ECON 209 Chapter Notes - Chapter 24: Demand Shock, Structural Unemployment, Full Employment
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30 Mar 2013
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Macroeconomics is the study of how the economy behaves as a whole: It is concerned with the determination of economic aggregates: e. g. total exports, total price investment, etc. This is called the nominal national income (measured in current dollars) Real national income is measured in constant (base- period) dollars; it only changes when quantities of goods produced change. Real national income is used to measure the changes between economies year after year. Business cycle: fluctuations of national income (usually measured as. Gdp) around its trend value that follow a more or less wavelike pattern. Potential/full-employment output (y*): the real gdp that an economy would produce if its productive resources were employed at their normal levels of utilization (also called potential gdp) Output gap (y-y*): measures the difference between the actual and potential outputs. Recessionary gap (yy*): a situation in which output exceeds potential output.
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| 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. 1982â1984 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 |
| Annual Growth Rates of Real GDP Per Capita (in percents) | |||||||||||||
| Ending | |||||||||||||
| 1929 | |||||||||||||
| 1933 | -8.2 | ||||||||||||
| 1939 | 0.2 | ||||||||||||
| 1940 | 0.9 | ||||||||||||
| 1945 | 3.7 | 10.3 | |||||||||||
| 1950 | 2.4 | 4.1 | -1.8 | ||||||||||
| 1955 | 2.4 | 3.6 | 0.4 | 2.7 | |||||||||
| 1960 | 2.2 | 2.9 | 0.6 | 1.7 | 0.8 | ||||||||
| 1965 | 2.4 | 3.0 | 1.3 | 2.3 | 2.1 | 3.5 | |||||||
| 1970 | 2.3 | 2.9 | 1.5 | 2.3 | 2.2 | 2.9 | 2.3 | ||||||
| 1975 | 2.3 | 2.7 | 1.5 | 2.2 | 2.0 | 2.4 | 2.0 | 1.6 | |||||
| 1980 | 2.3 | 2.7 | 1.7 | 2.2 | 2.1 | 2.5 | 2.2 | 2.1 | 2.6 | ||||
| 1985 | 2.3 | 2.6 | 1.7 | 2.2 | 2.2 | 2.4 | 2.2 | 2.1 | 2.4 | 2.2 | |||
| 1990 | 2.3 | 2.6 | 1.8 | 2.2 | 2.2 | 2.4 | 2.2 | 2.2 | 2.4 | 2.2 | 2.3 | ||
| 1995 | 2.2 | 2.5 | 1.7 | 2.1 | 2.1 | 2.3 | 2.1 | 2.0 | 2.1 | 1.9 | 1.8 | 1.3 | |
| 2001 | 2.3 | 2.5 | 1.9 | 2.2 | 2.2 | 2.3 | 2.2 | 2.2 | 2.3 | 2.2 | 2.2 | 2.1 | 2.8 |
| 1929 | 1940 | 1945 | 1950 | 1955 | 1960 | 1965 | 1970 | 1975 | 1980 | 1985 | 1990 | 1995 | |
| Starting Year | |||||||||||||
Source: Economic Report of the President, various years.
This table keeps changes in real GDP from being overstated by adjusting for
Select one:
a. productivity.
b. inflation.
c. standard of living.
d. population growth.
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| Per Capita GDP | |
| Luxembourg | $33,609 |
| United States | $33,586 |
| Switzerland | $27,126 |
| Japan | $23,311 |
| Iceland | $23,230 |
Economists use numbers such as those in the table as a measure of
Select one:
a. net exports.
b. total dollar value of all final goods and services.
c. national income.
d. standard of living.
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| Per Capita GDP | |
| Luxembourg | $33,609 |
| United States | $33,586 |
| Switzerland | $27,126 |
| Japan | $23,311 |
| Iceland | $23,230 |
The numbers in this table were calculated by
Select one:
a. multiplying GDP by total population.
b. dividing GDP by total population.
c. adding the dollar value of all final goods and services produced in the nation.
d. subtracting net exports from GDP.
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| A key gauge of future U.S. economic activity declined 0.5% last month, as the Sept. 11 terrorist attacks in New York and Washington weakened an already troubled economy. The Conference Board said Monday its index of leading economic indicators fell to 109.2 in September,...the largest one-month decline since January 1996.... The index indicates where the overall U.S. economy is headed in the next three to six months.... The economy had been struggling for several months before the Sept. 11 attacks. Many economists have said they believe that a recession is unavoidable with the new uncertainties raised by the disaster. Source: âLeading Indicators Decline,â USAToday.com, October 22, 2001. |
The passage discusses a business fluctuation influenced by
Select one:
a. external shock.
b. monetary factors.
c. innovation.
d. capital expenditures.
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| For all the recent talk of cutting taxes, Congress rarely cuts them when the economy is growing robustly, as it is now, and unemployment is low. The worry among economists is that the extra money in peopleâs pockets may make an already strong economy too strong, finally stoking inflation after a long period of relatively stable prices.
|
The passage describes rising inflation as a possible result of
Select one:
a. a booming economy.
b. rising unemployment.
c. tax cuts.
d. a prolonged period of stable prices.