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Macro Final
| Question | Answer |
|---|---|
| The fundamental problem of economics is: | the scarcity of resources relative to human wants |
| opportunity cost may be defined as the: | goods or services that are forgone in order to obtain something else |
| The doctrine of laissez faire is based on the belief that: | markets are likely to do a better job of allocating resources than government directives |
| when govenment directives do not produce better economic outcomes, which of the following has occurred | government failure |
| The government etsablishes the rules of the game for economic transactions in order to: | Legitimatize and enforce contracts |
| A lower quantity demanded of a good reflects, ceteris paribus: | A higher price of a good |
| If bagels and donuts are substitutes, then a decrease in the price of donuts will result in: | a decrease in demand for bagels |
| Ceteris paribus, which of the following is most likely to cause a decrease i the supply of skateboards? | An increase in the cost of materials used to produce skateboards |
| From an economic standpoint, government intervention justified: | When the market mechanism fails to achieve the optimal mix of output |
| Governments usually build highways because it is difficult to exclude individuals who don't pay for the highways from using them. what type of market failure is involved? | public goods |
| Which of the following is a sound economic reason why the government should subsidize your college education? | there are external benefits associated with education |
| The primary function of taxes is to: | transfer command over resources from the private sector to the public sector |
| According to cost benefit analysis, a government project should be undertaken as long as the: | Benefits exceeds the opportunity costs |
| Which of the following is excluded from calculations of GDP? | the value of lawn mowing provided by a teenager for his own family |
| Real GDP is more accurate than nominal GDP in making comparisons of output over time because: | Nominal GDP can increase simply because of price increases over time |
| If real GDP fails from one period to another and the price level stays the same we can conclude that: | Nominal GDP decreased |
| if the price level is 100 for 2005 and the price level is 106.5 in 2007 (the price level has increased by 6.5% from 2005-2007) a nominal GDP in 2007 is $15,600 billion would mean that real GDP in 2007 (in2005 prices) would be closest to: | $14,647.9 billion |
| the components of GDP are: | C + I + G + (X-M) |
| which of the following are included in labor force? | a part time store clerk who is looking for another job |
| If the population of a country is 250,000 people, its labor force consists of 145,000 people, 35,000 people are unemployed,10,000 are unable to work, and 5,000 are unwilling to work, the unemployment rate is: | 24.1% |
| The type of unemployment that economists generally associate with normal growth of the labor force and expanding job opportunities in a dynamic economy is: | Frictional unemployment |
| when there is a mismatch between skills required for a job and the skills of job seekers, the unemployment that results is an example of: | structural unemployement |
| To construct the Consumer Price Index, The Bureau of Labor Statistics must: | Find out what people buy with their incomes and how the prices of what they buy change |
| If the CPI increases from 110 to 125 for one year, the rate of inflation for that year is | 13.6 % |
| In the Full Employment and Balanced Growth Act of 1978 | Congress set an inflation goal of 3% |
| If the CPI doesnt measure product quality improvements, then the CPI tends to: | Overstate the inflation rate |
| According to classical theory: | Flexible wages and prices allow laissez-faire economy to adjust to shifts in aggregate demand |
| Unlike the Classical economists, Keynes asserted that: | the economy was inherently unstable |
| Which of the following is illustrated by the aggregate demand curve? | How total quantity of output demanded varies with average price level |
| The real balances effect says that an increase in the price level: | Reduces the value of savings, which reduces the purchase of goods and services |
| According to the profit effect: | some costs do not rise when average prices rise |
| The cost effect implies that: | higher average prices are reflected in higher costs |
| Which of the following is a potential problem at macro equilibrium? | It is inconsistent with the macroeconomic goals |
| Ceteris paribus, the price level will decrease if the aggregate: | Demand curve shifts to the left |
| According to Keynes, unemployment resulted from: | Increased government spending which reduced consumer spending |
| For the aggregate supply curve, the profit effect: | is temporary and in the long run the cost effect dominates |
| Between 1995 and 2000 the stock market's value increased significantly, adding billions of dollars to the wealth of U.S. households and businesses. This resulted in: | an increase in aggregate demand |
| The components of aggregate demand are: | Consumption, governments spending, net exports, and investment |
| Which of the following is not true about the marginal propensity to consume? | It is equal to the slope of the consumption function |
| If an increase in disposable income causes consumption to increase from $4,000 to $10,000 and causes saving to increase from $2,000 to $4,000 it can be inferred that the MPC equals | .75 |
| Which of the following is not a determinant of autonomous consumption | Technology |
| If the availability of credit increases,then: | the AD curve will shift to the right |
| If firms become more pessimistic about future sales, then: | the AD curve will shift to the left |
| When total spending falls below the full-employment level of output, which of the following types of unemployment is most likely to increase? | Cyclical |
| Which of the following is a leakage? | Imports |
| Investment represents: | An injection into the circular flow, like government spending |
| If leakages exceed injections: | the unemployment rate will be above its full employment level |
| If an economy is at full employment and consumption spending decreases while all other levels of spending remaining constant then: | Increased unemployment results |
| When unwanted inventories pile up in retail stores, retail managers will take actions that lead to greater: | Unemployment |
| Which of the following is an example of the multiplier at work as a result of an increase in consumption expenditures? | Household and business receive income from consumption expenditures; they spend a portion of this new income; these expenditures in turn generate income for other businesses and households, which in turn spend a portion of the new income, and so on |
| If the MPC= .85, the total change in spending resulting from an initial $200 increase in aggregate spending will be: | $2,000 |
| Which of the following fiscal policies would cause a decrease in aggregate expenditures? | An increase in taxes and a decrease in government spending |
| If aggregate demand increases by the amount of the recessionary GDP gap and aggregate supply is upward sloping: | A recessionary GDP gap will still exist |
| The amount of additional aggregate demand needed to achieve full employment after allowing for price level changes is: | the AD shortfall |
| If the multiplier is 4 and a change in govt. spending leads to a $600 million decrease in aggregate demand, we can conclude that: | Government spending decreased by $150 million |
| A tax cut has a smaller impact on aggregate demand than an increase in government purchases of the same size because: | A portion of the tax cut is saved |
| If the MPC for a ecpnpmy is .90, a $2 billion increasein taxes will ultimately cause consumption to decrease by: | $18 million |
| Which of the following policies will reduce the budget defect while achieving greater fiscal restraint? | Less government expenditure and higher taxes |
| Which of the following is an argument against balancing the federal budget? | Doing so may prevent the government from pulling the economy out of recession |
| Uncontrollable government spending includes: | interest payments on the national debt |
| The major reason why budget defecits were reduced during the 1990s and why there was a budget surplus in 1998-2000 is because of: | The growth of the U.S. economy |
| Increased government purchases crowd out private purchases whenever the economy is: | On the production possibilities curve |
| Interest payments on the national debt: | Are a redistribution of income from taxpayers to bondholders |
| Money is function as a store of value when you: | Save your cash pay for tuition next semester |
| When cash or coins are initially deposited into a bank: | The composition of the money supply changes, but the size of the money supply does not change |
| Suppose University bank has zero excess reserves. If the required reserve ratio decreases, the: | Bank will be able to make more loans |
| If total reverses for a bank are $12,000, excess reserves are $2,000, and demand deposits are $100,000, then the money multiplier must be: | 10 |
| The Board if Governers consists of: | 7 members, 14 year terms |
| The Current Chairman of the Fed Reserve is: | Ben Bernake |
| The Federal Open Market committee includes | All 7 governers and 5 of the regional reserve bank presidents |
| What swrvice is performed by the regional federal reserve banks? | Providing currency to private banks |
| The federal reserve system was created by: | Fed Reserve Act in 1913 |
| What does the govt. use to regulate the amount of money banks lend? | Monetary policy |
| Open market operations involve the Fed dong what? | buying or selling bonds |
| What is the principle mechanism used by the Fed reserve to directly alter the reserves of the bankong system? | Open market operations |
| by raising and lowering the discount rate, the Fed changes the: | incentive for banks to borrow reserves |
| The rate of interest charged by the Fed reserve banks for lending reserves to member banks is the: | Discount rate |
| federal funds rate is the interest rate changed when: | One bank lends to another bank |
| What are the 3 tools available to the Fed for controlling the money supply? | Reserve requirement, The discount rate, open market operations |
| The interest rate is: | The price paid for the use of money |
| The liquidity trap refers to: | The responsibility that interest rates may not respond to changes in the money supply |
| the federal funds rate is he interest rate for: | interbank reserve loans |
| ceteris paribus, if the Fed sells bonds through open market operations, the money: | supply curve should shift leftward |
| How can the Fed change the equilibrium rate of interest? | The Fed can change it by changing the money supply |
| Ceteris paribus, the quantities of money people are willing and able to hold: | increase as interest rates fall |
| someone holds $100 in cash in his wallet to make prchases for gas & groceries. This represents the: | Transactions demand for money |
| The speculative. transactions and precautionary demands for money added together give the: | market demand curve for money |
| lower interest rates cause the opportunity cost of holding money in the form of cash to do what? | Decrease |
| The choice hold your money in the form of cash results in: | foregone interest |
| Money supply (M2) is: | currency held by the public, balances in transaction, balances in most savings accounts, money market mutual funds |
Created by:
Thomas.Siu
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