Macro-econ Final Exam

27 December 2022
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66 test answers
question
The major economic goals of a capitalistic, market-based economic system are
answer
economic growth, full-employment, and price stability
question
Which of the following is a source of government failure?
answer
the enormous size and scope of government
question
Governments unfunded liabilities:
answer
result from the political bias toward immediate benefits and deferred costs
question
Which of the following is a key difference between the economic activities of government and those of private firms?
answer
government has the legal right to force people to do things; private firms do not
question
Economic efficiency
answer
Allocative efficiency, productive efficiency, producing the right combination of goods/services, producing goods/services at least cost (All of these)
question
An externality:
answer
creates free-riders, requires government intervention to correct, results in market failure (All of these)
question
Non-rivalry and non-excludability are the main characteristics of:
answer
Public goods
question
Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z and D1 and S1. If there are substantial external benefits associated with production of Z, then:
answer
a government subsidy for producers of Z would ensure that consumers are paying directly for all of the benefits they recieve from Z
question
A market:
answer
is an institution that brings together buyers and sellers
question
The law of demand states that, other things equal:
answer
price and quantity demanded are inversely related
question
The major economic goals:
answer
economic growth, full employment, price stability
question
If two goods are compliments:
answer
a decrease in the price of one will increase the demand for the other
question
Assume that the demand curve for product C is downward sloping. if the price of C falls from $2.00 to $1.75:
answer
a larger quantity of C will be demanded
question
Refer to the diagram. The equilibrium price and quantity in this market will be:
answer
$1.00 and 200
question
A surplus of a product will arise when the price is:
answer
above the equilibrium, with the result that the quantity supplied exceeds quantity demanded
question
Refer to the diagram. A government-set price floor is best illustrated by:
answer
price C
question
A price floor means that:
answer
government is imposing a minimum legal price that is typically above the equilibrium price
question
Which of the following is a distinguishing feature of a command system?
answer
central planning
question
Which of the following is a fundamental characteristic of the market system?
answer
property rights
question
The simple circular flow model shows that:
answer
households are on the selling side if the resource market and on the buying side of the product market
question
The business cycle depicts
answer
Short-run fluctuations in output and empoyment
question
Real GDP measures the:
answer
value of final goods and services produced within the borders of a country, corrected for price changes
question
Real GDP is preferred to nominal GDP as a measure of economic performance because:
answer
nominal GDP uses current prices and thus may over or under state true changes in output
question
Inflation is defined as:
answer
an increase in the overall level of prices
question
When economists refer to "business investment", they are describing a situation where:
answer
resources are devoted to increasing future output
question
A nations gross domestic product (GDP):
answer
can be found by summing C + Ig + G + Xn
question
If depreciation exceeds gross investment:
answer
the economy's stock of capital is shrinking
question
Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000. The appropriate price index (1985 - 100) was 120 in 1990 and 125 in 2000. Between 1990 and 2000 real GDP:
answer
increased by $60 billion
question
Refer to the graph. An increase in the economy's human capital would:
answer
shift curve AB to CD
question
For every 1 percentage the actual unemployment rate exceeds the natural rate, a 2 percentage point negative GDP gap occurs. This is a statement of:
answer
Okun's law
question
The fear of unwanted price wars may explain why many firms are reluctant to:
answer
reduce prices when a decline in aggregate demand occurs
question
Tom Atoe grows fruits and vegetables for home consumption. This activity is:
answer
productive but excluded from GDP because no market transaction occurs
question
An economy is enlarging its stock of capital goods:
answer
when gross investment exceeds replacement investment
question
If the economy adds to its inventory of goods during some year:
answer
this amount should be included in calculating that years GDP
question
Assume an economy that is producing only one product. Output and Price data for a three-year period are as follows. Answer the question on the basis of these data. If year two is chosen for the base year, in year 3 nominal and real GDP are: Year: 1 -- Units of output: 20 -- $ per unit: $4 Year: 2 -- Units of output: 25 -- $ per unit: $4 Year: 3 -- Units of output: 30 -- $ per unit: $6
answer
$180 and $120
question
At an annual growth rate of 7 percent, real GDP will double in about:
answer
10 years
question
Which of the following institutional structures is most likely to promote growth?
answer
A well-enforced system of patents and copyrights
question
Recurring upswings and downswings in an economy real GDP over time are called:
answer
business cycles
question
Which of the following is not seen by economists as an underlying cause of business cycle fluctuations?
answer
- Unexpected financial bubbles that eventually burst - shocks to the money supply by the nations central bank - supply shocks caused by major innovations (All of these)
question
Expansionary fiscal policy is so named because it:
answer
is designed to expand real GDP
question
If the MPC in an economy is .75, Congress could shift the aggregate demand curve leftward by $60 billion by:
answer
increasing taxes by $15 billion
question
In the diagram, it is assumed that investment, net exports, and government purchases:
answer
are independent of the level of GDP
question
Refer to the diagram in which T is tax and G is government expenditures. all figures are in billions. the equilibrium level of GDP is this economy is?
answer
$400
question
The U.S. public debt:
answer
consists of the historical accumulation of all past federal deficits and surpluses
question
The largest proportion of the U.S. public debt is held by:
answer
the U.S. public (individuals, businesses, financial institutions, and government)
question
Money functions as:
answer
a store of value a unit of account a medium of exchange
question
In the United States, the money supply (M1) is comprised of:
answer
coins, paper currency, and checkable deposits
question
If the price index rises from 100 to 120, the purchasing power value of the dollar:
answer
will fall by one-sixth
question
In the U.S. economy, the money supply is controlled by the:
answer
Federal Reserve System
question
In the financial industry, "securitization" refers to:
answer
bundling groups of loans, bonds, mortgages, and other financial debts into new securities
question
The goldsmith's ability to create money was based on the fact that:
answer
paper money in the form of gold receipts was rarely redeemed for gold
question
When the receipts given by goldsmiths to depositors were used to make purchases:
answer
the receipts became in effect paper money
question
The amount that a commercial bank can lend is determined by its:
answer
excess reserves
question
Overnight loans from one bank to another for reserve purposes entail an interest rate called the:
answer
federal funds rate
question
Other things equal, if required reserve ratio was lowered:
answer
the size of the monetary multiplier would increase
question
The asses demand for money:
answer
varies inversely with the rate of interest
question
Refer to the diagram of the market for money. The downward slope of the money demand curve Dm is best explained in terms of the:
answer
asset demand for money
question
At equilibrium in the given market for money, the total amount of money demanded is:
answer
$460, Money supply #
question
The four main tools of monetary policy are:
answer
the discount rate, the reserve ratio, interest on reserves, and open-market operations
question
The purchase of government securities from the public by the Fed will cause:
answer
the money supply to increase
question
If the reserve ratio is 10%, the monetary multiplier would be:
answer
10
question
Which of the following best describes the cause-effect chain of an expansionary monetary policy?
answer
an increase in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP
question
An increase in the money supply will:
answer
lower interest rates and increase the equilibrium GDP
question
Monetary policy is thought to be:
answer
more effective in controlling demand-pull inflation than in moving the economy out of a recession
question
Developing countries responsibility:
answer
global responsibility for trade, economically, socially, education, healthcare, infrastructure, look at their population growth rate, corruption in government, build a credit system that is accessible to small businesses, instill the rule of law
question
Responsibility of industrial advanced:
answer
stop selling military weapons, what is the best aid package to give, stop subsidizing agriculture, have to have better immigration policies
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question
The major economic goals of a capitalistic, market-based economic system are
answer
economic growth, full-employment, and price stability
question
Which of the following is a source of government failure?
answer
the enormous size and scope of government
question
Governments unfunded liabilities:
answer
result from the political bias toward immediate benefits and deferred costs
question
Which of the following is a key difference between the economic activities of government and those of private firms?
answer
government has the legal right to force people to do things; private firms do not
question
Economic efficiency
answer
Allocative efficiency, productive efficiency, producing the right combination of goods/services, producing goods/services at least cost (All of these)
question
An externality:
answer
creates free-riders, requires government intervention to correct, results in market failure (All of these)
question
Non-rivalry and non-excludability are the main characteristics of:
answer
Public goods
question
Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z and D1 and S1. If there are substantial external benefits associated with production of Z, then:
answer
a government subsidy for producers of Z would ensure that consumers are paying directly for all of the benefits they recieve from Z
question
A market:
answer
is an institution that brings together buyers and sellers
question
The law of demand states that, other things equal:
answer
price and quantity demanded are inversely related
question
The major economic goals:
answer
economic growth, full employment, price stability
question
If two goods are compliments:
answer
a decrease in the price of one will increase the demand for the other
question
Assume that the demand curve for product C is downward sloping. if the price of C falls from $2.00 to $1.75:
answer
a larger quantity of C will be demanded
question
Refer to the diagram. The equilibrium price and quantity in this market will be:
answer
$1.00 and 200
question
A surplus of a product will arise when the price is:
answer
above the equilibrium, with the result that the quantity supplied exceeds quantity demanded
question
Refer to the diagram. A government-set price floor is best illustrated by:
answer
price C
question
A price floor means that:
answer
government is imposing a minimum legal price that is typically above the equilibrium price
question
Which of the following is a distinguishing feature of a command system?
answer
central planning
question
Which of the following is a fundamental characteristic of the market system?
answer
property rights
question
The simple circular flow model shows that:
answer
households are on the selling side if the resource market and on the buying side of the product market
question
The business cycle depicts
answer
Short-run fluctuations in output and empoyment
question
Real GDP measures the:
answer
value of final goods and services produced within the borders of a country, corrected for price changes
question
Real GDP is preferred to nominal GDP as a measure of economic performance because:
answer
nominal GDP uses current prices and thus may over or under state true changes in output
question
Inflation is defined as:
answer
an increase in the overall level of prices
question
When economists refer to "business investment", they are describing a situation where:
answer
resources are devoted to increasing future output
question
A nations gross domestic product (GDP):
answer
can be found by summing C + Ig + G + Xn
question
If depreciation exceeds gross investment:
answer
the economy's stock of capital is shrinking
question
Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000. The appropriate price index (1985 - 100) was 120 in 1990 and 125 in 2000. Between 1990 and 2000 real GDP:
answer
increased by $60 billion
question
Refer to the graph. An increase in the economy's human capital would:
answer
shift curve AB to CD
question
For every 1 percentage the actual unemployment rate exceeds the natural rate, a 2 percentage point negative GDP gap occurs. This is a statement of:
answer
Okun's law
question
The fear of unwanted price wars may explain why many firms are reluctant to:
answer
reduce prices when a decline in aggregate demand occurs
question
Tom Atoe grows fruits and vegetables for home consumption. This activity is:
answer
productive but excluded from GDP because no market transaction occurs
question
An economy is enlarging its stock of capital goods:
answer
when gross investment exceeds replacement investment
question
If the economy adds to its inventory of goods during some year:
answer
this amount should be included in calculating that years GDP
question
Assume an economy that is producing only one product. Output and Price data for a three-year period are as follows. Answer the question on the basis of these data. If year two is chosen for the base year, in year 3 nominal and real GDP are: Year: 1 -- Units of output: 20 -- $ per unit: $4 Year: 2 -- Units of output: 25 -- $ per unit: $4 Year: 3 -- Units of output: 30 -- $ per unit: $6
answer
$180 and $120
question
At an annual growth rate of 7 percent, real GDP will double in about:
answer
10 years
question
Which of the following institutional structures is most likely to promote growth?
answer
A well-enforced system of patents and copyrights
question
Recurring upswings and downswings in an economy real GDP over time are called:
answer
business cycles
question
Which of the following is not seen by economists as an underlying cause of business cycle fluctuations?
answer
- Unexpected financial bubbles that eventually burst - shocks to the money supply by the nations central bank - supply shocks caused by major innovations (All of these)
question
Expansionary fiscal policy is so named because it:
answer
is designed to expand real GDP
question
If the MPC in an economy is .75, Congress could shift the aggregate demand curve leftward by $60 billion by:
answer
increasing taxes by $15 billion
question
In the diagram, it is assumed that investment, net exports, and government purchases:
answer
are independent of the level of GDP
question
Refer to the diagram in which T is tax and G is government expenditures. all figures are in billions. the equilibrium level of GDP is this economy is?
answer
$400
question
The U.S. public debt:
answer
consists of the historical accumulation of all past federal deficits and surpluses
question
The largest proportion of the U.S. public debt is held by:
answer
the U.S. public (individuals, businesses, financial institutions, and government)
question
Money functions as:
answer
a store of value a unit of account a medium of exchange
question
In the United States, the money supply (M1) is comprised of:
answer
coins, paper currency, and checkable deposits
question
If the price index rises from 100 to 120, the purchasing power value of the dollar:
answer
will fall by one-sixth
question
In the U.S. economy, the money supply is controlled by the:
answer
Federal Reserve System
question
In the financial industry, "securitization" refers to:
answer
bundling groups of loans, bonds, mortgages, and other financial debts into new securities
question
The goldsmith's ability to create money was based on the fact that:
answer
paper money in the form of gold receipts was rarely redeemed for gold
question
When the receipts given by goldsmiths to depositors were used to make purchases:
answer
the receipts became in effect paper money
question
The amount that a commercial bank can lend is determined by its:
answer
excess reserves
question
Overnight loans from one bank to another for reserve purposes entail an interest rate called the:
answer
federal funds rate
question
Other things equal, if required reserve ratio was lowered:
answer
the size of the monetary multiplier would increase
question
The asses demand for money:
answer
varies inversely with the rate of interest
question
Refer to the diagram of the market for money. The downward slope of the money demand curve Dm is best explained in terms of the:
answer
asset demand for money
question
At equilibrium in the given market for money, the total amount of money demanded is:
answer
$460, Money supply #
question
The four main tools of monetary policy are:
answer
the discount rate, the reserve ratio, interest on reserves, and open-market operations
question
The purchase of government securities from the public by the Fed will cause:
answer
the money supply to increase
question
If the reserve ratio is 10%, the monetary multiplier would be:
answer
10
question
Which of the following best describes the cause-effect chain of an expansionary monetary policy?
answer
an increase in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP
question
An increase in the money supply will:
answer
lower interest rates and increase the equilibrium GDP
question
Monetary policy is thought to be:
answer
more effective in controlling demand-pull inflation than in moving the economy out of a recession
question
Developing countries responsibility:
answer
global responsibility for trade, economically, socially, education, healthcare, infrastructure, look at their population growth rate, corruption in government, build a credit system that is accessible to small businesses, instill the rule of law
question
Responsibility of industrial advanced:
answer
stop selling military weapons, what is the best aid package to give, stop subsidizing agriculture, have to have better immigration policies