Macroeconomics Final Exam Study Guide (Embaye) UARK – Flashcards
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The one variable that stands out as the most significant explanation of large variations in living standards around the world is a. preferences. b. productivity. c. population. d. prices.
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B. Productivity
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Which of the following is human capital? a. training videos for new corporate employees b. a student loan c. understanding how to use a company's accounting software d. All of the above are correct.
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C. Understanding how to use a company's account software
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If a country were to increase its saving rate, then in the long run it would also increase its a. growth rate of productivity. b. growth rate of income. c. level of income. d. All of the above are correct.
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C. Level of income
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If there are diminishing returns to capital, then? a. capital produces fewer goods as it ages. b. increases in the capital stock eventually decrease output. c. old ideas are not as useful as new ones. d. increases in the capital stock increase output by ever smaller amounts.
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D. increases in the capital stock increase output by ever smaller amounts
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Institutions that help to match one person's saving with another person's investment are collectively called the a. Federal Reserve system. b. financial system. c. monetary system. d. banking system.
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B. Financial system
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In a closed economy, national saving equals what? -Income minus the sum of consumption and government purchases -Private saving plus public saving -Investment -All of the above
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D. All of the above
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Which of the following events could explain a decrease in interest rates together with an increase in investment? a. The government instituted an investment tax credit. b. The government went from surplus to deficit. c. The government reduced the tax rate on savings. d. None of the above is correct.
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C. The government reduced the tax rate on savings
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If the supply for loanable funds shifts to the left, then the equilibrium interest rate a. and quantity of loanable funds rise. b. falls and the quantity of loanable funds rises. c. rises and the quantity of loanable funds falls. d. and quantity of loanable funds fall.
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C. Rises and the quantity of lovable funds falls
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Which of the following is not included in M1? a. savings deposits b. traveler's checks c. currency d. demand deposits
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A. Savings Deposit
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Economists use the word "money" to refer to a. fianncial assets such as stocks and bonds. b. any type of wealth. c. those assets regularly used to buy goods and services. d. income generated by the production of goods and services.
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C. Those assets regularly used to buy goods and services
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Which of the following does the Federal Reserve not do? a. conduct monetary policy b. act as a lender of last resort c. convert Federal Reserve Notes into gold d. serve as a bank regulator
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C. Convert Federal Reserve Notes into gold
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Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy? a. the Board of Governors b. the FOMC c. the regional Federal Reserve Bank presidents d. the Central Bank Policy Commission
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B. The FOMC
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An open-market purchase a. increases the number of dollars and the number of bonds in the hands of the public. b. increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public. c. decreases the number of dollars and the number of bonds in the hands of the public. d. decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.
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b. increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.
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In a system of 100-percent-reserve banking, a. banks do not accept deposits. b. banks do not influence the supply of money. c. loans are the only asset item for banks. d. All of the above are correct.
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b. banks do not influence the supply of money.
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Which of the following is an asset of a bank and a liability for its customers? a. deposits of its customers and loans to it customers b. deposits of its customers but not loans to its customers c. loans of its customers but not the deposits of its customers d. neither the deposits of its customers nor the loans to its customers
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c. loans of its customers but not the deposits of its customers
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If the central bank in some country lowered the reserve requirement, then the money multiplier for that country a. would increase. b. would not change. c. would decrease. d. could do any of the above.
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a. would increase.
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If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to a. $5,500 of new money. b. $5,000 of new money. c. $4,000 of new money. d. None of the above is correct.
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d. None of the above is correct.
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The interest rate the Fed charges on loans it makes to banks is called a. the prime rate. b. the federal funds rate. c. the discount rate. d. the LIBOR.
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c. the discount rate.
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To increase the money supply, the Fed could a. sell government bonds. b. decrease the discount rate. c. increase the reserve requirement. d. None of the above is correct.
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b. decrease the discount rate.
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According to the classical dichotomy, which of the following is influenced by monetary factors? a. nominal interest rates b. real GDP c. unemployment d. All of the above are correct.
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a. nominal interest rates
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In 2001, the United States was in recession. Which of the following things would you not expect to have happened? a. increased layoffs and firings b. a higher rate of bankruptcy c. increased claims for unemployment insurance d. increased investment spending
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d. increased investment spending
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Which of the following decreases in response to the interest-rate effect from an increase in the price level? a. investment but not consumption b. consumption but not investment c. both investment and consumption d. neither investment nor consumption
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c. both investment and consumption
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Other things the same, a decrease in the price level motivates people to hold a. less money, so they lend less, and the interest rate rises. b. more money, so they lend more, and the interest rate rises. c. less money, so they lend more, and the interest rate falls. d. more money, so they lend less, and the interest rate falls.
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c. less money, so they lend more, and the interest rate falls.
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From 2001 to 2005 there was a dramatic rise in the price of houses. If this rise made people feel wealthier, then it would have shifted a. aggregate demand left. b. aggregate supply left. c. aggregate demand right. d. aggregate supply right.
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c. aggregate demand right.
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If the dollar appreciates because of speculation or government policy U.S. a. aggregate demand shifts left. experience recessions.U.S. aggregate demand also shifts left if other countries b. aggregate demand shifts left. experience recessions.U.S. aggregate demand shifts right if other countries c. aggregate demand shifts right. experience recessions.U.S. aggregate demand also shifts right if other d. aggregate demand shifts right. experience recessions.U.S. aggregate demand shifts left if other countries
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a. aggregate demand shifts left. experience recessions.U.S. aggregate demand also shifts left if other countries
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According to the aggregate demand and aggregate supply model, in the long run an increase in the money supply leads to a. increases in both the price level and real GDP. b. an increase in real GDP but does not change the price level. c. an increase in the price level but does not change real GDP. d. no change in either the price level or real GDP.
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c. an increase in the price level but does not change real GDP.
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Which of the following shifts short-run, but not long-run aggregate supply right? a. a decrease in the nominal wage b. a decrease in the nominal wage c. a decrease in the capital stock d. an increase in the money supply
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b. a decrease in the nominal wage
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The Great Depression couldn't have been caused by leftward shift of the long-run aggregate supply curve as argued by classical economists because it would then contradict what happened to: a. the price level. b. the unemployment level. c. the aggregate output. d. money supply.
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a. the price level.
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In the mid-1970s the price of oil rose dramatically. This a. caused U.S. prices to fall. b. shifted aggregate supply left. c. was the consequence of OPEC increasing oil production. d. All of the above are correct.
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b. shifted aggregate supply left.
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Suppose a shift in aggregate demand creates an economic contraction. If policymakers can respond with sufficient speed and precision, they can offset the initial shift by shifting a. aggregate supply right. b. aggregate demand right. c. aggregate demand left. d. aggregate supply left.
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b. aggregate demand right.
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An increase in the price level and a reduction in output would result from a. declining government expenditures. b. a fall in stock prices. c. tax rebates. d. natural disasters such as hurricanes, floods, and droughts.
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d. natural disasters such as hurricanes, floods, and droughts.
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Concerning the effect of an increase in government purchase (which increases budget deficit), the loanable fund model predicts ________ and the AD-AS model predicts __________ a. an increase in investment and output in the longrun; a decrease in output in the shortrun. b. a decrease in investment and output in the longrun; a decrease in output in the shortrun. c. an increase in investment and output in the longrun; an increase in output in the shortrun. d. a decrease in investment and output in the longrun; an increase in output in the shortrun
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d. a decrease in investment and output in the longrun; an increase in output in the shortrun
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The following are two set of quotes from the lyric or video the "Fight of the Century": Contestant A: The future's uncertain, our outlooks are frail That's why free markets are so prone to fail In a volatile world we need more discretion; so state intervention can counter depression! Contestant B: jobs are a means, not the ends in themselves people work to live better, to put food on the shelves real growth means production of what people demand That's entrepreneurship not your central plan! Based on the contents of the quotes, contestant A is _________ and Contestant B is ___________. a. Hayek ; Hayek b. Hayek ; Keynes c. Keynes; Hayek d. Keynes ; Keynes
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c. Keynes; Hayek
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Optimism Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time. 36. Refer to Optimism. How is the new long-run equilibrium different from the original one? a. both price and real GDP are higher b. both price and real GDP are lower. c. the price level is the same and GDP is higher. d. the price level is higher and real GDP is the same.
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d. the price level is higher and real GDP is the same.
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Which of the following by itself is consistent with the directions that the price level and real GDP changed at the onset of the Great Depression? a. aggregate demand shifted right b. aggregate demand shifted left c. aggregate supply shifted right d. aggregate supply shifted left
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b. aggregate demand shifted left
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Which of the following would raise the price level in both the short and long run? a. an increase in taxes b. an increase in government expenditures c. a decrease in the minimum wage d. an increase in the capital stock
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b. an increase in government expenditures
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Changes in the interest rate a. shift aggregate demand if they are caused by changes in the price level, but not if they are caused by changes in fiscal or monetary policy. b. shift aggregate demand if they are caused by fiscal or monetary policy, but not if they are caused by changes in the price level. c. shift aggregate demand whether they are caused by changes in the price level or by changes in fiscal or monetary policy. d. do not shift aggregate demand.
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b. shift aggregate demand if they are caused by fiscal or monetary policy, but not if they are caused by changes in the price level.
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Fed's open-market purchase implies? a. an increase in money supply and rise of interest rates b. an decrease in money supply and rise of interest rates c. an increase in money supply and fall of interest rates d. a decrease in money supply and fall of interest rates
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c. an increase in money supply and fall of interest rates
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Scenario 34-1. Take the following information as given for a small, imaginary economy: • When income is $10,000, consumption spending is $6,500. • When income is $11,000, consumption spending is $7,300. 41. Refer to Scenario 34-1. The marginal propensity to consume for this economy is a. 0.650. b. 0.664. c. 0.650 or 0.664, depending on whether income is $10,000 or $11,000. d. 0.800.
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d. 0.800.
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Refer to Scenario 34-1. The government purchase multiplier for this economy is a. 2.86. b. 2.98. c. 4.00. d. 5.00.
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d. 5.00.
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Tax cuts a. shift aggregate demand right while increases in government expenditures shift aggregate demand left. b. shift aggregate demand left while increases in government expenditures shift aggregate demand right. c. and increases in government expenditures shift aggregate demand left. d. and increases in government expenditures shift aggregate demand right.
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d. and increases in government expenditures shift aggregate demand right.
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Fiscal policy refers to the idea that aggregate demand is affected by changes in a. trade policy. b. government spending and taxes. c. the money supply. d. All of the above are correct.
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b. government spending and taxes.
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Which of the following is correct? a. Although levels of real GDP per person vary substantially from country to country, the growth rate of real GDP per person is similar across countries. b. Productivity is not closely linked to government policies. c. Productivity may be measured by the growth rate of real GDP per person. d. The level of real GDP per person is a good gauge of economic prosperity, and the growth rate of real GDP per person is a good gauge of economic progress.
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d. The level of real GDP per person is a good gauge of economic prosperity, and the growth rate of real GDP per person is a good gauge of economic progress.
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the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country.
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Human Capital
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is the total demand for final goods and services in an economy at a given time. It specifies the amounts of goods and services that will be purchased at all possible price levels.
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Aggregate Demand
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includes all government consumption, investment, and transfer payments.
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Government expenditures
