ECON 120 Final exam review

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Labor force

All persons over age 16 who are either working for pay or actively seeking paid employment is known as the

The CEO of General Motors

Which of the following individuals is part of the labor force?

deflation

A decrease in the average level of prices of goods and services is known as

barter

Reggie fixes his friend's car and the friend cleans his house instead of paying him. In economics, this is referred to as

Enhancing labor productivity.

Additional capital makes its best contribution to economic growth by

The Sherman Act

The first antitrust act to prohibit "conspiracies in restraint of trade" was:

The business cycle

Alternating periods of growth and contraction in real GDP define:

Include private costs.

Social costs:

Cyclical and structural unemployment have been minimized

"Full employment" in the U.S. economy means:

A change in the composition of the money supply, but not the size.

When an individual deposits cash or coins in a transactions account, there is:

Overproduce private goods and underproduce public goods

If the economy relies entirely on markets to answer the WHAT question, it tends to:

Amount of loans a bank can make after meeting the reserve requirement.

For a single bank in a large banking system, excess reserves are equal to the

All of the above are possible.

Starting from an equilibrium at less than full employment:

Is generally accepted as a medium of exchange

Money is anything that:

Shelly is looking for work but never finished high school so her skills are limited

Which of the following as an example of structural unemployment

Employment rate

The proportion of the adult population that is employed is the

Find out what people buy and then survey how the prices of these items change

To construct the Consumer Price Index, the Bureau of Labor Statistics must

All of the above

Even if the economy is in macro equilibrium, it is possible that the equilibrium

The equilibrium output will increase but the price level will stay the same until full employment is reached.

Given Keynesian assumptions about the shape of the aggregate supply curve and an economy suffering a recession, which of the following is most likely to occur if the Fed pursues expansionary monetary policy?

Decreases by $8 billion.

If the government reduces expenditures by $2 billion and the MPC = 0.75, then total spending for the economy

Increase, AD1 to AD2.

Refer to Figure 14.1. Suppose the Federal Reserve buys bonds in the open market. The money supply will _______ and cause a shift from _______.

All of the above could shift aggregate supply

Which of the following causes the aggregate supply curve to shift, ceteris paribus

A tax increase.

If excessive aggregate demand is causing prices to rise, which of the following would be a correct fiscal-policy action?

Real GDP.

The total value of goods and services produced within a nation's borders, measured in constant prices refers to:

GDP per capita.

One HEADLINE article is titled " What Economic Growth Has Done for U.S. Families." Living standards can best be measured using:

Cyclical unemployment.

Unemployment that occurs when there are not enough jobs for the number of people in the labor force is referred to as

Classical

Say's Law is consistent with the _______ view of the economy.

Because of a mismatch between skills and jobs

Structural unemployment occurs:

Supply-side explanations.

Which of the following explanations of the business cycle does not focus on aggregate demand shifts?

All of the above

Which of the following is a basic measure of macroeconomic performance?

Social costs and private costs

External costs are equal to the difference between

All of the above

Keynes believed that:

Government failure.

Which of the following occurs if government intervention forces the economy inside the production-possibilities curve?

A graduate assistant spends all of his income on tuition

Which of the following is not considered to be saving?

International balances

Macroeconomic outcomes include:

Prices of goods and services that the typical consumer buys increased by an average of 32 percent

If the Consumer Price Index (CPI) had a value of 132 in 2005, this means that during the period between the base year and 2005:

The interest rate effect.

Which of the following suggests that lower average prices stimulate more borrowing?

Government purchases are decreased

The aggregate demand curve shifts to the left when:

Decreases by $40 billion

If the government reduces expenditures by $4 billion and the MPC = 0.9, then total spending for the economy

Offer incentives to workers

In order to maximize the potential of workers, managers should:

An increase of $72 billion

A tax cut of $8 billion with an MPC of 0.90 will cause a cumulative change in spending equal to:

Antitrust laws

Which of the following is not considered to be a source of market power for a firm?

A rightward shift of aggregate demand

A HEADLINE article in the text is titled "Consumers are Spending Big Time." Which of the following is most likely to happen as a result of increased consumer spending?

Raise the reserve requirement, raise the discount rate, or sell bonds.

To decrease the money supply the Fed can:

Bob, a college student looking for summer work

Which of the following would be counted as unemployed?

Included in the calculation of GDP

Net exports in the U.S. are

Income transfers.

Payments to individuals for which no current goods or services are exchanged are known as

Reducing interest rates, which shifts aggregate demand to the right

Monetary policy can best cure a recession by:

An unbalanced budget was very appropriate at certain times

According to Keynes:

Social demand is less than market demand

Whenever external costs exist

Different rates of change in the prices of the two goods

Which of the following would cause a change in the relative prices of two goods

$80 billion

Assume an MPC of 0.75. The change in total spending for the economy as a result of a $20 billion new government spending injection would be:

Demand to the right

The purpose of fiscal stimulus is to shift aggregate:

Relative prices of polluting activities would rise

If a system of emission charges forced firms to internalize all external costs

Disposable income.
Investment.
Aggregate demand.
All of the above!

One HEADLINE article in the text is titled "Tax Cuts Could Improve Growth." A decrease in taxes can result in an increase in:

1 ÷ MPS.

The multiplier is equal to:

The lending capacity of the banking system increases.

Ceteris paribus, if the Fed reduces the reserve requirement, then

Pools of money used to buy interest-bearing securities

Money-market mutual funds are

Increases bank reserves.

When the Fed buys bonds, it:

A surplus pushes the average prices down to macro equilibrium

Which of the following results if the aggregate quantity supplied exceeds the aggregate quantity demanded?

A change in government spending.
A change in taxes.
Monetary policy.
All of the above!

Which of the following can be used to shift aggregate demand?

Includes business expenditure for plant and equipment.
Includes business inventory.
Decreased significantly in the U.S. during the Great Depression.
All of the above!

Investment:

More imported goods and fewer domestically produced goods, ceteris paribus.

When the U.S. price level increases relative to the price level in foreign economies, U.S. consumers tend to buy

$7.5 billion.

If the MPC = 0.75, a $10 billion tax increase will reduce consumption initially (in the first round) by:

Those that stimulate economic growth

Which of the following government policies or programs is most likely to reduce cyclical unemployment

None of these workers are likely to qualify for benefits

Which of the following workers would probably not qualify for unemployment benefits

Market power.

Government antitrust activity led to the breakup of AT&T in the 1980s because, among other things, it felt that AT&T had too much control over the telecommunications market. What type of market failure was most likely involved?

$500 million

Suppose the entire banking system has $50 million in excess reserves and a required reserve ratio of 10 percent. The deposit-creation potential of the banking system is:

Decide to save your cash to pay for tuition next semester

Money is functioning as a store of value when you:

Increased government purchases

Which of the following provides fiscal stimulus to the economy

Put it in a savings account so you can buy a new car next summer

Money is functioning as a store of value if you:

Purchase coffee at the local coffee shop before class

Money is functioning as a medium of exchange if you

0.90.

In Table 12.2, what is the marginal propensity to consume?

Inequity

The federal government's role in providing aid to the poor and the aged is justified because of concerns about

Aggregate supply and demand

Any influences on macro outcomes must be transmitted through:

Demand plus externalities

Social demand is equal to market

Structurally unemployed

An office worker who loses her job because she does not have the necessary computer skills is, ceteris paribus:

Price stability.
Full employment.
Economic growth.
All of the above!

Which of the following is a goal of macro intervention

Average prices are rising, but it is not certain what is happening to relative prices

During a period of inflation:

Stable or unstable.

A critical macroeconomic controversy is whether a market economy is inherently

Keynesian and monetarist

Which of the following economic policy options focus on aggregate demand to explain changes in unemployment and inflation?

Consumption, saving, and investment behavior

The uncertainty that results from inflation causes changes in

Aggregate supply has increased

When the production possibilities curve shifts outward, it is true that

The bank will not have enough required reserves

Suppose First National Bank has zero excess reserves. If the required reserve ratio increases, which of the following will happen immediately?

Decrease by $50 million

Suppose the banks in the Federal Reserve System have $1 billion in transactions accounts and the reserve requirement is 0.20. Ceteris paribus, if the reserve requirement is increased to 0.25, then excess reserves will:

Real GDP.

Which of the following is the best measure of actual output produced by an economy?

$12 million

Suppose the banks in the Federal Reserve System have $100 million in transactions accounts, the reserve requirement is 0.22, and excess reserves are zero. Ceteris paribus, if the reserve requirement is increased to 0.25, then the lending capacity of the banking system will decrease by:

Definitely falls

When a person's nominal income falls in a period of inflation then the person's real income:

4.0.

If the required reserve ratio is 25 percent, the money multiplier is:

Government spending decreased by $100 million

If the multiplier is 5 and a change in government spending leads to a cumulative $500 million decrease in aggregate spending, then initially:

Macroeconomic failure

When the economy experiences unemployment, there is

Government spending for highways.
Government purchase of military goods.
A tax cut.
All of the above!

Fiscal stimulus includes

"... businessmen traveling around the country found themselves borrowing funds from their customers each stage of the way. The cash they'd allocated for the entire trip barely sufficed to pay the way to the next stop."

Based on the HEADLINE article titled "Inflation and the Weimar Republic," which of the following is the best illustration of the price effect of inflation?

Multiplier is 4

If consumers spend 75 cents out of every extra dollar received, the

$25 million

Suppose the banks in the Federal Reserve System have $50 million in transactions accounts, the reserve requirement is 0.10, and excess reserves are zero. Ceteris paribus, if the reserve requirement is increased to 0.20, then over time the lending capacity of the banking system will decrease by:

The period before the Great Depression

The Classical approach dominated economic policy during:

Nominal GDP.

The total value of goods and services produced within a nation's borders, measured in current prices refers to

Buy lunch at a fast food restaurant

Money is functioning as a medium of exchange when you

An increase in the cost of labor.
Lower business taxes.
An easing of environmental regulations.
All of the above could shift aggregate supply!

Which of the following causes the aggregate supply curve to shift, ceteris paribus?

The Great Depression.

Which of the following events destroyed the credibility of classical economic theory

inflation

If an increase in the price of some goods outweighs other prices that remain constant or decrease then there is:

The aggregate demand curve should shift rightward

Ceteris paribus, which of the following will occur if the Fed buys securities through open-market operations

Producers do not always measure the same benefits and costs as society does

The market sometimes fails to produce society's optimum output because

Multiplier is 2.5

If consumers spend 60 cents out of every extra dollar received, the

Reduces bank reserves

When the Fed sells bonds, it:

Restrictive monetary policy

Which of the following will cause a decrease in aggregate demand

The link between payment and consumption is broken.
The free-rider dilemma exists.
People are reluctant to pay for what they can get for free.
All of the above!

The market produces too few public goods because

A decrease in consumer confidence.
A decrease in the rate of inflation.
An increase in unemployment.
All of the above!

Which of the following is likely if an economy is in a recession or headed for one

Supply-side explanations.

Which of the following explanations of the business cycle does not focus on aggregate demand shifts?

It creates a transactions-account balance for the borrower

When a bank makes a loan:

The 12 regional Federal Reserve banks

Checks are cleared between private banks by:

9.09 percent

If the population of a country is 800,000 people, the number employed is 700,000, and the number of unemployed is 70,000, the unemployment rate is:

An increase of $7.5 million

A tax cut of $5 million with an MPC of 0.60 will cause a cumulative change in spending equal to

Money.

In order for the U.S. economy to function efficiently, it should use:

Federal Reserve System's control over the money supply

U.S. monetary policy relies on the:

Some prices may fall.
People who have borrowed money may be better off.
The real incomes of some people may decrease.
All of the above are possible!

During a period of inflation

Many consumers have a free ride.

When public goods are marketed like private goods:

10.

If total reserves for a bank are $10,000, excess reserves are zero, and demand deposits are $100,000, then the money multiplier must be:

Rightward shift of the curve

In a graph of the aggregate demand curve, an increase in investment by businesses is represented by a:

The economy is not producing on the production possibilities curve.
The price level is not stable.
The economy is not growing.
All of the above!

Which of the following is a goal of macro intervention

The incentive to borrow reserves decreases

Ceteris paribus, if the Fed raises the discount rate, then

Deposit insurance

Which of the following is not one of the monetary policy tools used by the Fed

Taxes fall

An aggregate demand curve most likely shifts to the right when

The economy is not producing on the production possibilities curve.
The price level is not stable.
The economy is not growing.
All of the above!

Which of the following situations is a macro failure that justifies government intervention

An increase of $30 million

A tax cut of $10 million with an MPC of 0.75 will cause a cumulative change in spending equal to

The fraction of each additional dollar of disposable income spent on consumption

The marginal propensity to consume is:

Decrease by $50 million

Suppose the banks in the Federal Reserve System have $1 billion in transactions accounts and the reserve requirement is 0.20. Ceteris paribus, if the reserve requirement is increased to 0.25, then excess reserves will:

The equilibrium price level and output will both increase

Assuming the economy is in the upward sloping portion of the eclectic aggregate supply curve, which of the following is most likely to occur if the Fed pursues expansionary monetary policy?

Refers to the collective behavior of all buyers in the marketplace

Aggregate demand

The combination of price level and real output compatible with both AS and AD

Macro equilibrium indicates:

If aggregate demand increases, ceteris paribus, the economy will generally experience inflation.
If aggregate supply decreases, ceteris paribus, the economy will generally experience inflation.
If both aggregate demand and aggregate supply increase, output and employment should increase, but the price level could increase or decrease.
All of the above are possible!

Starting from an equilibrium at less than full employment

Aggregate demand

The total quantity of output demanded at alternative price levels in a given time period, ceteris paribus, is referred to

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