final exam Flashcards

1
Q

Federal Reserve Notes in circulation are:

A

Physical dollar bills (as a form of enchange)

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2
Q

Which of the following will increase commercial bank reserves?

A

Borrowing form a federal reserve bank

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3
Q

When a commercial bank borrows from a Federal Reserve Bank:

A

The bank gets extra reserves, a discount window

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4
Q

The Federal Reserve Banks sell government securities to the public. As a result, the checkable deposits:

A

Decrease

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5
Q

The Federal Reserve Banks buy government securities from commercial banks. As a result, the checkable deposits:

A

No change in checkable deposits

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6
Q

The commercial banking system borrows from the Federal Reserve Banks. As a result, the checkable deposits:

A

no change in checkable deposits

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7
Q

Which of the following is a tool of monetary policy?

A

Open market operations, discount rate, and Required reserve ration

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8
Q

Commercial banks and thrifts usually hold only small amounts of excess reserves because:

A

Banks perfer to lend out money to earn interest

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9
Q

Tariffs:

A

Taxes on imports to protect domestic industries or raise revenue.

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10
Q

An excise tax on an imported good that is not produced domestically is called a:

A

Revenue tariff

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11
Q

An excise tax on an imported good that is also produced by domestic firms is called a:

A

Protective tariff

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12
Q

Country A limits other nations’ exports to Country A to 1,000 tons of coal annually. This is an example of a(n):

A

Import quota

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13
Q

What is the main argument in favor of trade barriers such as tariffs?

A

The cost of trade barriers don’t exceed their benefits creating efficiency and domestic employment

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14
Q

What is an argument supporting the use of tariffs in the U.S.?

A

U.S. producers gain more from tariffs than U.S. consumers lose.

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15
Q

A high tariff on imported good X might reduce domestic employment in industry Y if:

A

A high tariff on good X raises its price. If industry Y uses good X, their costs go up, leading to fewer jobs or less output in industry Y.

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16
Q

The increased-domestic-employment argument for tariff protection holds that:

A

An increase in tariffs will increase net exports and stimulate domestic employment.

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17
Q

Which of the following arguments comes closest to constituting a legitimate economic exception to the case for free trade?

A

the infant-industry argument

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18
Q

The infant industry argument for tariffs is criticized:

A
  • Hard to pick which industries need protection.
  • Subsidies work better than tariffs to help industries grow.
  • Tariffs might stay even after the industry is strong, hurting consumers.
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19
Q

In terms of aggregate supply, the difference between the long run and the short run is that in the long run:

A

Wages and prices are flexible. for long run

Wages and prices are sticky for the short run

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20
Q

The long-run aggregate supply curve is vertical at the same rate as real GDP.

A

Long run is at full employment

21
Q

The short-run aggregate supply curve is up-sloping because:

A

of the way firsts respond to changes in the price level when wages/imput prices are sticky

22
Q

Other things equal, an increase in the price level will:

A

SHORT-RUN: Higher prices = Higher profits
AD: decreases (less spending/investment,exports)

23
Q

Other things equal, a decrease in the price level will:

A

SHORT RUN: lower prices = lower profits

AD: increases (more spending/investment,exports)

24
Q

Suppose Smith pays $100 to Jones. We can say with certainty that the GDP has:

A

Too vague, could be transfer payment

25
Q

Suppose the total market value of all final goods/services in a country is $500 billion and sold is $450 billion. We conclude:

A

Unsold inventory adds to GDP.

26
Q

National income accountants can avoid multiple counting by:

A

Counting only final goods.

27
Q

Gross domestic product (GDP) measures and reports output:

A

In dollar amounts.

28
Q

GDP is:

A

The total value of all final goods and services.

29
Q

in the U.S., the rate of unemployment is highest for:

A

young adults

30
Q

Kimberly quit her job to earn an MBA and is now searching for a management position. She is:

A

frictionally unemployed

31
Q

To be officially unemployed a person must:

A

be apart of the labor force

32
Q

The natural rate of unemployment is:

A

Frictional + structional unemployment
When cyclical unemployment is 0

33
Q

The labor force includes:

A

Unemplyed + employed

34
Q

The unemployment rate of:

A

Young adults are higher than adults

35
Q

Inflation initiated by increases in wages or resource prices is labeled:

A

Cost-push inflation.

36
Q

Cost-push inflation:

A

Moves left ward
Operating inside the Production possibilities curve

37
Q

Cost-push inflation may be caused by:

A

negative supply shock
When production costs rise

38
Q

Real income is found by:

A

Nominal Income/price level x100

39
Q

Correct formula: Percentage change in:

A

NewValue−OldValue/old value ×100

40
Q

Real income can be determined by:

A

By taking out inflation

41
Q

The multiplier effect:

A

A small change in spending leads to a larger change in GDP.

42
Q

If the MPC is 0.6, the multiplier will be:

A

1/1-mpc = multiplier
1/1-.6 = 2.5

43
Q

Assume MPC is 2/3. If investment spending increases by $2 billion, GDP will increase by:

A

1/1-2/3 = 3
GDP increase = increased x multiplier

44
Q

The multiplier is:

45
Q

The multiplier applies to:

A

Spending changes in consumption, investment, or government.

46
Q

The multiplier effect indicates:

A

One dollar of spending creates more GDP.

47
Q
  • Refer to the above diagram (PG 66-67)-. This economy will experience unemployment if it produces at point:
  • In drawing the production possibilities curve, we assume that:
A
  • Point D, because it is inside the PPC.
    Points inside the curve represent the underutilization of resources, such as unemployment or inefficiency.
  • Resources and technology are fixed.
    The PPC assumes a specific time frame with constant resource availability and no technological change.
48
Q
  • Refer to the above diagram (PG68-70). This production possibilities curve is constructed so that:
  • Refer to the above diagram. Which of the following is a normative statement?
  • Refer to the above diagram. Starting at point A, the opportunity cost of producing each successive unit of tractors is:
A
  • A normative statement is an opinion or value judgment
  • It reflects increasing opportunity costs.
    The curve is bowed outward, which means as more tractors are produced, more bread must be sacrificed. This shows that resources are not perfectly adaptable to both goods.
  • Answer: The amount of bread sacrificed as tractors are produced.
    Moving from A to B: Bread decreases from 20 to 16, so the opportunity cost is 4 units of bread.
    Moving from B to C: Bread decreases from 16 to 12, so the opportunity cost is 4 units of bread, and so on.