Macro Econ Study Flashcards
- Joe’s income this year is 55,000. The consumer price CPI is 110. What Joe’s income in term of base year dollars rounded to the nearest dollar? A. 60,500 B. 53,000 C. 49,800 D. 50,000 E. none
D 55000/110
- Government can increase Long-Run economy growth by encouraging A. Conservation of resources B. Consumption C. Spending D. Saving and Investing E. None
D
- Countries that devote a long share of GDP to investment such as Singapore vs. Korea tend to have. A. High B. Stable growth rate C. Low D. Highly cyclical growth rate E. There is no relationship between investment and growth.
D
- Enforceable private property risks A. Make economic development more likely. B. Make economic development less likely. C. Guarantee that economic development will occur. D. Ultimately have title effect on economy E. Guarantee that economic development will not occur
A
- If real interest rates are too low A. There will be excess demand in the loanable fund market B. Nominal interest rates will have to rise C. There will be excess supply in loanable funds market D. Inflation must be increase E. The GDP deflator has not been applend yet
C Think SUPPLY then demand.
- The substitution bias means that A. Consumer substitute towards good, that have become relatively more expensive. B. Consumers substitute towards goods that have become relatively less expense. C. The CPI understates the increase in the cost of living each years. D. The CPI compensates for equal changes and accurately reflect the cost of living. E. None of the above.
B
- Many countries in the far east, such as South Korea and Tawin have experience decades of repaid economic growth following by lower economic growth recent year. The phenomenon is known as A. The catch-up-effect B. The exploitation effect C. The Asian effect D. The supper growth effect E. The over investment effect.
A
- Accounting tends to grow faster when A. Greater proportion of its works force graduate from college. B. The trades less with the rest of the world. C. The government restrict foreign investment info to county. D. Saving and investment decreases. E. The stock of physical capital is held constant.
A
- 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 owners at the government D. A shrinking labor force. E. A fixed capital stock.
A
- If you take nation’s total income and subtract out private consumption, a government consumption you will find. A. GDP B. National Saving C. Net national product D. Net exports E. National consumption surplus.
B
- Frictional unemployment best defined as A. Deviation of unemployment from its natural rate B. Unemployment of people who do not want to work. C. Chronic unemployment due to wages not balancing supply and demand D. Unemployment due to individuals search for new job. E. None
D
- The decrease in Money Supply, the Fed would? A. Buy government’s bonds B. Increase the discount rate C. Decrease the reserve requirement D. All of the above E. None of the above
B
- Suppose that the country of France has a 22% nominal interest rate and an expected inflation rate of 10%. Which of the following is the best estimate of the Real interest Rate in the country’s A. 2.2) % B. 22% C. 12% D. 10% E. Not enough info.
C Formula: Nominal Interest Rate – Inflation Rate (22% - 10% = 12%)
- With sticky nominal wages an unexpected decline in aggregate demand can be expected to cause.
B. Both price and Real decrease in the Short-Run ————————————————————————– “Sticky” refers to a Short Run aggregate supply curve and demand. Since demand shifts to the left, the effect is a lower Price Level and lower Real GDP.
- The main problem with active fiscal policy is that? A. Changes in government’s spending have no effect on Aggregate Demand in short-run. B. The multiplier effect cancels out any positive effect of fiscal policy C. Automatic statistic countract the effect of fiscal policy. D. It happens without any involvement by congress E. It is difficult to time fiscal changes correctly.
E
- Net exports measure an imbalances between a country’s? A. Exports and its imports B. Sales of domestic assets of road, and buying of foreign assets. C. Income and expenditures D. Saving and investment E. All
A
- Which of the following affect a country’s net foreign investment? A. Real Interest Rates paid on foreign assets. B. Real Interest Rates paid on domestic assets C. Government policies that effect foreign ownership of domestic assets. D. All of the above E. None.
D
- 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
- 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
- If there is excess demand in the loan able funds. A. Interest rates are above equilibrium B. Interest rates are below equilibrium C. Interest rates expected to rise D. A & C E. B & C If there is excess Supply in the loanable funds framework? A. Interest Rates are above equilibrium. B. Total borrowing is greater than total spending. C. Interest Rates are below equilibrium. D. Both B & C E. Both A & C
E A ———————————————————————— Step One: Draw graph with supply and demand curve. Step Two: Demand is greater than supply Step Three: Interest rate is lower than equilibrium Step Four: Rates would rise. E.
Frictional unemployment? A. Recent graduate looking for a job. B. A mother is searching for a job and the kid has gone to college C. New Yorker moved to California. D. Computer program who turned down a job offer expect better job. E. All
E As long as they’re good and didn’t get fired and not because of the economy.
- Reserve require are regulations concerning? A. Amount of deposit banks are allowed to accepts B. Amount Reserve bank must hold against deposits. C. The total amount of loans, banks are allowed to make D. The interest rates at which banks are allowed the FED E. The number of open market transactions the Fed can perform.
B
Relationship between saving investment and net foreign investments A. S + I B. I – S C. S – I D. S/I E. S – I
C
- The U.S. organizations that is for monitory policy is A. Congress B. President C. Fed Reserve D. Cartel of privet bank. E. The Supreme Court.
C
- What is an automatic stabilizer? A. Tool of monitory policy that enters under control of the Fed Chairman. B. Tools of Fiscal that require specific legislation to be passed by congress. C. Tools of fiscal policy that responds to change in the economy without any action by politician. D. Tools of monitory policy that is Not control by Fed E. Tools of fiscal policy that is immune to crowding out.
C
- Aggregate demand predicts the short run effect of an unexpected in taxing
B. Both price level and real output decrease in short – run
- Nominal and real interest rate relationship A. Real interest rates. Expected inflation rates + the nominal interest rates B. Real interest rates. Inflation – the nominal interest rates C. Real interest rates. Nominal interest rates – the expected inflation rate D. The real interest rate is nominal interest rate x by expected inflation rate. E. None.
C Nominal
- Problems in measuring the cost of living include A. Substitution bias B. The introd of new goods C. Unmeasured quality changes D. All E. None
D
- The required Reserve ration is 25% an additional 5,000 of reserves can increase the money supply by? A. 1,250 B. 125,000 C. 25,000 D. 20,000 E. 5,000
D INCREASE MONEY SUPPLY (1/R) 1/25% = 4(5,000) = 20,000 1/25%= 4 (5000)=20000 KNOW RESERVE RATIO. Reserve Ratio=25%=1/25
According to the theory of liquidity preferences, an increase in the rate of growth of Money Supply will cause which of the following? A. Interest Rates will fall B. Interest Rates will raise C. Nominal wages will fall D. Nominal GDP will stay the same E. Real GDP will fall
A
- Price level 5, money supply is 10 trillion dollars, velocity of money is 4. What is the value of real GDP? A. $2 trillion B. 8 trillion C. 6 Trillion D. 10.25 trillion E. None
B Formula: V= P x Y/ M V= Velocity, M = Money Supply, P = Price Level, Y = Real GDP P=5 Y=? M=10 5 *?/ 10= 4 10*4=40 5*?=40 ?=8
- Which shifts the aggregate demand to the right? A. Increase in government purchases B. Reduction in consumer spending. C. The selling of government securities by Fed Reserve Bank D. Downsizing of corporate investment spending E. All of the above
A
- Number of Employment 1,800 Number of unemployment 200 Not in labor force 600 What is unemployment Rate? A. 10 % B. 12 % C. 14% D. 20%
A 1,800+200=2000 Number of Employment+Number of Unemployment=X Number of unemployment/X=(?) X (100) 200/2000=10%
- Example of structural unemployment? A. Factory worker temporally laid of during a recession. B. Recent Graduates C. A mother chooses to stay with child instead of working. D. Unskilled worker can’t get hired because the minimum wage is too high. E. A retired person living off her saving
D Cannot get hired because they don’t want to pay you. Structure (No good) = Won’t get hired
- According to loan able funds framework, if business decides to eliminate or postpone expansion plans reducing their need to borrow will be that A. There will be excess demand in the loan able fund market B Interest rates will increase C. Interest rates will decrease D. Interest rates will not change E. Interest rates either can rise or fall
C. definitely. I think this will shift demand to the left, causing decrease in equilibrium interest rates.
If there is excess demand in the loan able fund market? A. Interest rates are above equilibrium B. Interest rates are below equilibrium C. Interest can be expected to rise D. A & C E. B & C
E
- Decrease of price level of consumer spending and increase in aggregate quantity of goods and services demanded A. Shift in the aggregate demand curve. B. Negative slope of aggregate demand curve C. Shift in Short-Run aggregate supply curve D. The positive slope of the short – run aggregate supply curve E. The positive slope of the aggregate demand curve.
B
Which of the following will increase the long – run growth? A. Rate is U.S. Real GDP per person B. Bailout unsecured comp C. More efficient D. A, B and C E. A and C will increase the
C. Bigger possibility it’s A ————————————————————————– The GDP per person would be used as a measure of growth, but increase in efficiency (like technological efficiency) would increase long run growth. C.
- If you take GDP and subtract the value of depreciation of the economy’s capital stock, you find the. A. Net domestic product. B. Net national product. C. GNP D. GDP Deflator E. Nominal GDP
A
Sam, 2 drills process the furniture maker uses to produce tables are A. Physical capital B. Human capital. C. Natural resources. D. Technological resources E. None.
A
Private property right enforceability means that you can use the reward from your effect to? A. Sale B. Consumers C. Investment D. Help the poor E. All
E
- The value of depreciation of the economy’s capital stock, you find the inflation 10 %, nominal 14, economic 8 %. What is real? A. 14 B. 6 C. 24 D. 4 E. 2
D Formula: Real Interest Rate = Nominal Interest rate – Inflation (14% - 10% = 4%)
- If there is excess Supply in the loanable funds framework? A. Interest Rates are above equilibrium. B. Total borrowing is greater than total spending. C. Interest Rates are below equilibrium. D. Both B & C E. Both A & C If there is excess demand in the loanable funds MARKET? A. Interest rates are above equilibrium B. Interest rates are below equilibrium C. Interest rates can be expected to rise D. A & C E. B & C
A Think… Up=Above E
- How big is the labor force? # of employment 800 # of unemployment 200 Not in labor force 50 A. 250 B. 800 C. 1000 D. 1050 E. 850 c) 1000 (employed + unemployed) exclude labor force
C