Macro Final

Front 1

Deflation occurs when

Back 1

prices fall

Front 2

During the period between 1900 and 2000, the unemployment rate in the US was highest

Back 2

in the 1930s

Front 3

The unemployment rate

Back 3

has never been zero in the US

Front 4

Variables that a model tries to explain are called

Back 4

endogenous

Front 5

The assumption of flexible prices is a more plausible assumption when applied to price changes that occur:

Back 5

in the long run

Front 6

Two equivalent ways to view GDP are as the

Back 6

total income of everyone in the economy or the total expenditure on the economy's output of goods and services

Front 7

All of the following are a stock except

Back 7

the number of unemployed people

Front 8

All of the following are a flow except

Back 8

the government debt

Front 9

When a firm sells a product out of inventory, GDP

Back 9

is not changed

Front 10

In computing GDP

Back 10

the value of intermediate goods is included in the market price of the final goods

Front 11

An example of an imputed value in the GDP is the

Back 11

housing services enjoyed by homeowners

Front 12

In principle,the GDP accounts should - but do not - have an imputation for

Back 12

rental services of automobiles driven by owners

Front 13

Nominal GDP means the value of goods and services is measured in ________ prices.

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current

Front 14

The GDP deflator is equal to

Back 14

the ratio of the nominal GDP to real GDP

Front 15

If nominal GDP is increased by 5% and teh GDP inflator increased by 3%, then real GDP ____ by ____

Back 15

increased, 2

Front 16

The new chain-weighted measures of real GDP are an improvement over traditional measures because the prices used to compute real GDP are

Back 16

never far out of date

Front 17

The national income accounts identity, for an open economy, is

Back 17

Y = C + I + G + NX

Front 18

In the national income accounts, consumption expenditures include all of the following except household purchases of:

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new residential housing

Front 19

In the national accounts, all of the following are classified as government purchases except

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payments made to SS recipients

Front 20

GNP equals GDP __ income earned domestically by foreigners ___ income that US residents earn abroad.

Back 20

minus, plus

Front 21

The largest component of national income is

Back 21

compensation of employees

Front 22

Disposable personal income

Back 22

is computed by subtracting personal tax and nontax payments from personal income.

Front 23

Prices of items included in the CPI are

Back 23

weighted according to the quantity of the item purchased by the typical household.

Front 24

The number of households interviewed by the US bureau of labor statistics, a person is not in the labor force if that person:

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is going to school

Front 25

The labor force equals the

Back 25

number of employed and unemployed individuals

Front 26

The employment statistic comupted from the establishment survey do NOT include

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the self-employed

Front 27

A worker with two jobs is counted

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once in the household survey, but twice in the establishment survey.

Front 28

An estimate of the number of unemployed workers in the economy can be obtained from

Back 28

the household survey but not from the establishment survey.

Front 29

In the long run, what determines the level of total production of goods and services in an economy?

Back 29

the quantity of capital and labor and production technology

Front 30

The neoclassical theory of distribution

Back 30

is a theory of how national income is divided among the factors of production

Front 31

A competitive firm chooses the

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quantity of labor and capital to employ

Front 32

The marginal product of labor is

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the additional output produced when one additional unit of labor is added

Front 33

The property of diminishing marginal product means that, after a point, when additional quantities of:

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a factor are added when another factor remains fixed, the marginal product of that factor diminishes

Front 34

A competitive, profit-maximising firm hires labor until the:

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price of output multiplied by the marginal product of labor equals the wage

Front 35

The neoclassical theory of distribution explains the allocation of

Back 35

income among the factors of production

Front 36

According to Euler's theorem, if competitive firms pay each factor its marginal product and the production funtion has constant returns to scale, the sum of all factor payments will equal:

Back 36

total output

Front 37

According to the neoclassical theory of distribution, total output is divided between payments to capital and payments to labor depending on their

Back 37

marginal productivities

Front 38

Since 1960, the US ration of labor income to total income has

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been about 0.7

Front 39

National saving is

Back 39

private saving plus public saving

Front 40

Crowding out occurs when an increase in government spending ___ the interest rate and investment ____.

Back 40

Increases, decreases

Front 41

If increased immigration raises the labor force, the neoclassical theory of distribution predicts

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the real wage will fall and the real rental price of capital will rise.

Front 42

Open-market operations are:

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Federal Reserce purchases and sales of government bonds

Front 43

The quantity theory of money assumes that

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velocity is constant

Front 44

The Fisher effect assumes that there is a one to one relation between

Back 44

the expected inflation rate and the nominal interest rate

Front 45

Evidence from the past 40 years in the US shows that when the inflation rate is high, the ___ interest rates tends to be ____.

Back 45

nominal, high

Front 46

The opportunity cost of holding money is the

Back 46

nominal interest rate

Front 47

Over the past year, the Federal Reserve's balance sheet has __ and is about __ as it was prior to the financial crisis.

Back 47

increased, three times as large

Front 48

Inflation __ the variability of relative prices and ___ allocative efficiency

Back 48

increases, decreases

Front 49

If nominal wages cannot be cut, then the only way for real wages to fall is by

Back 49

inflation

Front 50

The concept of monetary neutrality in the classical model means that an increase in the money supply will increase

Back 50

nominal interest rates

Front 51

The factors most responsible for forecasts of the US government debt spiraling out of control in the next half century are the projected:

Back 51

aging of the US population and rising healthcare costs

Front 52

According to the traditional view as identified by Mankiw, if taxes are cut without cutting government spending, the the long-term effects will be ___ capital and ___consumption.

Back 52

lower, lower

Front 53

The possibility of capital flight is likely to be greater at higher levels of government debt because there is a greater

Back 53

temptation to default on the debt

Front 54

In the US, money supply is determined:

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jointly by the Fed and by the behavior of individuals who hold money and of banks in which money is held

Front 55

In a system with fractional-reserve banking:

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banks hold reserves equal to a fraction of their deposits

Front 56

The money supply will increase if the

Back 56

monetary base increases

Front 57

When the Fed makes an open market sale, it:

Back 57

decreases the monetary base (B)

Front 58

Frictional unemployment is unemployment caused by

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the time it takes workers to search for a job

Front 59

The minimum wage

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has its greatest impact on teenage unemployment

Front 60

During the past 50 years the natural rate of unemployment in the US ___ during the 1970s and 1980s, compared to the 1950s and 1960s, and the ___ during the 1990s, compared to the previous two decades.

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increased, decreased

Front 61

Spells of unemployment end whe the unemployed person finds a job or

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withdraws from the labor force

Front 62

Discouraged workers are counted as

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out of the labor force

Front 63

Business cycles are

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irregular and unpredictable

Front 64

Over the business cycle, investment spending __ consumption spending

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is more volatile than

Front 65

Okun's law is the __ relationship between real GDP and the ___

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negative, unemployment

Front 66

Most economists believe that prices are

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flexible in the long run but many are sticky in the short run

Front 67

In the long run, the level of output is determined by

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amoutns of capital and labor and available technology

Front 68

The natural level of output is

Back 68

the level of output at which unemployment is at its natural level

Front 69

The short run refers to a period

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during which prices are sticky and unemployment may occur

Front 70

Stabilization policy

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aims at keeping output and unemployment at their natural rates

Front 71

In the short run and adverse supplly shock causes

Back 71

prices to rise and output to fall

Front 72

When firms experience unplanned inventory accumulation, they typically would:

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lay off workers and reduce production

Front 73

A short-run expansionary fiscal policy funded by increased debt is expected to___ real GDP in the short-run and result in ___ real GDP in the long-run than would have otherwise occurred.

Back 73

increase, lower

Front 74

The government-purchases multiplier indicates how much __ change(s) in response to a change in government purchases.

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income

Front 75

The simple investment function shows that investment ___ as ___ increases

Back 75

decreases, interest rate

Front 76

The IS curve shifts when all of the following economic variable change except:

Back 76

the interest rate

Front 77

The theory of liquidity preferences implies that

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as the interest rate rises, the demand for real balances will fall

Front 78

An increase in the real money supply, other things being equal, will shift the LM curve

Back 78

downward and to the right

Front 79

In the IS-LM model when taxation increases, the change in short-run equilibrium in the usual cases restults in the interest rate ___ and output ___.

Back 79

falling, falling

Front 80

The spending hypothesis suggest that the great depression was caused by a

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leftward shift int he IS curve.

Front 81

A liquidity trap occurs when

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interest rates fall so low that standard monetary policy is no longer effective

Front 82

Inflation inertia refers to the idea that inflation

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tends to continue unless something acts to stop it.

Front 83

The Phillips curve analysis describe in chapter 13 implies that there is a negative trade-off between inflation and unemployment

Back 83

in the short run only

Front 84

Expansions can end because of all of the following except

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long length of the expansion

Front 85

Coincident indicators of economic activity include all except

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S&P stock index

Front 86

In the current situation, the decline in real household wealth can be viewed as contributint to

Back 86

a leftward shift in the IS curve

Front 87

The Phillips Curve states that the inflation rate depends on all of the following except

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the saving rate

Front 88

A two-consecutive-quarter in real GDP

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may or may not occur during a recession

Front 89

The official definition of the Great Depression

Back 89

does not exist

Front 90

The marginal tax rates for the top income bracket are

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proposed by the Obama administration to increase in 2011 to 39.6 percent from 35 percent currently.

Front 91

"Finaical intermendiation" refers to

Back 91

the process of transferring funds from savers to borrowers and investors

Front 92

TARP stands for

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Troubled asset relief program

Front 93

The American Recovery and Reinvestment Act (ARRA) is

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a classic expample of expansionary fiscal policy

Front 94

If the Fed accomodates an adverse supply shock, outpu falls __ and prices rise __

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less, more