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Macro Final Review 3020 - Tulane
Compaore Final Questions
Terms in this set (75)
Equilibrium in the goods market requires that
E. Production equals demand
An economy is in equilibrium when which of the following conditions is satisfied?
D. Total saving equals investment
Which of the following is NOT an asset on a bank's balance sheet?
C. Checkable deposits
Suppose an open economy is in equilibrium. Given this information we know with certainty that
Which of the following equals demand in an open economy?
Which of the following is a flow variable?
The labor force in the United States is defined as
A. the sum of the total number of individuals who are employed and officially unemployed
Between 2000 and 2010, the annual rate of output growth in China was approximately equal to
Which of the following is an exogenous variable in our model of the goods market in Chapter 3?
C. Government spending
Suppose a one-year discount bond offers to pay $1000 in one year and currently sells for $950. Given this information, we know that the interest rate on the bond is
The most recent financial crisis started in
B. housing market
For this question, assume that individuals do NOT hold currency (i.e., c = 0). The money multiplier is equal to
If individuals do not hold checkable deposits, we know that
D. All of the above
Which of the following will cause an increase in the amount of money that one wishes to hold?
B. a reduction in the interest rate
Which of the following is a component of high powered money?
C. bonds held by banks, loans, and bank reserves
Economists have suggested that the relatively higher unemployment in Europe has been caused by which of the following?
E. All of the above
Suppose the consumption equation is represented by the following: C = 250 + .75 YD. The multiplier in this economy is
Which of the following events will cause a reduction in equilibrium output?
D. All of the above
If C = 2000 + .9YD, what decrease in taxes must occur for equilibrium output to increase by 1000?
Refer to the information above. The labor force participation rate is
Refer to the information above. The official unemployment rate is
An increase in government spending will likely have which of the following effects?
C. a rightward shift in the IS curve
For this question, assume that investment spending depends only on output and no longer depends on the interest rate. Given this information, an increase in government spending
C. will cause investment to increase
Suppose the economy is currently operating on both the LM curve and the IS curve. Which of the following is true for this economy?
E. All of the above
The IS curve will shift to the left when which of the following occurs?
C. a reduction in government spending
A reduction in consumer confidence will likely have which of the following effects?
B. a leftward shift in the IS curve
During 2008 in the United States, consumer confidence fell significantly. Which of the following will occur as a result of this reduction in consumer confidence?
D. the IS curve will shift leftward
Suppose the economy is operating on the LM curve but not on the IS curve. Given this information, we know that
B. the money market and bond markets are in equilibrium and the goods market is not in equilibrium
Which of the following statements is consistent with a given (i.e., fixed) LM curve?
E. an increase in output causes an increase in money demand
The natural rate of unemployment is the rate of unemployment
A. that occurs when both the goods and financial markets and in equilibrium
An increase in the minimum wage will tend to cause which of the following?
A. an upward shift in the WS curve
Suppose we wish to examine the determinants of the equilibrium real wage and equilibrium level of employment (N). In a graph with the real wage on the vertical axis, and the level of employment on the horizontal axis, the wage-setting relation will now be
E. an upward sloping line
A reduction in the minimum wage will tend to cause which of the following?
C. a downward shift in the WS curve
A reduction in unemployment benefits will tend to cause which of the following?
B. a downward shift in the WS curve
For this question, assume that the economy is initially operating at the natural level of output. A one-time 5% reduction in the nominal money supply will cause
B. a 5% reduction in the price level in the medium run
The aggregate demand curve will shift to the right when which of the following occurs?
B. a reduction in taxes
When the economy is operating at a point where output is less than the natural level of output, which of the following occurs?
D. All of the above
Suppose a central bank implements a monetary expansion. Which of the following would we expect to occur in the short run?
E. an increase in the nominal wage
For this question, assume that the Phillips curve equation is represented by the following: piet - piet-1 = (m+z) - qut. Which of the following will cause a reduction in the natural rate of unemployment?
A. an increase in q
Which of the following best defines the IS curve?
C. the combinations of i and Y that maintain equilibrium in the goods market
The IS curve will shift to the right when which of the following occurs?
B. an increase in government spending
Based on price setting behavior, we know that a reduction in the unemployment rate will cause
D. no change in the real wage
Which of the following events will cause an increase in the aggregate price level?
D. an increase in the unemployment benefits
Suppose there is a simultaneous central bank purchase of bonds and increase in taxes. We know with certainty that this combination of policies must cause
A. a reduction in i
Which of the following represents the participation rate?
C. the ratio of the labor force to the civilian noninstitutional population
Based on the information above, the unemployment rate is
Henry Ford's experiment with efficiency wages resulted in
D. a reduction in the layoff rate
Data for which country were first used to illustrate the relationship between unemployment and inflation (i.e., the original Phillips curve)?
E. none of the above
Based on the information above, the non-employment rate is
Based on the information above, the labor force participation rate is
At the current level of output, suppose the actual price level is greater than the price level that individuals expect (i.e., Pt >Pet). We know that
E. none of the above
Which of the following individuals first discovered the relationship between unemployment and inflation for the United States?
C. Samuelson and Solow
The original Phillips curve implied or assumed that
B. the expected rate of inflation would be zero
For this question, assume that the Phillips curve equation is represented by the following equation: piet - piet-1 = (m + z) -qut. A reduction in the unemployment rate will cause
D. an increase in the inflation rate over time
Since approximately 1970, the most stable Phillips-type relationship for the United States has been between which of the following?
C. the unemployment rate and the change in the rate of inflation
In which of the following periods was the relationship between the U.S. unemployment rate and U.S. inflation rate unstable?
E. none of the above
Today, about _______ of U.S. workers have their wages set by collective bargaining agreements
Suppose the aggregate production function is given by the following: Y = AN. Given this information, we know that labor productivity is represented by the following:
The natural level of output is the level of output that occurs when
A. the economy is operating at the unemployment rate consistent with both the wage-setting and price-setting equations
In the wage setting relation W = PeF(u,z), the variable z does NOT include which of the following variables?
A. the extent to which firms mark up prices over their marginal cost
The mortgage is said to be underwater when
A. the value of the mortgage exceeds the value of the house
When a liquidity trap situation exists, the most appropriate policy to increase output would be
C. an increase in government spending
An open market purchase of bonds by the central bank will cause which of the following when a liquidity trap situation exists?
A. the interest rate will not change
Suppose bank A has assets of 100, liabilities of 80, and capital of 20. Its capital ratio is
Suppose bank A has assets of 100, liabilities of 80, and capital of 20. Its leverage ratio is
FDIC deposit insurance is _________ per account
Of the following, the most often used measure of changing living standards is
E. the growth rate of real GDP per capita
Firms with _____ ratings are considered the safest
When an economy is operating at the steady state, we know that
B. steady state saving is equal to depreciation per worker
Suppose two countries are identical in every way with the following exception. Economy A has a higher rate of depreciation (6*) than economy B. Given this information, we know with certainty that
C. steady state consumption in A is lower than in B
Suppose, due to the effects of a military conflict that has ended, that a country experiences a large reduction in its capital stock. Assume no other effects of this event on the economy. Which of the following will tend to occur as the economy adjusts to this situation?
D. a relatively high growth rate for some time
Decreasing returns to capital (K) implies that a 4% increase in K will cause
E. Y to increase by less than 4%
Assume that employment increases by 3%. Holding all other factors constant, we know with certainty that which of the following will occur?
A. output will increase by less than 3%
Which of the following will cause a reduction in output per worker (Y/N)?
D. all of the above
Constant returns to scale implies that if N and K both increase by 3% that
A. output (Y) will increase by 3%
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