final exam Flashcards
Federal Reserve Notes in circulation are:
Physical dollar bills (as a form of enchange)
Which of the following will increase commercial bank reserves?
Borrowing form a federal reserve bank
When a commercial bank borrows from a Federal Reserve Bank:
The bank gets extra reserves, a discount window
The Federal Reserve Banks sell government securities to the public. As a result, the checkable deposits:
Decrease
The Federal Reserve Banks buy government securities from commercial banks. As a result, the checkable deposits:
No change in checkable deposits
The commercial banking system borrows from the Federal Reserve Banks. As a result, the checkable deposits:
no change in checkable deposits
Which of the following is a tool of monetary policy?
Open market operations, discount rate, and Required reserve ration
Commercial banks and thrifts usually hold only small amounts of excess reserves because:
Banks perfer to lend out money to earn interest
Tariffs:
Taxes on imports to protect domestic industries or raise revenue.
An excise tax on an imported good that is not produced domestically is called a:
Revenue tariff
An excise tax on an imported good that is also produced by domestic firms is called a:
Protective tariff
Country A limits other nations’ exports to Country A to 1,000 tons of coal annually. This is an example of a(n):
Import quota
What is the main argument in favor of trade barriers such as tariffs?
The cost of trade barriers don’t exceed their benefits creating efficiency and domestic employment
What is an argument supporting the use of tariffs in the U.S.?
U.S. producers gain more from tariffs than U.S. consumers lose.
A high tariff on imported good X might reduce domestic employment in industry Y if:
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.
The increased-domestic-employment argument for tariff protection holds that:
An increase in tariffs will increase net exports and stimulate domestic employment.
Which of the following arguments comes closest to constituting a legitimate economic exception to the case for free trade?
the infant-industry argument
The infant industry argument for tariffs is criticized:
- 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.
In terms of aggregate supply, the difference between the long run and the short run is that in the long run:
Wages and prices are flexible. for long run
Wages and prices are sticky for the short run
The long-run aggregate supply curve is vertical at the same rate as real GDP.
Long run is at full employment
The short-run aggregate supply curve is up-sloping because:
of the way firsts respond to changes in the price level when wages/imput prices are sticky
Other things equal, an increase in the price level will:
SHORT-RUN: Higher prices = Higher profits
AD: decreases (less spending/investment,exports)
Other things equal, a decrease in the price level will:
SHORT RUN: lower prices = lower profits
AD: increases (more spending/investment,exports)
Suppose Smith pays $100 to Jones. We can say with certainty that the GDP has:
Too vague, could be transfer payment
Suppose the total market value of all final goods/services in a country is $500 billion and sold is $450 billion. We conclude:
Unsold inventory adds to GDP.
National income accountants can avoid multiple counting by:
Counting only final goods.
Gross domestic product (GDP) measures and reports output:
In dollar amounts.
GDP is:
The total value of all final goods and services.
in the U.S., the rate of unemployment is highest for:
young adults
Kimberly quit her job to earn an MBA and is now searching for a management position. She is:
frictionally unemployed
To be officially unemployed a person must:
be apart of the labor force
The natural rate of unemployment is:
Frictional + structional unemployment
When cyclical unemployment is 0
The labor force includes:
Unemplyed + employed
The unemployment rate of:
Young adults are higher than adults
Inflation initiated by increases in wages or resource prices is labeled:
Cost-push inflation.
Cost-push inflation:
Moves left ward
Operating inside the Production possibilities curve
Cost-push inflation may be caused by:
negative supply shock
When production costs rise
Real income is found by:
Nominal Income/price level x100
Correct formula: Percentage change in:
NewValue−OldValue/old value ×100
Real income can be determined by:
By taking out inflation
The multiplier effect:
A small change in spending leads to a larger change in GDP.
If the MPC is 0.6, the multiplier will be:
1/1-mpc = multiplier
1/1-.6 = 2.5
Assume MPC is 2/3. If investment spending increases by $2 billion, GDP will increase by:
1/1-2/3 = 3
GDP increase = increased x multiplier
The multiplier is:
1/1-mpc
The multiplier applies to:
Spending changes in consumption, investment, or government.
The multiplier effect indicates:
One dollar of spending creates more GDP.
- 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:
- 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.
- 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 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.
