Macroeconomics TESTS – Flashcards

Unlock all answers in this set

Unlock answers
question
In China, which of the following would be a resource in the production of rice?
answer
Fertile land Labor Capital Equipment
question
If there is a tremendous natural disaster, the effect can be shown by:
answer
an inward contraction of the production possibilities frontier
question
Which fundamental economic question is most closely related to the issues of income distribution and poverty?
answer
The For Whom to Produce question
question
100 shares of stock in General Motors
answer
Not a capital resource
question
A high school graduate who gets a college degree is adding to the economy's stock of
answer
Human capital
question
The simplest circular-flow model shows the interaction between households and firms. In this model:
answer
Firms supply goods and services to households which, in turn, supply factors of production to the firms
question
The economy's factors of production are not equally suitable for producing different types of goods. This principle generates:
answer
the law of increasing opportunity cost
question
You can either spend $100 on a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is
answer
the new CD player
question
Specialization in production was the starting point for what book in economics that many regard as the beginning of economics
answer
The Wealth of Nations by Adam Smith
question
The basic concern of economics is:
answer
to study the choices people make
question
The study of a single firm and how it determines prices would fall under:
answer
Microeconomics
question
The branch of economics that focuses on economy-wide variables like inflation and unemployment is called:
answer
Macroeconomics
question
A key theme fundamental to all of economics is:
answer
people have unlimited wants facing limited means to satisfy them
question
In economics a resource is anything that
answer
is also called an input or factor can be used in production
question
When a chef creates a dinner plate of food for a customer, the physical capital resource is
answer
the oven
question
Margo spends $10,000 on one year's college tuition. he could have worked this year and earned some money. The opportunity cost of spending one year in college for margo is:
answer
The $10,000 and whatever she would have earned had she not been in college
question
The local Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is:
answer
the burrito
question
The primary emphasis in macroeconomics is on:
answer
the national economy at the aggregated level
question
In attempt to reduce shooting deaths, some cities have offered money to people who turn in illegal guns. This program is an example of the government using________ to influence behavior
answer
Incentives
question
If the economy's resources are used efficiently, then it is guaranteed that the economy will also achieve equity
answer
FALSE
question
Specialization in production was the starting point for what book in economics that many regard as the beginning of modern economics
answer
The Wealth of Nations by Adam Smith
question
Economists usually make the assumption that production represented by a PPF is subject to increasing opportunity costs because
answer
all resources are not equally suited to produce every good
question
A high school graduate who gets a college degree is adding to the economy's stock of:
answer
human capital
question
In economics, a simplified representation that is used to study a real situation is called:
answer
a model
question
In the simplest circular-flow model, households supply _____ and demand_______
answer
Factors of production; goods and services
question
If LeRoyce trades two cookies for one of Amir's brownies, we say that they are engaging in
answer
barter
question
The circular-flow diagram illustrates how households________ goods and services and __________ factors of production
answer
buy; sell
question
Jim is being paid $7.25 an hour to work at a restaurant. In the circular-flow this is an example of a:
answer
Household selling a resource in the factor market
question
footballs is sold
answer
In the product market
question
If there is a tremendous natural disaster, the effect can be shown by:
answer
an inward contraction of the production possibilities frontier
question
Suppose you manage a corner grocery store. If peanut butter is an inferior good, what do you suppose would happen to the price and quantity of peanut butter as incomes falls during an economic recession
answer
the price and quantity would both increase (incomes=demand)
question
After graduation from college, you will receive a substantial increase in your income from a new job. If you decide that you will purchase more t-bone steak and less hamburger, then for you hamburger is considered an
answer
inferior good
question
A shift in the demand curve of textbooks to the right would be caused by
answer
an increase in college enrollment (population=demand factor)
question
If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price:
answer
is above the market equalibrium
question
the most likely to shift the supply of milk to the right would be caused by
answer
a decrease in the price of feed given to dairy cows
question
Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled new potatoes. If the price of Raclette cheese decreased, we would expect to see:
answer
an increase in demand for new potatoes
question
A shift of the demand curve for thin-crust pizza would NOT be caused by a change in
answer
the price of thin-crust pizza
question
The demand curve for meals at a local Applebee's will shift to the left if:
answer
The Olive Garden offers a 10 percent discount coupon in the local newpaper
question
Hugo Chávez was the president of Venezuela. Venezula is a major producer of oil products, which remain the keystone of Venezula's economy. Suppose President Chávez wanted to increase his popularity with the citizens of Venezuela and enacted a government policy to reduce theprice of gasoline sold at state-owned gas stations to 50 percent of the previous price. This policy is called a
answer
price ceiling
question
Farmers in developing countries want the United States to reduce the subsidies that it gives to U.S. farmers because subsidized agricultural products from the United States
answer
lead to agricultural surpluses and lower prices for farmers in developing countries
question
Rent controls in New York City are not caused by
answer
an increase in the quantity supplied of rent-controlled apartments
question
Consider the market for iPods. What happens if a fantastic new alternative MP2 player is developed and at the same time a boat carrying a large shipment of iPods is attacked by pirates and sunk?
answer
The change in price is indeterminate and the quantity decreases
question
In the expenditure approach used in calculation of GDP, a laptop computer purchased by an accounting firm is considered to be
answer
investment spending
question
An example of government transfer or transfer payment is a
answer
Social Security payment
question
GDP omits
answer
purchase of stocks, doing things on your own, and receiving government transfers
question
One role for government policy is
answer
to attempt to manage short-run macroeconomic fluctuations
question
Real GDP is nominal GDP adjusted for
answer
changes in prices
question
Goods that are produced domestically but sold abroad are
answer
exports
question
A cartoon shows two people watching television. On the screen are the words "Economic growth indicators are up, led by car repairs, divorce costs, open-heart surgeries, and toxic waste cleanups." The cartoon illiterates the:
answer
Difficulty in measuring social welfare
question
An intermediate good would be:
answer
lumber used in building a house
question
The three ways of measuring GDP are the __________ approach, the ______________ approach and the ____________approach
answer
Expenditure National income Value-added
question
An increase in RGDP is called
answer
economic growth
question
If the price of health services rises 13% during a period when the level of average prices rises 13%, the relative price of health services compared with other goods and services
answer
stays the same
question
Assume that the real GDP of the U.S. is approximately $12 trillion and the population of the United States is approximately 300 million. What is the per capita GDP
answer
3/12=4--> $40,000
question
Recessions are periods when
answer
output and employment are falling
question
If wages grew at 5% rate last year and the average prices grew at 3% rate, then the average worker is
answer
better off
question
Suppose the total market value of all final goods and service produced this year in economy X is $4 million. Of the 4$ million worth of goods, $3 million is sold and $1 million is held in inventory. For this year, the GDP for economy X is
answer
$4 million Investment inventory C+I+G=Y
question
Macroeconomic stabilization policies are:
answer
monetary policy and fiscal policy
question
Suppose the market basket consists of 10X, 20Y, and 30Z. Current-year prices are $1.00 for each unit of X, $0.96 for each unit of Y, and $1.13 for each unit of Z. Base-year prices are $1.00 for each unit of X,Y, and Z. What is the approximate CPI i the current year?
answer
base-year= 10(1)+20(1)+30(1)=60 {[10(1)+20(.96)+30(1.13)]/60}x 100=105.17
question
Is Sean buying a new iPhone included in GDP?
answer
YES
question
Long-run economic growth depends almost entirely on
answer
labor productivity growth
question
Human capital is
answer
the improvement in labor created by education and knowledge that is embodied in the work force
question
Physical capital is purchased through investment spending, made by _____________, which in turn is mostly financed out of __________ taking the form of financial securities such as ____________ which we call _________ an investment
answer
Businesses; domestic and foreign savings; stocks an bonds; making
question
economists say that long-run economic growth is almost entirely due to
answer
rising population
question
Diminishing returns to physical capital implies that, when human capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to
answer
a smaller increase in productivity
question
Roads, telephone lines, power facilities, and schools are examples of a nation's
answer
infastructure
question
Education's effect on productivity:
answer
is an even more important determinant of growth than increases in physical capital
question
Long-run growth is sustainable if:
answer
it can continue in the face of limited natural resources and the impact of growth on the environment
question
Most physical capital, except for infrastructure, is provided by
answer
investment spending by private sector firms
question
sources of funds for Facebook's investment spending are
answer
investors who purchase shares of stock in the company borrowing from savers (bonds)
question
If the interest rate in the market for loanable funds is above the equilibrium rate
answer
the quantity demanded for loanable funds exceeds the quantity supplied
question
The main role of financial systems is to
answer
channel funds from savers into investments
question
An asset that can be quickly converted to cash with relatively little loss of value is
answer
liquid
question
Financial assets with the highest risk are
answer
stocks
question
Which of the following financial assets is likely to be the most liquid?
answer
bank demand deposits
question
A financial intermediary that sets up a diversified portfolio of stocks and then resells that portfolio to individual investors is known as a
answer
mutual fund
question
Shares of stock are
answer
shares of ownership in the issuing company
question
Most of the bank's assets are
answer
loans from the federal reserves
question
An example of maturity transformation is
answer
Justin takes $10,000 from his savings account and uses it to buy some Apple stock
question
The 2008 financial crisis in Europe was caused primarily by problems with:
answer
home loans
question
Subprime mortgages
answer
are made to buyers who do not qualify for a standard mortgage
question
Before the 2008 financial crisis, shadow banks were
answer
not subject to regulations, such as capital requirements and reserve requirments
question
Recessions are periods when
answer
output and employment are falling
question
fiscal policy refers to
answer
The control of government spending and taxation
question
Suppose an economy has rising total output accompanied by increasing employment. This is generally known as
answer
expansion
question
One role for macroeconomics policy is
answer
attempt to manage macroeconomic fluctuations and the severity of their impact
question
Households in the national income accounts derive from
answer
rent from allowing firms to use their land, interest from lending, and wages or labor income
question
A share in the ownership of a company held by a share holder is considered
answer
stock
question
The market that channel the excess savings of households into investment spending by firms is known as
answer
Financial markets
question
The total income households have after paying taxes and receiving government transfers is called
answer
disposable personal income
question
Buying a new object is
answer
calculated in GDP
question
If the economy grew at a 3% rate this year and the average prices increased ___________, people would be better off this year than last year
answer
less than 3%
question
Suppose banks are issuing personal loans at an interest rate of 9%. If the expected inflation is 3% then the
answer
nominal interest rate is 6% and the real interest rate is 9%
question
The purpose of indexing Social Security payments to the CPI would be to
answer
increase corporate profits
question
Statement: "Inflation functions as a redistribution mechanism". This is because people
answer
-have income which respond differently to inflation -by different goods and services for which relative prices change during inflation -own different asses for which relative market values change with inflation
question
the following is included in the labor force
answer
A part-time store clerk who is looking or another job
question
In February of 2012, the bureau of labor statistics calculated the unemployment rate to be 8.3%. If frictional unemployment was 2% and structural unemployment was 3.2% then Cyclical unemployment would be
answer
3.2+2=5.2 8.3-5.2=3.1%
question
Anna recently moved to Boston in order for her husband Joe to begin a new job as an economics professor at Harvard. Anna is an experience surgeon who is interviewing with several hospitals in Boston, Anna is
answer
Frictionally unemployed
question
Economists frequently use GDP per capita to reflect
answer
difference in living standards across the country
question
Examples of Government Transfers are
answer
food stamps, medicare benefits paid to someone who is indigent, unemployment compensation
question
A cartoon shows two people watching television. On the screen are the words "Economic growth indicators are up, led by car repairs, divorce costs, open-hear surgeries, and toxic waste cleanups". The cartoon illustrates
answer
difficulty measuring social welfare and overall well-being
question
Example of an intermediate good
answer
tires purchased from Goodyear by General Motors for newly produced electric cars
question
The rate of unemployment that exists when the economy is at full employment is
answer
the natural rate of unemployment
question
The theory of long-run 'self-adjustment' was proposed by the
answer
Classicals
question
The Keynesians and Classicals disagreed on
answer
the way the economy worked and how to solve macroeconomic problems
question
The short-run aggregate supply curve is positively sloped because
answer
higher prices lead to higher profit and higher output
question
A decrease in energy prices will
answer
increase short-run aggregate supply
question
A natural disaster that destroys part of the country's infastructure is a type of ___________ and therefor shifts that ____________ to the _________
answer
Negative supply shock; short-run aggregate supply curve; left
question
Suppose that the stock market crashes. What is most likely to occur
answer
the aggregate demand curve shifts to the left
question
suppose that a presidential candidate who promised large personal income tax cuts is elected. What is most likely to occur
answer
an increase in aggregate demand
question
The AD curve represents a negative relationship between price levels and real GDP in the economy. This can be justified because the following hold
answer
-as inflation occurs, my purchasing power falls -as inflation occurs consumers rush to banks for credit and thus raises interest rates and thus reduces quantity demand of real GDP in the economy -as price levels in the U.S. rise, we buy cheaper imported goods and thus reduce quantity demand of real GDP in the economy
question
The international trade effect helps justify the downward slope of the AD curve but the exchange rate effect will shift the AD curve at a given price level
answer
TRUE
question
Government purchases of goods and services (the term C+I+G+NX) differ from changes in taxes and transfer payments because government purchases of goods and services
answer
influence aggregate demand directly while changes in taxes and transfer payments influence aggregate demand indirectly
question
Education and training contributes to the accumulation of human capital thus helping to increase productivity of labor. How does such increase in productivity help the macro economy?
answer
-increase in AS, both short-run and long-run -increase in equilibrium level of real GDP and fall in price levels -long-term growth
question
Suppose $1=115 Japanese Yen. The exchange rate then changes to $1=105 Japanese Yen. The dollar has_________, making Japanese goods_______ expensive to Americans
answer
Depreciated; more
question
The long-run level of output is known as:
answer
potential output or full employment level of output
question
The marginal propensity to save plus the marginal propensity to consume must equal
answer
1
question
If the marginal propensity to consume is 0.5, individual autonomous consumption is $10,000, and disposable income is $40,000, the individual consumption spending is
answer
c=a+by c=a+.5y c=10,000+.5(40,000)
question
"income-expenditure equilibrium" can be defined as a situation in which
answer
there is no unplanned inventory investment
question
An unplanned fall in inventories leads to
answer
production increasing
question
Human capital is
answer
the improvement in labor created by education, knowledge and health care that is then embodied in the work force
question
Physical capital is purchased through investment spending, which in turn is mostly financed out of
answer
domestic and foreign savings
question
Economists say that long-run economic growth is almost entirely due to
answer
rising productivtiy
question
The supply of loanable funds is________ sloping because ____________ respond to lower interest rtes by_______ their quantity supplied of loanable funds
answer
upward; savers; decreasing
question
An example of infrastructure is
answer
New York City's public transportation system
question
Shares of stock represent
answer
shares of ownership in the issuing company
question
The main role of financial systems is to
answer
channel funds from savers into investment spending/ borrowing
question
The short-run aggregate supply curve is positively sloped becasue
answer
higher prices lead to higher profit and higher output
question
This is intended t prevent bank runs
answer
deposit insurence
question
Investment banks differ from commercial banks because commercial banks__________, but investment banks_________
answer
accept deposits from costumers; do not accept deposits
question
Suppose that the stock market crashes. What is most likely to occur?
answer
the aggregate demand curve shifts to the left
question
Suppose that a presidential candidate who promised large personal tax cuts is elected. What is most likely to occur?
answer
an increase in aggregate demand
question
A natural disaster that destroys part of a country's infrastructure is a type of _________ and therefor shifts the ______________ to the ___________(classical model)
answer
negative supply shock; short-run aggregate supply curve; left
question
Suppose the real exchange rate of 115 Japanese yen to dollar moves to 105 yen to the dollar. The dollar has _________, making Japanese goods___________ expensive for Americans
answer
depreciated; more
question
The two economists, Smith and Jones, are discussing the currently high unemployment rate. Smith says that something ought to be done quickly because the economy may not be able to restore itself to full employment. Jones says that it is better to take a "hands-off" approach. What is most likely true?
answer
Smith is probably a Keynesian economist, and Jones a classical economists
question
According to classical economists, in the long-run, inflationary and recessionary gaps are self-correcting because, eventually
answer
nominal wages rise and fall in order to close an inflationary or recessionary gap, repectivly
question
The inflation is sometimes referred to as tax on money holding because it is
answer
the decrease in the real value of money held by the public caused by inflation
question
In the income-expenditure model, inventories are
answer
constantly changing and provide insight into the future of the economy
question
The AD curve represents a negative relationship between price levels and real GDP in the economy. This can be justified because the following hold
answer
-As inflation occurs, my purchasing power falls -As inflation occurs, consumers rush to banks for credit and thus raises interest rates and thus reduces quantity demanded for real GDP in the economy -As price levels in the U.S. rise, we buy cheaper imported goods and thus reduce quantity demand of RGDP in the economy
question
During the Great Depression
answer
both consumption and investment decreased
question
The current level of RGDP lies above potential GDP. An appropriate fiscal policy would be to _________, which will shift the _________ curve to the ____________.
answer
decrease government purchases; AD; left
question
When we keep part of our wealth in a savings account, money is playing the role of:
answer
store of value
question
All of the following are responsibilities of the FED
answer
-Control the monetary base -Oversee and regulate the banking system -Set the interest (referred to as the discount) rate
question
The most liquid asset is
answer
a $50 bill
question
A bond is considered
answer
an asset that is not part of M1 and M2
question
In the U.S., the institution that is charged with fiscal policy is the
answer
Treasury Department
question
The banking crisis of 1907 the preceded the Great Depression and the recent one in 2008 were both caused by
answer
risky speculation in real estate and in the stock market
question
If the state government allocates additional spending on education, the opportunity cost is
answer
measured in terms of the alternative uses for that money
question
If the economy grew at a 3% rate this year and average prices grew______, people would be better off this year compared with last year
answer
slower than 3%
question
When the FED is acting as a fiscal agent for the treasure it will
answer
receive and process bids for the treasury securities in preparation for the treasury's auction of securities
question
Reserve requirements
answer
set the minimum amount of reserves a bank must hold
question
If the government spends more than it earns it runs a ________________. In order to finance its excess spending it can ______________ from the public by selling______________.
answer
budget deficit; borrow; treasury securites
question
The following are sources of federal tax revenue
answer
-the personal income tax -social insurance taxes -the corporate profits tax
question
The effect of automatic stabilizers is to increase the size of the multiplier
answer
FALSE
question
A contractionary fiscal policy__________ government spending or ___________ taxes.
answer
decreases; increases
question
If the economy is at equilibrium above potential output, there is a(n)______________ gap, and __________ fiscal policy is appropriate
answer
inflationary; contractionary
question
In order to fight the recession the began in December 2007, FED policy in late 2008 involved:
answer
cutting its target interest rate (discount rate or prime rate) to near zero followed by a massive surge in buying bonds called quantitative easing
question
Open market operations are the:
answer
buying and selling of treasury securities by the FED
question
A decrease in money supply will occur if
answer
-an increase in the discount rate(relative to federal funds rate) -an increase in the required-reserve ratio
question
When the federal government incurs a budget deficit, it will:
answer
borrow money from the public by issuing securities
question
Debit cards
answer
are considered part of the money supply, since they allow access to a part of the money supply.
question
Example of liquid asset:
answer
cash and coin
question
Suppose the reserve ratio is 20%. If Sam deposits $500 into his checking account, his bank can increase loans by
answer
.2x500=100 500-100=400 $400
question
If the required reserve ratio is 10%, and the FED conducts an open market purchase of $100, what is the maximum possible change in the money supply created by the commercial banking system?
answer
1/r x 100=1,000 1,000-100=900 $900
question
Consider a Texaco gas station. If it introduces a new technology where customers pay at the pump, thus decreasing production costs, there will be:
answer
a shift to the right in the station's supply curve and lower gas prices
question
If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price:
answer
is above the market equilibrium price
question
Sam, who is 55 years old and has been a steel worker for 30 years, is unemployed because the steel plant in his town closed and moved to Mexico. Sam is experiencing
answer
structural unemployment
question
To close a recessionary gap using monetary policy, the Fed should ________ the money supply to ________ investment and consumer spending, and shift the aggregate demand curve to the ________.
answer
increase; increase; right
question
The 2009 U.S. stimulus was a(n) _____ fiscal policy that _____ aggregate demand.
answer
expansionary; increased
question
When a bank borrows from the federal reserve, it pays the
answer
discount rate
Get an explanation on any task
Get unstuck with the help of our AI assistant in seconds
New