Macroeconomics Final- Cheng Li

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Macroeconomists study

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economy-wide phenomena

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Which of the following is NOT a characteristic of a perfectly competitive market?

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Sellers set the price of the product

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When the price of a good or service changes

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there is a movement along a given demand curve

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If buyers today become more willing and able than before to purchase larger quantities of Coke at each price of Coke, then

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the demand curve for Coke will shift to the right

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Which of the following would not shift due the demand curve for mp3 players?

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a decrease in the price of mp3 players

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The demand curve for textbooks shifts

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when a determinant of the demand fro textbooks other than the price of textbooks changes

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Suppose you use gold to make jewelry. If the price of gold falls, then we would expect you to

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be willing and able to produce more jewelry than before at each price.

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Which of the following events must cause equilibrium price to fall?

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demand decreases and supply increases

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When the price of a good is higher than the equilibrium price,

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sellers desire to produce and sell more than buyers wish to purchase.

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If buyers today become more willing and able than before to purchase larger quantities of Vanilla Coke at each price of Vanilla Coke, then

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the demand curve for Vanilla Coke will shift to the right.

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If an economy's GDP falls, then the economy's

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income and expenditure both fall.

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Gross domestic product adds together many different kinds of good and services into a single measure of the economic activity. To do this, GDP makes use of

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market Prices

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A farmer sells $50,000 of apples to individuals who take them home to eat and $75,000 of apples to a company that uses them all to produce apple cider. How much of the farmer's sales will be included as apples in GDP?

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$50,000

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Over time, people have come to rely more on market-produced goods and services and less on goods and services they produce for themselves. For example, busy people with high incomes, rather than cleaning their own homes, hire people to clean their homes. This change has

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caused measured GDP to rise

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A professional gambler moves from a state where gambling is illegal to a state where gambling is legal.Most of his income was, and continues to be, from gambling. His move

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Raises GDP

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If you buy a burger at your favorite fast food restaurant

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then both GDP and consumption spending will be higher

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For the purpose of calculating GDP, investment is spending on

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capital equipment, inventories, and structures, including household purchases of new housing

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A Texas household receives a social security check for $500, which it uses to purchase a $460 tv made in Korea by a Korea firm and a $40 dinner at a local restaurant. As a result, the US GDP

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increased by $40

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The city of Ann Arbor Michigan buys a police car manufactured in Germany. In the GDP account this transaction is included in

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government expenditures and imports

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Which of the following items is counted as part of government purchases?

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The city of Athens, Ohio pays $10,000 to a tree trimming firm to trim trees along the city boulevards

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Consider the market for minivans. For each of the events listed here, indicate whether demand or supply increases or decreases. Then draw a supply and demand diagram to show the effect on the price and quantity of minivans.

A strike by steelworkers raises the steel prices.

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Market supply will decrease.
Supply will go left.

(look at hw1)

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Demand increases.
Prices & quantity rise.

(look at hw1)

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Demand decreases.
Supply decreases.

(look at hw1)

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A hypothetical country of Lahland produces only movies and popcorn. Quantities and prices of the goods for the last several years are shown below in Table 1. The base year is 2008.
year: $ movie quant $ popcorn quant
2008 $10 400 movies $5 800 popcorn
2009 $11 500 movies $4 900 popcorn
2010 $12 600 movies $5 1000 popcorn
2011 $12 600 moveis $6 900 popcorn

What was this country's nominal GDP in 2009?

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11 x 500 = 5,500
4 x 900 = 3,600

= $9,100

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10 x 600 = 6,000
5 x 1,000 = 5,000

=$11,000

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2010:

10 x 600 = $6,000
5 x 1,000= $5,000
= $11,000

2011:

10 x 600 = $6,000
5 x 900 = $4,500
= $10,500

=3.28%

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-4.55%

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11,000/100= $110

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Which of the following is not correct?

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The consumer price index is used to measure the quantity of goods and services that the economy is producing.

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Consider a small economy in which consumers buy only two goods: apples and pears. In order to compute the consumer price index for this economy for two or more consecutive year, we assume that

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neither the number of apples nor the number of pears bought by the typical consumer changes from year to year.

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Economists use the term inflation to describe a situation in which

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the economy's overall price level is rising.

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Suppose a basket of goods and services has been selected to calculate CPI and 2002 has been selected as the base year. In 2002, the basket's cost was $50; in 2004, the basket's cost was $52; and in 2006, the basket's cost was $54.60. The value of the CPI in 2004 was

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104.0

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Samantha goes to the grocery store to make her monthly purchase of ginger ale. As she enters the soft drink section, she notices that the price has increase by 15 percent, so she buys tea instead. To which problem in the construction of the CPI is this situation most relevant?

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Substitution Bias

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The introduction of a new good

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decreases the cost of maintaining the same level of economic well-being.

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When the consumer price index falls, the typical family

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can spend fewer dollars to maintain the same standard of living.

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From 2008 to 2009, the CPI for medical care increased from 150.8 to 164.4. What was the inflation rate for medical care?

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9.0 perecent

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In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2. In 2007, a sandwich cost $5. The base year is 2006. If the consumer price index in 2007 was 125, then how much did a magazine cost in 2007?

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$2.50

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Shawn puts money into an account. One year later he sees that he has 5 percent more dollars and that his money will buy 6 percent more goods

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The nominal interest rate was 5 percent and the inflation rate was -1 percent.

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When inflation rises, people will desire to hold

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less money and will go to supermarkets more frequently.

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When inflation rises, people tend to go to supermarkets

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more often, giving rise to shoeleather costs.

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Andre owns his own business. Oscar is an unpaid worker in his family's business. Who is included in the Bureau of Labor Statistics' "employed" category?

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both Andre and Oscar

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Who of the following is counted as unemployed by the BLS?

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someone on temporary layoff

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Danielle did not work last week because flooding forced an evacuation of her workplace. The Bureau of Labor Statistics counts Danielle as

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employed and in the labor force

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Nance just lost her job, and she hasn't yet started looking for a new one. The Bureau of Labor Statistics counts Nancy as

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neither in the labor force nor unemployed.

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People who are unemployed because of job search are best classified as

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frictionally unemployed.

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People who are unemployed because wages are set above the level that brings labor supply and demand into equilibrium are best classified as

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structurally unemployed.

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John is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. Curtis has looked for work as an accountant for some time. While the demand for accountants doesn't appear to be falling, there seems to be more people applying than jobs available.

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John is frictionally unemployed, and Curtis is structurally unemployed.

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Jenna is searching for a job that suits her tastes about where to live. Mary is looking for a job that makes best use of her skills.

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Jenna and Mary are both frictionally unemployed.

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Minimum wages create unemployment in markets where they create a

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surplus of labor. Unemployment of this type is called structural.

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If the minimum wage is currently above the equilibrium wage, then a decrease in the minimum wage

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increases the quantity of labor demanded but decreases the quantity of labor
supplied.

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Which of the following is not correct?
a. When a union is present in a labor market, wages are determined by the
equilibrium of supply and demand.
b. Like any cartel, a union is a group of sellers acting together in the hope of
exerting their joint market power.
c. The process by which unions and firms agree on the terms of employment is
called collective bargaining.
d. Today, most workers in the U.S. economy are not members of a union.

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When a union is present in a labor market, wages are determined by the equilibrium of supply and demand.

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When a union raises the wage above the equilibrium level,

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the quantity of labor supplied and unemployment both rise.

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The theory of efficiency wages provides a possible explanation as to why

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firms may be inclined to keep their workers' wages above the equilibrium level.

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Table 1 pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators.

Year Price of a book Price of a calculator
2006 $24 $8
2007 $30 $12

What was the cost of the basket in 2006? What was the cost of the basket in 2007?

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2006:
5 x 24 + 10 x 8 =
120 + 80 = 200 in 2006

2007:
5 x 30 + 10 x 12 =
150 + 120 =270 in 2007

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Table 1 pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators.

Year Price of a book Price of a calculator
2006 $24 $8
2007 $30 $12

If 2006 is the base year, what was the consumer price index in 2007?

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CPI = 100 x 270/200 = 135 CPI

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(135-100)/100 x 100% =
35/100 x 100% = 35%

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Consider a very small economy in which the total adult population is 10. Of those ten people, 1 person is unemployed and 5 are out of the labor force.

What is the labor force participation rate in this economy?

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100% x (4 + 1)/10 = 50%

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Consider a very small economy in which the total adult population is 10. Of those ten people, 1 person is unemployed and 5 are out of the labor force.

What is the unemployment rate in this economy?

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100% x 1/5 = 20%

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Institutions that help to match one person's saving with another person's investment are collectively called the

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financial system.

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Norberto is opening a bicycle shop, and his monthly expenditures to get the shop up and running exceed his monthly income. Norberto is best described as a

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borrower or as a demander of funds.

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We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

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Bond A has a term of 20 years and Bond B has a term of 2 years.

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Two of the economy's most important financial intermediaries are

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banks and mutual funds.

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Morgan, a financial advisor, has told her clients the following things. Which of her statements is not correct?

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"U.S. government bonds generally pay a higher rate of interest than corporate bonds."

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The primary advantage of mutual funds is that they

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allow people with small amounts of money to diversify.

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Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,500, consumption equals 7,500, and government purchases equal 2,000. What is national saving?

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None of the above is correct.

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If a reform of the tax laws encourages greater saving, the result would be

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lower interest rates and greater investment.

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If Congress instituted an investment tax credit, the interest rate would

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rise and saving would rise.

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If the government currently has a budget deficit, then

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its debt is increasing.

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Other things the same, a government budget deficit

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reduces both public and national saving.

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You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

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has no intrinsic value. The exchange is not an example of barter.

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Which list ranks assets from most to least liquid?

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currency, stocks, fine art.

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When in France you notice that prices are posted in euros, this best illustrates money's function as

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a unit of account.

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If an economy uses silver as money, then that economy's money

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is commodity money.

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In a system of 100-percent-reserve banking, the purpose of a bank is to

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give depositors a safe place to keep their money.

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A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

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an asset for the bank and a liability for Greg's Ice Cream. The loan increases the money supply.

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If the money multiplier is 2 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

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it increases by $100,000

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When the Fed decreases the discount rate, banks will

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borrow more from the Fed and lend more to the public. The money supply
increases.

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When there is a reserve requirement, banks

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may hold more than, but not less than, the required quantity of reserves.

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Consider a very small economy in which private saving is $5, public saving is $2, tax revenues are $3, and consumption is $4. Assume for simplicity that the economy is closed, that is, both imports and exports always equal zero, so that net exports are always zero too.

Calculate government purchases for this economy.

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$3 - G = $2 - 3
- G = $3 + $2
-1 -1 -1
G = $1

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$2 + $5 = $7

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Closed economy means the investment is equal to national savings which is $7

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Y = C + G + I
= $4 + $1 + $7
= $12

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Suppose that the Federal Reserve conducts an open market operation in which it buys $100 in US government bonds from a private saver, but assume now that banks engage in fractional reserve banking.

Assume, in particular, that all banks choose a 10% reserve ratio and that all households and non-bank businesses always deposit all the funds they receive and therefore never hold any currency. In this economy, by how much, in dollar terms, does the total money supply increase as a result of this open market operation?

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Money Multiplier = 1/ Reserve Ratio

=1/10% = 10
= $1,000

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Suppose that the Federal Reserve conducts an open market operation in which it buys $100 in US government bonds from a private saver, but assume now that banks engage in fractional reserve banking.

Continue to assume that all banks choose a 10% reserve ratio, but assume, instead, that households and non-bank businesses deposit only half of the funds they receive and hold the rest as currency. Is the increase in the money supply as a result of this open market operation in this case larger than, smaller than, or the same as the increase in the money supply from part (a) above, where households and non-bank businesses hold no currency?

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Less than $1,000

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Suppose that the Federal Reserve conducts an open market operation in which it buys $100 in US government bonds from a private saver, but assume now that banks engage in fractional reserve banking.

Finally, go back to assuming that all households and non-bank businesses deposit all the funds that they receive and therefore hold no currency, but assume that while most banks choose a 10% reserve ratio, some banks choose a lower reserve ratio. Is the increase in the money supply as a result of this open market operation in this case larger than, smaller than, or the same as the increase in the money supply from part (a) above, where all banks choose a 10% reserve ratio?

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Larger than $1,000

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Consider two banks - the First National Bank, and the Second National Bank - with T-accounts as shown below:

First National Bank
Assets : Liabilities:
Reserves $20 Deposits $100
Loans $80 Shareholders' Equity $10
Other Assets $10

Second National Bank
Assets: Liabilities:
Reserves $10 Deposits $90
Loans $90 Shareholders' Equity $20
Other Assets $10

If the First National Bank experiences a $15 deposit outflow, is it illiquid, insolvent, or neither? Explain your answer briefly (in one sentence or two).

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Neither because there is a large enough amount of assets to match the deposits outflow.

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Consider two banks - the First National Bank, and the Second National Bank - with T-accounts as shown below:

First National Bank
Assets : Liabilities:
Reserves $20 Deposits $100
Loans $80 Shareholders' Equity $10
Other Assets $10

Second National Bank
Assets: Liabilities:
Reserves $10 Deposits $90
Loans $90 Shareholders' Equity $20
Other Assets $10

If the Second National Bank experiences a $15 deposit outflow, is it illiquid, insolvent, or neither? Explain your answer briefly (in one sentence or two).

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Illiquid because there is not enough $ in the reserves so you have to liquify other assets.

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Consider two banks - the First National Bank, and the Second National Bank - with T-accounts as shown below:

First National Bank
Assets : Liabilities:
Reserves $20 Deposits $100
Loans $80 Shareholders' Equity $10
Other Assets $10

Second National Bank
Assets: Liabilities:
Reserves $10 Deposits $90
Loans $90 Shareholders' Equity $20
Other Assets $10

If some of the consumers and businesses who borrowed from the First National Bank default on their loans, so that the First National Bank's manager is forced to conclude that $15 in loans will never be repaid, is the First National Bank illiquid, insolvent, or neither? Explain your answer briefly (in one sentence or two).

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Insolvent because there isn't enough money in the shareholder's equity to cover all of the loans.

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Consider two banks - the First National Bank, and the Second National Bank - with T-accounts as shown below:

First National Bank
Assets : Liabilities:
Reserves $20 Deposits $100
Loans $80 Shareholders' Equity $10
Other Assets $10

Second National Bank
Assets: Liabilities:
Reserves $10 Deposits $90
Loans $90 Shareholders' Equity $20
Other Assets $10

If some of the consumers and businesses who borrowed from the Second National Bank default on their loans, so that the Second National Bank's manager is forced to conclude that $15 in loans will never be repaid, is the Second National Bank illiquid, insolvent, or neither? Explain your answer briefly (in one sentence or two).

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Neither because the bank has enough equity to pay off all the loans.

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The supply of money increases when

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the Fed makes open-market purchases.

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Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes

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your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage also increased.

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Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds?

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8 units of goods.

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According to the classical dichotomy, when the money supply doubles which of the following doubles?

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the price level and nominal GDP

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Based on the quantity equation, if velocity = 3.5, the quantity of money = 15,000, and the price level = 1.2, then the real value of output is

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43,750.00.

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If velocity and real output were nearly constant, then

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the inflation rate would be about the same as the money supply growth rate.

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If money is neutral and velocity is stable, an increase in the money supply creates a proportional increase in

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both the price level and nominal output.

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The inflation tax falls mostly heavily on

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those who hold a lot of currency but accounts for a small share of U.S.
government revenue.

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If the exchange rate is 0.60 British pounds = $1, a bottle of ale that costs 3 pounds costs

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$5.

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You are planning a graduation trip to Nepal. Other things the same, if the dollar depreciates relative to the Nepalese rupee, then

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the dollar buys fewer rupees. Your purchases in Nepal will require more dollars.

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If you go to the bank and notice that a dollar buys more Mexican pesos than it used to, then the dollar has

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appreciated. Other things the same, the appreciation would make Americans
more likely to travel to Mexico.

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You are staying in London over the summer and you have a number of dollars with you. If the dollar depreciates relative to the British pound, then other things the same,

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the dollar would buy fewer pounds. The depreciation would discourage you from buying as many British goods and services.

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When American goods and services become more attractive to Chinese, the demand for US dollars

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increases. The supply of Chinese yuan increases.

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When European goods and services become more attractive to Chinese, the demand for euros

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increases, and euros appreciate.

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In the foreign exchange market, the supply of US dollars comes from

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Americans, and the demand for US dollars comes from foreigners.

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In 1980 major US banks offered interest rates as high as 15% per year on savings accounts offered to consumers. By 2000, that rate had dropped to 5% per year. On the other hand, in 1980 the US inflation rate was about 14% per year, whereas in 2000, the US inflation rate was only 3% per year.

What was the nominal interest rate in 1980?

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15%

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answer

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15% - 14% = 1%

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5% - 3% = 2%

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Year 2000 was a better time because real interest rates were more relevant since consumers care not so much about the # of $ received but the amount of goods and services they can get.

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Consider an economy in which the velocity of money (V) equals 2 and real GDP (Y) equals $4.

If the money supply (M) equals $2, what is the value of nominal GDP?

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Monimal GDP = $4.00

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Consider an economy in which the velocity of money (V) equals 2 and real GDP (Y) equals $4.

If the money supply (M) equals $2, what is the value of the economy-wide price level (P)?

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P = $1.00

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Consider an economy in which the velocity of money (V) equals 2 and real GDP (Y) equals $4.

If the money supply doubles while velocity and real GDP remain unchanged, what happens to nominal GDP: does it rise, fall, or stay the same?

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Nominal GDP rises (double)

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Consider an economy in which the velocity of money (V) equals 2 and real GDP (Y) equals $4.

If the money supply doubles while velocity and real GDP remain unchanged, what happens to the economy-wide price level (P): does it rise, fall, or stay the same?

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P rises (double)

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If Japan specializes in producing cars, it can produce 16 million cars a year. If Japan specializes in producing cellphones, it can produce 80 million cellphones a year.
If Korea specializes in producing cars, it can produce 8 million cars a year. If Korea specializes in producing cellphones, it can produce 48 million cellphones a year.

Which country has absolute advantage in producing cars?

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Japan

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Japan

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Korea

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Japan

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Perry accumulated a lot of mathematical skills while in high school, college, and graduate school. Economists include these skills as part of Perry's

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human capital.

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A leading environmental group recently published a report contending that humans are running a "resource deficit" because we are using natural resources faster than they can be regenerated. The group claims that this means that economic growth will eventually stop, and will even be reversed. An economist would

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disagree with the report, in part because it ignores the mitigating effects of technological change.

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If there are diminishing returns to capital, then

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increases in the capital stock increase output by ever smaller amounts.

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All else equal, by saving more, a country

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has more resources for capital goods. The increase in capital raises
productivity.

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The dictator of a certain country requires that companies planning to open or expand must pay a large fee to file an application one year prior to building new factories or expanding existing ones. Other things the same, in the long run this requirement would

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reduce real GDP per person and productivity.

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In the past there have been violent protests against the World Bank and the World Trade Organization. The protesters argued that these institutions promote free trade and also encourage corporations in rich countries to invest in poor countries. The protesters contended that these practices make rich countries richer and poor countries poorer. An economist would

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disagree with the protesters because these practices will help make both rich and poor countries richer.

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The Economic Development Minister of a country has a list of things she thinks may explain her country's low growth of real GDP per person relative to other countries. She asks you to pick the one you think most likely explains her country's low growth. Which of the following contributes to low growth?

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poorly enforced property rights

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When we say that economic fluctuations are "irregular and unpredictable," we mean that

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recessions do not occur at regular intervals.

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Which of the following is correct?

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Real GDP is the variable most commonly used to measure short-run
economic fluctuations. It is almost impossible to predict these fluctuations
with much accuracy.

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Most economists believe that in the long run, changes in the money supply

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affect nominal but not real variables. This view is consistent with the classical macroeconomic theory.

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The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

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the slope of the aggregate-demand curve.

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If the price level falls, the real value of a dollar

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rises, so people will want to buy more. This response helps explain the slope of the aggregate demand curve.

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Other things the same, when the price level falls, interest rates

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fall, so firms increase investment.

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Other things the same, if the price level falls, people

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increase foreign bond purchases, so the supply of dollars in the market for
foreign-currency exchange increases

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Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to

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decrease consumption, shown by shifting the aggregate-demand curve to the left.

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When consumption tax decreases, consumption

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increases as shown by a shift of the aggregate demand curve to the right.

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Which of the following both shift aggregate demand right?

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net exports rise for some reason other than a price change and the money
supply rises.

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Which of the following would cause prices to fall and output to rise in the short run?

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short run aggregate supply shifts right

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If aggregate demand shifts right then in the short run

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firms will increase production. Unemployment will fall.

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Suppose that there is an increase in the costs of production that shifts the short- run aggregate supply curve left. If there is no policy response, then eventually

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firms will decrease production. Unemployment will rise.

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The economy is in a recession with high unemployment and low output. In order to recover the economy, the Fed can increase money supply to reduce interest rate

Identify an open market operation that would increase money supply.

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The fed can lower the spending and this will increase the money supply.
Buy government bonds.

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The economy is in a recession with high unemployment and low output. In order to recover the economy, the Fed can increase money supply to reduce interest rate

Draw a graph of the money market to illustrate the effect of this open market operation. Show the resulting change in the interest rate.

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(See HW5)

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The economy is in a recession with high unemployment and low output. In order to recover the economy, the Fed can increase money supply to reduce interest rate

How does the change in interest rate identified in part (2) affect investment and aggregate demand?

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This increases investment and shifts the demand curve to the right.

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The economy is in a recession with high unemployment and low output. In order to recover the economy, the Fed can increase money supply to reduce interest rate

How does the change in aggregate demand identified in part (3) affect unemployment and output in the economy?

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This would result in low employment and high output.

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Suppose economists observe that an increase in government purchases of $10 billion raises aggregate demand by $30 billion.

If these economists ignore the possibility of crowding out, what would they estimate the marginal propensity to consume (MPC) to be?

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Multiplier = 1 / (1 - MPC)
Multiplier = 30 / 10 = 3
MPC = 2 / 3

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Suppose economists observe that an increase in government purchases of $10 billion raises aggregate demand by $30 billion.

Now suppose the economists allow for crowding out. Would their new estimate of the MPC be larger or smaller than their initial one?

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If crowding out is allowed, the MPC would be greater than 2/3 if the MPC is bigger than 2/3 the multiplier would also be bigger than 3.
Multiplier greater than 3.
MPC greater than 2/3.

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The primary economic function of the financial system is to

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match one person's savings with another person's investment

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The economy's two most important financial markets are

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the bond market and the stock market

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Two of the economy's most important financial intermediaries are

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banks and mutual funds

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The fact that borrowers sometimes default on their loans by declaring bankruptcy is directly related to the characteristic of a bond called

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Credit Risk

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Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,500, consumption equals 7.500, and government purchases equal to 2,000. What is the national saving?

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None are correct

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Consider a very small economy in which private saving is $5, public saving is $2, tax revenues are $4, and consumption is $4. What is government purchases for this economy?

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When in France you notice that prices are posted in Euros, this best illustrates money's function as

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a unit of account

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Which list ranks assets from most to least liquid?

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Currency, stocks, Fine art

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The Fed can increase the money supply by

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purchasing government bonds or lowering the discount rate

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In 1991, the federal reserve lowered the reserve requirement from 12 percent to 10 percent. Other things the same this should have

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increased both the money multiplier and the money supply

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The Fed purchases $200 worth of government bonds from the public. The reserve requirement is 10%, people hold no currency, and the banking system keeps no excess reserves. The US money supply eventually increased by

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$2,000

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Suppose an ice cream cone cost $3. Molly holds $60. What is the real value of the money she holds?

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20 ice cream cones

question

The data on hyperflation show a clear link between the quantity of money and

answer

the price level

question

If money is neutral and velocity is stable, an increase in the money supply creates a proportional increase in

answer

both the price level and nominal output

question

The inflation tax falls most heavily on

answer

those who hold a lot of currency but accounts for a small share of US gov revenue

question

You are staying in London over the summer and you have a number of dollars with you. If the dollar depreciated relative to the British pound, then other things the same,

answer

the dollar would buy fewer pounds. The depreciation would discourage you from buying as many British goods and services.

question

When European goods and services become more attractive to Chinese, the demand for Euros

answer

increases, ans euro appreciate

question

When the interest rate of the US government bonds fall, the supply of US dollars in the foreign exchange market

answer

increases and the dollar depreciate

question

When the US government reduced the tariff on European goods, the supply of US dollars in the foreign exchange market

answer

increases and dollars depreciate

question

In an open economy, S = I + NX, where S represents national saving, I represents investments, and NX represents net exports.
Consider two open economies: the United States, which is now running a trade deficit, meaning that its net exports are negative, and China, which is now running a trade surplus, meaning that its net exports are positive.

What does the United States trade deficit imply for the relationship between its national savings and investment?

answer

national saving < investment

question

In an open economy, S = I + NX, where S represents national saving, I represents investments, and NX represents net exports.
Consider two open economies: the United States, which is now running a trade deficit, meaning that its net exports are negative, and China, which is now running a trade surplus, meaning that its net exports are positive.

What does the China's trade surplus imply for the relationship between its national savings and investment?

answer

national savings > investment

question

answer

Borrowing

question

answer

Lending

question

Assume that all banks choose a 20% reserve ratio and there is no cash held by the public. The Federal Reserve decides that it wants to expand the money supply by $40 million dollars.

What is the money multiplier?

answer

1/ 20% = 0.05 = 5

question

Assume that all banks choose a 20% reserve ratio and there is no cash held by the public. The Federal Reserve decides that it wants to expand the money supply by $40 million dollars.

If the fed is using open market operations, does it need to buy or sell government bonds to accomplish the goal?

answer

Buy

question

If an economy's GDP rises, then it must be the case that

answer

the economy's income and expediture both rise

question

If a state made a perviously-illegal activity, such as gambling or prostitution legal, then, other things equal, GDP

answer

increases

question

A steel company sells some steel to a bike company for $150. the bicycle company uses the steel toto produce a bike and sell it for $250. Taken together, these two transactions contribute

answer

$250 to GDP

question

Susan switches from Jiffy Lube for an oil change to changing the oil herself. The value of changing the oil is

answer

included in the GDP if Susan pays Jiffy lube but not if she pays herself.

question

In the economy of Ukzten in 2010, consumption was $3,000, exports were $400, GDP was $5,000, imports were $600, and investment was $1100. What were Ukzten's gov purchase in 2010

answer

$1,100

question

Consumption consists of spending by households on goods and services, with the exception of

answer

purchases of new houses

question

A US firm produces sweatshirts in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the sweatshirt to consumers. In which quarter does these transactions raise investments?

answer

first but not the second

question

Shawn puts money in an account. One year later he sees that he has 5% more dollars and that his money will buy 6% more goods.

answer

the nominal interest rate was 5% and the inflation rate was -1

question

By not taking into account the possibility of consumer substitution, the CPI

answer

overstates the cost of living

question

If an unemployed person quits looking for work, then

answer

unemployment rate and the labor-force participation rate both decrease

question

Which of the following is not an explanation for the existence of structural unemployment?

answer

job search

question

When a minimum wage law forces the wage to remain above the level that balances supply and demand, the result is a

answer

surplus of labor and shortage of jobs

question

The theory of efficiency wages provides a possible explanation as to why firms

answer

may be inclined to keep their workers' wages above the equilibrium level

question

answer

Supply increases

question

answer

Supply increases and demand decreases

question

answer

demand increases

question

A hypothetical country of New Yard had only 6 adult people in 2015.
Monica is a chef in a restaurant.
Pheobe is a homemaker who enjoys making apple pie for her family.
Chandler is the owner of the restaurant that hired Monica.
Joey does not have a job but is looking for employment.
Ross is a professor of paleontology at New Yard University but he did not work last week due to illness.
Rachel is a waitress at Chandler's restaurant.

Is Phoebe in the labor force in 2015?

answer

No.

question

answer

question

answer

5/6 x 100% = 83%

question

answer

Joey

question

answer

1/5 x 100% = 20%

question

Beerland:
Year: $ of karaoke Quant $ of beer Quant
2012 $40 8 $5 20
2013 $42 10 $6 30

What was Beerland's real GDP in 2013?

answer

40 x 10 + 5 x 30 = 550
real GDP = 550

question

Beerland:
Year: $ of karaoke Quant $ of beer Quant
2012 $40 8 $5 20
2013 $42 10 $6 30

What was Beerland's nominal GDP in 2013?

answer

42 x 10 + 6 x 30 = 600
100 x 550/ 600 = 109%

question

Beerland:
Year: $ of karaoke Quant $ of beer Quant
2012 $40 8 $5 20
2013 $42 10 $6 30

Suppose that in 2013 the population in Beerland was 100. What was Beerland's real GDP per capita in 2013?

answer

GDP per capita= 550/100
= 5.5

1 of 192

question

Macroeconomists study

answer

economy-wide phenomena

question

Which of the following is NOT a characteristic of a perfectly competitive market?

answer

Sellers set the price of the product

question

When the price of a good or service changes

answer

there is a movement along a given demand curve

question

If buyers today become more willing and able than before to purchase larger quantities of Coke at each price of Coke, then

answer

the demand curve for Coke will shift to the right

question

Which of the following would not shift due the demand curve for mp3 players?

answer

a decrease in the price of mp3 players

question

The demand curve for textbooks shifts

answer

when a determinant of the demand fro textbooks other than the price of textbooks changes

question

Suppose you use gold to make jewelry. If the price of gold falls, then we would expect you to

answer

be willing and able to produce more jewelry than before at each price.

question

Which of the following events must cause equilibrium price to fall?

answer

demand decreases and supply increases

question

When the price of a good is higher than the equilibrium price,

answer

sellers desire to produce and sell more than buyers wish to purchase.

question

If buyers today become more willing and able than before to purchase larger quantities of Vanilla Coke at each price of Vanilla Coke, then

answer

the demand curve for Vanilla Coke will shift to the right.

question

If an economy's GDP falls, then the economy's

answer

income and expenditure both fall.

question

Gross domestic product adds together many different kinds of good and services into a single measure of the economic activity. To do this, GDP makes use of

answer

market Prices

question

answer

$50,000

question

answer

caused measured GDP to rise

question

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal.Most of his income was, and continues to be, from gambling. His move

answer

Raises GDP

question

If you buy a burger at your favorite fast food restaurant

answer

then both GDP and consumption spending will be higher

question

For the purpose of calculating GDP, investment is spending on

answer

capital equipment, inventories, and structures, including household purchases of new housing

question

A Texas household receives a social security check for $500, which it uses to purchase a $460 tv made in Korea by a Korea firm and a $40 dinner at a local restaurant. As a result, the US GDP

answer

increased by $40

question

The city of Ann Arbor Michigan buys a police car manufactured in Germany. In the GDP account this transaction is included in

answer

government expenditures and imports

question

Which of the following items is counted as part of government purchases?

answer

The city of Athens, Ohio pays $10,000 to a tree trimming firm to trim trees along the city boulevards

question

answer

Market supply will decrease.
Supply will go left.

(look at hw1)

question

answer

Demand increases.
Prices & quantity rise.

(look at hw1)

question

answer

Demand decreases.
Supply decreases.

(look at hw1)

question

answer

11 x 500 = 5,500
4 x 900 = 3,600

= $9,100

question

answer

10 x 600 = 6,000
5 x 1,000 = 5,000

=$11,000

question

answer

2010:

10 x 600 = $6,000
5 x 1,000= $5,000
= $11,000

2011:

10 x 600 = $6,000
5 x 900 = $4,500
= $10,500

=3.28%

question

answer

-4.55%

question

answer

11,000/100= $110

question

Which of the following is not correct?

answer

The consumer price index is used to measure the quantity of goods and services that the economy is producing.

question

Consider a small economy in which consumers buy only two goods: apples and pears. In order to compute the consumer price index for this economy for two or more consecutive year, we assume that

answer

neither the number of apples nor the number of pears bought by the typical consumer changes from year to year.

question

Economists use the term inflation to describe a situation in which

answer

the economy's overall price level is rising.

question

answer

104.0

question

answer

Substitution Bias

question

The introduction of a new good

answer

decreases the cost of maintaining the same level of economic well-being.

question

When the consumer price index falls, the typical family

answer

can spend fewer dollars to maintain the same standard of living.

question

From 2008 to 2009, the CPI for medical care increased from 150.8 to 164.4. What was the inflation rate for medical care?

answer

9.0 perecent

question

answer

$2.50

question

Shawn puts money into an account. One year later he sees that he has 5 percent more dollars and that his money will buy 6 percent more goods

answer

The nominal interest rate was 5 percent and the inflation rate was -1 percent.

question

When inflation rises, people will desire to hold

answer

less money and will go to supermarkets more frequently.

question

When inflation rises, people tend to go to supermarkets

answer

more often, giving rise to shoeleather costs.

question

Andre owns his own business. Oscar is an unpaid worker in his family's business. Who is included in the Bureau of Labor Statistics' "employed" category?

answer

both Andre and Oscar

question

Who of the following is counted as unemployed by the BLS?

answer

someone on temporary layoff

question

Danielle did not work last week because flooding forced an evacuation of her workplace. The Bureau of Labor Statistics counts Danielle as

answer

employed and in the labor force

question

Nance just lost her job, and she hasn't yet started looking for a new one. The Bureau of Labor Statistics counts Nancy as

answer

neither in the labor force nor unemployed.

question

People who are unemployed because of job search are best classified as

answer

frictionally unemployed.

question

People who are unemployed because wages are set above the level that brings labor supply and demand into equilibrium are best classified as

answer

structurally unemployed.

question

answer

John is frictionally unemployed, and Curtis is structurally unemployed.

question

Jenna is searching for a job that suits her tastes about where to live. Mary is looking for a job that makes best use of her skills.

answer

Jenna and Mary are both frictionally unemployed.

question

Minimum wages create unemployment in markets where they create a

answer

surplus of labor. Unemployment of this type is called structural.

question

If the minimum wage is currently above the equilibrium wage, then a decrease in the minimum wage

answer

increases the quantity of labor demanded but decreases the quantity of labor
supplied.

question

answer

When a union is present in a labor market, wages are determined by the equilibrium of supply and demand.

question

When a union raises the wage above the equilibrium level,

answer

the quantity of labor supplied and unemployment both rise.

question

The theory of efficiency wages provides a possible explanation as to why

answer

firms may be inclined to keep their workers' wages above the equilibrium level.

question

answer

2006:
5 x 24 + 10 x 8 =
120 + 80 = 200 in 2006

2007:
5 x 30 + 10 x 12 =
150 + 120 =270 in 2007

question

Table 1 pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators.

Year Price of a book Price of a calculator
2006 $24 $8
2007 $30 $12

If 2006 is the base year, what was the consumer price index in 2007?

answer

CPI = 100 x 270/200 = 135 CPI

question

answer

(135-100)/100 x 100% =
35/100 x 100% = 35%

question

answer

100% x (4 + 1)/10 = 50%

question

Consider a very small economy in which the total adult population is 10. Of those ten people, 1 person is unemployed and 5 are out of the labor force.

What is the unemployment rate in this economy?

answer

100% x 1/5 = 20%

question

Institutions that help to match one person's saving with another person's investment are collectively called the

answer

financial system.

question

Norberto is opening a bicycle shop, and his monthly expenditures to get the shop up and running exceed his monthly income. Norberto is best described as a

answer

borrower or as a demander of funds.

question

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

answer

Bond A has a term of 20 years and Bond B has a term of 2 years.

question

Two of the economy's most important financial intermediaries are

answer

banks and mutual funds.

question

Morgan, a financial advisor, has told her clients the following things. Which of her statements is not correct?

answer

"U.S. government bonds generally pay a higher rate of interest than corporate bonds."

question

The primary advantage of mutual funds is that they

answer

allow people with small amounts of money to diversify.

question

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,500, consumption equals 7,500, and government purchases equal 2,000. What is national saving?

answer

None of the above is correct.

question

If a reform of the tax laws encourages greater saving, the result would be

answer

lower interest rates and greater investment.

question

If Congress instituted an investment tax credit, the interest rate would

answer

rise and saving would rise.

question

If the government currently has a budget deficit, then

answer

its debt is increasing.

question

Other things the same, a government budget deficit

answer

reduces both public and national saving.

question

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

answer

has no intrinsic value. The exchange is not an example of barter.

question

Which list ranks assets from most to least liquid?

answer

currency, stocks, fine art.

question

When in France you notice that prices are posted in euros, this best illustrates money's function as

answer

a unit of account.

question

If an economy uses silver as money, then that economy's money

answer

is commodity money.

question

In a system of 100-percent-reserve banking, the purpose of a bank is to

answer

give depositors a safe place to keep their money.

question

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

answer

an asset for the bank and a liability for Greg's Ice Cream. The loan increases the money supply.

question

If the money multiplier is 2 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

answer

it increases by $100,000

question

When the Fed decreases the discount rate, banks will

answer

borrow more from the Fed and lend more to the public. The money supply
increases.

question

When there is a reserve requirement, banks

answer

may hold more than, but not less than, the required quantity of reserves.

question

answer

$3 - G = $2 - 3
- G = $3 + $2
-1 -1 -1
G = $1

question

answer

$2 + $5 = $7

question

answer

Closed economy means the investment is equal to national savings which is $7

question

answer

Y = C + G + I
= $4 + $1 + $7
= $12

question

answer

Money Multiplier = 1/ Reserve Ratio

=1/10% = 10
= $1,000

question

Suppose that the Federal Reserve conducts an open market operation in which it buys $100 in US government bonds from a private saver, but assume now that banks engage in fractional reserve banking.

Continue to assume that all banks choose a 10% reserve ratio, but assume, instead, that households and non-bank businesses deposit only half of the funds they receive and hold the rest as currency. Is the increase in the money supply as a result of this open market operation in this case larger than, smaller than, or the same as the increase in the money supply from part (a) above, where households and non-bank businesses hold no currency?

answer

Less than $1,000

question

Suppose that the Federal Reserve conducts an open market operation in which it buys $100 in US government bonds from a private saver, but assume now that banks engage in fractional reserve banking.

Finally, go back to assuming that all households and non-bank businesses deposit all the funds that they receive and therefore hold no currency, but assume that while most banks choose a 10% reserve ratio, some banks choose a lower reserve ratio. Is the increase in the money supply as a result of this open market operation in this case larger than, smaller than, or the same as the increase in the money supply from part (a) above, where all banks choose a 10% reserve ratio?

answer

Larger than $1,000

question

answer

Neither because there is a large enough amount of assets to match the deposits outflow.

question

Consider two banks - the First National Bank, and the Second National Bank - with T-accounts as shown below:

First National Bank
Assets : Liabilities:
Reserves $20 Deposits $100
Loans $80 Shareholders' Equity $10
Other Assets $10

Second National Bank
Assets: Liabilities:
Reserves $10 Deposits $90
Loans $90 Shareholders' Equity $20
Other Assets $10

If the Second National Bank experiences a $15 deposit outflow, is it illiquid, insolvent, or neither? Explain your answer briefly (in one sentence or two).

answer

Illiquid because there is not enough $ in the reserves so you have to liquify other assets.

question

Consider two banks - the First National Bank, and the Second National Bank - with T-accounts as shown below:

First National Bank
Assets : Liabilities:
Reserves $20 Deposits $100
Loans $80 Shareholders' Equity $10
Other Assets $10

Second National Bank
Assets: Liabilities:
Reserves $10 Deposits $90
Loans $90 Shareholders' Equity $20
Other Assets $10

If some of the consumers and businesses who borrowed from the First National Bank default on their loans, so that the First National Bank's manager is forced to conclude that $15 in loans will never be repaid, is the First National Bank illiquid, insolvent, or neither? Explain your answer briefly (in one sentence or two).

answer

Insolvent because there isn't enough money in the shareholder's equity to cover all of the loans.

question

Consider two banks - the First National Bank, and the Second National Bank - with T-accounts as shown below:

First National Bank
Assets : Liabilities:
Reserves $20 Deposits $100
Loans $80 Shareholders' Equity $10
Other Assets $10

Second National Bank
Assets: Liabilities:
Reserves $10 Deposits $90
Loans $90 Shareholders' Equity $20
Other Assets $10

If some of the consumers and businesses who borrowed from the Second National Bank default on their loans, so that the Second National Bank's manager is forced to conclude that $15 in loans will never be repaid, is the Second National Bank illiquid, insolvent, or neither? Explain your answer briefly (in one sentence or two).

answer

Neither because the bank has enough equity to pay off all the loans.

question

The supply of money increases when

answer

the Fed makes open-market purchases.

question

Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes

answer

your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage also increased.

question

Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds?

answer

8 units of goods.

question

According to the classical dichotomy, when the money supply doubles which of the following doubles?

answer

the price level and nominal GDP

question

Based on the quantity equation, if velocity = 3.5, the quantity of money = 15,000, and the price level = 1.2, then the real value of output is

answer

43,750.00.

question

If velocity and real output were nearly constant, then

answer

the inflation rate would be about the same as the money supply growth rate.

question

If money is neutral and velocity is stable, an increase in the money supply creates a proportional increase in

answer

both the price level and nominal output.

question

The inflation tax falls mostly heavily on

answer

those who hold a lot of currency but accounts for a small share of U.S.
government revenue.

question

If the exchange rate is 0.60 British pounds = $1, a bottle of ale that costs 3 pounds costs

answer

$5.

question

You are planning a graduation trip to Nepal. Other things the same, if the dollar depreciates relative to the Nepalese rupee, then

answer

the dollar buys fewer rupees. Your purchases in Nepal will require more dollars.

question

If you go to the bank and notice that a dollar buys more Mexican pesos than it used to, then the dollar has

answer

appreciated. Other things the same, the appreciation would make Americans
more likely to travel to Mexico.

question

You are staying in London over the summer and you have a number of dollars with you. If the dollar depreciates relative to the British pound, then other things the same,

answer

the dollar would buy fewer pounds. The depreciation would discourage you from buying as many British goods and services.

question

When American goods and services become more attractive to Chinese, the demand for US dollars

answer

increases. The supply of Chinese yuan increases.

question

When European goods and services become more attractive to Chinese, the demand for euros

answer

increases, and euros appreciate.

question

In the foreign exchange market, the supply of US dollars comes from

answer

Americans, and the demand for US dollars comes from foreigners.

question

answer

15%

question

answer

question

answer

15% - 14% = 1%

question

answer

5% - 3% = 2%

question

answer

Year 2000 was a better time because real interest rates were more relevant since consumers care not so much about the # of $ received but the amount of goods and services they can get.

question

Consider an economy in which the velocity of money (V) equals 2 and real GDP (Y) equals $4.

If the money supply (M) equals $2, what is the value of nominal GDP?

answer

Monimal GDP = $4.00

question

Consider an economy in which the velocity of money (V) equals 2 and real GDP (Y) equals $4.

If the money supply (M) equals $2, what is the value of the economy-wide price level (P)?

answer

P = $1.00

question

answer

Nominal GDP rises (double)

question

answer

P rises (double)

question

answer

Japan

question

answer

Japan

question

answer

Korea

question

answer

Japan

question

Perry accumulated a lot of mathematical skills while in high school, college, and graduate school. Economists include these skills as part of Perry's

answer

human capital.

question

answer

disagree with the report, in part because it ignores the mitigating effects of technological change.

question

If there are diminishing returns to capital, then

answer

increases in the capital stock increase output by ever smaller amounts.

question

All else equal, by saving more, a country

answer

has more resources for capital goods. The increase in capital raises
productivity.

question

answer

reduce real GDP per person and productivity.

question

answer

disagree with the protesters because these practices will help make both rich and poor countries richer.

question

answer

poorly enforced property rights

question

When we say that economic fluctuations are "irregular and unpredictable," we mean that

answer

recessions do not occur at regular intervals.

question

Which of the following is correct?

answer

Real GDP is the variable most commonly used to measure short-run
economic fluctuations. It is almost impossible to predict these fluctuations
with much accuracy.

question

Most economists believe that in the long run, changes in the money supply

answer

affect nominal but not real variables. This view is consistent with the classical macroeconomic theory.

question

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

answer

the slope of the aggregate-demand curve.

question

If the price level falls, the real value of a dollar

answer

rises, so people will want to buy more. This response helps explain the slope of the aggregate demand curve.

question

Other things the same, when the price level falls, interest rates

answer

fall, so firms increase investment.

question

Other things the same, if the price level falls, people

answer

increase foreign bond purchases, so the supply of dollars in the market for
foreign-currency exchange increases

question

Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to

answer

decrease consumption, shown by shifting the aggregate-demand curve to the left.

question

When consumption tax decreases, consumption

answer

increases as shown by a shift of the aggregate demand curve to the right.

question

Which of the following both shift aggregate demand right?

answer

net exports rise for some reason other than a price change and the money
supply rises.

question

Which of the following would cause prices to fall and output to rise in the short run?

answer

short run aggregate supply shifts right

question

If aggregate demand shifts right then in the short run

answer

firms will increase production. Unemployment will fall.

question

Suppose that there is an increase in the costs of production that shifts the short- run aggregate supply curve left. If there is no policy response, then eventually

answer

firms will decrease production. Unemployment will rise.

question

answer

The fed can lower the spending and this will increase the money supply.
Buy government bonds.

question

answer

(See HW5)

question

answer

This increases investment and shifts the demand curve to the right.

question

The economy is in a recession with high unemployment and low output. In order to recover the economy, the Fed can increase money supply to reduce interest rate

How does the change in aggregate demand identified in part (3) affect unemployment and output in the economy?

answer

This would result in low employment and high output.

question

answer

Multiplier = 1 / (1 - MPC)
Multiplier = 30 / 10 = 3
MPC = 2 / 3

question

answer

If crowding out is allowed, the MPC would be greater than 2/3 if the MPC is bigger than 2/3 the multiplier would also be bigger than 3.
Multiplier greater than 3.
MPC greater than 2/3.

question

The primary economic function of the financial system is to

answer

match one person's savings with another person's investment

question

The economy's two most important financial markets are

answer

the bond market and the stock market

question

Two of the economy's most important financial intermediaries are

answer

banks and mutual funds

question

The fact that borrowers sometimes default on their loans by declaring bankruptcy is directly related to the characteristic of a bond called

answer

Credit Risk

question

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,500, consumption equals 7.500, and government purchases equal to 2,000. What is the national saving?

answer

None are correct

question

Consider a very small economy in which private saving is $5, public saving is $2, tax revenues are $4, and consumption is $4. What is government purchases for this economy?

answer

question

When in France you notice that prices are posted in Euros, this best illustrates money's function as

answer

a unit of account

question

Which list ranks assets from most to least liquid?

answer

Currency, stocks, Fine art

question

The Fed can increase the money supply by

answer

purchasing government bonds or lowering the discount rate

question

In 1991, the federal reserve lowered the reserve requirement from 12 percent to 10 percent. Other things the same this should have

answer

increased both the money multiplier and the money supply

question

answer

$2,000

question

Suppose an ice cream cone cost $3. Molly holds $60. What is the real value of the money she holds?

answer

20 ice cream cones

question

The data on hyperflation show a clear link between the quantity of money and

answer

the price level

question

If money is neutral and velocity is stable, an increase in the money supply creates a proportional increase in

answer

both the price level and nominal output

question

The inflation tax falls most heavily on

answer

those who hold a lot of currency but accounts for a small share of US gov revenue

question

You are staying in London over the summer and you have a number of dollars with you. If the dollar depreciated relative to the British pound, then other things the same,

answer

the dollar would buy fewer pounds. The depreciation would discourage you from buying as many British goods and services.

question

When European goods and services become more attractive to Chinese, the demand for Euros

answer

increases, ans euro appreciate

question

When the interest rate of the US government bonds fall, the supply of US dollars in the foreign exchange market

answer

increases and the dollar depreciate

question

When the US government reduced the tariff on European goods, the supply of US dollars in the foreign exchange market

answer

increases and dollars depreciate

question

answer

national saving < investment

question

In an open economy, S = I + NX, where S represents national saving, I represents investments, and NX represents net exports.
Consider two open economies: the United States, which is now running a trade deficit, meaning that its net exports are negative, and China, which is now running a trade surplus, meaning that its net exports are positive.

What does the China's trade surplus imply for the relationship between its national savings and investment?

answer

national savings > investment

question

answer

Borrowing

question

answer

Lending

question

answer

1/ 20% = 0.05 = 5

question

answer

Buy

question

If an economy's GDP rises, then it must be the case that

answer

the economy's income and expediture both rise

question

If a state made a perviously-illegal activity, such as gambling or prostitution legal, then, other things equal, GDP

answer

increases

question

A steel company sells some steel to a bike company for $150. the bicycle company uses the steel toto produce a bike and sell it for $250. Taken together, these two transactions contribute

answer

$250 to GDP

question

Susan switches from Jiffy Lube for an oil change to changing the oil herself. The value of changing the oil is

answer

included in the GDP if Susan pays Jiffy lube but not if she pays herself.

question

In the economy of Ukzten in 2010, consumption was $3,000, exports were $400, GDP was $5,000, imports were $600, and investment was $1100. What were Ukzten's gov purchase in 2010

answer

$1,100

question

Consumption consists of spending by households on goods and services, with the exception of

answer

purchases of new houses

question

answer

first but not the second

question

Shawn puts money in an account. One year later he sees that he has 5% more dollars and that his money will buy 6% more goods.

answer

the nominal interest rate was 5% and the inflation rate was -1

question

By not taking into account the possibility of consumer substitution, the CPI

answer

overstates the cost of living

question

If an unemployed person quits looking for work, then

answer

unemployment rate and the labor-force participation rate both decrease

question

Which of the following is not an explanation for the existence of structural unemployment?

answer

job search

question

When a minimum wage law forces the wage to remain above the level that balances supply and demand, the result is a

answer

surplus of labor and shortage of jobs

question

The theory of efficiency wages provides a possible explanation as to why firms

answer

may be inclined to keep their workers' wages above the equilibrium level

question

answer

Supply increases

question

answer

Supply increases and demand decreases

question

answer

demand increases

question

answer

No.

question

answer

question

answer

5/6 x 100% = 83%

question

answer

Joey

question

answer

1/5 x 100% = 20%

question

Beerland:
Year: $ of karaoke Quant $ of beer Quant
2012 $40 8 $5 20
2013 $42 10 $6 30

What was Beerland's real GDP in 2013?

answer

40 x 10 + 5 x 30 = 550
real GDP = 550

question

Beerland:
Year: $ of karaoke Quant $ of beer Quant
2012 $40 8 $5 20
2013 $42 10 $6 30

What was Beerland's nominal GDP in 2013?

answer

42 x 10 + 6 x 30 = 600
100 x 550/ 600 = 109%

question

Beerland:
Year: $ of karaoke Quant $ of beer Quant
2012 $40 8 $5 20
2013 $42 10 $6 30

Suppose that in 2013 the population in Beerland was 100. What was Beerland's real GDP per capita in 2013?

answer

GDP per capita= 550/100
= 5.5

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