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144 Cards in this Set

  • Front
  • Back
The smaller the amount income saved out of a change in disposable income, the
larger the MPC.
A decrease in wealth ________ consumption expenditure and ________.
decreases; shifts the consumption function downward
According to John Maynard Keynes,
effective demand determines real GDP.
The expenditure multiplier equals 5 and there is a $3 million increase in investment.
Equilibrium expenditure
increases by $15 million
An increase in the marginal tax rate
decreases the expenditure multiplier but cannot make it negative.
The federal budget is defined as
an annual statement of expenditures and tax revenues of the U.S. government.
The national debt is the amount
of debt outstanding that arises from past budget deficits.
The supply-side effects show that a tax cut on labor income ________ employment and _______ potential GDP.
increases; increases
Discretionary fiscal policy is defined as fiscal policy
initiated by an act of Congress.
If government expenditures on goods and services increases by $20 billion, then aggregate demand
increases by more than $20 billion.
If the economy is in an equilibrium with real GDP less than potential GDP, discretionary fiscal policy could move the economy toward potential GDP by simultaneously ________ taxes and ________ government expenditures on goods and services.
cutting; increasing
An example of automatic fiscal policy is
expenditure for unemployment compensation increasing as economic growth slows.
President Reagan often stated he preferred supply side policies. Which of the following federal government policies would be considered supply side?
i. decrease the quantity of money
ii. lower taxes
iii. more government spending
ii only
The business cycle is defined as
irregular ups and downs in production and jobs.
How long must a downturn in real GDP last before it is considered a recession?
six months
The U.S. economy is experiencing rising output, rising employment, rising incomes and falling unemployment. These conditions best describe a business cycle ________.
expansion
The turning point that reflects the end of an expansion is a
peak.
A fall in the money wage rate ________ aggregate supply and ________.
increases; shifts the AS curve rightward
A technological advance ________ potential GDP, ________ aggregate supply, and shifts the
aggregate supply curve ________.
increases; increases; rightward
The aggregate demand curve shifts when any of the following factors change EXCEPT
the price level.
If taxes are cut, there is
an increase in aggregate demand and the AD curve shifts rightward.
To change the federal funds rate, the Fed
uses open market operations to change the quantity of money.
If the Fed raises the federal funds rate, eventually the
AD curve shifts leftward, decreasing real GDP and the price level.
Milton Friedmanʹs fixed-money rule says to set the rate of growth of the quantity of money equal to
the rate of growth of potential GDP.
If the Fed is concerned about a possible recession, it ________ the federal funds rate, which ________ the quantity of money and ________ the amount of bank loans.
lowers; increases; increases
If the federal government has a budget deficit, then it is definitely the case that
government expenditures exceed tax receipts.
The Laffer curve shows
that higher tax rates eventually lead to decreases in the amount of tax revenue.
Because of the existence of the aggregate demand multiplier, a $10 billion change in
expenditure
shifts the aggregate demand curve by more than $10 billion.
If the economy is at macroeconomic equilibrium, then real GDP
might be equal to, greater than, or less than potential GDP
Which of the following is not a part of aggregate expenditure?
taxes
Aggregate expenditure is equal to
C + I + G + NX.
The consumption function shows the relationship between
consumption expenditure and disposable income.
The marginal propensity to consume equals
the change in consumption expenditure divided by the change in disposable income.
The federal funds rate is
the interest rate banks charge each other on overnight loans.
Control of monetary policy rests with
the Federal Reserve.
Tariffs.
is a tax on imports
The most restrictive form of international trade is
tariff
Buying a good produced outside the U.S.
increases the demand for the other country’s currency
When a citizen of Japan buys a good produced in the U.S. it
increases the Qd of U.S. dollars
Which of the following people would be classified as employed?
Rich, who is working 20 hours a week but wants a full-time job
Suppose Andy is laid off from the automobile plant because of slow automobile sales. Andy is looking for a new job. Andy is considered
a job loser.
The total U.S. labor force participation rate increased since 1967 because
the female labor force participation rate increased.
Cyclical unemployment is
created by a recession.
A person is considered unemployed if the person
does not have a job and is going to start looking next week.
Unemployment most likely lasts the longest when it is
structural unemployment
discouraged worker is
not part of the official unemployment rate
Roger has decided that the he does not like San Diego and has decided to quit his job as a college professor to look for a job in Riverside. Roger’s unemployment as he searches for a new job is best classified as
frictional.
Money is best defined as
anything accepted as a means of payment.
When money is used to compare the relative price of a burrito and a taco, money is being
used as a
unit of account.
When we keep part of our wealth in a bank account, we are using money as a
store of value.
Checkable deposits are money because
they can be converted into currency on demand and are used directly as a means of payment.
M1 is composed of
currency held by individuals and businesses, travelerʹs checks, and checkable deposits
owned by individuals and businesses.
Checkable deposits are money because
they can be converted into currency on demand and are used directly as a means of payment.
When a commercial bank receives a deposit, it must keep part of the deposit as cash reserves to satisfy its
required reserves.
M1 is composed of
currency held by individuals and businesses, travelerʹs checks, and checkable deposits
owned by individuals and businesses.
New money is created in the U.S. economy by
banks that create checkable deposits.
When a commercial bank receives a deposit, it must keep part of the deposit as cash reserves to satisfy its
required reserves.
When the Fed ________ securities in an open market operation, banksʹ reserves ________ and therefore lending may ________.
buys; increase; increases
New money is created in the U.S. economy by
banks that create checkable deposits.
When the Fed ________ securities in an open market operation, banksʹ reserves ________ and therefore lending may ________.
buys; increase; increases
The quantity of money demanded is
the money that people choose to hold.
The quantity of money demanded is
the money that people choose to hold.
The opportunity cost of holding money is the
nominal interest rate.
The opportunity cost of holding money is the
nominal interest rate.
When the Fed changes the quantity of money, the most immediate effect is on
the nominal interest rate.
When the Fed changes the quantity of money, the most immediate effect is on
the nominal interest rate.
The speed with which a dollar circulates as people use it to buy a good or service is called
velocity of circulation.
The speed with which a dollar circulates as people use it to buy a good or service is called
velocity of circulation.
The quantity theory of money is a proposition about the
relationship between a change in the quantity of money and the price level.
The quantity theory of money is a proposition about the
relationship between a change in the quantity of money and the price level.
Other things remaining the same, if the quantity of money increases by a given percentage,
then in the long run the ________ by the same percentage.
price level rises
If the price level increases, the
demand for money decreases.
The task of identifying and dating business cycle phases and turning points is performed by
a private organization, the National Bureau of Economic Research.
A business cycle has two phases, called
expansion and contraction
A business cycle has two turning points, called a
peak and a trough.
In order to be classified as a recession, a contraction of general economic activity must last at
least
six months.
The growth rate of GDP from 2009 to 2010 is:
[(GDP 2010 – GDP 2009)/ GDP 2009]
The % of growth due to productivity growth is approximately:
50%.
In the classical growth theory:
population increases at a geometric rate and output increases at an arithmetic rate.
. Per-capita growth of GDP is calculated as:
GDP growth – population growth
In the equation of exchange:
a. V=PT/M
b. P=MV/T
c. M=PT/V
d. all of the above are correct.
Which is most likely true when the economy is at its trough
a. leading indicators are rising
b. lagging indicators are falling
c. coincident indicators are at their low point (trough)
d. all of the above are correct.
When the economy is at its peak
coincident indicators are at their highest value
In the equation of exchange:
a. V=PT/M
b. P=MV/T
c. M=PT/V
d. all of the above are correct.
What is the central bank of the United States?
The Federal Reserve System.
Which is most likely true when the economy is at its trough
a. leading indicators are rising
b. lagging indicators are falling
c. coincident indicators are at their low point (trough)
d. all of the above are correct.
Conducting the nationʹs monetary policy is the duty of the
Federal Reserve System.
When the economy is at its peak
coincident indicators are at their highest value
Which of the following is a tool the Federal Reserve System can use to regulate the quantity of money?
i. changing the discount rate
ii. conducting open market operations
iii. changing the required reserve ratio
i, ii, and iii
What is the central bank of the United States?
The Federal Reserve System.
Which is correct
a. a single bank can make loans = to their excess reserves
b. the banking system can create loans = 1/RR
c. a single bank can make loans = to their excess reserves but they are not required to do so.
d. all of the above are correct.
Conducting the nationʹs monetary policy is the duty of the
Federal Reserve System.
The collapse of the hosing market in the U.S.:
a. was due to bad decisions of some home buyers
b. was due to bad decisions of members of Congress
c. was due to bad decisions of financial institutions (banks, etc)
d. all of the above are correct.
Which of the following is a tool the Federal Reserve System can use to regulate the quantity of money?
i. changing the discount rate
ii. conducting open market operations
iii. changing the required reserve ratio
i, ii, and iii
The required reserve ratio is 10 percent and Beth deposits $1,000 in her checking account. Beth’s bank must
increase required reserves by $100 and can lend $900.
Which is correct
a. a single bank can make loans = to their excess reserves
b. the banking system can create loans = 1/RR
c. a single bank can make loans = to their excess reserves but they are not required to do so.
d. all of the above are correct.
An opportunity cost is
the benefits of the highest-valued foregone alternative
The collapse of the hosing market in the U.S.:
a. was due to bad decisions of some home buyers
b. was due to bad decisions of members of Congress
c. was due to bad decisions of financial institutions (banks, etc)
d. all of the above are correct.
The required reserve ratio is 10 percent and Beth deposits $1,000 in her checking account. Beth’s bank must
increase required reserves by $100 and can lend $900.
An opportunity cost is
the benefits of the highest-valued foregone alternative
Which of the following is the best example of ceteris paribus?
holding the price of substitute goods constant while allowing price and Qd to change
Which of the following best describes microeconomics?
It studies the choices that individuals and businesses make when coping with scarcity.
Which of the following is a normative statement?
An increase in college tuition is not fair to students.
Investment refers to
money spent by business on capital goods
Of the following, the federal governmentʹs largest source of revenue is the
personal income tax.
Of the following, state governments collect the most tax revenue from
sales tax.
The U.S. population is roughly ________ percent of the world population.
5
The negative slope of the production possibilities frontier represents the idea
of tradeoffs, that in order to produce more of one good, the nation must produce less of another.
Which of the following is the best example of ceteris paribus?
holding the price of substitute goods constant while allowing price and Qd to change
Production efficiency is represented by ________ a production possibilities frontier.
all points on
Which of the following best describes microeconomics?
It studies the choices that individuals and businesses make when coping with scarcity.
The law of demand states that
as the price of a good rises, consumers decrease the quantity they demand, ceteris paribus.
Which of the following is a normative statement?
An increase in college tuition is not fair to students.
Investment refers to
money spent by business on capital goods
Of the following, the federal governmentʹs largest source of revenue is the
personal income tax.
Of the following, state governments collect the most tax revenue from
sales tax.
The U.S. population is roughly ________ percent of the world population.
5
The negative slope of the production possibilities frontier represents the idea
of tradeoffs, that in order to produce more of one good, the nation must produce less of another.
Production efficiency is represented by ________ a production possibilities frontier.
all points on
The law of demand states that
as the price of a good rises, consumers decrease the quantity they demand, ceteris paribus.
Consumers eat salsa with taco chips. The price of salsa rises. How does the increase in the price of salsa affect the demand for taco chips?
It decreases the demand for taco chips.
An increase in the number of movie theatres results in
a rightward shift in the supply curve of movie theatres
If supply and demand both decrease, Pe ____ and Qe ____.
might change, but the change is ambiguous; decreases
f both producers and consumers believe that a productʹs price will fall in the future, then at the present, the equilibrium price
falls
People consume more hot dogs SOUP as temperatures falls. So, as cold weather approaches,
the demand for soup increases.
If income falls but technology improves:
Pe will fall and Qe may rise, fall, or stay the same
GNationalP includes the goods and services produced
by a country’s citizens anyway in the world
The following are all intermediate goods except
a color TV bought by you
Gross Domestic Product equals
Y = C + I + G + (X-M)
The purchase of the financial assets, such as stocks and bonds, is not included in GDP because
they donʹt represent the production of goods or services.
Real GDP is GDP
after adjusting for any price changes.
The CPI is a measure of the
average prices paid by consumers for a fixed basket of goods and services.
Suppose a report from the Bureau of Labor Statistics states that the CPI for the year 2009 was 215. What is the percentage point increase in the prices of the goods and services since the reference base period? (215-100=115)
115%
Real GDP is GDP
after adjusting for any price changes.
The more money an average household spends on one specific type of good or service per month, the
larger the relative importance of that item in the CPI market basket.
The CPI is a measure of the
average prices paid by consumers for a fixed basket of goods and services.
The formula for the CPI is 100 times
(Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at base period prices).
Suppose a report from the Bureau of Labor Statistics states that the CPI for the year 2009 was 215. What is the percentage point increase in the prices of the goods and services since the reference base period? (215-100=115)
115%
Suppose the CPI for the year 2009 is 200. This number means that
prices rose 100 percent over the last year.
The more money an average household spends on one specific type of good or service per month, the
larger the relative importance of that item in the CPI market basket.
The inflation rate is the
percentage change in the price level from one year to the next year.
The formula for the CPI is 100 times
(Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at base period prices).
Suppose the CPI for the year 2009 is 200. This number means that
prices rose 100 percent over the last year.
The inflation rate is the
percentage change in the price level from one year to the next year.