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A Short Review of Macroeconomics Flashcards | StudBud
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A Short Review of Macroeconomics
A Short Review of Macroeconomics
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Questions
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Answers
1
What will happen to the labor force participation rate as the population becomes older?
There will not be any change.
The labor force participation rate will decline.
The labor force participation rate will rise.
2
Consider an agricultural economy. If the weather is perfect, what probably happens?
AS shifts to the right, real GDP growth rises and inflation declines
AS shifts to the left, real GDP growth decreases and inflation rises
Unemployment and inflation both increase.
Unemployment rises and inflation falls.
3
Please identify the national expenditure approach to gross domestic product.
Y = C + I + G + NX
M x V = P x Y
Y = Wages + C + Rent + G
Y = Wages + Rent + Interest + Profit
4
When the government passes legislation to cap prices below their equilibriums, this generally
increases the rate of real GDP growth.
lowers unemployment but drives inflation higher.
is an effective method of controlling inflation.
creates inefficiencies like shortages, delays, and queues.
5
In the AD - AS model, the long run aggregate supply normally is drawn as a
line with a negative slope.
line with a positive slope.
horizontal line at the average price level.
vertical line.
6
When a country with very productive labor trades with a country with less productive labor,
no one benefits.
wages in both countries tend to rise.
comparative advantage will not exist.
wages fall for the more productive and rise for the less.
7
Which of the following is NOT an explanation for the negative slope of the aggregate demand line?
the interest rate effect
the exchange rate effect (also known as the international trade effect)
the wealth effect (also known as the real balances effect)
the substitution effect
8
A decrease in the price of oil could be caused by
an increase in incomes around the world.
an increase in the supply of oil.
an increase in the demand for oil.
an increase in the price of electric vehicles.
9
What is the basic macroeconomic role of financial intermediaries, such as banks?
They do not really have one.
To collect taxes on behalf of the government.
To move funds from savers to borrowers.
To ensure an equitable distribution of income.
10
A significant quantity of child care is provided by stay-at-home moms and stay-at-home dads,
if included in the calculation of GDP, GDP would be higher.
if included in the calculation of GDP, GDP would be lower.
11
Select the general macroeconomic goals emphasized in our course.
maximum employment (i.e., low unemployment rates)
price stability (i.e., low inflation rates)
sustained economic growth
ensuring that net exports are positive.
12
Translating the predictions of the AD - AS model to a dynamic world: If AD increases, then we should expect to see
a higher rate of real GDP growth and inflation.
a lower rate of real GDP growth and inflation.
a lower rate of real GDP and a higher rate of inflation.
a higher rate of real GDP growth and a lower inflation rate.
13
Which of the following is a Fisher Equation?
real interest = nominal interest - actual inflation
real interest / nominal interest = actual inflation + expected inflation
nominal interest = real interest - actual inflation
real interest = nominal interest + expected inflation
14
Iceland can produce either 10 units of cod or 20 units of aluminum (AL).
The opportunity cost of one unit of cod is a unit of AL.
Iceland has a comparative advantage at cod production.
Iceland has a comparative advantage at AL production.
The opportunity cost of one unit of cod is two units of AL.
15
Gabriel lives in Arizona and works in Mexico. The value of Gabriel's production is included in
Mexico's GDP
Canada's GDP and China's GDI
Neither U.S. GDP nor Mexico's GDP
U.S. GDP
16
If the FOMC announces an increase in their target for the federal funds rate, then the FOMC probably will
begin an aggressive program of open market purchases.
lower the required reserve ratio to zero.
lower the discount rate.
increase both the discount rate and the interest on reserve balances.
17
If the government increase government spending and decreases taxes, then
the AS curve shifts to the right.
the AD curve shifts to the left.
the AS curve shifts to the left.
the AD curve shifts to the right.
18
The idea that an increase in government spending will motivate more spending by the private sector is termed ?
crowding out
federal budget surplus
the spending multiplier
the required reserve ratio
19
To stimulate the economy, the FOMC is likely to
lower interest rates.
pass a law to make unemployment illegal.
raise interest rates.
tell people to go out and spend as much as they can, as fast as they can.
20
Max is not working. He stopped looking for work a few months ago. What is Max (officially)?
Max is unemployed, but no longer in the labor force.
Max is no longer unemployed, but still in the labor force.
Max will be counted as unemployed and in the labor force.
Max is neither unemployed nor part of the labor force.
21
In the AD - AS Model, an increase in government spending shifts
AS to the left, lowering real GDP and raising the price level.
AD to the left, lowering real GDP and the price level.
AS to the right, raising real GDP and lowering the price level.
AD to the right, raising real GDP and the price level.
22
In the AD - AS model, an increase in the prices of imported inputs shifts
AS to the left, decreasing real GDP and increasing the price level.
AD to the right, increasing real GDP and driving the price level down.
AS to the right, increasing real GDP and decreasing the price level.
AD to the left, decreasing real GDP and driving the price level up.
23
Which equation represents the way that markets tend to work?
Marginal Benefit to buyer > Price > Marginal Cost of seller
Price > Marginal Benefit to buyer > Marginal Cost of seller
Marginal Cost of seller > Price > Marginal Benefit to buyer
24
What makes it difficult for people to judge the real value of things?
Highly variable inflation rates
The velocity of money
Stable real GDP growth
Bayes' theorem
25
In the AD - AS Model, an improvement in technology shifts
AD to the right, raising real GDP and the price level.
AD to the left, lowering real GDP and the price level.
AS to the left, lowering real GDP and raising the price level.
AS to the right, raising real GDP and lowering the price level.
26
To be able to produce a good at a lower opportunity cost is to have
morphin' time!
a competitive edge.
a comparative advantage at production.
an absolute advantage at production.
27
If the pace of economic activity declines and the economy enters a recession, the Federal Reserve is likely to
decrease the target for the federal funds rate.
increase government spending.
borrow more money from commercial banks.
decrease taxes.
28
Studies of central bank independence suggest that countries with relatively independent central banks tend to
have higher unemployment rates than other countries.
have lower inflation rates than other countries.
have higher inflation rates than other countries.
have frequent military coups and suffer from political instability.
29
What term is used to note that a metric has been adjusted to remove the impact of inflation?
reactionary
relative
real
revision
30
If nominal GDP is $1,000,000 and real GDP is $800,000, then the
GDP deflator
is
80
125
-$200,000
$200,000
31
Who was the President the last time the federal government ran surpluses rather than deficits?
President Andrew Jackson
President Bill Clinton
President Ronald Reagan
President William Howard Taft
32
The institutions that facilitate economic growth include
private property rights
everything listed here
strong central governments
tariffs, quotas, and other trade barriers
33
What do economists call policy intended to increase aggregate demand?
Contractionary
Redistributive
Expansionary
Futile
34
If the Federal Reserve raises the interest rate that it pays on reserve balances, then
AS shifts to the right, increasing real GDP.
AD shifts to the right, increasing real GDP.
other interest rates tend to rise, decreasing interest-sensitive spending.
other interest rates tend to fall, increasing interest-sensitive spending.
35
If a country runs a trade deficit, then
national savings is less than investment.
net capital output is zero.
national savings is greater than investment.
net capital outflow is positive.
36
Countries where bribes and other forms of corruption are common when dealing with the government
tend to have a lower living standards than countries with less corruption.
seem to be as successful as countries with less corruption.
tend to be located on the continent of North America.
grow rapidly and create high living standards for citizens.
37
If bankers become more optimistic about the future, then banks tend
to make fewer loans, which can decrease the amount of investment.
to make more loans, which can increase the amount of investment.
to make fewer loans, which can increase the amount of investment.
to make more loans, which can decrease the amount of investment.
38
Crowding out
refers to the idea that
gov't borrowing lowers interest rates, discouraging savings.
many industries have too many business for their customers.
private sector spending falls when gov't spending rises.
social media is harmful to civil society.
39
Thinking about investment: Everything else the same, the higher the interest rate the
fewer investment projects are likely to be undertaken.
more investment projects are likely to be undertaken.
40
Use Okun's Rule of Thumb: If the output gap goes from 0 to -2%, then the unemployment rate is likely to
fall by 1 %.
rise by 1%.
rise by 2%.
fall by 2%.
41
What is the
Law of Demand
?
Where it ends usually depends on where it starts
Quantity demanded rises as the price falls, everything else the same.
Bad money drives out good money.
Supply creates its own demand.
42
If the CPI rises from 150 to 180, then the increase in the average level of prices is
83.3 percent.
330 percent.
30 percent.
20 percent.
43
Suppose that an economic expansion increases average incomes in the U.S. In the market for trucks this is likely to
shift the demand for trucks to the left.
shift the supply of trucks to the right.
shift the supply of trucks to the left.
shift the demand for trucks to the right.
44
Based on the AD - AS model, inflation can result from:
increases in AD or decreases in AS
either an increase in AD or an increase in AS.
decreases in AD or increases in AS.
either a decrease in AD or a decrease in AS.
45
An increase in the demand for bonds is likely to
push bond prices and interest rates down.
drive bond prices and interest rates higher.
drive bond prices higher and push interest rates down.
push bond prices down and drive interest rates higher.
46
The primary drivers of the growth of GDP per captia are
improvements in productivity.
expansionary monetary and fiscal policies
level playing fields vis-a-vis international trade.
policies that move resources to where politicians want them.
47
In the AD - AS Model, an increase in the money supply shifts
AD to the right, increasing real GDP and the price level.
SRAS to the left, decreasing real GDP and increasing the price level.
SRAS to the right, increasing real GDP and decreasing the price level.
AD to the left, decreasing real GDP and the price level.
48
If real GDP is greater than potential GDP, then the economy might be said to be in
an inflationary gap.
a recessionary gap.
an Okun - Taylor Convergence.
a Marshall - Hicks Conundrum.
49
Some economists worry the frequent government deficits and rising national debt may
require the sale of national parks to raise funds.
motivate the U.S. military to overthrow our republic.
result in the U.S. having to file for bankruptcy at the IMF.
result in slower real GDP growth due to crowding out.
50
To lower inflation, the Federal Reserve is likely to
increases its lending operations to ensure that banks have plenty of money.
pass a law that bans price increases.
lower interest rates.
raise interest rates.
