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Econ > ECON Midterm 2 > Flashcards

ECON Midterm 2 Flashcards

1
Q

The net present value of an investment is Blank______ related to the interest rate.

A

Negatively

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2
Q

In order to compare two dollar amounts paid (or received) apart from one another in time, we use the concept of Blank______ value.

A

Present

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3
Q

The interest rate that equates the present value of costs and benefits is known as the Blank______ rate of return.

A

Internal

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4
Q

The risk an investor takes that an asset’s value may move in an unfavorable direction is referred to as Blank______ risk.

A

Market

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5
Q

Microsoft’s Excel spreadsheet program allows users to calculate how much money they will have given their ability to save a particular amount per pay period through its Blank______ function.

A

FV

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6
Q

According to the foreign purchases effect, which of the following is likely to occur when prices rise in the United States?

Multiple choice question.

There will be an increase in U.S. GDP.

Americans will be more willing to buy imports.

Foreigners will be more willing to buy U.S. goods.

There will be an increase in net exports.

A

Americans will be more willing to buy imports.

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7
Q

Because consumption and business investment decline as higher prices push interest rates Blank______, the aggregate demand curve is Blank______ sloping.

A

Upward, Downward

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8
Q

Aggregate demand shows the quantities of goods and services that will be purchased at different possible Blank______ levels.

A

Price

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9
Q

The measure of the level of Blank______ domestic output available at each possible price level is called aggregate supply.

A

Real

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9
Q

True or false: For there to be full employment, the unemployment rate must equal zero.

A

False

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10
Q

According to Keynesian economists, the aggregate supply (AS) curve is best described by a Blank______ line.

A

Horizontal

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11
Q

The backward bending L shape given the aggregate supply (AS) curve reflects the Blank______ of views regarding the nature of full employment.

A

Disparity

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12
Q

A stronger U.S. dollar will adversely affect U.S. exports, causing the aggregate demand (AD) curve to shift

A

Leftward

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13
Q

According to Keynesian economists, prices and wages in the modern economy exhibit a high degree of

A

Rigidity

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14
Q

A stronger U.S. dollar means that the foreign currency prices of U.S. products have

A

Risen

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15
Q

Which form of policy involves cutting taxes and increasing government spending?

A

Expansionary

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16
Q

Classical economists believe the economy is currently on what point of the aggregate supply curve?

A

Vertical

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17
Q

When changing economic conditions induce the president and the Congress to confer on the implementation of possible remedies, Blank______ fiscal policy is being developed.

A

Discretionary

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18
Q

Economic liberals criticized the Obama stimulus package arguing that it Blank______. (Select all that apply.)

Multiple select question.

focused too little on tax cuts

was too large

was too small

focused too little on spending increases

A

Was too small
focused too little on spending increases

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19
Q

Which one of the following events is most likely to produce a negative aggregate demand shock?

Multiple choice question.

A long anticipated increase in interest rates.

A sudden and steep decline in the stock market.

A widely expected (but disliked) tax increase.

A

A sudden and steep decline in the stock market.

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20
Q

A positive aggregate demand shock is reflected by a sudden Blank______ shift in the aggregate demand (AD) curve.

A

Rightward

21
Q

In its early years the Fed saw the Blank______ as its fundamental purpose.

A

promotion of sound financial institutions

22
Q

What is an institution that sets monetary policy for a country?

A

A central bank

23
Q

If the Federal Reserve sells a portion of its stock of government bonds, the money supply will

A

Decrease

24
Q

What is the federal funds rate?

A

The interest rate for interbank reserve loans

25
Q

True or false: The history of monetary policy in the United States shows the Federal Reserve has a willingness to increase the inflation rate and keep it steady.

A

False

26
Q

Which one of the following has been the most important historical goal of monetary policy?

A

Avoidance of boom and bust cycles.

27
Q

An institution that sets monetary policy for a country or a collection of countries is a

A

Central Bank

28
Q

What is the federal funds rate?

A

The rate of interest that banks charge one another on overnight loans made from temporary excess reserves.

29
Q

Which of the following is not one of the things that history of monetary policy since 1970 shows about what the Federal Reserve has learned?

A

It has established its willingness to increase inflation and keep it steady.

30
Q

When the Fed wants to increase the money that is in circulation, it Blank______ government bonds.

A

Buys

31
Q

While federal spending certainly fluctuates as events change, it’s ratio to GDP over the last several decades has more or less averaged about Blank______%.

A

20

32
Q

Crowding out is said to be less than complete if each dollar of deficit spending displaces Blank______ than a dollar of private investment.

A

Less

33
Q

The dramatic rise since 1970 in federal health care spending has been propelled by

A

Medicare and Medicaid.

34
Q

Which of the following programs/items are part of entitlement spending? (Select all that apply.)

Multiple select question.

Interest on the debt.

Income Security (welfare).

Medicare.

Medicaid.

Social Security.

A

Income Security (welfare).

Medicare.

Medicaid.

Social Security.

35
Q

According to economists, if the benefits resulting from the government’s expenditure of additional tax money exceeds the benefits that would have otherwise accrued to citizens had they not paid those taxes, then the government spending (i.e., the program being funded) is

A

Desirable

36
Q

According to some critics of baseline budgeting, it may tend to Blank______ programs that provide government services to those eligible to receive them.

A

underfund

37
Q

Starting in mid-2006, housing prices in many metropolitan areas declined

A

Sharply

38
Q

Which of the following are considered to be the key ingredients in what a house is fundamentally worth? (Select all that apply.)

Multiple select question.

The home’s features/amenities.

The income of likely potential buyers.

The cost of labor and materials.

The opportunity cost of the land upon which the home sits.

The seller’s desire to sell the home.

The age of likely potential buyers.

A

The home’s features/amenities.

The income of likely potential buyers.

The cost of labor and materials.

The opportunity cost of the land upon which the home sits.

39
Q

Mortgage-backed securities are:

A

claims on bundles of mortgages.

40
Q

Credit default swaps as insurance policies were Blank______ regulated as were other types of insurance (e.g., auto insurance).

A

inadequately

41
Q

Identify the extraordinary actions taken by the Federal Reserve in response to the Great Recession. (Select all that apply.)

Multiple select question.

The purchase of corporate paper

The purchase of long-term Treasuries

Changes to the reserve ratio.

The purchase of short-term Treasuries

The purchase of mortgage-backed securities

Changes to the targeted federal funds rat

A

The purchase of corporate paper

The purchase of long-term Treasuries

The purchase of mortgage-backed securities

42
Q

The Fed’s response to the economic crisis was such that by the end of 2008, it had reduced the federal funds rate from just over 5% in September, 2007 to… %

A

0

43
Q

Among goods only, exports for the United States are “heaviest” in Blank______.

A

transportation equipment

44
Q

In a 2 country, 2 commodity model, if the “advantages” are in line, then each country’s absolute advantage good Blank______ its comparative advantage good.

A

is also

45
Q

With few exceptions, changes in the ratios of imports to GDP and exports to GDP are

A

synchronized.

46
Q

A curious feature of international trade is that the some goods (namely oil and gas) are Blank______.

A

both imported and exported

47
Q

An entity is said to hold a comparative advantage in a good if it can produce the good at a lower Blank______ cost than others.

A

opportunity

48
Q

If the country of Uplandia possess an absolute advantage in both shoes and socks but a comparative only in socks, then to reap the full benefits from trade it should

A

export socks and import shoes.

49
Q

As was the case during the 2007–09 Great Recession, most economic downturns see Blank______ in the importance of trade.

A

declines

Econ (9 decks)

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