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Environmental Econ > Macro Econ Final > Flashcards

Macro Econ Final Flashcards

1
Q

The higher the real interest rate, the ________(more/fewer) investment project firms can profitably undertake, and the _______ (greater/smaller)the quantity of loanable funds they will demand

A

fewer; smaller

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2
Q

All of the following new construction projects are examples of fixed investment spending except

A

a public library

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3
Q

The part of the balance of payments that records a country’s net exports, net investment income, and net transfers is the

A

current account

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4
Q

If the nominal exchange rate between the dollar and the euro is $1=0.70(Euro), and the price of an 8.4oz can of Red Bull is $1.75 in the United States and 1.40(Euro) in Germany, the real exchange rate between the dollar and the euro is

A

0.875 cans of Red Bull in Germany per can of Red Bull in the US.

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5
Q

If the actual inflation rate is less than the expected inflation rate, the actual real interest rate will be _______ (greater/less)than the expected real interest rate. When this happens,_______ (borrowers/lenders)will lose and _______ (borrowers/lenders) will gain.

A

greater; borrowers; lenders

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6
Q

The current account includes all of the following accounts except.

A

net financial derivatives

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7
Q

Which of the following is not one of the three key services provided by the financial system to savers and borrowers?

A

Credit counseling

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7
Q

The money demand curve will shift to the left if real GDP ______ (increases/decreases)or if the price level ______(increases/decreases).

A

decreases; decreases

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8
Q

If the real interest rate is 3% and the expected inflation rate is 6%, then the nominal interest rate is.

A

9%

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9
Q

When the net capital outflows are negative.

A

capital inflows are greater than capital outflows

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10
Q

Which of the following is likely to increase measured GDP in the United States ?

A

Prostitution is legalized in all 50 states

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11
Q

Which of the following is an example of fiscal policy ?

A

The federal government increases infrastructure spending during an economic recession.

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12
Q

In building an economic model, variables that will be explained by the model are referred to as ______ variables.

A

endogenous

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13
Q

Suppose a Treasury bond will mature in 4 years. If the bond pays a coupon of $200 per year and will make a final par value payment of $5,000 at maturity, what is its price if the relevant market interest rate is 3% ?

A

$5,185.85

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14
Q

Which of the following good is directly counted in GDP ?

A

The Burrito Supreme that Sondra purchases for lunch at Taco Bell.

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15
Q

Suppose Chevrolet produced 90,000 Camaros in the United States in 2012 and during 2012 sold 69,000 to U.S. customers and exported 14,000 to foreign buyers. How many Camaros would the BEA count as investment spending by Chevrolet in 2012 ?

A

7,000

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16
Q

The consumer price index is

A

An average of the prices of the goods and services purchased by the typical family

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17
Q

What is the present value of $750 received 3 years from now if the current rate of interest is 7%?

A

$612.22

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18
Q

If the dollar appreciates relative to the Swiss franc,

A

U.S. exports to Switzerland become more expensive.

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19
Q

Suppose the population of a fictional economy falls into the following categories: 320 are employed full time; 110 are employed part time; 20 are unemployed but are actively looking for employment; 50 are unemployed and are not actively looking for employment. The official unemployment rate as calculated by the BLS would be

A

4.4%

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20
Q

The ______ (lower/higher)the down payment made by a borrower when taking out a mortgage, the ______.

A

lower; more highly leveraged that borrower is on the mortgage.

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21
Q

An increase in the money supply will cause the nominal interest rate to ______ (increases/decreases)and the quantity of money to _______(increases/decreases).

A

decrease; increase

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22
Q

National income accounting reveals that the value of total production in an economy

A

is always equal to the value of total income in the economy

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22
Q

If the current account is in surplus and the capital account is zero, then

A

the financial account must be in deficit

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23
Q

The supply of loanable funds is equal to the supply of saving in the economy. The three sources of saving in an economy include all of the following except

A

businesses

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24
Q

An American insurance company hires a call center in India to handle customer service calls in order to cut costs. Other things equal, this will ______ of the United States

A

decrease net exports

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25
Q

The part of the balance of payments that records purchases of assets a country has made abroad and foreign purchases of assets in the country is the

A

financial account

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26
Q

In response to the destructive bank panics of the Great Depression, Congress established the _______ in 1934 to reduce the likelihood of asset deflation and bank failures.

A

Federal Deposit Insurance Corporation
(FDIC)

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27
Q

When nominal interest rates increase, the opportunity cost of holding money will ______(increases/decreases), and the quantity of money demanded by households and firms will ______ (increases/decreases).

A

increase; decrease

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27
Q

An increase in interest rates

A

reduces the prices of existing financial assets

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28
Q

The prices by which productivity raises the average standard of living is referred to as

A

long-run economic growth

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29
Q

An increase in foreign investment in Brazil’s mining industry will increase the capital stock in Brazil. Holding labor and total factor productivity constant, continued increases in the capital stock will lead to

A

smaller and smaller increases in real GDP

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30
Q

Which of the following equations best represents the concept of constant returns to scale?

A

3Y= AF(3K,3L)

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31
Q

If the nominal rental price of capital divided by the price of output is less than the marginal product of capital, a firm that wishes to maximize profits will

A

purchase more capital goods

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32
Q

If the required reserve ration increases and the monetary base is unchanged, the value of the money multiplier will _____ (incline/decline) and The value of the money supply will ______(incline/decline).

A

decline; decline

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33
Q

The government’s profit from issuing fiat money is known as

A

seigniorage

34
Q

A major shortcoming of a barter economy is

A

the requirement of a double coincidence of wants

35
Q

There is ______ to how much increases in labor inputs can increase real GDP per capita, and there is ______ to how much increases in labor productivity can increase real GDP per capita.

A

a limit; no limit

36
Q

In the Slow growth model , investment is a ______ variable and depreciation is a _______ variable.

A

flow; flow

37
Q

If the real wage needs to decrease to restore equilibrium in a labor market, this can happen by

A

keeping the nominal wage constant and using inflation to allow the real wage to decline.

38
Q

Suppose that. the production function for the economy is: Y= AK^1/4L^3/4. Assume that A = 1,000, the capital stock is $32 billion, and the labor force is 120 billion, the value of the marginal product of capital is

A

$0.0213

38
Q

Consider the Solow growth model with both labor force and technology growth. In the steady state, real GDP per worker ______(will grow/will not grow), and real GDP per effective worker_______(is constant/is not constant).

A

will grow; is constant

39
Q

Which of the following would be the least likely to increase total factor productivity?

A

Government control of production and property

40
Q

If Jennifer withdraws $750 from her savings account and deposits it in her checking account, the M1 will _____ (increases/decreases) and M2 will ______(change/not change).

A

increase; not change

41
Q

If the money supply grows at 6% and the inflation rate is 2%, the quantity theory predicts that. the change in real GDP will be

A

4%

42
Q

The marginal product of capital is always _____ (positive/negative) and it _____(increases/decreases) as the capital stock increases

A

positive; decreases

43
Q

The Fisher equations states the

A

nominal interest rate equals the expected real interest rate plus the expected inflation rate.

44
Q

In the aggregate production function, the symbol “A” represents an index of how efficiently the economy transforms capital and labor into real GDP. “A” measures the influence

A

of any factor that determines real GDP other than the quantities of capital and labor.

45
Q

In the Slow growth model, as the capital-labor ratio increases, real GDP per worker ______ (increases/ decreases), and investment per worker ______ (increases/ decreases).

A

increases; increases

46
Q

In the Solow growth model with labor force or technology growth, suppose y=k^1/2, total factor productivity is constant and equal to 1, s=0.40, and d=0.10. When the economy reaches the steady state, the capital-labor ratio is ______ of capital per worker

A

$16

47
Q

If the capital-labor ratio is below the steady-state value, investment is ______ (less/greater) than break even investment, and the capital-labor ratio (increases/ decreases) ______.

A

greater; increases

48
Q

In the aggregate production function, Y represents real GDP, K represents the capital stock, L represents the quantity of labor, and A represents an index of efficiency. Which of the following equations represents the aggregate production function?

A

Y = AF(K,L)

49
Q

The Slow growth model (with labor force growth) predicts that a lower labor force growth rate will lead to

A

Higher labor productivity and a higher standard of living.

50
Q

Suppose y = Ak^1/3, the capital-labor ratio is $30,000 per worker, the level of total factor productivity is 400, 50% of the population works, and there are 50 million workers. Real GDP per worker is

A

$12,428.93

51
Q

Suppose that the production function for the economy is Y=AK^1/4 L^3/4. Assume that real GDP is $8 billion, capital stock is $32 billion, and the labor supply is 120 million. An increase of one worker will increase GDP by

A

$50,000

52
Q

The quantity theory of money predicts that, in the long run, inflation results from the

A

money supply growing at a faster rate than real GDP.

52
Q

In the Slow growth model with the labor force growth, if the saving rate decreases, break-even investment will be _______ (greater/less) than investment, and the capital-labor ration will ______ (increases/decreases).

A

greater; decreases

53
Q

The purchase of Treasury securities by the Federal reserve will, in general,

A

increase the quantity of reserves held by banks

54
Q

Suppose you purchased a bottle of vitamin water with a price of $3. The price of $3 best reflects the function of money as a ______, and when you take $3 out of your wallet to purchase the bottle, money is function as a _______.

A

unit of account; medium of exchange

54
Q

Borrowers benefit and lenders lose when the

A

actual interest rate is less than the expected real interest rate.

55
Q

Other things equal, when the real interest rate rises, C, I, and NX ______ (increases/ decreases) and real GDP will ______(increases/decreases) relative to potential GDP.

A

decrease; decrease

56
Q

Equilibrium in the goods market occurs where

A

aggregate expenditure equals real GDP

57
Q

If the output gap is greater than zero, real GDP is ______ (greater/less) than potential GDP, and the economy will _____ (expand/contract) to reach full employment

A

greater; contract

58
Q

Economists initially viewed the Phillips curve as a structural relationship, meaning that the relationship between the two measured variables

A

will not change over time.

59
Q

If potential GDP for the fourth quarter of 2012 = $58.5 billion, and real GDP for the quarter of 2012 = $53.7 billion, the the output gap was

A

-8.2%

60
Q

If the MPC= 0.75, a decrease in personal taxes from $100 billion to $80 billion will increase real GDP by

A

$60 billion

61
Q

If the price level is constant in the short-run,

A

the short-run aggregate supply curve is horizontal

62
Q

assume the economy is in a recession and the federal government decided to cut personal income tax rates. All else equal, the cut in taxes should

A

Shift the IS curve to the right and move the output gap closer to zero.

62
Q

Sine the 1950s,

A

US business cycle fluctuations have become milder

63
Q

The Phillips curve will shift down with a ____ (positive/negative)supply shock or a ____ (increase/decrease) in expected inflation.

A

positive; decrease

63
Q

The IS curve shows the combinations of _____ and _____ where the goods market is in equilibrium.

A

the real interest rate; real GDP

64
Q

Holding other factors constant, a decline in incomes of Europeans will result in a _____ curve in the United States, reducing real GDP relative to potential GDP.

A

leftward shift of the IS

65
Q

Keynesian economics refers to the perspective that the business cycle represents

A

disequilibrium

66
Q

Assume the economy is initially in equilibrium where potential GDP equals real GDP. if the economy experiences a ________ (negative/positive) demand shock and the Fed does not change its target short-term nominal interest rate, the IS curve shifts to the left and real GDP will be _______ (greater/less) than potential GDP.

A

negative; less

66
Q

if the MPC = 0.8, an increase in investment spending from $35 billion to $38 billion will increase real GDP by

A

$15 billion

67
Q
A
67
Q

If oil prices decreases,

A

the short-run aggregate supply curve will shift down.

68
Q

An unexpected exogenous event which has a significant impact on an important sector of the economy or on the economy as a whole is called a(n)

A

macroeconomic shock

69
Q

Negative demand shocks have a tendency to _____ (increases/decreases) real GDP relative to potential GDP and ______ (increases/ decreases) the inflation rate.

A

decrease; decrease

70
Q

Other things equal, if planned investment spending is less than actual investment spending, then aggregate expenditure will be ______ (greater/less) than real GDP and employment will _____(increases/decreases).

A

less; decrease

71
Q

In which of the following situations are wages the least likely to be sticky ?

A

A firm hires hourly workers based on changes in the supply and demand for its products.

72
Q

From the classical perspective, an increase in unemployment during a recession represents

A

voluntary unemployment

73
Q

On average, expansions in the United States have become ______ (longer/shorter), and recessions have become ______ (longer/shorter) since 1950.

A

longer; shorter

74
Q

A decrease in the unemployment rate which is accompanied by a decrease in the inflation rate is represented by a ______ of the Phillips curve

A

downward shift

75
Q

Prices and wages are considered “sticky” if

A

they do not fully adjust to changes in demand and supply

76
Q

Contradictory monetary policy causes a _______ (upward shift/downward shift) of the MP curve and a _______ (shift to the right/shift to the left) of the aggregate demand curve.

A

upward shift; shift to the left

77
Q

Assume that for he second quarter of 2012, actual real GDP was $125.5 billion and potential real GDP was $142.7 billion. According to Okun’s law, the cyclical unemployment rate during the second quarter of 2012 was

A

6.0%

78
Q
A

Environmental Econ (3 decks)

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