Macro - Assignment Essays

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1. The calculation of GDP does not account for the following:

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e. Both b and c

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2. Country tends to grow faster when

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a. Have more greater college graduates

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if you buy a drink, private property rights give you the ability to

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ALL

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if you buy a drink, private property rights give you the ability to a. allowssomeoneelsetodrinkit
b. drink it when someone is thirty
c. do whatever you want with it(wrong)
d. share it
e. all of the above

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e. all of the above

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if the government created a new tax credit to encourage businesses to build more factories

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b. demand of loanable funds would increase

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5. In economics, "real interest rate" can best be described as

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c. the nominal interest rate adjusted for expected inflation

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6. How big is the labor force?
Employed 800, unemployed 200, not in labor force 50

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c) 1000 (employed + unemployed) exclude labor force

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7. which of the following is not a important determinant of the quantity of money demand
a. availability of a ATM machine (wrong)
b. price level
c. interest rate
d. value of money
e. all of the above

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d. value of money

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8. long question about BRAZIL, nominal rate = 18, expected interest = 12

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d. 6 (Interest rate = Nominal Rate - Inflation) (18 - 12 = 6)

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5. In economics, "real interest rate" can best be described as

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c. the nominal interest rate
adjusted for expected inflation

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9. which of the following is the incorrect statement

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a. during a period of inflation, prices are always rising

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10.According to the multiplier effect, a dollar increases in government spending will lead to
a. A multiple dollar increase in the money supply (wrong)
b. ??
c. ??
d. A multiple dollar increase in the aggregate demand
e. None of the above

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d. A multiple dollar increase in the aggregate demand (maybe)

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11.which of the following will shift the aggregate demand to the right

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a. increase in government purchases

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12.if you take investment by US residents in other countries and you subtract investment by
foreign resident in the US, you will find

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b. net foreign investment

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13.cyclical unemployment is best defined as
a. deviation of unemployment from the natural rate
b. unemployment dued to individuals searching for new jobs
c. chronic unemployment dued to wages not balancing with goods and services
d. unemployment associated with inefficiency in capital markets
e. unemployment resulting from people who don't wish to work

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d. unemployment associated with inefficiency in capital markets

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Joe's income this year is 55,000. The consumer price CPI is 110. What Joe's income in
term of base year dollars rounded to the nearest dollar?

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(55,000 / 110) * 100 = 50,000
D. 50,000

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2. Government can increase Long-Run economy growth by encouraging

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D. Saving and Investing

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. Enforceable private property risks

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A. Make economic development more likely.

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If real interest rates are too low

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C. There will be excess supply in loan able funds market

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The substitution bias means that

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B. Consumers substitute towards goods that have become relatively less expense

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Many countries in the Far East, such as South Korea and Tawin have experience decades of
repaid economic growth following by lower economic growth recent year. The phenomenon is
known as

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A. The catch-up-effect *******

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To find the Real interest Rate

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D. Take the nominal interest rate / inflation rate

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If you take nation's total income and subtract out private consumption, government
consumption you will find.

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B. National Saving

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Frictional unemployment best defined as

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D. Unemployment due to individuals search for new job.

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The decrease in Money Supply, the Fed would?

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B. Increase the discount rate

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Suppose that the country of France has a 22% nominal interest rate and an expected
inflation rate of 10%. Which of the following is the best estimate of the Real interest Rate in the
country?

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C. 12%

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With sticky nominal wages an unexpected decline in aggregate demand can be expected to
cause.

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B. Both price and Real decrease in the Short-Run

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A country tends to grow faster when?

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A. Greater proportion of its work force graduate from college

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0. The main problem with active fiscal policy is that?*****
A. Changes in government's spending have no effect on Aggregate Demand in short-run. (WA)
B. The multiplier effect cancels out any positive effect of fiscal policy
C. Automatic statistic countract the effect of fiscal policy.
D. It happens without any involvement by congress
E. It is difficult to time fiscal changes correctly.

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E. It is difficult to time fiscal changes correctly.

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Relationship between the quantity of inputs used in production and the quantity produced
from those inputs is called.

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B. Production function

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Which of the following is an example of frictional unemployment?
A. Recent graduate looking for a job.
B. A mother is searching for a job and the kid has gone to college
C. New Yorker moved to California. (WA)
D. Computer program who turned down a job offer expect better job.
E. All

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E. All

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Relationship between saving investment and net foreign investments *******8
A. S + I
B. I - S (WA)
C. S - I --------
D. S/I
E. S - I

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C. S - I

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30. What is an automatic stabilizer? **************
A. Tool of monitory policy that enters under control of the Fed Chairman.
B. Tools of Fiscal that requires specific legislation to be passed by congress.
C. Tools of fiscal policy that responds to change in the economy without any action by
politician.
D. Tools of monitory policy that is not control by Fed (WA)
E. Tools of fiscal policy that is immune to crowding out (WA)

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C. Tools of fiscal policy that responds to change in the economy without any action by
politician.

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. Problems in measuring the cost of living include ***************
A. Substitution bias
B. The introd of new goods
C. Unmeasured quality changes
D. All
E. None

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D. All

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The required Reserve ration is 25% an additional 5,000 of reserves can increase the money
supply by?

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D. 20,000 (0.25 / 1) = (5,000 / x) 0.25x = 5,000 x = 5,000 / 0.25 x =
20,000

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Which shifts the aggregate demand to the right?

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A. Increase in government purchases

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. Liquidity performance an increase in the rate of growth of the money supply cause?

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A. Interest rates will fall

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GDP is 5 trillion dollars, the price level is $2, money supply is 2 trillion dollars. What is the
value of the velocity of money according to the quantity equation?

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A. 5 MV = PY V = (PY / M) V = (5 * 2) / 2 V = 10 / 2 V = 5

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Suppose that the price level is 5, money supply is 10 trillion dollars, velocity of money is 4.
What is the value of real GDP?

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B. 8 trillion MV=PY Y= MV / P Y= (10 * 4) / 5 Y= 40 / 5 Y= 8

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Decrease the money supply the Fed would?
A. Buy government's bond (WA)
B. Increase the discount rate
C. Decrease the Reserve requirements
D. Any of the above
E. None

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B. Increase the discount rate

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Example of structural unemployment?

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D. Unskilled worker can't get hired because the minimum wage is too high.

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According to loan able funds framework, if business decides to eliminate or postpone
expansion plans reducing their need to borrow?

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C. Interest rates will decrease

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If there is excess demand in the loan able fund market?

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E. B & C

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Decrease of price level of consumer spending
A. Shift in the aggregate demand curve.
B. Negative slope of aggregate demand curve
C. Shift in Short-Run aggregate supply curve (WA)
D. The positive slope of the short - run aggregate supply curve
E. The positive slope of the aggregate demand curve.

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E. The positive slope of the aggregate demand curve.

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Which of the following will increase the long - run growth?
A. Rate is U.S. Real GDP per person
B. Bailout unsecured comp
C. More efficient
D. A, B and C
E. A and C will increase the ....... (WA)

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If you take GDP and subtract the value of depreciation of the economy's capital stock, you
find the.**************
A. Net domestic product.
B. Net national product. (WA)
C. GNP
D. GDP Deflator
E. Nominal GDP

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A. Net domestic product.

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Sam, 2 drills process the furniture maker uses to produce tables are

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A. Physical capital

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Private property right enforceability means that you can use the reward from your effect to?
A. Sale
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B. Consumers
C. Investment
D. Help the pue
E. All

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E. All

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If there is excess Supply in the loanable funds framework? ***********

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A. Interest Rates are above equilibrium.

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The value of depreciation of the economy's capital stock, you find the inflation 10 %,
nominal 14, economic 8 %. What is real?

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D. 4 (14 - 10 = 4)

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How big is the labor force? (800 + 200 = 1000)
# of employment 800
# of unemployment 200
Not in labor force 50

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C. 1000

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Following shifts can explain an increase in the price level and decrease in real output.

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C. A leftward shift in the Short-Run Aggregate Supply Curve.

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9. According to the theory of liquidity preferences, an increase in the rate of growth of Money
Supply will cause which of the following?
A. Interest Rates will fall
B. Interest Rates will raise (WA)
C. Nominal wages will fall
D. Nominal GDP will stay the same
E. Real GDP will fall

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A. Interest Rates will fall

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Which of the following is a form of monitory policy?

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A. Increasing the Money Supply faster than usual during recession.

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Which of the following factors effect a country's net foreign investments?
A. Real interest rates paid on foreign assets
B. Real interest rates paid on domestic assets
C. Government policies that effect foreign ownership (WA)
D. All
E. None.

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D. All

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Privet property rights

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E. As they see and help their neighbors.

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a person who was laid off during a recession and .....
7

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Cyclical

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Technological refers to

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Knowledge of current value of GDP and CPI

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Merchandise trade deficit

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Foreign investors see opportunities in US Net export

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Physical capital
Land materials ...trees (WA)

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The stock of equipment and building that used to produce goods and service

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Real interest rate will decrease if

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Expected inflation increases

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6%-8% economic growth rate is 2% what is nominal rate

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14% (6 + 8 = 14)

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Reserve ratio is 10% bank receives new checkable deposit of $2000

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Will be able to make loans up to a max $2000

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18% nominal rate expected inflation rate at 12% what is real interest rate?

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6% (18 - 12 = 6)

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What is the labor force?
Employed 1000
Unemployed 500
Not in labor force 600
1

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500 (1000 + 500)

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Reserve ratio is 10% and a bank receive a new checkable deposit 1,000

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Require to increase by 100 (1,000 * 10% = 100)

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Michael Jordan is currently worth 25,000 and the CPI is 108

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23148
(25,000 / 108= 231.48 231.48 * 100= 23148)

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.Real wages are equal to
Nominal wages minus the inflation rate (WA)

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Nominal wage divided by a price index

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Suppose that aggregate consumption is $1,200,000, aggregate investment is $300,000,
government spending is $200,000, the value of exports is $200,000, and the value of imports is
$100,000. What is the value of Gross Domestic Product (GDP)?
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a. $1,800,000 Y= C + I + G + Nx Y= 1,200,000 + 300,000 + 200,000 + 100,000 = 1,800,000

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The catch-up effect is the idea that
a. it is harder for a country to grow fast when it is relatively poor.
b. savings will always catch up with investment.
c. poor countries with small capital stocks will grow faster that
wealthy countries when investment increases.
d. countries with large capital stocks will always grow faster than
countries with small capital stocks.
e. consumption tends to catch up with savings.

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c. poor countries with small capital stocks will grow faster that
wealthy countries when investment increases.

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Education is an example of

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b. investment in human capital

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Which of the following programs is likely to increase the long run growth rate in US real GDP
per person?
a. A program designed to give money to poor people with no strings attached.
b. A program to bailout unsuccessful companies.
c. A more efficiently designed patent system. Correct.
d. Items a, b, and c will all increase the long run growth rate in the US.
e. Items a and c will increase long run growth rates in the US, but item b will not.

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c. A more efficiently designed patent system. Correct.

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In economics, "Public Saving" is defined as
a. Saving that is made public by disclosure to the IRS.
b. Tax revenue minus government spending. Correct.
c. National Income minus consumption.
d. Deposits made at banks and other lending institutions.
e. Investment in a publicly held company

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b. Tax revenue minus government spending. Correct.

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A person who did not have a job but was looking for work would be categorized as
a. employed
b. unemployed
c. not in the labor force
d. marginally unemployed
e. partially employed

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b. unemployed

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According to the following information, what is the unemployment rate? (Round to the nearest
tenth of a percent.)
Number of Employed: 20,000
Number of Unemployed: 1,000
Not in the Labor Force: 4,000
a. 5.0%
b. 4.8%
c. 3.7%
d. 20.0% Incorrect. Please review Top Ten Concept # 5.
e. none of the above

answer

b. 4.8%

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If the reserve ratio is 20 percent and a bank receives a new checkable deposit of $100, this bank
a. must increase required reserves by $20.
(100*20%=20)
b. will initially see its total reserves increase
by $200.
c. will be able to make new loans up to a
maximum of $20.
d. will be allowed to make new loans of up to
$100.
e. all of the above are true.

answer

a. must increase required reserves by $20.
(100*20%=20)

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Suppose that the country of Argentina has an 6% real interest rate and an expected inflation rate
of 10%. Which of the following is the best estimate of the nominal interest rate in the country?
a. 16% (10+6
=16) Correct.
b. 8%
c. 4%
d. 18%
e. none of the
above

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a. 16% (10+6
=16)

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Which of the following statements most accurately describes the relationship between the
nominal and real interest rates?
a. The real interest rate is the expected inflation rate plus the nominal interest rate.
b. The real interest rate is the expected inflation rate minus the nominal interest rate.
c. The real interest rate is the nominal interest rate minus the expected inflation
rate.
d. The real interest rate is the nominal interest rate multiplied by the expected inflation
rate.
e. None of the above statements is accurate.

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c. The real interest rate is the nominal interest rate minus the expected inflation
rate.

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The aggregate supply-aggregate demand model predicts that the short-run effect of
an unexpected decrease in taxes is:
a. A decrease in the price level and an increase in real
output.
b. An increase in both the price level and real output.
c. An increase in the price level and a decrease in real
output.
Incorrect. Please review Top Ten
Concept # 8.
d. A decrease in both the price level and real
output.
e. No effect on the price level and a decrease in real
output.

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d. A decrease in both the price level and real
output.

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The government increases spending by $200 million. This increases the incomes of the people
who receive it, and they use their higher income to buy more goods and services. The people
who produce those goods and services get paid more, and they use their higher income to buy
even more goods and services. What process is being described here?
a. the Keynesian multiplier
b. increasing returns to investment
c. the money multiplier
d. the GDP inflator
e. the catch-up effect

answer

a. the Keynesian multiplier

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Which of the following is an automatic stabilizer?
a. FDIC insurance
b. The income tax system.
c. An open market operation. Incorrect. Please review Top Ten Concept # 9.
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d. Defense spending

answer

e. none of the above.

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Net exports measure an imbalance between a country's
a. exports and its imports. .
b. sale of domestic assets abroad and buying of foreign assets.
c. income and expenditure.
d. savings and consumption.
e. all of the above.

answer

a. exports and its imports.

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All of the following would cause a leftward shift in the short-run aggregate-supply curve except
a. a substantial drop in employment caused by a large hike in
the legal minimum wage.
b. a natural disaster that leads to a significant decline in the the
economy's physical capital stock.
c. the removal of government regulations, leading to a large
increase in oil production.
d. the imposition of foreign-trade barriers that substantially
reduce the level of mutually beneficial trade.
e. a decrease in the level of immigration.

answer

c. the removal of government regulations, leading to a large
increase in oil production.

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The Real GDP of a country is
a. the total income earned by a nation's permanent residents in a given time period divided by
the GDP deflator.
b. the market value of all final goods and services produced within a country in a given
time period, using prices from a "base" year to calculate the market value.
c. the market value of all final goods and services produced within a country in a given time
period, using prices from the current year to calculate the market value.
d. the market value of all final goods and services produced within a country minus losses from
depreciation in a given time period.
e. none of the above.

answer

b. the market value of all final goods and services produced within a country in a given
time period, using prices from a "base" year to calculate the market value.

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Which of the following is not an example of input growth that is a potential source of economic
growth?
a. immigration
b. growth of the capital stock
c. development of new technologies that reduce energy use.
d. greater investment in workers' skills
e. All of these are examples of input growth.

answer

a. immigration

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Countries that devote a large share of GDP to investment, such as Singapore and S. Korea, tend
to have
a. high growth rates.
b. stable growth rates.
c. low growth rates.
d. highly cyclical growth rates. Incorrect. Please review Top Ten Concept # 2.
e. there is no relationship between investment and growth.

answer

c. low growth rates.

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Which of the following is most likely to encourage economic growth?
a. stable private property rights
b. an extensive welfare system
c. frequent military take-overs of the government
d. a shrinking labor force
e. a fixed capital stock

answer

a. stable private property rights

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If expected inflation is 2%, the real interest rate is 7% and the economy is growing at a rate of
4%, the nominal interest rate is equal to
a. 9% (Real Interest Rate=Nominal Interest Rate - Inflation)
b. 5%
c. 7% Incorrect. Please review Top Ten Concept # 4.
d. 6%
e. none of the above

answer

a. 9% (Real Interest Rate=Nominal Interest Rate - Inflation)

question

A person who is switching careers and is unemployed while looking for a better job is an
example of
a. Cyclical Unemployment
b. Frictional Unemployment
c. Structural Unemployment
d. Reciprocal Unemployment
e. Transitional Employment

answer

b. Frictional Unemployment

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Suppose that the Velocity of money were to suddenly increase in the United States. Use the
quantity equation to identify which of the following statements is true.
a. If the Money Supply and real GDP are constant, then the price level in the United States is
likely to fall.
b. If the Money Supply and the price level are constant, then real GDP is likely to fall.
Incorrect. Please review Top Ten Concept # 7.
c. If the Money Supply and the price level are constant, then real GDP is likely to rise.
d. If the Money Supply is constant, then nominal GDP is likely to fall.
e. None of the above statements are consistent with the quantity equation

answer

c. If the Money Supply and the price level are constant, then real GDP is likely to rise.

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Which of following helps explain the negative slope of the aggregate demand curve?
a. A lower price level increases real wealth, which encourages spending on consumption.
Incorrect. Please review Top Ten Concept # 8.
b. A lower price level reduces the interest rate, which encourages spending on investment.
c. A lower price level causes the real exchange rate to depreciate, which encourages
spending on net exports.
d. All of the above.
e. None of the above.

answer

c. A lower price level causes the real exchange rate to depreciate, which encourages
spending on net exports.

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Congress passes a tax cut because economists predict a coming recession. This is an example of
what?
a. Automatic stabilization. Incorrect. Please review Top Ten Concept # 9.
b. Active fiscal policy.
c. Discretionary monetary policy.
d. Non-discretionary monetary policy.
e. none of the above

answer

b. Active fiscal policy.

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In the U.S., the organization that is responsible for monetary policy is
a. the Congress.
b. the President.
c. the Federal Reserve.
d. a cartel of private banks.
e. the Supreme Court

answer

c. the Federal Reserve.

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A merchandise trade deficit
a. occurs when net exports are positive.
b. occurs when imports are greater than exports.
c. is usually accompanied by decreases in foreign investment in the U.S. Incorrect. Please
review Top Ten Concept # 10.
d. occurs when domestic investment is less than domestic saving.
e. none of the above.

answer

b. occurs when imports are greater than exports.

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Which of the following factors affect a country's net foreign investment?
a. real interest rates paid on foreign assets
b. real interest rates paid on domestic assets
c. government policies that affect foreign ownership of domestic assets
d. all of the above
e. none of the above

answer

d. all of the above

question

The Consumer Price Index
a. is an attempt to measure the cost of living for a typical
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family
b. measures price changes in a basket of goods bought by a
typical family
c. weights prices by the quantities bought by a typical
family in the base year
Incorrect. Please review Top Ten
Concept # 1.
d. all of the above
e. none of the above

answer

b. measures price changes in a basket of goods bought by a typical family

question

An aggregate production function shows the relationship between
a. the quantity of inputs used in production and the quantity of output. Correct.
b. gross domestic product and national income.
c. workers as inputs and consumers as buyers.
d. production and spending.
e. none of the above.

answer

a. the quantity of inputs used in production and the quantity of output.

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A government can increase long-run economic growth by
a. discouraging saving.
b. encouraging education and training of labor. Correct.
c. increasing the taxation of capital.
d. imposing restrictions on international trade.
e. all of the above.

answer

b. encouraging education and training of labor. Correct.

question

Which of the following institutions is not identified by economists as a major determinant of
long run-growth?
a. A legal system that efficiently enforces property rights. Incorrect. Please review Top Ten
Concept # 3.
b. A trading system that allows people to buy and sell products
with whomever they please.
c. Government programs that reward productive behavior by
individuals.
d. Democratic government.
e. All of the above are major determinants of long-run growth

answer

e. All of the above are major determinants of long-run growth

question

According to the loanable funds framework, if the government runs a budget deficit due to an
increase in spending,
15
a. Interest rates will increase.
b. Interest rates will decrease. Incorrect. Please review Top Ten Concept # 4.
c. The supply of loanable funds will increase.
d. Both (a) and (c) are true.
e. None of the above are true

answer

d. Both (a) and (c) are true.

question

If real interest rates are too high,
a. there will be excess demand in the loanable funds
market.
Incorrect. Please review Top Ten
Concept # 4.
b. nominal interest rates will have to rise.
c. there will be excess supply in the loanable funds
market.
d. inflation must be increasing.
e. the GDP deflator hasn't been applied yet.

answer

c. there will be excess supply in the loanable funds market.

question

According to the following information, what is the unemployment rate?
Number of Employed: 800
Number of Unemployed: 200
Not in the Labor Force: 50
a. 6%
b. 19%
c. 20% (800 + 200 = 1,000 200
/ 1,000 = 20)
d. 28%
e. none of the above

answer

c. 20% (800 + 200 = 1,000 200
/ 1,000 = 20)

question

According to the following information, what is the unemployment rate?
Number of Employed: 1800
Number of Unemployed: 200
Not in the Labor Force: 600
a. 10%
b. 12%
c. 14%
d. 20%

answer

a. 10%

question

Reserve requirements are regulations concerning
a. the amount of deposits banks are allowed to accept.
b. the amount of reserves banks must hold against deposits.
c. the total amount of loans banks are allowed to make.
d. the interest rate at which banks can borrow from the Fed.
e. the number of open market transactions the Fed can perform.

answer

b. the amount of reserves banks must hold against deposits.

question

Economists sometimes refer to an "inflation tax". Which of the following statements best
describes what they have in mind?
a. Many tax laws cause great inefficiency in the presence of inflation.
b. Many tax policies cause substantial redistribution of income during
inflationary periods.
c. When the government prints money to pay for its expenses,
inflation occurs, and this causes a reduction in wealth for everybody
who holds on to money.
d. When inflation occurs, nominal interest rates rise, which causes an
enormous transfer of wealth between borrowers and lenders.
Incorrect. Please review
Top Ten Concept # 7.
e. None of the above.

answer

a. Many tax laws cause great inefficiency in the presence of inflation.

question

Which of the following statements most accurately describes the "Fisher Effect"?
a. The Fisher Effect states that when the rate at which the money supply grows is
increased, nominal interest rates fall.
b. The Fisher Effect states that when the the rate at which the money supply grows is
increased, real interest rates fall.
c. The Fisher Effect states that when the rate at which the money supply grows is
increased, nominal interest rates rise. Correct.
d. The Fisher Effect states that when the rate at which the money supply grows is
increased real interest rates rise.
e. None of the above statements are correct

answer

c. The Fisher Effect states that when the rate at which the money supply grows is

question

The aggregate demand curve shows
a. the quantity of goods and services that households, firms, and the government
want to buy at each price level.
b. the quantity of goods and services that households, firms, and the government want
to buy at each interest rate.
c. the quantity of goods and services that households (not firms) want to buy at each
17
price level.
d. the quantity of goods and services that firms (not households) want to buy at each
interest rate.
e. none of the above.

answer

a. the quantity of goods and services that households, firms, and the government
want to buy at each price level.

question

Most economists argue that an effective monetary policy would
a. create money faster during recessions and more slowly during booms.
b. create money faster all the time.
c. create money more slowly all the time.
d. create money faster during booms and more slowly during recessions.
e. create money slowly during booms and not at all during recessions.

answer

a. create money faster during recessions and more slowly during booms

question

According to the theory of liquidity preference, an increase in the rate of growth of the money
supply will cause which of the following?
a. Interest rates will fall.
b. Interest rates will rise.
c. Nominal wages will fall.
d. Nominal GDP will stay the same.
e. Real GDP will fall.

answer

a. Interest rates will fall.

question

If you take investment by U.S. residents in other countries and you subtract investment by
foreign residents in the U.S., you will find
a. gross foreign investment
b. net foreign investment
c. net domestic saving
d. gross domestic product
e. negative net foreign investment

answer

b. net foreign investment

question

A person who worked 20 hours per week while going to school would be categorized as
a. employed
b. unemployed
c. not in the labor force
d. marginally unemployed
e. labor impaired

answer

a. employed

question

. If expected inflation is 2%, the nominal interest rate is 7% and the economy is growing at a
rate of 3%, the real interest rate is equal to

answer

a. 5%

question

The GDP deflator is

answer

b. (Nominal GDP x 100) / (Real GDP).

question

According to the loanable funds framework, if businesses see new opportunities to expand
capacity by building new factories, the likely effect will be that:

answer

e. None of the above.

question

A full-time student who did not have a job and was not looking for work would be
categorized as

answer

c. not in the labor force

question

Which of the following statements is consistent with the theory of liquidity preference?

answer

a. When the Federal Reserve Board of Govenors increases the money supply
faster than usual, interest rates fall

question

An open market purchase is where the Fed

answer

b. Purchases government bonds from the public, thereby increasing the money
supply.

question

All of the following would cause a rightward shift in the short-run aggregate-supply curve
except

answer

c. A war that reduces the economy's physical capital stock.

question

Which of the following is not an example of monetary policy?

answer

d. An increase in the earned income tax credit.

question

If nominal wages adjust slowly to changing economic conditions, then a decrease in the price
level will cause the real wage rate to rise and employment and real output to fall. This
description of the impact of a decrease in the price level on real output is used to explain:

answer

e. The positive slope of the short-run aggregate-supply curve

question

According to the theory of "money neutrality" which of the following statements is likely to
be true?

answer

e. When the money supply is increased, nominal wage rates will rise

question

If the reserve ratio is 25 percent, the money multiplier is

answer

a. 4

question

. Private property rights
a. Make it more likely that a society will develop rapidly.
b. Allow an individual to decide what to do with the product of his/her labor.
d. Allow the owners of a firm to decide what to do with any profits.

answer

all

question

A country will grow faster if

answer

a. Investment in human capital increases.

question

The aggregate supply-aggregate demand model suggests that the government can stabilize
an economy that experiences a sudden and unexpected decline in consumer confidence and
aggregate demand by:

answer

a. Increasing the money supply.

question

Suppose that aggregate consumption is $1,000,000, aggregate investment is $200,000,
government spending is $300,000, the value of exports is $100,000, and the value of imports is
$200,000. What is the value of Gross Domestic Product (GDP)?

answer

c. $1,400,000

question

. If the dollar value of a country's exports is greater than the value of its imports,

answer

a. Net foreign investment is generally positive.

question

Which of the following is an example of active fiscal policy?

answer

c. Congress passes a tax cut after the beginning of a recession with the aim of stimulating
the economy.

question

Negative net exports means that

answer

b. The country buys more goods from other countries than it sells to other
countries.

question

Which of the following is not an example of an automatic stabilizer?

answer

c. the reduction in income tax revenues during a recession

question

. To decrease the money supply, the Fed would

answer

b. Increase the discount rate.

question

The aggregate supply-aggregate demand model predicts that an unexpected increase in
government spending will have what short-run effects?

answer

e. An increase in both the price level and real output.

question

Which of the following would be included in Gross National Product (GNP) but not in Gross
Domestic Product (GDP) of the United States?

answer

a. the earnings of an American-owned factory in Germany

question

According to the following information, what is the unemployment rate? (Round to the
nearest tenth of a percent.)
Number of Employed: 10,000
Number of Unemployed: 500
Not in the Labor Force: 3,000

answer

b. 4.8% (10,000 + 500 = 10,500 500 / 10,500 = 4.8%)

question

In economics, "National Saving" is calculated by

answer

d. Subtracting private and government consumption from total income.

question

Which of the following is NOT one of the components of aggregate demand?

answer

d. Money supply.

question

In the long-run, higher saving leads to

answer

c. Temporarily faster growth.

question

. Which of the following is not included in a country's Gross Domestic Product (GDP)?

answer

e. the value of household production in the economy

question

Which of the following statements are correct?

answer

a. Economists using the classical dichotomy distinguish between variables
measured in monetary units from those measured in physical units.

question

The quantity equation relates a measure of the money supply (M), to the velocity of money
(V), the GDP deflator (P) and real GDP (Y). Which of the following expression accurately
describes the quantity equation?

answer

c. MV = PY

question

An increase in the minimum wage will likely:

answer

a. Increase structural unemployment

question

According to the loanable funds framework, if businesses reduce their willingness to spend
money on new capital equipment,

answer

c. Interest rates will decrease.

question

Governments can increase the likelihood of economic development by

answer

b. Supporting smooth transitions from one set of office-holders to another

1 of 143

question

1. The calculation of GDP does not account for the following:

answer

e. Both b and c

question

2. Country tends to grow faster when

answer

a. Have more greater college graduates

question

if you buy a drink, private property rights give you the ability to

answer

ALL

question

answer

e. all of the above

question

if the government created a new tax credit to encourage businesses to build more factories

answer

b. demand of loanable funds would increase

question

5. In economics, "real interest rate" can best be described as

answer

c. the nominal interest rate adjusted for expected inflation

question

6. How big is the labor force?
Employed 800, unemployed 200, not in labor force 50

answer

c) 1000 (employed + unemployed) exclude labor force

question

7. which of the following is not a important determinant of the quantity of money demand
a. availability of a ATM machine (wrong)
b. price level
c. interest rate
d. value of money
e. all of the above

answer

d. value of money

question

8. long question about BRAZIL, nominal rate = 18, expected interest = 12

answer

d. 6 (Interest rate = Nominal Rate - Inflation) (18 - 12 = 6)

question

5. In economics, "real interest rate" can best be described as

answer

c. the nominal interest rate
adjusted for expected inflation

question

9. which of the following is the incorrect statement

answer

a. during a period of inflation, prices are always rising

question

answer

d. A multiple dollar increase in the aggregate demand (maybe)

question

11.which of the following will shift the aggregate demand to the right

answer

a. increase in government purchases

question

12.if you take investment by US residents in other countries and you subtract investment by
foreign resident in the US, you will find

answer

b. net foreign investment

question

answer

d. unemployment associated with inefficiency in capital markets

question

Joe's income this year is 55,000. The consumer price CPI is 110. What Joe's income in
term of base year dollars rounded to the nearest dollar?

answer

(55,000 / 110) * 100 = 50,000
D. 50,000

question

2. Government can increase Long-Run economy growth by encouraging

answer

D. Saving and Investing

question

. Enforceable private property risks

answer

A. Make economic development more likely.

question

If real interest rates are too low

answer

C. There will be excess supply in loan able funds market

question

The substitution bias means that

answer

B. Consumers substitute towards goods that have become relatively less expense

question

Many countries in the Far East, such as South Korea and Tawin have experience decades of
repaid economic growth following by lower economic growth recent year. The phenomenon is
known as

answer

A. The catch-up-effect *******

question

To find the Real interest Rate

answer

D. Take the nominal interest rate / inflation rate

question

If you take nation's total income and subtract out private consumption, government
consumption you will find.

answer

B. National Saving

question

Frictional unemployment best defined as

answer

D. Unemployment due to individuals search for new job.

question

The decrease in Money Supply, the Fed would?

answer

B. Increase the discount rate

question

Suppose that the country of France has a 22% nominal interest rate and an expected
inflation rate of 10%. Which of the following is the best estimate of the Real interest Rate in the
country?

answer

C. 12%

question

With sticky nominal wages an unexpected decline in aggregate demand can be expected to
cause.

answer

B. Both price and Real decrease in the Short-Run

question

A country tends to grow faster when?

answer

A. Greater proportion of its work force graduate from college

question

answer

E. It is difficult to time fiscal changes correctly.

question

Relationship between the quantity of inputs used in production and the quantity produced
from those inputs is called.

answer

B. Production function

question

answer

E. All

question

Relationship between saving investment and net foreign investments *******8
A. S + I
B. I - S (WA)
C. S - I --------
D. S/I
E. S - I

answer

C. S - I

question

answer

C. Tools of fiscal policy that responds to change in the economy without any action by
politician.

question

. Problems in measuring the cost of living include ***************
A. Substitution bias
B. The introd of new goods
C. Unmeasured quality changes
D. All
E. None

answer

D. All

question

The required Reserve ration is 25% an additional 5,000 of reserves can increase the money
supply by?

answer

D. 20,000 (0.25 / 1) = (5,000 / x) 0.25x = 5,000 x = 5,000 / 0.25 x =
20,000

question

Which shifts the aggregate demand to the right?

answer

A. Increase in government purchases

question

. Liquidity performance an increase in the rate of growth of the money supply cause?

answer

A. Interest rates will fall

question

GDP is 5 trillion dollars, the price level is $2, money supply is 2 trillion dollars. What is the
value of the velocity of money according to the quantity equation?

answer

A. 5 MV = PY V = (PY / M) V = (5 * 2) / 2 V = 10 / 2 V = 5

question

Suppose that the price level is 5, money supply is 10 trillion dollars, velocity of money is 4.
What is the value of real GDP?

answer

B. 8 trillion MV=PY Y= MV / P Y= (10 * 4) / 5 Y= 40 / 5 Y= 8

question

Decrease the money supply the Fed would?
A. Buy government's bond (WA)
B. Increase the discount rate
C. Decrease the Reserve requirements
D. Any of the above
E. None

answer

B. Increase the discount rate

question

Example of structural unemployment?

answer

D. Unskilled worker can't get hired because the minimum wage is too high.

question

According to loan able funds framework, if business decides to eliminate or postpone
expansion plans reducing their need to borrow?

answer

C. Interest rates will decrease

question

If there is excess demand in the loan able fund market?

answer

E. B & C

question

answer

E. The positive slope of the aggregate demand curve.

question

Which of the following will increase the long - run growth?
A. Rate is U.S. Real GDP per person
B. Bailout unsecured comp
C. More efficient
D. A, B and C
E. A and C will increase the ....... (WA)

answer

question

answer

A. Net domestic product.

question

Sam, 2 drills process the furniture maker uses to produce tables are

answer

A. Physical capital

question

Private property right enforceability means that you can use the reward from your effect to?
A. Sale
6
B. Consumers
C. Investment
D. Help the pue
E. All

answer

E. All

question

If there is excess Supply in the loanable funds framework? ***********

answer

A. Interest Rates are above equilibrium.

question

The value of depreciation of the economy's capital stock, you find the inflation 10 %,
nominal 14, economic 8 %. What is real?

answer

D. 4 (14 - 10 = 4)

question

How big is the labor force? (800 + 200 = 1000)
# of employment 800
# of unemployment 200
Not in labor force 50

answer

C. 1000

question

Following shifts can explain an increase in the price level and decrease in real output.

answer

C. A leftward shift in the Short-Run Aggregate Supply Curve.

question

answer

A. Interest Rates will fall

question

Which of the following is a form of monitory policy?

answer

A. Increasing the Money Supply faster than usual during recession.

question

answer

D. All

question

Privet property rights

answer

E. As they see and help their neighbors.

question

a person who was laid off during a recession and .....
7

answer

Cyclical

question

Technological refers to

answer

Knowledge of current value of GDP and CPI

question

Merchandise trade deficit

answer

Foreign investors see opportunities in US Net export

question

Physical capital
Land materials ...trees (WA)

answer

The stock of equipment and building that used to produce goods and service

question

Real interest rate will decrease if

answer

Expected inflation increases

question

6%-8% economic growth rate is 2% what is nominal rate

answer

14% (6 + 8 = 14)

question

Reserve ratio is 10% bank receives new checkable deposit of $2000

answer

Will be able to make loans up to a max $2000

question

18% nominal rate expected inflation rate at 12% what is real interest rate?

answer

6% (18 - 12 = 6)

question

What is the labor force?
Employed 1000
Unemployed 500
Not in labor force 600
1

answer

500 (1000 + 500)

question

Reserve ratio is 10% and a bank receive a new checkable deposit 1,000

answer

Require to increase by 100 (1,000 * 10% = 100)

question

Michael Jordan is currently worth 25,000 and the CPI is 108

answer

23148
(25,000 / 108= 231.48 231.48 * 100= 23148)

question

.Real wages are equal to
Nominal wages minus the inflation rate (WA)

answer

Nominal wage divided by a price index

question

answer

a. $1,800,000 Y= C + I + G + Nx Y= 1,200,000 + 300,000 + 200,000 + 100,000 = 1,800,000

question

answer

c. poor countries with small capital stocks will grow faster that
wealthy countries when investment increases.

question

Education is an example of

answer

b. investment in human capital

question

answer

c. A more efficiently designed patent system. Correct.

question

answer

b. Tax revenue minus government spending. Correct.

question

A person who did not have a job but was looking for work would be categorized as
a. employed
b. unemployed
c. not in the labor force
d. marginally unemployed
e. partially employed

answer

b. unemployed

question

answer

b. 4.8%

question

answer

a. must increase required reserves by $20.
(100*20%=20)

question

answer

a. 16% (10+6
=16)

question

answer

c. The real interest rate is the nominal interest rate minus the expected inflation
rate.

question

answer

d. A decrease in both the price level and real
output.

question

answer

a. the Keynesian multiplier

question

Which of the following is an automatic stabilizer?
a. FDIC insurance
b. The income tax system.
c. An open market operation. Incorrect. Please review Top Ten Concept # 9.
11
d. Defense spending

answer

e. none of the above.

question

answer

a. exports and its imports.

question

answer

c. the removal of government regulations, leading to a large
increase in oil production.

question

answer

b. the market value of all final goods and services produced within a country in a given
time period, using prices from a "base" year to calculate the market value.

question

answer

a. immigration

question

answer

c. low growth rates.

question

answer

a. stable private property rights

question

answer

a. 9% (Real Interest Rate=Nominal Interest Rate - Inflation)

question

answer

b. Frictional Unemployment

question

answer

c. If the Money Supply and the price level are constant, then real GDP is likely to rise.

question

answer

c. A lower price level causes the real exchange rate to depreciate, which encourages
spending on net exports.

question

answer

b. Active fiscal policy.

question

In the U.S., the organization that is responsible for monetary policy is
a. the Congress.
b. the President.
c. the Federal Reserve.
d. a cartel of private banks.
e. the Supreme Court

answer

c. the Federal Reserve.

question

answer

b. occurs when imports are greater than exports.

question

answer

d. all of the above

question

answer

b. measures price changes in a basket of goods bought by a typical family

question

answer

a. the quantity of inputs used in production and the quantity of output.

question

answer

b. encouraging education and training of labor. Correct.

question

answer

e. All of the above are major determinants of long-run growth

question

answer

d. Both (a) and (c) are true.

question

answer

c. there will be excess supply in the loanable funds market.

question

answer

c. 20% (800 + 200 = 1,000 200
/ 1,000 = 20)

question

According to the following information, what is the unemployment rate?
Number of Employed: 1800
Number of Unemployed: 200
Not in the Labor Force: 600
a. 10%
b. 12%
c. 14%
d. 20%

answer

a. 10%

question

answer

b. the amount of reserves banks must hold against deposits.

question

answer

a. Many tax laws cause great inefficiency in the presence of inflation.

question

answer

c. The Fisher Effect states that when the rate at which the money supply grows is

question

answer

a. the quantity of goods and services that households, firms, and the government
want to buy at each price level.

question

answer

a. create money faster during recessions and more slowly during booms

question

answer

a. Interest rates will fall.

question

answer

b. net foreign investment

question

A person who worked 20 hours per week while going to school would be categorized as
a. employed
b. unemployed
c. not in the labor force
d. marginally unemployed
e. labor impaired

answer

a. employed

question

. If expected inflation is 2%, the nominal interest rate is 7% and the economy is growing at a
rate of 3%, the real interest rate is equal to

answer

a. 5%

question

The GDP deflator is

answer

b. (Nominal GDP x 100) / (Real GDP).

question

According to the loanable funds framework, if businesses see new opportunities to expand
capacity by building new factories, the likely effect will be that:

answer

e. None of the above.

question

A full-time student who did not have a job and was not looking for work would be
categorized as

answer

c. not in the labor force

question

Which of the following statements is consistent with the theory of liquidity preference?

answer

a. When the Federal Reserve Board of Govenors increases the money supply
faster than usual, interest rates fall

question

An open market purchase is where the Fed

answer

b. Purchases government bonds from the public, thereby increasing the money
supply.

question

All of the following would cause a rightward shift in the short-run aggregate-supply curve
except

answer

c. A war that reduces the economy's physical capital stock.

question

Which of the following is not an example of monetary policy?

answer

d. An increase in the earned income tax credit.

question

answer

e. The positive slope of the short-run aggregate-supply curve

question

According to the theory of "money neutrality" which of the following statements is likely to
be true?

answer

e. When the money supply is increased, nominal wage rates will rise

question

If the reserve ratio is 25 percent, the money multiplier is

answer

a. 4

question

answer

all

question

A country will grow faster if

answer

a. Investment in human capital increases.

question

The aggregate supply-aggregate demand model suggests that the government can stabilize
an economy that experiences a sudden and unexpected decline in consumer confidence and
aggregate demand by:

answer

a. Increasing the money supply.

question

answer

c. $1,400,000

question

. If the dollar value of a country's exports is greater than the value of its imports,

answer

a. Net foreign investment is generally positive.

question

Which of the following is an example of active fiscal policy?

answer

c. Congress passes a tax cut after the beginning of a recession with the aim of stimulating
the economy.

question

Negative net exports means that

answer

b. The country buys more goods from other countries than it sells to other
countries.

question

Which of the following is not an example of an automatic stabilizer?

answer

c. the reduction in income tax revenues during a recession

question

. To decrease the money supply, the Fed would

answer

b. Increase the discount rate.

question

The aggregate supply-aggregate demand model predicts that an unexpected increase in
government spending will have what short-run effects?

answer

e. An increase in both the price level and real output.

question

Which of the following would be included in Gross National Product (GNP) but not in Gross
Domestic Product (GDP) of the United States?

answer

a. the earnings of an American-owned factory in Germany

question

According to the following information, what is the unemployment rate? (Round to the
nearest tenth of a percent.)
Number of Employed: 10,000
Number of Unemployed: 500
Not in the Labor Force: 3,000

answer

b. 4.8% (10,000 + 500 = 10,500 500 / 10,500 = 4.8%)

question

In economics, "National Saving" is calculated by

answer

d. Subtracting private and government consumption from total income.

question

Which of the following is NOT one of the components of aggregate demand?

answer

d. Money supply.

question

In the long-run, higher saving leads to

answer

c. Temporarily faster growth.

question

. Which of the following is not included in a country's Gross Domestic Product (GDP)?

answer

e. the value of household production in the economy

question

Which of the following statements are correct?

answer

a. Economists using the classical dichotomy distinguish between variables
measured in monetary units from those measured in physical units.

question

answer

c. MV = PY

question

An increase in the minimum wage will likely:

answer

a. Increase structural unemployment

question

According to the loanable funds framework, if businesses reduce their willingness to spend
money on new capital equipment,

answer

c. Interest rates will decrease.

question

Governments can increase the likelihood of economic development by

answer

b. Supporting smooth transitions from one set of office-holders to another

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