MACRO #1 Flashcards
Suppose that aggregate consumption is $1,200,000, aggregate investment is $300,000, government spending is $200,000, the value of exports is $200,000, and the value of imports is $100,000. What is the value of Gross Domestic Product (GDP)?
A. $1,800,000 B. $1,700,000 C. $1,600,000 D. $2,000,000 E. none of the above
A. 1,800,000
[1,200,000+300,000+200,000+200,000] - 100,000
1,900,000-100,000
= 1,800,000
Education is an example of
A. investment in physical capital.
B. investment in human capital.
C. investment in natural resources.
D. technological change.
E. none of the above.
B. investment in human capital
Which of the following programs is likely to increase the long run growth rate in US real GDP per person?
a. A program designed to give money to poor people with no strings attached. b. A program to bailout unsuccessful companies. c. A more efficiently designed patent system. d. Items a, b, and c will all increase the long run growth rate in the US. e. Items a and c will increase long run growth rates in the US, but item b will not.
c. A more efficiently designed patent system.
In economics, “Public Saving” is defined as
a. Saving that is made public by disclosure to the IRS. b. Tax revenue minus government spending. c. National Income minus consumption. d. Deposits made at banks and other lending institutions. e. Investment in a publicly held company.
b. Tax revenue minus government spending.
If expected inflation is 2%, the real interest rate is 7% and the economy is growing at a rate of 4%, the nominal interest rate is equal to.
a. 9% b. 5% c. 7% d. 6% e. none of the above
a. 9%
(Real Interest + Expected Inflation)
7+2=
9%
According to the following information, what is the unemployment rate? (Round to the nearest tenth of a percent.)
Number of Employed: 20,000
Number of Unemployed: 1,000
Not in the Labor Force: 4,000
a. 5.0% b. 4.8% c. 3.7% d. 20.0% e. none of the above
b. 4.8%
1,000 / [20,000+1,000]
1,000/21,000
=4.8%
If the reserve ratio is 20 percent and a bank receives a new checkable deposit of $100, this bank
a. must increase required reserves by $20. b. will initially see its total reserves increase by $200. c. will be able to make new loans up to a maximum of $20. d. will be allowed to make new loans of up to $100. e. all of the above are true.
a. must increase required reserves by $20.
Suppose that the country of Argentina has an 6% real interest rate and an expected inflation rate of 10%. Which of the following is the best estimate of the nominal interest rate in the country?
a. 16% b. 8% c. 4% d. 18% e. none of the above
a. 16%
(Real Interest + Expected Inflation)
6%+ 10%= 16%
Which of the following statements most accurately describes the relationship between the nominal and real interest rates?
a. The real interest rate is the expected inflation rate plus the nominal interest rate. b. The real interest rate is the expected inflation rate minus the nominal interest rate. c. The real interest rate is the nominal interest rate minus the expected inflation rate. d. The real interest rate is the nominal interest rate multiplied by the expected inflation rate. e. None of the above statements is accurate.
c. The real interest rate is the nominal interest rate minus the expected inflation rate.
Which of the following statements most accurately describes the relationship between the nominal and real interest rates?
a. The real interest rate is the expected inflation rate plus the nominal interest rate. b. The real interest rate is the expected inflation rate minus the nominal interest rate. c. The real interest rate is the nominal interest rate minus the expected inflation rate. d. The real interest rate is the nominal interest rate multiplied by the expected inflation rate. e. None of the above statements is accurate.
c. The real interest rate is the nominal interest rate minus the expected inflation rate.
Net exports measure an imbalance between a country’s
a. exports and its imports. b. sale of domestic assets abroad and buying of foreign assets. c. income and expenditure. d. savings and consumption. e. all of the above.
a. exports and its imports.
The Real GDP of a country is
a. the total income earned by a nation’s permanent residents in a given time period divided by the GDP deflator.
b. the market value of all final goods and services produced within a country in a given time period, using prices from a “base” year to calculate the market value.
c. the market value of all final goods and services produced within a country in a given time period, using prices from the current year to calculate the market value.
d. the market value of all final goods and services produced within a country minus losses from depreciation in a given time period.
e. none of the above.
b. the market value of all final goods and services produced within a country in a given time period, using prices from a “base” year to calculate the market value.
Which of the following is most likely to encourage economic growth?
a. Stable private property rights.
b. An extensive welfare system
c. frequent military take-overs of the government
d. a shrinking labor force
e. a fixed capital stock
a. Stable private property rights.
A person who did not have a job but was looking for work would be categorized as
a. employed
b. unemployed
c. Not in the labor force
d. marginally unemployed
e. partially employed
b. unemployed
A person who is switching careers and is unemployed while looking for a better job is an example of
a. Cyclical Unemployment
b. Frictional Unemployment
c. Structural Unemployment
d. Reciprocal Unemployment
e. Transitional Employment
b. Frictional Unemployment
In the U.S., the organization that is responsible for monetary policy is
a. The Congress.
b. The President.
c. The Federal Reserve.
d. A cartel of private banks.
e. The Supreme Court.
c. The Federal Reserve.
A merchandise trade deficit
a. occurs when net exports are positive.
b. Occurs when imports are greater than exports.
c. Is usually accompanied by decreases in foreign investment in the U.S.
d. Occurs when domestic investment is less than domestic saving.
e. None of the above.
b. Occurs when imports are greater than exports.
The Consumer Price Index
a. Is an attempt to measure the cost of living for a typical family b. Measures price changes in a basket of goods bought by a typical family c. Weights prices by the quantities bought by a typical family in the base year d. All of the above e. None of the above
b. Measures price changes in a basket of goods bought by a typical family
An aggregate production function shows the relationship between
a. The quantity of inputs used in production and the quantity of output. b. Gross domestic product and national income. c. Workers as inputs and consumers as buyers. d. Production and spending. e. None of the above.
a. The quantity of inputs used in production and the quantity of output.
A government can increase long-run economic growth by
a. Discouraging saving. b. Encouraging education and training of labor. c. Increasing the taxation of capital. d. Imposing restrictions on international trade. e. All of the above.
b. Encouraging education and training of labor.
According to the following information, what is the unemployment rate?
Number of Employed: 800
Number of Unemployed: 200
Not in the Labor Force: 50
a. 6% b. 19% c. 20% d. 28% e. None of the above
c. 20%
(200/1,000) = 20%
According to the following information, what is the unemployment rate?
Number of Employed: 1800
Number of Unemployed: 200
Not in the Labor Force: 600
a. 10% b. 12% c. 14% d. 20%
a. 10%
(200/2,000)=10%
Reserve requirements are regulations concerning
a. The amount of deposits banks are allowed to accept. b. The amount of reserves banks must hold against deposits. c. The total amount of loans banks are allowed to make. d. The interest rate at which banks can borrow from the Fed. e. The number of open market transactions the Fed can perform.
b. The amount of reserves banks must hold against deposits.
Which of the following statements most accurately describes the “Fisher Effect”?
a. The Fisher Effect states that when the rate at which the money supply grows is increased, nominal interest rates fall. b. The Fisher Effect states that when the rate at which the money supply grows is increased, real interest rates fall. c. The Fisher Effect states that when the rate at which the money supply grows is increased, nominal interest rates rise. d. The Fisher Effect states that when the rate at which the money supply grows is increased real interest rates rise.
e. None of the above statements are correct.
c. The Fisher Effect states that when the rate at which the money supply grows is increased, nominal interest rates rise.
The aggregate demand curve shows
a. The quantity of goods and services that households, firms, and the government want to buy at each price level. b. The quantity of goods and services that households, firms, and the government want to buy at each interest rate. c. The quantity of goods and services that households (not firms) want to buy at each price level. d. The quantity of goods and services that firms (not households) want to buy at each interest rate.
a. The quantity of goods and services that households, firms, and the government want to buy at each price level
Most economists argue that an effective monetary policy would
a. Create money faster during recessions and more slowly during booms. b. Create money faster all the time. c. Create money more slowly all the time. d. Create money faster during booms and more slowly during recessions. e. Create money slowly during booms and not at all during recessions.
a. Create money faster during recessions and more slowly during booms
According to the theory of liquidity preference, an increase in the rate of growth of the money supply will cause which of the following?
a. Interest rates will fall. b. Interest rates will rise. c. Nominal wages will fall. d. Nominal GDP will stay the same. e. Real GDP will fall.
a. Interest rates will fall.
If you take investment by U.S. residents in other countries and you subtract investment by foreign residents in the U.S., you will find
a. Gross foreign investment b. Net foreign investment c. Net domestic saving d. Gross domestic product e. Negative net foreign investment
b. Net foreign investment
A person who worked 20 hours per week while going to school would be categorized as
a. Employed
b. unemployed
c. not in the labor force
d. marginally unemployed
e. labor impaired
a. Employed
Education is a example of ?
b. Investment in human capital
Country tends to grow faster when they
a. Have more greater college graduates
b. Less trade with the world
c. Government restricts direction
d. Savings and investments decreases
e. Stock on physical capital
a. Have more greater college graduates
How big is the labor force?
Employed 800,
unemployed 200,
not in labor force 50
c) 1000
(employed + unemployed) exclude labor force
800+200=1,000
Long question about BRAZIL, nominal rate = 18,
expected inflation = 12,
Real Interest= ?
d. 6
(18-12) = 6
(Interest rate = Nominal Rate – Inflation)
A country tends to grow faster when?
A. Greater proportion of its work force graduate from college.
B. It trades less with the rest of the world.
C. The government restricts direct foreign investment into others.
D. Saving and investing decrease.
E. The Stock of fiscal capital is held constant.
A. Greater proportion of its work force graduate from college.
Relationship between the quantity of inputs used in production and the quantity produced from those inputs is called.
A. Productivity Equation
B. Production function
C. An input – output function.
D. A GDP deflator
E. None
B. Production function
