rate on

answer

planned investment

question

Refer the the Figure. If the interest rate drops from 7% to 5%, planned investment

answer

increases, causing both aggregate expenditures and real output to rise

question

If real GDP (Y) increases, there will be

answer

an increase in Money Demand and the equilibrium interest rate will rise

question

A decrease in aggregate output causes the demand for money to_______ and the interest rate to ________.

answer

decrease;decrease

question

Monetary Policy affects the goods market through the effects on

answer

the interest rate and planned investment

question

Which of the following is considered Expansionary Fiscal Policy?

answer

Cutting Net Taxes (T)

question

Which of the following is considered Expansionary Monetary Policy?

answer

Increasing the money supply

question

Which of the following is considered Contractionary Fiscal Policy?

answer

Cutting government purchases (G)

question

Which of the following is considered Contractionary Monetary Policy?

answer

decreasing the money supply

question

If planned investment falls when the interest rates rise, there will be

answer

a crowding-out effect from expansionary Fiscal policy

question

Monetary policy can be effective only if

answer

planned investment reacts to changes in the interest rate

question

Assuming that investment spending depends on the interest rate, as the supply of money is increased, the interest rate ________ and planned investment spending ____________.

answer

falls;increases

question

The level of aggregate output demanded falls when the price level rises, because the resulting increase in the interest rate will lead to

answer

lower investment spending and lower consumption spending

question

Refer to the figure. An aggregate demand shift from AD0 to AD1 can be caused by

answer

an increase in money supply

question

Refer to the figure. Suppose the economy is at point A, a decrease in the price level will cause a movement to

answer

point D

question

Refer to the figure. Suppose the economy is at point A, an increase in taxes can cause a movement to point

answer

point C

question

It is very important to distinguish between the short run and the long run when we are discussing

answer

aggregate supply

question

Refer to the figure. At aggregate output levels below $600 billion, this economy is most likely experiencing

answer

large excess capacity

question

Which of the following would cause "sticky wages"

answer

long-term contracts for labor
minimum wages
social contracts to not lower wages

question

If the prices of output is rising, but nominal wages paid by firms is constant, then the real wages paid by firms _______________, and firms profit maximizing output _______________.

answer

falls;increases

question

High inflation with large unemployment is known as

answer

stagflation

question

In the Keynesian Model, recessions with low inflation are caused by

answer

decreases in spending causing aggregate demand to shift left

question

Refer to the figure. If the economy is originally at point A, where would the economy produce after increases in output prices assuming wages are "sticky"

answer

Point B

question

Refer to the figure. If the economy was originally at point A on the AS0, where might the economy produce after a spike in oil prices

answer

Point E

question

A rightward shift in the aggregate demand curve generates _________ inflation and _________ output in the short run.

answer

demand pull;higher

question

When nominal wages rise to keep up with inflation, the

answer

short run aggregate supply curve to the left

question

A sudden increase in the price of oil causes ________ inflation and __________ output in the short run.

answer

cost push;lower

question

Graph. Assuming at point A a sudden shock to spending, such a housing bubble that pops, would cause

answer

Aggregate Demand to shift left to AD2

question

Refer to the figure. This economy cannot continue to produce Y1 (or at point B) in the long run because

answer

wages will increase shifting the aggregate supply curve to AS1

question

Refer to the figure. The Y0 level of output could be described as

answer

output at the natural rate of unemployment
potential GDP
full unemployment output

question

The Phillips curve depicts the relationship between

answer

inflation and unemployment

question

Refer to the figure. The unemployment rate at U0

answer

equals the natural rate of unemployment

question

Refer to the figure. Suppose the economy is at Point A, a decrease in the money supply decreasing the Aggregate Demand will move the economy to point ____ in the short run.

answer

point E

question

If the Phillips Curve is vertical in the long run, then

answer

there is no trade-off between inflation and unemployment in the long run

question

In the long run, increasing which of the following would not cause an increase in output

answer

The overall price level (P)

1 of 104

question

Macroeconomists study?

answer

Economy Wide phenomena

question

Which of the following statistics is the best single measure of an economy's well being?

answer

GDP

question

The 3 main concerns of Macro are?

answer

Inflation, Unemployment and output growth

question

According to the Classical Model, excessive unemployment

answer

could not persist because wages would fall to eliminate the excess supply of labor

question

According to the Keynesian model, excessive unemployment

answer

is caused by sticky wages that do not adjust as fast as prices.

question

Which of these is a quote by John Maynard Keyes

answer

We are all dead in the long run

question

Which of the following is counted in GDP?

answer

None of the above

question

Expenditures equal income because

answer

for every sale there is a buyer and a seller

question

Over the last few decades Americans have chosen to cook less at home and eat more at resturants. This change in behavior, by itself,

answer

increased measured in GDP

question

Darla, a Canadian citizen, only works in the US. The value added to production from her employment is

answer

included in US GDP, but not US GNP

question

Grapes are

answer

counted as an intermediate good only if they are used to produce another good like wine

question

A period during which aggregate output falls is known as a(n)

answer

recession

question

The single largest expenditure component in GDP is

answer

consumption

question

Using year 1 as the base year, what is real GDP in year 3

answer

$183.00

question

Using year 1 as the base year, the real GDP growth rate in year 3 was

answer

2.81%

question

Using year 1 as the base year, the GDP deflator in year 3 was

answer

115.85

question

Using year 1 as the base year, the rate of inflation in year 3 was

answer

6.05%

question

Which US gov agency estimates GDP

answer

BEA

question

US GNP is calculated from US GDP by

answer

including income earned by US citizens abroad and excluding income earned by foreigners in the US

question

Real GDP

answer

evaluates current production at the prices that prevailed in some specific year in the past

question

Which of the following statements about GDP is most accurate

answer

Nominal GDP values production at current prices, while real GDP values production at constant prices

question

When economists talk about growth in the economy, they measure that growth with the

answer

percentage change in real GDP

question

Inflation is a(n)

answer

increase in the overall price level

question

From a historical perspective, since 1987, inflation has been

answer

low and steady

question

Which of the following is a cost of anticipated high inflation

answer

the menu cost of inflation and the shoe leather of inflation

both A and B

question

Which US government agency calculates the CPI

answer

BLS

question

The CPI stands for

answer

the Consumer Price Index

question

An unanticipated increase in inflation will

answer

benefit debtors

question

The natural rate of unemployment is generally thought of as the

answer

sum of frictional unemployment and structural unemployment

question

Some workers are unemployed because the manufacturing sector is shrinking and the health care sector is growing. This is an example of

answer

structural unemployment

question

Which of the following will lead to a long-run growth

answer

Increases in capital stock and increases in the level of technology

both A and B

question

Which of the following will lead to long-run growth in the productivity of labor (Y/L)

answer

Increases in capital stock and Increases in level of technology

both A and B

question

Using year 1 as the base year, find CPI in year 2

answer

108

question

Using year 1 as the base year, find the rate of inflation in year 3

answer

3.70%

question

In the consumption function C=100+0.8Yd, 100 represents?

answer

The autonomous level of consumption

question

In the consumption function C=100+0.8Yd, .08 represents?

answer

The MPC

question

The difference between planned investment and actual investment is

answer

are unplanned changes in inventories

question

45 line on a graph with AE and Y is where

answer

planned Aggregate Expenditure is equal to output

question

If planned aggregate expenditure is equal to output then

answer

inventories will shrink causing firms to increase output

question

At equilibrium output (Y*), which of the following must be true

answer

S+T=I+G

question

answer

the multiplier effect

question

The MPC is defined as the fraction of

answer

additional income that a household consumes rather than saves

question

Assume the MPC is 0.75. Assuming only the multiplier effect matters, an increase in government purchases of $200 billion will

answer

increase the equilibrium output by $800 billion

question

Assume that the MPC is 0.75. Assuming only the multiplier effect matters, an increase in taxes of $100 billion will

answer

None of the above

question

During recessions, automatic stabilizers tend to make the governments budget

answer

move toward cyclical deficit

question

If the federal government is currently running a budget surplus, the federal debt is

answer

decreasing

question

Fiscal policy involves

answer

government purchases of new goods and services , and tax policies

question

(Figure)The equilibrium output (Y*) is

answer

175

question

(Figure)At the equilibrium output, disposable income is

answer

170

question

At the equilibrium output, household consumption is

answer

163

question

At the equilibrium output, household saving is

answer

question

Current US currency is

answer

fiat money with no intrinsic value

question

Which of the following is included in M2 but not in M1

answer

Savings deposits

question

The agency responsible for regulating the money supply in the United States is

answer

The Federal Reserve

question

The Fed does all except

answer

Convert Federal Reserve Notes into gold

question

The Fed can increase the money supply by conducting open market

answer

purchases of T-Bills and lowering the discount rate

question

Suppose a bank has 10 percent reserve ratio, $5,000 in deposits, and it loans out all it can given the reserve requirement

answer

it has $500 in reserves and $4,500 in loans

question

If the required reserve ratio is 20 percent, the money multiplier is

answer

question

Which list contains only actions that decrease the money supply

answer

Raise the discount rate, and make open market sales of T-Bills

question

When the Fed conducts open market purchases of T-BIlls, bank reserves

answer

increase and banks can increase lending

question

The interest rate the Fed charges on overnight loans of reserves to banks who fall below their required reserves is called

answer

the discount rate

question

Monetary policy is determined by

answer

the FOMC

question

People own or hold money primarily because it

answer

can directly be used to buy goods and services

question

When the interest rate increases, the opportunity cost of holding money

answer

increases, so the quantity of money demanded decreases

question

(Figure)If the interest rate is 2% on the graph, people will desire to

answer

sell interest-bearing assets causing interest rates to increase

question

Which of the following shifts money demand to the right

answer

an increase in the price level

question

When the money market is drawn with the interest rate on the vertical axis, an increase in the money supply shifts the money supply curve to the

answer

right, lowering interest rates

question

If real output is expanding and the Federal Reserve holds the money supply steady, then interest rates should

answer

rise

question

Who is the current Chair of the Federal Reserve

answer

Janet Yellen

question

The money market and aggregate expenditure are linked through the impact of interest rate on

answer

planned investment

question

Refer the the Figure. If the interest rate drops from 7% to 5%, planned investment

answer

increases, causing both aggregate expenditures and real output to rise

question

If real GDP (Y) increases, there will be

answer

an increase in Money Demand and the equilibrium interest rate will rise

question

A decrease in aggregate output causes the demand for money to_______ and the interest rate to ________.

answer

decrease;decrease

question

Monetary Policy affects the goods market through the effects on

answer

the interest rate and planned investment

question

Which of the following is considered Expansionary Fiscal Policy?

answer

Cutting Net Taxes (T)

question

Which of the following is considered Expansionary Monetary Policy?

answer

Increasing the money supply

question

Which of the following is considered Contractionary Fiscal Policy?

answer

Cutting government purchases (G)

question

Which of the following is considered Contractionary Monetary Policy?

answer

decreasing the money supply

question

If planned investment falls when the interest rates rise, there will be

answer

a crowding-out effect from expansionary Fiscal policy

question

Monetary policy can be effective only if

answer

planned investment reacts to changes in the interest rate

question

Assuming that investment spending depends on the interest rate, as the supply of money is increased, the interest rate ________ and planned investment spending ____________.

answer

falls;increases

question

The level of aggregate output demanded falls when the price level rises, because the resulting increase in the interest rate will lead to

answer

lower investment spending and lower consumption spending

question

Refer to the figure. An aggregate demand shift from AD0 to AD1 can be caused by

answer

an increase in money supply

question

Refer to the figure. Suppose the economy is at point A, a decrease in the price level will cause a movement to

answer

point D

question

Refer to the figure. Suppose the economy is at point A, an increase in taxes can cause a movement to point

answer

point C

question

It is very important to distinguish between the short run and the long run when we are discussing

answer

aggregate supply

question

Refer to the figure. At aggregate output levels below $600 billion, this economy is most likely experiencing

answer

large excess capacity

question

Which of the following would cause "sticky wages"

answer

long-term contracts for labor
minimum wages
social contracts to not lower wages

question

If the prices of output is rising, but nominal wages paid by firms is constant, then the real wages paid by firms _______________, and firms profit maximizing output _______________.

answer

falls;increases

question

High inflation with large unemployment is known as

answer

stagflation

question

In the Keynesian Model, recessions with low inflation are caused by

answer

decreases in spending causing aggregate demand to shift left

question

Refer to the figure. If the economy is originally at point A, where would the economy produce after increases in output prices assuming wages are "sticky"

answer

Point B

question

Refer to the figure. If the economy was originally at point A on the AS0, where might the economy produce after a spike in oil prices

answer

Point E

question

A rightward shift in the aggregate demand curve generates _________ inflation and _________ output in the short run.

answer

demand pull;higher

question

When nominal wages rise to keep up with inflation, the

answer

short run aggregate supply curve to the left

question

A sudden increase in the price of oil causes ________ inflation and __________ output in the short run.

answer

cost push;lower

question

Graph. Assuming at point A a sudden shock to spending, such a housing bubble that pops, would cause

answer

Aggregate Demand to shift left to AD2

question

Refer to the figure. This economy cannot continue to produce Y1 (or at point B) in the long run because

answer

wages will increase shifting the aggregate supply curve to AS1

question

Refer to the figure. The Y0 level of output could be described as

answer

output at the natural rate of unemployment
potential GDP
full unemployment output

question

The Phillips curve depicts the relationship between

answer

inflation and unemployment

question

Refer to the figure. The unemployment rate at U0

answer

equals the natural rate of unemployment

question

Refer to the figure. Suppose the economy is at Point A, a decrease in the money supply decreasing the Aggregate Demand will move the economy to point ____ in the short run.

answer

point E

question

If the Phillips Curve is vertical in the long run, then

answer

there is no trade-off between inflation and unemployment in the long run

question

In the long run, increasing which of the following would not cause an increase in output

answer

The overall price level (P)

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