eco final – Flashcards
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macroeconomists study
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economy-wide phenomena
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which of the following statistics is usually regarded as the best single measure of society's economic well being
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gross domesticproduct
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income generated by a nation's domestic production
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is equal to its domestic production
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for an economy as a whole
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income must equal expenditure
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which of the following statements about GDP is correct?
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GDP is generally regarded as the best single measure of society's economic well-being
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If an economy's GDP rises, then it must be the case that the econom's
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income and expenditure both rise
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In the actual economy, households
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divide their income among spending, taxes and saving
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GDP is defined as the
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value of all final goods and services produced within a country in a given period of time
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Gross domestic product together adds together many different kinds of goods and services into a single measure of the value of economic activity. To do this, GDP makes use of
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market prices
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most goods and services produced at home
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are included in GDP while most goods and services produced illegally are included in GDP
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which of the following is not included in GDP
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carrots grown in your garden and eaten by your fmaily
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which of the following is not an example of durable good?
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a business suit
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which of the following is not an example of a nondurable good?
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a microwave
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which of the following items is included in GPD?
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all of the above
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government purchases include spending on goods and services by?
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federal, state, and local government
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net exports equal
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exports minus imports
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in the United States in 2009, purchases of capital equipment, inventories, and structures represented approximately
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11 percent of GDP
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Changes in nominal GDP reflect
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both changes in prices and changes in the amounts being produced
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real GDP is the yearly production of final goods and services valued at
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constant prices
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which of the following is always measured in prices from a based-year?
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real but not nominal GDP
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The term economists use to describe a situation in which the economy's overall price level is rising is
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inflation
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the inflation rate is the
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percentage change in the price level from one period to another
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if the nominal GDP doubles and the GDP deflator doubles, then real GDP
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quadruples
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GDP per person tells us the income and expenditure of the
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average person in the economy
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GDP does not reflect
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the value of leisure
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The consumer price index is used to
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monitor changes in the cost of living over time
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When the consumer price index rises, the typical family
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has to sped more dollars to maintain the same standard of living
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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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the inflation rate is defined as the
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percentage change in the price level from the previous period
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the CPI is a measure of the overall cost of the goods and services bought by
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the government
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The CPI is calculated
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monthly by the Bureau of Labor Statistics
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The CPi is calculated
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monthly
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To calculate the CPI, the Bureau of Labor Statistics use
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the prices of all goods and services produced domestically.
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Suppose a basket of goods and services has been selected to calculate the CPI and 2004 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 2006 was
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105.0
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If the consumer price index was 100 in the base year and 107 in the following year, then the inflation rate was
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7 percent
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The goal of the consumer price index is to measure changes in the
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production of consumer goods
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Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 214.5 for 2009. Ruth's 1931 salary was equivalent to a 2009 salary of about
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$1,128,947
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In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 214.5 for 2009. President Hoover's 1931 salary was equivalent to a 2009 salary of about
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$1,058,388
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Grapes are considered intermediate goods
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if the purchaser uses them to make wine to sell to others but not if the purchaser eats them.
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Unemployment data are collected
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using all of the above
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The Bureau of Labor Statistics produces data on unemployment
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monthly
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Ava owns her own business. The Bureau of Labor Statistics counts Ava as
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employed and in the labor force
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Jouke is on a temporary layoff from his factory job but has not looked for work in the last four weeks. The Bureau of Labor Statistics counts Jouke as
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unemployed and not in the labor force
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The labor force equals the
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number of people employed plus the number of people unemployed.
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Frictional unemployment is inevitable because
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sectoral shifts are always happening.
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Unemployment insurance
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reduces search effort which raises unemployment
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More generous unemployment insurance would
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raise frictional unemployment
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Minimum-wage laws can keep wages
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above equilibrium and cause a surplus of labor
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An increase in the minimum wage
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increases structural unemployment
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Collective bargaining refers to
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the process by which unions and firms agree on the terms of employment
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Unions contribute to
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structural unemployment
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The Wagner Act of 1935
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prevents employers from interfering when workers try to organize a union.
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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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Minimum-wage laws, unions and efficiency wages contribute to
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structural unemployment, but not the natural rate of unemployment
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Sectoral changes in demand
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create fictional unemployment, while firms paying wages above equilibrium to attract a better pool of candidates creates structural unemployment
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Money
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all of the above
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The existence of money leads to
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greater specialization and to a higher standard of living
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Liquidity refers to
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the ease with which an asset is converted to the medium of exchange
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Money
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all of the above are correct
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Commodity money is
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money with intrinsic value
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Paper dollars
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are fiat money and gold coins are commodity money
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Currency includes
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paper bills and coins
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Demand deposits are a type of
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checking account
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The agency responsible for regulating the money
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the Federal Reserve
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The members of the Federal Reserve's Board of Governors
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are appointed by the president of the U.S. and confirmed by the U.S. senate.
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The Board of Governors
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has 7 members
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In a fractional-reserve banking system, a bank
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keeps only a fraction of its deposits in reserve.
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If a bank has a reserve ratio of 8 percent, then
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the bank keeps 8 percent of its deposits as reserves and loans out the rest.
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If R represents the reserve ratio for all banks in the economy, then the money multiplier is
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1/R
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If the reserve ratio is 20 percent, the money multiplier is
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5
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If the reserve ratio is 20 percent, then $100 of new reserves can generate
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$500 of new money in the economy
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When the fed conducts open-market purchases
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banks buy Treasury securities from the Fed, which decreases the money supply.
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When the fed makes open-market sales bank
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withdrawals increase and lending decreases
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which tool of monetary policy does the Federal Reserve use most often?
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open-market operations
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The discount rate is the interest rate that
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the Fed charges banks for loans
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The discount rate is
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the interest rate the Fed charges banks
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When there is a reserve requirement, bank
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may hold more than, but not less than, the required quantity of reserves
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Inflation can be measured by the
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change in the consumer price index
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The quantity theory of money
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can explain both moderate inflation and hyperinflation.
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The velocity of money is
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the average number of times per year a dollar is spent
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If M=3,000, P=2, and Y=12,000, what is velocity?
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8
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When inflation rises, the nominal interest rate
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rises, and people desire to hold less money
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The costs of changing price tags and price listings are known as
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menu costs
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In order to maintain stable prices, a central bank must
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tightly control the money supply
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During a recession the economy experiences
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falling employment and income
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During recessions
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All of the above are correct
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The Classical model is appropriate for analysis of the economy in the
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long run, since real and nominal variables are essentially determined separately in the long run
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Most economists believe that money neutrality holds
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in the long run but not the short run
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The aggregate-demand curve
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shows an inverse relation between the price level and the quantity of all goods and services demanded
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Other things the same, a decrease in the price level makes consumers feel
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more wealthy, so the quantity of goods and services demanded rises.
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The long-run aggregate supply curve
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is vertical
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Which of the following shifts long-run aggregate supply right?
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an increase in either the physical or human capital stock
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Other things the same, if workers and firms expected prices to rise by 2 percent but instead they rise by 3 percent, then
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employment and production fall
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The sticky-price theory implies that
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the short-run aggregate-supply curve is upward sloping
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Which of the following shifts both the short-run and long-run aggregate supply right?
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an increase in the expected price level
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The price level rises in the short if
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aggregate demand shifts rights or aggregate supply shifts left
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If aggregate demand shifts left, then in the short run
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the price and real GDP both fall
