Structural Unemployment: Worker Loses Job Due to Automation

Q: Under which of the following conditions would consumer spending most likely increase?

Consumers\' wealth is increased by changes in the stock market.

question

In a mixed economy, what to produce and how much to produce are determined by

answer

Markets and the government

question

The major difference between real and nominal gross domestic product (GDP) is that real GDP

answer

Is adjusted for price-level changes using a price index

question

Which of the following statements exemplifies the concept of structural unemployment?

answer

Workers are fired because their skills are no longer in demand.

question

Assume that for consumers, pears, and apples are substitutes. It is announced that pesticides used on most apples may be dangerous to consumers' health. As a results of this announcement, which of the following market changes is most likely to occur in the short run in the pear market?

answer

(Google Doc 4)

question

Federal budget deficits occur when

answer

The Federal government spends more than it collects in taxes in a given year

question

Under which of the following conditions would consumer spending most likely increase?

answer

Consumers' wealth is increased by changes in the stock market.

question

Crowding out is best described as which of the following?

answer

The decrease in consumption or private investment spending caused by an increase in government spending.

question

Under a fractional reserve banking system, banks are required to

answer

Keep part of their demand deposits as reserves

question

An increase in which of the following will increase aggregate demand?

answer

Government spending

question

When the United States government engages in deficit spending, that spending is primarily financed by

answer

Issuing new bonds

question

When the Federal Reserve buys government securities on the open market, which of the following will decrease in the short run?

answer

Interest rates

question

Changes in which of the following factors would affect the growth of an economy?

answer

- Quantity and quality of human and natural resources - Amount of capital goods available - Technology

question

According to the short-run Phillips Curve, there is a trade-off between

answer

Inflation and unemployment

question

A favorable supply shock, such as a decrease in energy prices, is most likely to have which of the following short-run effects on the price level and output?

answer

Price level = decrease Output = no effect

question

Which of the following best explains why many United States economists support free international trade?

answer

The long-run gains to consumers and some producers exceed the losses to other producers.

question

(refer to Google doc 16-17) If two coats are currently being produced, the opportunity cost of producing the third coat is

answer

15 belts

question

(refer to Google doc 16-17) The best combination of belts and coats for this economy to produce is

answer

Indeterminate with the available information

question

The unemployment rate measures the percentage of

answer

People in the labor force who do not have jobs

question

The classical economists argued that involuntary unemployment would be eliminated by

answer

Self-correcting market forces stemming from flexible prices and wages

question

Which of the following can be considered a leakage from the circular flow of economic activity?

answer

Saving

question

An increase in the marginal propensity to consume causes an increase in which of the following?

answer

Spending multiplier

question

If Mexicans increase their investment in the United States, the supply of Mexican pesos to the foreign exchange market and the dollar price of the peso will most likely change in which of the following ways?

answer

Supply of Pesos = increase Dollar Price of Peso = decrease

question

If a commercial bank has no excess reserves and the reserve requirement is 10 percent, what is the value of new loans this single bank can issue if a new customer deposits $10,000?

answer

$9,000

question

An increase in government spending with no change in taxes leads to a

answer

Higher interest rate

question

(refer to Google doc 25 for answer) If AD and AS represent aggregate demand and aggregate supply curves, respectively, and the arrows indicate the movement of the curves, which of the following graphs best illustrates long-run economic growth?

answer

Google doc 25

question

(refer to Google doc 26) Assume that the economy is at full-employment equilibrium in the diagram shown. Which of the following would lead to stagflation?

answer

A leftward shift of the short-run aggregate supply curve only

question

If the real interest rate in Country X increases relative to the real interest rate in Country Y and there are no trade barriers between the two countries, then for Country X which of the following will be true of its capital flow, the value of its currency, and its exports?

answer

Capital Flow = inflow Currency = appreciation Exports = decrease

question

When a central bank sells securities in the open market, which of the following set of events is most likely to follow?

answer

A decrease in the money supply, an increase in interest rates, and a decrease in aggregate demand

question

The federal funds rate is the interest rate that

answer

Banks charge one another for short-term loans

question

According to the long-run Phillips curve, which of the following is true?

answer

The natural rate of unemployment is independent of monetary and fiscal policy changes that affect aggregate demand

question

A change in which of the following will cause the short-run aggregate supply curve to shift?

answer

The cost of all inputs

question

In an economy with lump-sum taxes and no international sector, assume that the aggregate supply curve is horizontal. If the marginal propensity to consume is equal to 0.8, which of the following will necessarily be true?

answer

The government expenditure multiplier will be equal to 5

question

Country A can produce either 2 tons of cocoa or 4 cars with 10 units of labor. Country B can produce either 5 tons of cocoa or 25 cars with 10 units of labor. Based on this information, which of the following is true?

answer

Country A has a comparative advantage in the production of cocoa, while Country B has a comparative advantage in the production of cars.

question

Which of the following is included in the computation of gross domestic product?

answer

Additions to business inventories.

question

In the country of Agronomia, banks charge 10 percent interest on all loans. If the general price level has been increasing at the rate of 4 percent per year, the real rate of interest in Agronomia is

answer

6%

question

According to the theory of rational expectations, a fully anticipated expansionary monetary policy will

answer

Have no impact on real output

question

In an economy with a horizontal aggregate supply curve, an increase in government spending will cause output and the price level to change in which of the following ways?

answer

Output = increase Price Level = no exchange

question

The aggregate demand curve is downward sloping because as the price level increases the

answer

Purchasing power of wealth decreases

question

(refer to Google doc 29) A commercial bank is facing the conditions given above. If the reserve requirement is 12 percent and the bank does not sell any of its securities, the maximum amount of additional lending this bank can undertake is

answer

$3,000

question

According to Keynesian analysis, if government expenditures and taxes are increased by the same amount, which of the following will occur?

answer

Aggregate demand will increase

question

If investors feel that business conditions will deteriorate in the future, the demand for loans and real interest rate in the loanable funds market will change in which of the following ways in the short-run?

answer

Demand for Loans = decrease Real Interest Rate = decrease

question

If a country has a current account deficit, which of the following must be true?

answer

It must show a surplus in its capital account

question

The long-run growth rate of an economy will be increased by an increase in all of the following EXCEPT

answer

Real interest rate (all others increased: capital shock, labor supply, rate of technological change, and spending on education and training.

question

Assume that the government implements a deficit-reduction policy that results in changes in aggregate income and output. Then the Federal Reserve engages in monetary policy actions that reverse the changes in income and output cased by fiscal policy action. Which of the following sets of changes in taxes, discount rate is most consistent with these policies?

answer

Taxes = increase Gov. spending = decrease Required Reserve Ratio = decrease Discount Rate = no change

question

With an increase in investment demand in the United States, the real interest rate rises. In this situation, the most likely change in the capital stock in the U.S. and the international value of the dollar would be which of the following?

answer

Capital Stock in U.S. = increase International Value of $ = increase

question

Which of the following events will most likely cause an increase in both the price level and real gross domestic product?

answer

Exports increase

question

Which of the following best explains why transfer payments are not included in the calculation of gross domestic product?

answer

Recipients of transfer payments have not produced or supplied goods and services in exchange for these payments

question

(refer to Google doc 48) Which of the following can be concluded about the consumer price index (CPI) for this individual from 1993 to 1994?

answer

It increased by 25%

question

If an economy's aggregate supply curve is upward sloping, an increase in government spending will most likely result in a decrease in the

answer

Unemployment rate

question

An increase in which of the following is consistent with an outward shift of the production possibilities curve?

answer

Long-run aggregate supply

question

An increase in which of the following will lead to lower inflation and lower unemployment?

answer

Labor productivity

question

An unanticipated decrease in aggregate demand when the economy is in equilibrium will result in

answer

An increase in unplanned inventories

question

Which of the following would be true if the actual rate of inflation were less than expected rate of inflation?

answer

People who borrowed funds at the nominal interest rate during this time period would lose

question

If the Federal Reserve institutes a policy to reduce inflation, which of the following is most likely to increase?

answer

Interest rates

question

To stimulate investment in new plant and equipment without increasing the level of real output, the best policy mix is to

answer

Increase the money supply and decrease government spending

question

Assume that the reserve requirement is 20 percent, but banks voluntarily keep some excess reserves. A $1 million increase in new reserves will result in

answer

An increase in the money supply of less than $5 million

question

Assume that a perfectly competitive financial market for loanable funds is in equilibrium. Which of the following is most likely to occur to the quantity demanded and quantity supplied of loanable funds if the government imposes an effective interest rate ceiling?

answer

Quantity Demanded = increase Quantity Supplied = decrease

question

If the economy is operating at full employment and there is a substantial increase in the money supply, the quantity theory of money predicts an increase in

answer

The price level

question

Which of the following would cause the U.S. dollar to increase in value compared to the Japanese yen?

answer

An increase in interest rates in the U.S.

question

Assume that the supply of loanable funds increases in Country X. The international value of Country X's currency and Country X's exports will most likely change in which of the following ways?

answer

International Value of Country X's Currency = decrease Country X's Exports = increase

question

A country's government runs a budget deficit when which of the following occurs in a given year?

answer

Government spending exceeds tax revenues.

question

A high marginal propensity to consume implies which of the following?

answer

A low marginal propensity to save

question

The transaction demand for money is very closely associated with money's use as a

answer

medium of exchange

question

Unlike a market economy, a command economy uses

answer

more centralized planning in economic decision making

question

The value of a country's currency will tend to appreciate if

answer

demand for the country's exports increases

question

Which of the following best illustrates an improvement in a country's standard of living?

answer

An increase in real per capita gross domestic product

question

Hyperinflation is typically caused by

answer

continuous expansion of the money supply to finance government budget deficits

question

All of the following changes will shift the investment demand curve to the right EXCEPT

answer

an increase in the real interest rate

question

The official unemployment rate understates the unemployment level in the economy because the official unemployment rate

answer

ignores underemployed and discouraged workers

question

If a reduction in aggregate supply is followed by an increase in aggregate demand, which of the following will definitely occur?

answer

The price level will increase.

question

Which of the following combinations of changes in government spending an d taxes is necessarily expansionary?

answer

Government Spending: Increase Taxes: Decrease

question

The amount of money that the public wants to hold in the form of cash will

answer

decrease if interest rates increase

question

For an economy consisting of households and businesses only, which of the following is consistent with the circular flow of income and production?

answer

Households are suppliers of resources and consumers of goods and services.

question

With an increase in the real interest rate, consumption and real gross domestic product will most likely change in which of the following ways?

answer

Consumption: Decrease RGDP: Decrease

question

According to the short-run Phillips curve, lower inflation rates are associated with

answer

higher unemployment rates

question

Which of the following will lead to a decrease in a nation's money supply?

answer

An increase in reserve requirements

question

17. An increase in which of the following would cause the aggregate demand curve to shift to the left?

answer

Income taxes

question

Which of the following changes in the supply of and the demand for a good will definitely result in a decrease in both the equilibrium price and quantity of the good?

answer

No change in supply and decrease in demand

question

Based on the balance sheets a bove for three different banks, which of the following is true, if the reserve requirement is 10 percent? Check doc for balance sheets

answer

Bank B can increase its loans by $40.

question

Which of the following will most likely lead to a decrease in inflationary expectations?

answer

A decrease in the money supply

question

With an upward-sloping short-run aggregate supply curve, an increase in government expenditure will most likely

answer

increase real gross domestic product

question

Which of the following are the most likely short-run effects of an increase in government expenditures?

answer

Decrease in Unemployment Rate, Increase in Inflation Rate, and Increase in Real GDP

question

In the short run, an expansionary monetary policy would most likely result in which of the following changes in the price level and real gross domestic product (GDP) ?

answer

Price level - increase. Real GDP - increase

question

A reduction in inflation can best be achieved by which of the following combinations of fiscal and monetary policy?

answer

Fiscal Policy - increase taxes. Monetary policy - sell government bonds.

question

Which of the following is likely to occur following the depreciation of the United States dollar?

answer

United States exports will increase

question

The table below shows the production alternatives of Country A and Country B for producing computers and cars with equal amounts of resources that are fully and efficiently employed. (ON DOC) Which of the following is true according to the data in the table?

answer

Country B has an absolute and comparative advantage in the production of computers.

question

Which of the following individuals is considered officially unemployed?

answer

Pat, who recently left a job to look for a different job in another town

question

An increase in net investment leads to faster economic growth because capital per worker and output per worker will change in which of the following ways?

answer

Capital per worker - Increase. Output per Worker - Increase

question

If a country's economy is operating below the full-employment level of output at a very low inflation rate, the central bank of the country is most likely to

answer

lower the discount rate and buy bonds on the open market to generate an increase in output

question

Assume that an economy is currently in long-run equilibrium and the short-run aggregate supply curve is upward sloping. An adverse supply shock, such as a drought, will most likely cause which of the following to the economy in the short run?

answer

An increase in the price level and a decrease in the real wage

question

31. If Country Alpha has been experiencing a higher inflation rate than Country Beta over the past decade, which of the following is true?

answer

Alpha's currency will have depreciated relative to Beta's currency.

question

Based on the economic figures in the table above, what is the value of gross domestic product, in billions of dollars? figure on doc

answer

$4, 500

question

Which of the following best explains the increase in national income that results from equal increases in government spending and taxes?

answer

Consumers do not reduce their spending by the full amount of the tax increase.

question

Which of the following statements is true of unanticipated inflation?

answer

It increases the economic well-being of net debtors.

question

A simultaneous increase in inflation and unemployment could be explained by an increase in which of the following?

answer

Inflationary expectations

question

A country can have an increased surplus in its balance of trade as a result of

answer

declining imports and rising exports

question

Policies intended to re duce demand-pull inflation are most likely to increase which of the following in the short run?

answer

Unemployment

question

An increase in the government budget deficit is most likely to result in an increase in which of the following?

answer

The real interest rate

question

An increase in which of the following would be most likely to increase long-run growth?

answer

Subsidies to businesses for purchases of capital goods

question

A commercial bank's ability to create money depends on which of the following?

answer

A fractional reserve banking system

question

The consumer price i ndex (CPI) is designed to measure changes in the

answer

cost of a select market basket of goods and services

question

A barter economy is different from a money economy in that a barter economy

answer

involves higher costs for each transaction

question

In the short run, which of the following would occur to bond prices and interest rates if a central bank bought bonds through open-market operations?

answer

Bond Prices - Increase. Interest rates - Decrease

question

Suppose that in an economy with lump-sum taxes and no international trade, autonomous investment spending increases by $2 million. If the marginal propensity to consume is 0.75, equi-librium gross domestic product will change by a maximum of

answer

$8.0 million

question

The diagram above shows the production possi-bilities curve for an economy that produces only consumption and capital goods. All of the following statements about this economy are true EXCEPT: DOC

answer

Point X represents the most efficient combination of the two goods that can be produced by this economy.

question

Assume that the required reserve ratio is 10 percent, banks keep no excess reserves, and borrowers deposit a ll loans made by banks. Suppose you have saved $100 in cash at home and decide to deposit it in your checking account. As a result of your deposit, the money supply can increase by a maximum of

answer

$900

question

Which of the following would be the initial impact on an economy if wages were to increase more than worker productivity?

answer

The short-run aggregate supply curve would shift to the left, increasing the price level.

question

Under a flexible exchange-rate system, the Indian rupee will appreciate against the Japanese yen when

answer

real interest rates in India increase relative to those in Japan

question

Which of the following occurs as investment becomes more responsive to changes in the interest rate?

answer

Monetary policy becomes more effective at changing real gross domestic product.

question

If two nations specialize according to the law of comparative advantage a nd then trade with each other, which of the following would be true?

answer

Each nation would increase its consumption possibilities.

question

The shifting of a country's production possibilities curve to the right will most likely cause

answer

(E) the long-run aggregate supply curve to shift to the right

question

One explanation for the downward slope of the aggregate demand curve is that when the price level increases, which of the following will decrease?

answer

Real value of assets

question

Which of the following is true about changes in tax rates, changes in the level of government expenditures, and change s in the money supply?

answer

They have different lag times between implementation of a policy and its effects on aggregate demand.

question

An increase in which of the following would LEAST likely increase labor productivity?

answer

The labor force

question

Tariffs are different from assigned import quotas in that tariffs will

answer

generate additional revenue for the domestic government

question

In the narrowest definition of money, M1, savings accounts are excluded because they are

answer

not a medium of exchange

question

For which of the following sets of unemployment and inflation rates will a central bank be most reluctant to increase the rate of growth in the money supply?

answer

Unemployment rate 5%. Inflation rate 10%.

question

Assume that Jane's marginal propensity to consume equals 0.8, and that in 2004 Jane spent $36, 000 from her disposable income of $40, 000. If her disposable income in 2005 increased to $50, 000, her consumption spending increased by

answer

$8, 000

question

Advocates of a monetary rule recommend increasing the money supply at a rate that is equal to the rate of increase in which of the following?

answer

Long-run real gross domestic product

question

If economic agents perfectly anticipate policy changes and if all prices, including wages, are completely flexible, which of the following will be true in the long run?

answer

There will be no trade-off between inflation and unemployment.

question

which of the following will most likely occur in an economy if more money is demanded than is supplied?

answer

interest rates will increase

question

which of the following transactions would represent an addition to a nation's current GDP?

answer

the government increases its domestic purchases of food for use by the military

question

an increase in energy costs will most likely cause the price level and real GDP to change in which of the following ways?

answer

price level: increase, real GDP: decrease

question

which of the following arguments is typically associated with classical economics?

answer

a market economy is self-correcting and thus will not remain in a recession indefinitely

question

which of the following is true according to the circular flow model?

answer

households are demanders in the product markets and suppliers in the factory markets

question

which of the following will occur if the federal government runs a budget deficit?

answer

the size of the national debt will increase

question

according to the keynsian savings schedule, when aggregate income increases by a given amount, savings will

answer

increase by less than the amount of the change in income

question

if on receiving a checking deposit of $300 a bank's excess reserve increased by $255, the required reserve ratio must be

answer

25%

question

the federal reserve can increase the money supply by

answer

buying government bonds on the open market

question

when consumers hold money rather than bonds because they expect the interest rate to increase in the future, they are holding money for which of the following purposes?

answer

speculation

question

an increase in the money supply is most likely to have which of the following short-run effects on real interest rates and real output?

answer

real interest rate: decrease, real output: increase

question

in the keynesian model, an expansionary monetary policy will lead to

answer

lower real interest rates and more investment

question

an infaltionary gap can be eliminated by all of the following except

answer

an increase in the money supply

question

a contractionary supply shock will most likely result in

answer

a decrease in employment

question

an increase in japan's demand for united states goods would cause the value of the dollar to

answer

appreciate because japan would be buying more united states dollars

question

#16 refer to google doc

answer

i, ii, and iii

question

if real GDP is increasing at 3% per year and nominal GDP is increasing at 7% per year, which of the following is necessarily true?

answer

the price level is increasing

question

the official unemployment rate is not an actual indicator of actual unemployment in the economy because

answer

the official rate does not include persons who have given up for work

question

#19 refer to google doc

answer

recession

question

#20 refer to google doc

answer

the money supply

question

#21 refer to google doc

answer

$500

question

if the economy is operating in the intermediate range of the aggregate supply curve and if aggregate demand increases due to an increase in net exports, then the price level, output, and the unemployment rate are most likely to change in which of the following ways?

answer

price level: increase, output: increase, unemployment rate: decrease

question

the value of the spending multiplier decreases when

answer

the MPS increases

question

which of the following best explains why equilibrium income will rise by more than $100 in response to a $100 increase in government spending?

answer

incomes will rise, resulting in higher consumption

question

the money-creating ability of the banking system will be less than the maximum amount indicated by the money multiplier when

answer

people hold a portion of their money in the form of currency

question

which of the following constitutes the largest component of the united states money supply? (m1)

answer

checkable deposits (demand deposits)

question

under which of the following conditions would a restrictive monetary policy be most appropriate?

answer

high inflation

question

a major advantage in automatic stabilizers in fiscal policy is that they

answer

go into effect without passage of new legislation

question

which of the following would best explain a decline in potential GDP?

answer

negative net investment

question

which of the following changes will occur to the demand for the united states dollars and the international value of the dollar in the short run if investors in the united states and abroad increase their purchases of united states government bonds?

answer

demand for dollars: increase, international value of the dollar: increase

question

as nations specialize in production and trade in international markets, they can expect which of the following domestic improvement? i: allocation of domestic resources, ii: standard of living, iii: self-sufficiency

answer

i and ii

question

as a measure of economic welfare, GDP underestimates a country's production of goods and services when there is an increase in

answer

household production

question

unexpected increases in inventories usually precede

answer

decreases in production

question

the short-run aggregate supply curve is likely to shift to the left when there is an increase in

answer

the cost of productive resources

question

in the simple keynesian aggregate expenditure model of an economy, changes in investment of government spending will lead to a change in which of the following?

answer

the level of output and employment

question

in a closed economy with no taxes in which the average propensity to consume is .75, which of the following is actually true?

answer

if income is $200, then saving is $50

question

in the short run, a restrictive fiscal policy will cause aggregate demand, output, and the price level to change in which of the following ways?

answer

AD: decrease, output: decrease, price level: decrease

question

one way in which the federal reserve works to change the united states money supply is by changing the

answer

discount rate

question

assume that the reserve requirement is 20%. if a bank initially has no excess reserves and $10,000 cash is deposited in the bank, the maximum amount by which this bank may increase its loans is

answer

$8,000

question

if the money stock decreases but nominal GDP remains constant, which of the following has occured?

answer

income velocity of money has increased

question

which of the following best explains how an economy could simultaneously experience high inflation and high unemployment?

answer

negative supply shocks cause factor prices to increase

question

crowding out due to government borrowing occurs when

answer

higher interest rates decrease private sector investment

question

policymakers concerned about fostering long-run growth in an economy that is currently in a recession which would most likely recommend which of the following combinations of monetary and fiscal policy actions?

answer

monetary policy: buy bonds, fiscal policy: no change

question

which of the following would be most likely to occur if the united states placed high tarriffs on imported goods?

answer

the united states economy would become less efficient

question

mary jane is a lawyer who can earn $150 per hour in her law practice. she is also an excellent carpenter who can build cabinets 3x as fast as the best carpenter, whose hourly wage is $20 per hour. which of the following is the correct economic statement?

answer

mary jane has a comparative advantage in law so she should specialize in law and hire a carpenter to make her cabinets

question

the intersection of the aggregate supply curve and the aggregate demand curve occurs at the economy's equillibrium level of

answer

real national output and the price level

question

if purchases of education and medical care were counted as investment rather than consumption, GDP would

answer

not change, because there is no change in total expenditures

question

which of the following would most likely cause the united states to fall into a recession?

answer

an open market sale by the federal reserve

question

which of the following would most likely cause a rightward shift in an economy;s aggregate supply curve?

answer

an across-the-board reduction of wages in the manufacturing sector

question

suppose that disposable income is $1000, consumption is $700, and MPC is .6. if disposable income then increases by $100, consumption and savings will equal which of the following?

answer

consumption: $760, savings: $340

question

if at full employment, the government wants to increase its spending by $100 billion without increase inflation in the short-run, it must do which of the following?

answer

raise taxes by more than $100 billion

question

assume that the reserve requirement is 15% and that a bank receives a new checking deposit of $200. which of the following will most likely occur in the bank's balance sheet.

answer

liabilities: increase by $200, required reserves: increase by $30

question

open market operations refer to which of the following activities?

answer

the buying and selling of government securities by the federal reserve

question

compared to expansionary monetary policies adopted to counteract a recession, expansionary policies tend to result in

answer

higher interest rates

question

according to monetarists, which of the following is true of expansionary fiscal policy?

answer

it will cause interest rates to rise and crowd out private investment spending

question

which of the following policies would a keynesian recommend during a period of high unemployment and low inflation?

answer

decrease taxes to stimulate aggregate demand

question

an important assumption in keynesian theory is that

answer

prices are rigid downward and decreases in aggregate demand will lead to an increase in unemployment

question

which of the following changes in the aggregate demand and aggregate supply curves is likely to result in stagflation?

answer

the aggregate supply curve shifts to the left

question

in a flexible system of exchange rates, an open market sale of bonds by the federal reserve will most likely change the money supply, the interest rate, and the value of the united states dollar in which of the following ways?

answer

money supply: decrease, interest rate: increase, value of the dollar: increase

question

Economic Growth is best defined as

answer

a sustained increase in real gross domestic product per capita

question

the price of one nation's currency expressed in the terms of another nation's currency is called

answer

the exchange rate

question

Using equal amounts of labor hours, Country X and Country Y can each produce the number of watches and radios shown in the production possibilities curves above. Based on the information, which of the following is true? (Refer to picture)

answer

Countries X and Y can engage in a mutually advantageous trade by exchanging 1 watch for 1 radio

question

If a worker's nominal wage rate increases from $10 to $12 per hour and at the same time the general price level increases by 10 percent, the worker's real wage has

answer

approximately increased by 10%

question

Which of the following is an example of fiscal policy?

answer

Increasing government expenditures to build highways

question

The Federal Reserve can cause an increase in interest rates in an attempt to

answer

reduce inflation

question

The value of which of the following is counted in the United States' gross domestic product?

answer

A car produced in the United States and sold in Europe

question

Aggregate demand may be measured by adding

answer

consumption, investment, government spending, and net exports

question

According to the short-run Phillips' curve, a decrease in unemployment is expected to be accompanied by

answer

an increase in inflation

question

If labor costs rise in the automobile industry, which of the following will happen to car prices and the quantity of cars sold?

answer

Price: Increase Quantity sold: Decrease

question

The annual inflation rate is expected to be 5 percent over the next 3 years. Juan plans to take out a 3-year loan to purchase an automobile. If Juan decides not to take out the loan if the interest rate exceeds 3 percent, the highest nominal interest rate he is willing to pay is

answer

8 percent

question

Which of the following is true about the national debt of the United States?

answer

It is the accumulation of past and current budget deficits and surpluses

question

Which of the following most undermines the ability of a nation's currency to store value?

answer

a decrease in the purchasing power of the currency

question

Assume that the inflation rate in Country X is very high relative to the inflation rates in all of its trading partners. Which of the following is likely to happen to Country X's currency on the foreign exchange market?

answer

The demand for the currency will shift to the left, and the currency will depreciate

question

Comparative advantage implies that

answer

two countries should benefit from trade unless both have equal opportunity costs in every good

question

If the velocity of money is stable, the quantity theory of money predicts that an increase in the money supply will lead to a proportional

answer

increase in the nominal output

question

Refer to the picture. If the economy is currently producing 10 units of good A and 90 units of good B, the opportunity cost of increasing the production of good A from 10 units to 20 units is how many units of good B?

answer

10

question

no item scored

answer

no item scored

question

Which of the following is most likely to occur when the Federal Reserve buys government bonds on the open market?

answer

Interest rates will decrease

question

An industry historically used employees with specific skills. If this industry experiences technological advances that require new skills there will most likely be

answer

structural unemployment

question

If marginal business tax rates are decreased, how will the aggregate supply and employment change in the long run?

answer

Aggregate Supply: Increase Employment: Increase

question

Which of the following would cause the official unemployment rate to understate the problem of unemployment

answer

discouraged workers

question

Which of the following actions by the Federal Reserve reduces the ability of the banking system to create money?

answer

increasing the reserve requirement

question

An increase in the international value of the United States dollar will tend to cause

answer

United States exports to fall

question

Which of the following statements about the circular flow model of a market economy is correct?

answer

Households are on the demand side of the product market and the supply side of the resource market

question

Which of the following government policies to reduce the rate of inflation in the short run

answer

selling bonds on the open market

question

Crowding out occurs when

answer

government borrowing to finance its spending decreases private sector investment

question

Which of the following is true of a horizontal aggregate supply curve?

answer

It suggests that increases in output can occur without increases in price levels

question

Which of the following individuals is considered unemployed?

answer

A recent college graduate who is looking for her first job

question

If an effective price floor is removed from a market for a good, then the price and quantity of the good sold will change in which of the following ways?

answer

Price: decrease Quantity: increase

question

When the Federal Reserve increases the money supply to stimulate aggregate demand, workers believe that this action will cause inflation in the future and ask for higher wages to offset the expected increase in inflation. This is an example of

answer

national expectations

question

Which of the following would be included as a liability on a commercial bank's balance sheet?

answer

demand deposits

question

Which of the following statements best describes the impact of a decrease in Japanese income on aggregate demand in the United States?

answer

aggregate demand will decrease because the demand for United States exports decreases

question

Suppose the Federal Reserve is committed to keeping the nominal interest rate fixed. To maintain the interest rate target in the face of an expansionary fiscal policy, the Federal Reserve can do which of the following?

answer

Engage in open-market purchases

question

Which of the following is true of the quantity of money demanded?

answer

It falls when interest rates rise, because the opportunity cost of holding money increases

question

Which of the following would be a current account transaction?

answer

A United States firm sells $500 million of its products to a Chinese company

question

Which of the following will most likely occur if a government adopts an annually balanced budget rule that requires the government to eliminate any deficits or surpluses?

answer

the automatic stabilizing effect of fiscal policy will be eliminated

question

Which of the following changes would cause an economy's aggregate demand curve to shift to the right?

answer

An increase in autonomous consumption spending

question

In the measurement of gross domestic product, investment includes spending by

answer

businesses on capital goods and changes in inventories

question

Which of the following statements concerning economic growth is true?

answer

With long-run economic growth, there is an increase in aggregate supply

question

If the economy was in a severe recession, the most expansionary fiscal policy would be to

answer

decrease personal income taxes and increase government spending by equal amounts

question

Which of the following would best explain an inward shift of the production possibilities curve?

answer

a decrease in the quality of human capital

question

Assume that the economy is in equilibrium. If aggregate demand increases, nominal interest rates and bond prices will most likely change in which of the following ways?

answer

Nominal interest rates: increase Bond Prices: decrease

question

Which of the following would most likely stimulate economic growth?

answer

technological progress

question

If a French firm buys computers from the United States, there would be an increase in which of the following in the foreign exchange market?

answer

demand for the United States dollars and supply of euros

question

If the Federal Reserve pursues a contractionary monetary policy, output and price level will change in which of the following ways in the short run?

answer

Output: decrease Price level: decrease

question

If the nominal GDP of the nation of Hypothetica increased in 2007 relative to the previous year, it must be true that in Hypothetica in 2007

answer

the price level and/or the real GDP has increased

question

A decrease in the prices of inputs will cause which of the following to occur in the short run?

answer

an increase in the short-run aggregate supply and a decrease in the price level

question

Which of the following best describes human capital?

answer

the training and education of workers

question

Which of the following is an example of foreign direct investment?

answer

A United States automobile manufacturer building a steel plant in Russia

question

Which of the following is true of the long-run Phillips curve?

answer

It is vertical at the natural rate of unemployment

question

Gross domestic product has been criticized as a measure of well-being because it fails to take into account which of the following?

answer

the distribution of income

question

The graph above (refer to doc) shows the macroeconomic conditions of Wattsonia. Many economists estimate that the natural rate of unemployment is 6 percent. If this is true and the current rate of unemployment is 5.1 percent, in what range of the real gross domestic product is the country currently producing?

answer

Greater than Y2

question

Expansionary monetary policy can affect the economy through which of the following chains of events?

answer

buying bonds increases the money supply, which lowers the interest rates

question

If the real interest rates in the United States rise relative to the rates of other countries, what will happen to the international value of the United States dollar and the United States net exports?

answer

Value of the dollar: appreciate Net exports: decrease

question

Which of the following changes will have the smallest expansionary effect on aggregate demand in the short run?

answer

a decrease in taxes of $100

question

A leftward shift of the LRAS curve is most likely consistent with an improvement in a country's standard of living if

answer

population decreases

question

Stagflation is caused by

answer

a decrease in aggregate supply

question

The required reserve ratio is 0.2 and the Federal Reserve sells $1 million in securities. If there are no leakages and banks do not hold excess reserves, which of the following is the change in the money supply?

answer

A decrease of $5 million

question

The economy of a country is currently at equilibrium at point A in the diagram above (refer to doc). If the government does nothing and wages are flexible, which of the following will most likely occur in the long run?

answer

Falling wages will shift the aggregate supply curve to the right, producing full employment.

question

1. If a certain combination of goods or services lies outside the production possibilities curve of an economy, which of the following is true?

answer

(C) Resources are not available to achieve that combination of goods or services.

question

2. Which of the following groups would most likely gain from unanticipated inflation?

answer

(D) Individuals who have borrowed money at fixed interest rates

question

3. With a constant money supply, if the demand for money decreases, the equilibrium interest rate and quantity of money will change in which of the following ways?

answer

(E) Decrease in interest rates and No change in quantity of money

question

4. According to the graph above, an increase in aggregate supply will most likely cause income and employment to change in which of the following ways

answer

(E) Increase in income and increase in employment

question

5. If the exchange rate between the United States dollar ($) and the British pound (£) changed from $2 per £1 to $3 per £1, and domestic prices in both countries stayed the same, then the United States dollar would

answer

(A) depreciate, making United States imports from Britain more expensive

question

6. If an economy is operating with significant unemployment, an increase in which of the following will most likely cause employment to increase and the interest rate to decrease?

answer

(A) Purchases of government bonds by the central bank

question

7. An increase in which of the following is most likely to promote economic growth?

answer

(B) Investment tax credits

question

8. An appropriate fiscal policy to combat a recession would be to increase which of the following?

answer

(D) Government spending

question

9. The concept of opportunity cost would no longer be relevant if

answer

(B) the supply of all resources were unlimited

question

10. An appreciation of the United States dollar on the foreign exchange market could be caused by a decrease in which of the following?

answer

(B) The United States consumer price index

question

11. Which of the following would indicate that economic growth has occurred?

answer

(B) The long-run aggregate supply curve shifts to the right.

question

12. Which of the following is most likely to occur if the Federal Reserve engages in open market operations to reduce inflation?

answer

(B) A decrease in reserves in the banking system

question

13. Which Federal Reserve action can shift the aggregate demand curve to the left?

answer

(D) Raising the discount rate

question

14. Crowding out refers to the decrease in

answer

(C) private investment due to increased borrowing by the government

question

15. If the real interest rate in the United States increases relative to that of the rest of the world, capital should flow

answer

(B) into the United States and the dollar will appreciate

question

16. Which of the following policy choices represents a combination of fiscal and monetary policies designed to bring the economy out of a recession?

answer

(C) Increasing government spending and decreasing the federal funds rate

question

17. Which of the following will be counted as unemployed by the United States Bureau of Labor Statistics?

answer

(C) Persons who were fired from their previous jobs and are actively applying for work

question

18. Which of the following sequences of events would occur if the Federal Reserve implemented contractionary monetary policy?

answer

(A) Interest rates increase, investment and consumption spending decrease, aggregate demand decreases, and output and prices decrease.

question

19. Suppose that autonomous consumption is $400 and that the marginal propensity to consume is 0.8. If disposable income increases by $1,200, consumption spending will increase by

answer

D) $ 960

question

20. In an economy in which all prices, including wages, are completely flexible, an increase in labor productivity will result in which of the following changes in output and real wages?

answer

(A) Increase in output and Increase in Real Wages

question

21. When the average price level increases by 10 per- cent in a given year, which of the following must increase by 10 percent for real output to remain constant?

answer

(B) Nominal national income

question

22. Which of the following will occur in a competi- tive market when the price of a good is less than the equilibrium price?

answer

(D) Price will increase to eliminate the shortage and restore equilibrium.

question

23. A short-run Phillips curve shows an inverse relationship between

answer

(B) inflation and unemployment

question

24. Which of the following can be expected to cause an increase in gross domestic product in the short run?

answer

(D) Equal increases in both taxes and government expenditures

question

25. If the federal government reduces its budget deficit when the economy is close to full employ- ment, which of the following will most likely result?

answer

(C) Interest rates will decrease.

question

26. Which of the following will cause the United States dollar to depreciate relative to the euro?

answer

(A) An increase in household income in the United States

question

27. Stagflation is most likely to be caused by

answer

(D) a decrease in aggregate supply

question

28. Assume that the nominal interest rate is 10 percent. If the expected inflation rate is 5 percent, the real interest rate is

answer

(C) 5%

question

29. Which of the following will lead to an increase in the United States gross domestic product?

answer

(D) Foreign companies build new assembly plants in the United States.

question

30. An advance in technology will cause the

answer

(E) long-run aggregate supply curve to shift to the right

question

31. Suppose that the Federal Reserve buys $400 billion worth of government securities from the public. If the required reserve ratio is 20 percent, the maximum increase in the money supply is

answer

(C) $2,000 billion

question

32. Before specialization and trade, the domestic opportunity cost of producing 1 ton of grain in Alpha and in Beta is which of the following?

answer

(B) 1 ton of steel (Alpha) 2 tons of steel (Beta)

question

33. The theory of comparative advantage implies that Alpha would find it advantageous to

answer

(A) export grain and import steel

question

34. At what real exchange ratio, also referred to as the terms of trade, between grain (G) and steel (S) would both Alpha and Beta find it mutually advantageous to specialize and trade?

answer

(B) 1G = 1.5S

question

35. According to the graph above, which of the following is true about the long-run equilibrium of the economy depicted?

answer

(E) As wages increase, the short-run aggregate supply curve will shift to the left to restore long-run equilibrium.

question

36. An increase in personal income taxes will most likely cause aggregate demand and aggregate supply to change in which of the following ways in the short run?

answer

(C) Decrease in Aggregate Demand and No change in Aggregate Supply

question

37. Which type of unemployment would increase if workers lost their jobs because of a recession?

answer

(A) Cyclical

question

38. Which of the following is true about the marginal propensity to consume?

answer

(B) It determines the size of the simple spending multiplier.

question

39. When an economy is operating below the full- employment level of output, an appropriate monetary policy would be to increase which of the following?

answer

(D) Open market purchases of government bonds

question

40. Assume that the economy is at full employment. Policymakers wish to maintain the price level but want to encourage greater investment. Which of the following combinations of monetary and fiscal policies would best achieve this goal?

answer

(C) Expansionary for Monetary Policy and Contractionary for Fiscal Policy

question

41. In one year, spending on consumption, investment, and government purchases was equal to 103 percent of a country's gross domestic product. This would be possible only if

answer

(C) net exports were negative

question

42. When firms restructure their operations to decrease production costs, the aggregate supply curve, the price level, and real output will change in which of the following ways?

answer

(D) Shift to the right in AS curve, Price level Decrease, and Increase in Real Output

question

43. An economy is in a short-run equilibrium at a level of output that is less than full-employment output. If there were no fiscal or monetary policy interventions, which of the following changes in output and the price level would occur in the long run?

answer

(A) Increase in Output and Decrease in Price Level

question

44. Assume that the world operates under a flexible exchange rate system. If the central bank of Mexico increases its money supply but other countries do not change theirs, Mexico's inflation rate and the international value of the Mexican peso will most likely change in which of the following ways?

answer

(B) Increase in Inflation Rate and International Value of the Peso Depreciates

question

45. The Federal Reserve decreases the federal funds rate by

answer

(E) buying government bonds on the open market

question

Labor Market Data for Country X (in millions of persons) Population 180 Employed 94 Unemployed 6 Not in labor force 80 46. Based on the information in the table above, what is the unemployment rate for Country X?

answer

(C) 6.0%

question

47. Suppose that the government decreases taxes and at the same time the central bank decreases the discount rate. The combined actions will result in

answer

(E) an increase in the real gross domestic product and an indeterminate change in the interest rate

question

48. In a closed economy with only lump-sum taxation, if the marginal propensity to con- sume is equal to 0.75, a $70 billion increase in government spending could cause a max- imum increase in output of

answer

(E) $280 billion

question

49. Which of the following is NOT a function of fiat money?

answer

(C) A source of intrinsic value

question

50. When an economy is at full employment, which of the following will most likely create demand- pull inflation in the short run?

answer

(C) A decrease in the real rate of interest

question

51. Under rational expectations, an announced expansion in the money supply will change nominal and real gross domestic products (GDP) in which of the following ways?

answer

(C) Increase in Nominal GDP and No change in Real GDP

question

52. A decrease in labor productivity will shift the

answer

(E) short-run aggregate supply curve to the left

question

53. In the long run, if aggregate demand decreases, real gross domestic product (GDP) and the price level will change in which of the following ways?

answer

(C) No change in Real GDP and Price Level Decreases

question

54. Suppose that all banks keep only the minimum reserves required by law and that there are no currency drains. The legal reserve requirement is 10 percent. If Maggie deposits the $100 bill she received as a graduation gift from her grandmother into her checking account, the maximum increase in the total money supply will be

answer

(C) $900

question

55. Assuming fixed exchange rates, if country Z's rate of inflation increases relative to its trading partners, Country Z's imports and exports will most likely change in which of the following ways?

answer

(C) Increase in Imports and Decrease in Exports

question

56. Which of the following household purchases will be counted as part of gross private investment in a country's gross domestic product?

answer

(E) A newly constructed home

question

57. An increase in aggregate demand will cause which of the following?

answer

(A) A movement along a given short-run Phillips curve

question

58. Which of the following would cause the short-run aggregate supply curve to shift to the right?

answer

(E) A decrease in the expected price level

question

59. A decrease in business taxes would lead to an increase in national income by increasing which of the following?

answer

(E) Both aggregate demand and aggregate supply

question

60. In an open economy, an increase in government budget deficit tends to cause the international value of a country's currency and its trade deficit to change in which of the following ways?

answer

(B) Value of Currency will Appreciate and Trade Deficit will Become larger

Structural Unemployment: Worker Loses Job Due to Automation

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards