question

according to the world bank, ___ are in extreme poverty

answer

over 1 billion

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according to the world bank, "extreme" poverty is defined as

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an income per person of less than $1 per day

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according to the world bank, "severe" poverty is defined as

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an income per person of less than $2 per day

question

the supply of US dollars originate from

answer

american demand for imported goods

question

when foreigners come to the united states as tourists, they are generating

answer

a demand for US dollars and a supply of foreign currency

question

the depreciation of a country's currencies causes

answer

the price of imports to rise and the prices of exports to fall

question

____ would be aided by a depreciation of the american dollar

answer

american producers of goods for export

question

when foreign residents increase their demand for US dollars,

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the dollar will appreciate in value

question

exchange rates change because of

answer

relative income, relative price, and relative interest rate changes

question

an increase in the US trade deficit could be caused by

answer

an appreciation of the dollar in terms of other currencies

question

US GDP per capita is

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5x larger than the world average

question

world output of goods and services increase with specialization because

answer

the world's resources are being used more efficiently

question

the expansion of world output as a result of trade is mainly due to

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the effects of specialization according to comparative advantage

question

the infant industry argument can be justified because

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a new industry may be difficult to start in the face of foreign competition

question

if the united states raises tariffs on foreign goods, it may achieve

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greater profitability of import-competing firms

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increased trade restrictions

answer

reduce total consumption possibilities

question

the exchange rate is the price of

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one currency in terms of another

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the demand for US dollars in the foreign exchange market is not determined by

answer

american demand for american products

question

specialization in production and then trading with other countries changes the

answer

mix of output for each country and increases total world output

question

world output of goods and services increases with specialization because

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the world's resources are being used more efficiently

question

when a country has a lower opportunity cost in producing a good than any other country, then

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consumption possibilities will increase with specialization and trade

question

as a result of a tariff on imports,

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equilibrium price should go up, and equilibrium quantity should go down

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suppose china can produce 200 TVs or 200 DVD players. South Korea can produce either 100 TVs or 200 DVD players. In terms of TV production, we can conclude that

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china has a comparative advantage

question

producers of paper products are most likely to be in favor of

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protectionism in the paper product market, but free trade in the lumber market

question

tariffs tend to reduce the volume of imports by

answer

making them more expensive to domestic consumers

question

the demand for dollars in the foreign exchange market depends in part on the

answer

foreign demand for US goods

question

the depreciation of a country's currency causes

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the price of imports to rise and the prices of exports to fall

question

if african countries experience a drought and purchase food from the united states, the currencies of the african countries should

answer

depreciate and the dollar should appreciate

question

a decrease in marginal tax rates is most likely to cause

answer

an increase in aggregate supply because of an incentive to work

question

if a country currently produces a mix of output that lies inside its production possibilities curve then macro stabilization polices try to

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shift the aggregate demand curve to the right

question

long run economic growth can occur as a result of

answer

a technological advance

question

what must occur in order to achieve large and lasting increases in output?

answer

an increase in potential GDP

question

economic growth implies

answer

a rightward shift of the long run aggregate supply curve

question

the percentage change in real GDP from one period to another is called

answer

the growth rate

question

countries that have higher savings rates are likely to have

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a higher investment rate as a percentage of GDP and a higher growth rate of real GDP

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fiscal policy is a responsibility of whom?

answer

congress

question

fiscal policy does NOT include

answer

interest rate increases

question

fiscal policy DOES include

answer

tax cuts, tax increases, discretionary spending by the government

question

when the chairman of the federal reserve announced a goal of "zero inflation," what economic policy was most likely to be changed?

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supply-side policy

question

an accurate statement about supply-side policy is

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the aggregate supply curve should be shifted to the right during periods of both inflation and recession

question

during a sever recession, appropriate economic policy might include

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an open market purchase by the fed, a decrease in the discount rate, or a decrease in government regulation

question

if the united states has a trade deficit, it means

answer

the trade balance is negative

question

monetary policy is

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the use of money and credit controls to change the macroeconomy

question

the market demand curve for money is

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a downward sloping demand curve, where money supply is held at lower interest rates

question

the money supply curve is determined by

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the federal reserve policy, the lending behavior of private banks, and the willingness of individuals to borrow money

question

the money supply curve is NOT determined by

answer

the demand for money

question

the fed can change the equilibrium rate of interest by

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changing reserve requirements, the discount rate, or through open market operations

question

the most visible market signal of the fed's activity is

answer

the federal funds rate

question

in a graph showing investment demand, the effect of a higher discount rate could best be represented by

answer

a movement up the investment demand curve

question

what should happen to the equilibrium interest rate and the corresponding rate of investment if the fed decreases the discount rate?

answer

the money supply increases, interest rates decrease, investment increases, AD increases

question

long term investment rates may not mirror short term investment rates if

answer

lenders are reluctant to make loans

question

what will cause an increase in unemployment and inflation at the same time?

answer

a leftward shift of aggregate supply

question

the general consensus about the short run aggregate supply curve is

answer

horizontal, then upward sloping, and ultimately vertical

question

the closer the economy is to capacity, the greater the risk that

answer

fiscal or monetary stimulus will cause an increase in the price level

question

if the aggregate supply curve is upward sloping, a decrease in aggregate demand will cause

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a decrease in the price level and an increase in unemployment

question

phillips developed a curve which shows the tradeoff between

answer

unemployment and inflation rates

question

stagflation is

answer

an increase in both unemployment and inflation

question

the total quantity of output producers are willing and able to supply at alternative price levels in a given time period is

answer

aggregate supply

question

a movement along the phillips curve shows that the unemployment and inflation rate are

answer

inversely related to eachother

question

during a recession, what is a supply side and fiscal policy tool?

answer

tax cuts

question

who believes that money supply is the critical value policy lever/

answer

monetarists

question

income taxes are an automatic stabilizer because when income rises, tax reciepts

answer

rise since taxes are computed on the basis of income

question

what has made the greatest contribution to advances in productivity in recent years?

answer

spending on research and development (R&D)

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from the long-run persepective of economic growth, saving is

answer

a basic source of investment financing

question

human capital is

answer

the knowledge and skills possessed by the labor force

question

labor productivity is measured as

answer

the output per unit of dollar

question

in order to produce a combination of goods and services outside the production possibilities curve, an economy

answer

must find additional resources or better technology

question

short run growth

answer

moves the economy closer to the production possibilities curve, while long run growth shifts the curve outward

question

what impact do transfer payments have?

answer

they reduce the incentive to work and shift the AS curve to the left

question

supply side economists favor tax incentives that

answer

encourage investment

question

according to supply side theorists, taxes

answer

alter the disposable income and affect the incentives to wrok and produce

question

when americans buy mercedes-benz automobiles made from germany, they are

answer

generating a supply of US dollars and a demand for foreign currency

question

if the exchange rate between the US dollar and japanese yen change from $1=100 yen to $1=90 yen, then

answer

japanese tourists to the US will benefit

question

supply side polices are designed to achieve

answer

a lower inflation rate and a lower unemployment rate

question

if the federal reserve raises the discount rate, we would expect to see

answer

the AD curve to decrease

question

when the fed buys bonds from the public, it

answer

increases the flow of reserves to the banking system

question

a country with a comparative advantage in producing computer chips has

answer

a lower opportunity cost of producing computer chips than its trading partners

question

suppose the united states can produce 2000 cars or 2000 trucks. japan can produce 2000 cars or 1000 trucks. in terms of car production,

answer

japan has a comparative advantage

question

a decrease in aggregate demand could be caused by

answer

contractionary money policy

question

if the fed sells bonds through open market operations,

answer

the money supply curve should shift leftward

question

when the fed raises the discount rate, it

answer

signals that it is reluctant to lend reserves, it is moving toward a slower growth rate for the money supply, and the cost of borrowing reserves for a member increases

question

the government uses monetary policy to

answer

regulate the amount of money the banks lend

question

an absolute advantage refers to

answer

a country's ability to produce a certain good more efficiently than another country

question

the success of fed intervention depends on

answer

how well changes in long term investment rates mirror changes in short term investment rates

question

macroeconmic models

answer

attempt to identify key determinants of macro performance, are mathematical summaries of an economy's performance, and are based on theories of macroeconomic behavior

question

human capital investment is

answer

a supply side lever policy

question

stagflation can be corrected by

answer

policies that increase aggregate supply

question

the expansion of world output as a result of trade is mainly due to

answer

the effects of specialization according to comparative advantage

question

in a graph showing investment demand, the effect of a higher discount rate could best be represented by

answer

a movement up the investment demand curve

question

the equilibrium rate of interest is determined by

answer

money demand and money supply

question

economic growth implies a

answer

rightward shift of the long run aggregate supply curve

question

if the fed's objective is to stimulate the economy, then the sequence of events is

answer

the money supply increases, interest rates decrease, investment increases, and AD increases

question

the primary method for controlling the money supply in the united states is

answer

to limit the volume of loans the banking system can make

question

tax credits for investment are likely to increase

answer

physical capital investment

question

the effectiveness of monetary supply is influenced by

answer

the time is takes for lower interest rates to make investment and spending more profitable

question

the series of events that accurately describes the steps by which restrictive monetary policy is effective is

answer

decrease in M1, increase in interest rates, decrease in I

question

a change in the reserve requirement causes a change in

answer

the lending capacity of banking system, the money multiplier, and excess reserves

Econ 101 midterm 3

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