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98 Cards in this Set

  • Front
  • Back
Economists focus on which of the following measures as an indication of a country's living standard?
GDP per person
Which of the following has contributed to the increase in real GDP in the U.S. over the past four decades?
a. Increasing female labor force participation
b. The baby boom
c. Increasing average labor productivity
d. The rising share of Americans with jobs
The increase in the standard of living in the US over the past century is the result of
a positive growth rate of output
The standard of living increases if:
productivity and the share of the population employed grow
The talents, education, training, and skills of workers are known as
human capital.
A good that is long-lasting and is used to produce other goods is called
capital good.
Getting a college degree is an example of investing in
Human capital
Mike and Tom debone chicken breasts for Ted’s chicken Co. Mike is new and can only debone 60 chicken breasts per hour, while Tom’s experience allows him to debone 120 chicken breasts per hour. Both Mike and Tom work 40 hours per week. Their average hourly productivity is:
(60+120)/2 = 90
Increasing the capital available to the workforce, holding other factors constant, tends to ______ total output at a(n) ______ rate.
increase; decreasing
Diminishing returns to capital implies that, holding labor and other inputs constant, as more capital is added, each additional unit of capital adds
less to production.
Alpha has $40000 of capital per worker, while Beta has $5000 of capital per worker. According to the principle of diminishing returns to capital, an additional unit of capital will increase output _______ in Alpha compared to Beta, holding other factors constant.
less
Which of the following is a measure that policymakers might take to raise a country's rate of economic growth?
a. Increase human capital
b. Promote saving and investment
c. Support research and development
d. Provide an appropriate political and legal framework
Most economists agree that _______is/are detrimental to economic growth.
political instability
At the time it collapsed in 1991, the Soviet Union possessed all of the factors that promote increases in economic growth EXCEPT:
a political and legal environment that promoted economic productivity.
Which of the following statement is false?
a) The main source of increase in the standard of living since the 1960’s has been the increase in labor productivity.
b) The increase in the percentage of people employed in the population has increased the standard of living since the 1960’s.
c) In the future, economists expect that labor productivity will increase.
d) In the future, economists expect that the percentage of people employed in the population will strongly increase.
e) In Europe, the standard of living is lower than the US standard of living.
In the future, economists expect that the percentage of people employed in the population will strongly increase.
Hong Kong and Singapore strong rates of economic growth illustrate that:
Land and natural resources are not a necessary condition for GDP growth
The increase in productivity growth in the second half of the 1990’s is largely due to:
The increase in investment in IT in the 1980’s (Invest ahead of time!)
The fictitious country "Alpha" has a real GDP of $18,600, a population of 30 and 20 employed workers. If a new technology is introduced that increases real GDP to $25,000, what is the increase in average labor productivity in Alpha (measured in $) as a result of the technological change?
320
The biggest barrier to growth for many of the poorest countries in the world is the need for:
improved legal and political frameworks
High rates of saving and investing in the private sector promote economic growth by
increasing physical capital
The saving rate is equal to
saving divided by income.
Wealth can be defined as
assets minus liabilities
Increases in the value of existing assets are known as
capital gains.
Saving to meet long-term objectives is called
life-cycle saving
Saving for the purpose of leaving an inheritance is called
bequest saving.
Saving to protect against unexpected setbacks is called
precautionary saving.
Middle-class families that were once content with medium-priced cars, but now feel the need to drive expensive cars to keep up with community standards illustrate which of the following effects?
Demonstration effect
If tax collections exceed government spending, there is a budget
surplus.
For the past 20 years, the saving rate of US households
a) has
has been decreasing like in most industrialized countries.
In the 1990’s, US households’ wealth has ______ because ________.
increased; of capital gains.
During the second half of the 1990’s, national savings ________ because ________.
have stabilized; government improving budget balance has offset declining households saving rate.
National savings is the sum of
households, firms and government savings
In a closed economy, national savings equals:
National income minus spending on current needs.
When the government runs a budget deficit this is equivalent to:
Negative public savings.
In a closed economy, the loanable funds market, savings _______ .
Always equals the supply for funds.
In a closed economy, an increase in government deficits ________ national savings and results in ______ interest rates and _______ investment.
Decreases; increased; decreased
The effect of ______ on _______ is called the crowding-out effect.
Deficits; investment
Technological progress ________ investment and results in ______ interest rates and _______ savings.
Increases; increased; increased
Investment growth in the US has been possible thanks to:
Flows of capital from foreign countries.
From a microeconomic point of view, low households saving is a problem because it tends to affect
Poor households who would need to constitute precautionary savings.
Since the beginning of the 2008 recession, households saving rate has_____ and government saving rate has_______.
Increased; decreased
Over the past 200 years, the main causes of the increase in debt as a percentage of GDP have been:
wars and economic recessions
During the second world war the ratio debt/GDP was:
larger than the current debt/GDP ratio
The 2009 Congressional Budget Office study finds that the deterioration of deficits since 2001 is essentially due to:
the great recession and policies enacted by president Bush
The main sources of the increase in the debt/GDP ratio in the future are:
Medicare and social security
Learning from the great depression and the Japanese slump, we should:
b) maintain targeted stimulus when the economy is weak
c) cautiously and progressively reduce structural deficits
Money refers to
assets that can be used to make purchases.
When you use money as a basic yardstick for measuring economic value, it is serving which function?
unit of account
When you use money to buy lunch, it is serving which function of money?
medium of exchange
When you keep a $10 bill in your piggy bank and it is still worth $10 a year later, your money has served which function?
store of value
Cash or similar assets held by banks for the purpose of meeting depositor withdrawals and payments are knows as
bank reserves.
Which of the following the most frequent tool used by the Fed to use to control the money supply?
open market purchases
An episode in which depositors rush to withdraw their deposits from the banking system is called a bank
panic
Which of the following was instituted to prevent depositors from rushing to withdraw their deposits from fear that their bank will go bankrupt?
Deposit insurance
M2 includes M1 as well as:
Less liquid assets
Currency is ______ the M1 measure of money and ________ the M2 measure of money.
included in; included in
In Econland, the public does not hold any currency . There is a $5,000,000 initial deposit in a commercial bank. If the banks' reserve/deposit ratio is 10%, the money supply in Econland equals:
$50,000,000

(5,000,000/10%)
In Macroland there is $1,000,000 in currency that can either be partially held by the public or used by banks as reserves. Assuming the public continues to hold the same amount of currency, if banks' reserve/deposit ratio increases from 10% to 15%, the money supply in Macroland will ______.
decrease.
In Macroland, suppose that the public holds 200,000 in currency and the initial deposit is 800, 000.
Assuming the public continues to hold the same amount of currency, if banks' reserve/deposit ratio is 20%, the Final consolidated balance sheet of commercial banks show that commercial banks have lent a total amount equal to:
3,200,000

Total deposits=800000/20%=4000000
Total reserves=800000
Total loans=3200000
In Macroland, suppose that the public holds 200,000 in currency and the initial deposit is 800, 000.
Assume the public continues to hold the same amount of currency and the banks' reserve/deposit ratio is 20%.
The total amount of money in Macroland is:
4,200,000

(200000+800000/20%)
In Macroland, suppose that the public holds 200,000 in currency and the initial deposit is 800, 000.
Assume the public continues to hold the same amount of currency and the banks' reserve/deposit ratio is 20%.
Suppose the Fed conducts an open market purchase for 200,000, the total amount of money in Macroland after the open market purchase is:
5,200,000

money creation due to the open market operation: 200000/20%=1000000. This adds up to the 4200000 already in the economy.
Suppose the Fed conducts an open market sale for 200,000, the total amount of reserves in commercial banks in Macroland after the open market sale is:
600,000

(800000-200000)
In the recent past, the Fed has tried to increase liquidity in credit markets by:
purchasing risky assets from commercial banks
The Federal Open Market Committee makes decisions about ____ policy.
monetary
According to the quantity equation if velocity and real GDP are constant and the Federal Reserve increases the money supply by 5 percent, then the price level:
increases by 5 percent
If velocity is constant, real GDP growth is 2% and the growth rate of money is 7%, then according to the quantity equation, inflation is:
5%
The credit market meltdown is related to
a) Wrong rating of mortgage-backed asset securities.
b) Weak oversight and regulation by Government Sponsored Agencies.
The credit market meltdown describes
a) the difficulty faced by banks to find liquidities in the market through securitization.
b) the decline in the market value of banks' assets and their resulting bankruptcies .
c) the credit crunch experienced by potential borrowers.
Bond prices and interest rates are
inversely related.
A regular payment made to a partial owner of a firm is called a(n)
equity.
A legal promise to repay a debt, including both the principal amount and regular interest payments describes a
bond
Spreading wealth over a variety of different financial investments to reduce overall risk is known as
diversification
The value of a stock is _________ related to expected dividend payments and ________ related to the market interest rate
positively; negatively
High rates of saving and investing in the private sector promote economic growth by
increasing physical capital
At the begining of 1998 - Smith's wealth was $100,000 - they don't save anything that year. experience housing ,arket gains equal to $40,000 what was their wealth @ end of 1998?
140,000
in 1990's, US households' wealth has __________ because __________ .
increased; of capital gains
The saving rate of american households is currently about:
5%
Durring the second half of the 1990s, national savings _______ because_______.
have increased; the government has run a surplus
In a closed economy, and increase in government deficits _____ national savings and results in _______ interest rates and _______ investments.
decreased; increased; decreased
The effect of _____ on ______ is called the crowding-out effect.
deficits; investments
In a closed economy, technological progress results in ______ national savings results in _____ interest rates and ______ investment.
Increases; Increased; Increased
What does monetary policy consist of?
Controlling money supply
Cash or similar assets held by banks for the purpose of meeting depositor withdrawals and payments are known as
bank reserves
Public holds: 300,000
Initial Deposit: 60,000
deposit ratio: 10%
total amount of money in the economy:
60,000/.10 = 600,000
600,000+300,000 = 900,000
Public holds: 300,000
Initial Deposit: 60,000
deposit ratio: 10%
Total Reserves:
reserves = initial deposits
60,000
Public holds: 300,000
Initial Deposit: 60,000
deposit ratio: 10%
Open Market Purchase: 50,000
total reserves:
110,000
Public holds: 300,000
Initial Deposit: 60,000
deposit ratio: 10%
Open Market Purchase: 50,000
total amount of money in the economy:
1,400,000
An Open Market Sales:
1. Decreases the sum of reserves held by commercial banks
2. Decreases the sum of the deposits held by commercial banks
3. Decreases the amount of money in the economy
Quantity theory of money:
supposing constant velocity, if output grows at 2%/year, the growth rate of money is 5%, then inflation is:
M+V=P+Y
5%=P+2%
inflation = 3%
Quantitative easing is
the Fed buying long term government bonds with newly created money
The article "The Central Banks" from the economist, refers to the fact that public confidence in central banks has decreased because:
1. of their limited success in the face of the great recession
2. quantitative easing is unpopular due to the risk of inflation
3. of their inability to regulate financial markets prior to the credit crisis
article "The shift away from thrift" from 1980s-2005:
households saving has tend to decrease in industrialized countries and has been high in Asia
Article "The productivity gap between Europe and the US: Trends and Causes" slower productivity growth in Europe is due to :
slower productivity growth in market services
Quantitative easing is
the Fed buying long term government bonds with newly created money
The article "The Central Banks" from the economist, refers to the fact that public confidence in central banks has decreased because:
1. of their limited success in the face of the great recession
2. quantitative easing is unpopular due to the risk of inflation
3. of their inability to regulate financial markets prior to the credit crisis
article "The shift away from thrift" from 1980s-2005:
households saving has tend to decrease in industrialized countries and has been high in Asia
Article "The productivity gap between Europe and the US: Trends and Causes" slower productivity growth in Europe is due to :
slower productivity growth in market services
article "the great illusion" up to the recession of 2008, spending in the US is increasingly driven by:
higher asset values rather than higher incomes