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EC140 Study Guide - Final Guide: Interbank, Consumer Confidence, Demand Curve

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8 Dec 2017
School
WLU
Department
Economics
Course
EC140
Professor
Christos Shiamptanis

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EC140 Full Course Notes
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EC140 Full Course Notes
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Document Summary

Ch 19 what macroeconomics is all about. Microeconomics: the study of the decisions of individuals, households, and firms, and how they interact in an economy. Macroeconomics: the study of aggregated economic outcomes such as inflation, unemployment, or economic growth. Most comprehensive measure of a nation"s level of economic activity: value of total production of goods and service, national product, output, national income. Nominal national income: measured in current dollars. Real national income: measured in constant (base-period) dollars: changes only when quantities change. Actual gdp: output the economy actually produces. Potential gdp: output the economy would have produced if all resources were fully employed. Recession: fall in the real gdp: from peak to trough. Recovery (expansion): from a trough to peak. Output gap: measures the difference between potential output (y*) and actual output (y: output gap = y y* Recessionary gap: when actual output is less than potential output (y < y*)

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Related Questions

What is the market for factors of production?

  1. What is the market for factors of production?

    1. The market for factors of production is where households and firms interact to trade factors of production for factor payments. For example this is where people provide firms with labor and firms pay them with wages. 

  2. What is the money market?

    1. The money market is where households, firms, and the government may save and/or invest their money to earn interests. Money market includes banks, stock market, bonds market, and other financial institutions where economic actors can buy and sell financial assets to earn interests and/or dividends.

  3. Who are the three economic actors in the circular flow model?

    1. In a circular flow model, the three main economic actors are the households, firms, and the government. Households include the typical individual consumers. Firms include businesses and similar producers in the economy. Finally, the government refers to the whole government system from federal to local level.

  4. How is the national income of an economy determined?

    1. The national income of an economy is determined by measuring the total value of the output produced in an economy or the total income earned by the actors in the economy. In a circular flow model, we can see that the value of total output produced should equal the total value of income generated and earned in the economy. This is because every dollar spent by someone in the economy is received by another person in the economy as income.

  5. What is GDP?

    1. The gross domestic product or GDP represents the sum total of the value of the final goods and services produced within the economy for a given year. It is the most commonly used measure of its economy’s productivity and income.

1. An economic system is

a. a set of institutional arrangements used to allocate scarce resources.

b. the movement of capital between countries.

c. how wealth is distributed and created in a country.

d. the natural resource available.

e. none of the above.

 

2. Contemporary economic change in Eastern Europe was preceded by

a. declining economic performance.

b. political change.

c. the withdrawal of Soviet backing.

d. all of the above.

 

3. Prior to the onset of economic reform in the late 1980s, the Soviet Union and most Eastern European countries allocated resources primarily by means of

a. Markets.

b. national economic plans.

c. neither a nor b.

d. both a and b.

 

4. Prices in the planned socialist systems were generally set by

a. supply and demand forces in the market.

b. the state.

c. external forces through international trade.

d. none of the above.

 

5. A major political change in the former planned socialist economies has been

a. the end of the political domination of Communist regimes.

b. the strengthening of the Communist regimes in combination with economic decentralization.

c. the full implementation of Western-style democracy.

d. all of the above.

 

6. The modern approach to defining economic systems

a. is based on the ”isms” of capitalism and socialism.

b. emphasizes resource allocation arrangements over incentive systems.

c. defines economic systems according to a number of characteristics.

d. states that defining economic systems is impossible.

e. none of the above.

 

7. The major attributes of an economic system are

a. its population and capital resources.

b. its level of GDP.

c. its level of GDP per capita.

d. its economic policies.

e. none of the above.

 

8. One very important characteristic of organizations in the comparing of economic systems is

a. the nature of economies of scale.

b. whether they exhibit capitalism or socialism.

c. the use of computers in the organization.

d. the level of centralization or decentralization of decisions.

e. none of the above.

 

9. A planned economy is one in which

a. subunits are coordinated by directives formulated by a superior agency.

b. subunits are not induced by appropriate incentives to carry out plan directives.

c. market allocation is combined with planned allocation.

d. a ministerial system prevails.

e. none of the above.

 

10. Ownership rights may affect economic outcomes because

a. public and private owners may have different time preferences.

b. public ownership may mean more attention to social rates of return.

c. the distribution of income is affected by ownership arrangements.

d. answers a and b are correct. e. answers a, b, and c are correct.

 

11. Which of the following would not be classified as an economic-environmental factor?

a. Natural resource endowments

b. The size of the economy

c. The nature of decision-making arrangements

d. The economy’s per capita income

e. The economy’s labor force

 

12. If one finds that the planned socialist economies all have higher growth rates than capitalist countries, this shows that

a. planned socialism necessarily produces higher growth than capitalism.

b. planned socialism may produce higher growth than capitalism, ceteris paribus.

c. capitalism may produce higher growth than planned socialism, ceteris paribus.

d. capitalism necessarily produces higher growth than planned socialism.

e. both b and c are correct.

 

13. National priorities tend to be

a. the same for countries that have similar economic systems.

b. the same for all countries.

c. different for different countries.

d. completely unknown.

e. none of the above.

 

14. Economic growth measures

a. the increase in nominal income.

b. the increase in the volume of output on either a total or a per capita basis.

c. the growth of efficiency.

d. the growth of productivity.

e. none of the above.

 

15. A measure of economic instability is

a. the unemployment rate.

b. the inflation rate.

c. the business cycle.

d. the Lorenz curve.

e. all except d are correct.

 

16. In the real world, most economic systems are in fact

a. centralized systems.

b. mixed systems.

c. market systems.

d. planned systems.

 

17. Although economic reform is difficult to characterize with precision, reform in planned socialist systems has typically been thought of as

a. revolutionary or abrupt in character.

b. occurring gradually over time.

c. successful in most cases.

d. none of the above.

 

18. In the United States, social security transfers as a percentage of the gross national product have

a. increased.

b. decreased.

c. remained the same.

d. fluctuated but with a significant downward trend.

 

19. In the industrialized capitalist systems, taxes as a percentage of the gross national product have

a. increased.

b. decreased slightly.

c. decreased greatly.

d. remained the same.

 

20. In contemporary capitalist economic reforms, privatization means

a. expansion of private ownership of the means of production.

b. improvement of planning methods.

c. implementation of worker management.

d. none of the above.

Q1. The total resource cost of goods and services produced by the U. S. economy is known as
a. real GDP
b. personal income
c. national wealth
d. national income

Q2. The difference between GDP and final sales equals
a. depreciation
b. exports
c. imports
d. net inventory change

Q3. Current disposable income can be adjusted for price changes and population changes to yield real per capita disposable income.
a. true
b. false

Q4. If a lawn service mows your grass, it is included in the GDP.
a. true
b. false

Q5. In national income accounting, grain fed to a hog at a commercial hog farm is considered a(n)
a. final good
b. intermediate good
c. consumer good
d. capital consumption allowance

Q6. Imports constitute a minus figure in national income accounting.
a. true
b. false

Q7. The total value added in the production of a final good
a. exceeds the price of the final good
b. equals the price of the final good
c. exceeds the total payments made to owners of productive resources used in the production
d. both (b) and (c)

Q8. The GDP is reported on a monthly basis by the Department of Commerce.
a. true
b. false

Q9. Transfer payments are added to NI in the process of determining personal income.
a. true
b. false

Q10. U.S. gross domestic product is converted to U.S. gross national product by
a. adding the value of output produced by U.S.-owned resources in foreign countries
b. subtracting the value of output produced by U.S.-owned resources in foreign countries
c. subtracting the value of output produced in the United States by foreign-owned resources
d. both (a) and (c)

Q11. Final sales are always larger than the GDP.
a. true
b. false

Q12. Because of the value of things produced inside households, (building your own desk, mowing your own lawn, etc.)
a. the GDP value is automatically adjusted upward to reflect this
b. the GDP value is automatically adjusted downward to reflect this
c. Official GDP is surely smaller than true total output
d. Official GDP is surely larger than true total output

Q13. A government surplus may trigger a decline in the money supply.
a. true
b. false

Q14. Real wages are determined by multiplying money wages by the CPI.
a. true
b. false

Q15. The more volatile the inflation rate, the weaker the money supply as a standard of deferred payment.
a. true
b. false

Q16. An increase in the money supply always causes an increase in the price level.
a. true
b. false

Q17. Your nominal wages rose during the same period from $200 a week to $260. By how much did your real income rise?
a. 30 percent
b. 16.7 percent
c. 8.33 percent
d. 12 percent

Q18. In the past 10 years or so, average real wages of U.S. workers in nonagricultural industries have
a. increased about 40 percent
b. increased slightly
c. remained about the same
d. declined

Q19. If a new cash deposit creates excess reserves of $5,000 and the required reserve ratio is 10 percent, the banking system can increase the money supply by a maximum of
a. $50,000
b. $500
c. $5,000
d. $4,500

Q20. The effect of a change in the money supply on economic activity may be offset by a change in velocity.
a. true
b. false

Q21. The current base period for the CPI is
a. 1967
b. 1977
c. 1982–1984
d. 1990

Q22. In the circular flow, an increase in the money supply tends to result when
a. planned I equals planned S
b. planned I is less than planned S
c. planned I is greater than planned S
d. there is a surplus government budget

Q23. COLA is a form of indexation.
a. true
b. false

Q24. The total checkable deposits a bank may have can be determined by dividing its reserves by the reserve requirement.
a. true
b. false

Q25. The Financial Services Modernization Act
a. reinforced the Glass Steagall Act
b. prevented mergers of banks
c. eliminated barriers between banks, brokerage houses, and insurance companies
d. eliminated all banking regulations

Q26. Each Federal Reserve Bank has its own board of directors.
a. true
b. false

Q27. The most frequently used tool of U.S. monetary policy is
a. the discount rate
b. the reserve requirement
c. open-market operations
d. moral suasion

Q28. When the Fed conducts open-market operations, it primarily uses
a. Treasury bills
b. long-term U.S. government bonds
c. bonds of publicly traded corporations
d. overnight loans of major banks

Q29. The Board of Governors of the Federal Reserve System has
a. 6 members
b. 7 members
c. 1 member from each Federal Reserve Bank
d. 20 members

Q30. If the Fed desires to increase checkable deposits, it may lower the reserve requirement.
a. true
b. false

Q31. The interest rate at which banks borrow excess reserves from each other is known as the
a. prime rate
b. federal funds rate
c. discount rate
d. T-bill rate

Q32. If member banks need to borrow reserves, they must do so through the discount window.
a. true
b. false

Q33. The Fed Chairman appears before Congress semi-annually to present the Monetary Policy Report.
a. true
b. false

Q34. In terms of the total number of payments, which of the following comprises the largest share?
a. cash
b. personal checks
c. debit cards
d. credit cards

Q35. By buying government securities, the Federal Open Market Committee adds to member banks' reserves.
a. true
b. false

Q36. More than 50 percent of commercial banks in the United States belong to the Federal Reserve System.
a. true
b. false

Q37. The Federal Reserve System is built around
a. 4 regional banks
b. 6 regional banks
c. 12 district banks
d. 1 bank with several branches

Q38. The time lags lead monetarists to contend that monetary policy is counterproductive.
a. true
b. false

Q39. The marginal propensity to consume is
a. the fraction of an increase in income that would be spent on consumer goods
b. the additional desire people have for consumer goods
c. the fraction of a person's total income normally spent for consumer goods
d. the change in consumption resulting from a $1 change in the price level

Q40. The consumption function shows
a. how fast the economy is consuming its capital
b. that the amount of national income determines the rate at which the economy consumes its resources
c. that households' incomes determine how much the households will spend for consumer goods
d. the rate at which people actually use up their consumer goods

Q41. In the simple Keynesian model, if output exceeds aggregate expenditures,
a. there will be no response from businesses
b. inventories will decrease and businesses will increase output
c. inventories will increase and businesses will increase output
d. inventories will increase and businesses will decrease output

Q42. If planned construction investment increases by $30 billion and the MPC is two-thirds, total output will increase by
a. $30 billion
b. $20 billion
c. $45 billion
d. $90 billion

Q43. "A given change in business investment will cause a larger change in equilibrium output." This statement describes an important Keynesian concept called the
a. multiplier effect
b. marginal propensity to consume
c. marginal propensity to invest
d. consumption function

Q44. In the multiplier formula, 1/MPS equals the multiplier.
a. true
b. false

Q45. The classical economists held that chronic unemployment was likely.
a. true
b. false

Q46. As income increases, the absolute level of planned consumption will increase.
a. true
b. false

Q47. The new classical school contends that government fiscal policy is better than monetary policy in controlling inflation.
a. true
b. false

Q48. Higher price levels are associated with lower aggregate expenditure at every level of income.
a. true
b. false

Q49. Any time that planned leakages exceed planned injections, the economy will expand.
a. true
b. false

Q50. According to the Keynesian model, increased foreign spending for U.S. goods is likely to
a. reduce total employment in the United States
b. increase total employment in the foreign country
c. reduce total output in the United States
d. increase total output in the United States