ASSIGNMENT5BDuebeforeClassonMonday2/26
DOTHEFOLLOWINGBEFORECLASSONMONDAY:
1.watchtheTWOvideoclips
2.readthenewsheadlinesbelow
3.readtheexplanationsofhw5questionsthatlotsofpeoplegotwrong
4.reviewthebigQUESTIONSFROMAssignment5
5.DoHW5bwhichwilltestyouonalloftheabove.
1.a.WatchthevideocliponKeynes,andsingalong(justabit)http://www.youtube.com/watch?v=Fwc5sorFE
b.gotothiswebpagedealingwithHowtheGovernmentDealtWithPastRecessions,andclickonandlistentothe
1960recessionANDthe198082recession(s)
http://www.nytimes.com/interactive/2009/01/26/business/economy/20090126-recessions-graphic.html
What was unusual about the policy in the 1960 recession?
What caused the 1980-82 recession(s)? What ended them?
2.Readallofthefollowing:
Recent job posting (names changed to protect the innocent)
Portfolio Analytics & Reporting Analyst Position
Summary:
xxx represents over $80 billion in assets under management, and over 200 professionals across offices in New York,
London, San Francisco, Tokyo, Hong Kong and Bangalore. The AIMS businesses include xxxx Investors in the xxx funds
include corporate pensions, public pensions, financial institutions, endowments, foundations, individuals, as well as xxx
and its employees. The Investment Teams, along with the Research & Risk Management teams, are responsible for
sourcing, evaluating, and investing in external public market, hedge fund and private equity managers. The teams also
acquire portfolios of private equity assets in the secondary market, and source, value, and structure direct co-investment
opportunities across the various investment strategies. Across each business, the teams focus extensively on portfolio
construction, monitoring and risk management.
The xxx Group is seeking to add an Analyst to its Portfolio Analytics & Reporting team (xxx xxx). xxx is responsible for
quantitative analysis of the underlying portfolios, performance monitoring, client reporting, oversight of business
infrastructure, and new product implementation. The team works closely with other areas of the firm including the
investment managers, product management, client services, fund accounting/controllers, operations and technology.
Qualifications:
-Highly motivated and enthusiastic individual
-Strong analytical, communication and interpersonal skills
-Team player
-Detail oriented and meticulous
-Strong Excel skills and adaptability to other software products
-Highly organized and able to manage multiple tasks in a fast-paced environment
1.
What are they looking for what skills, major, etc.
2.
How do you demonstrate you have this?
3.
Dow7,555.63+3.03+0.04%
Nasdaq1,467.97-2.69-0.18%
S&P 500788.42-0.75-0.10%
How is the stock market doing? Why?
How Will Obama's Housing Plan Work?
CBS News - 37 minutes ago
President Obama announced a $75 billion plan on Wednesday that he said would help as many as 9 million Americans avoid
foreclosure.
The Obama administration's plan has three main elements:
the effort to help homeowners refinance, particularly when the value of their mortgages nears or exceeds the current value of
their homes;
a $75 billion initiative to modify loans to make payments more affordable for as many as four million borrowers whose
interest rates have skyrocketed or whose incomes have fallen;
and broader steps aimed at driving down mortgage rates.
Fed Offers Bleak Economic Outlook
New York Times - 2 hours ago
The Fed chairman, Ben S. Bernanke, spoke at the National Press Club in Washington on Wednesday. By JACK HEALY The Federal
Reserve cut its economic outlook for 2009 on Wednesday and warned that the United States economy would face an unusually
gradual ...
The Fed expects GDP to contract by up to 1.3% this year. Bernanke pledged to do "everything possible" to restore stability and get the
U.S. out of recession.
the Fed's latest projections show the FOMC expects unemployment this year could rise as high as 8.8%, higher than its October
projection of 7.1% to 7.6%. January's unemployment rate hit 7.6%, according to Labor Department.
Under the Fed's forecasts, unemployment rates would fall to between 8% and 8.3% in 2010 and to between 6.7% and 7.5% in 2011,
according to the projections, which are higher than the Fed's October estimates. Unemployment on a longer-term basis is expected to
hit between 4.8% and 5%.
Economy slows down; inventory piles up
We certainly have a higher inventory than we would like, said John Thalenfeld, president of the Wilkes-Barre manufacturing
company that makes display hooks, shelving products and fixtures for retail stores. Thats cash to us sitting in a warehouse.
Earlier this month, Trion laid off 35 people 10 percent of its work force as inventories soared 15 percent above demand, Mr.
Thalenfeld said. Retail sales declined in six of the last seven months and merchandisers scrapped plans for store renovations and
expansions. That left manufacturers like Trion with idle heaps of products.
Excess inventories pose problems for some manufacturers struggling to balance production and stock volumes in the economic rut.
Some are laying off workers as orders slump.
3.Lookattheexplanationsforthehw5questionsbelowandmakesureyouunderstandthem.
Exam
Name___________________________________
1) consumptionfunctionshowsa
A
A) egative(inverse)relationshipbetweenconsumptionexpenditureand
n
disposableincome.
B) ositive(direct)relationshipbetweenconsumptionexpenditureandprice
p
level.
C) egative(inverse)relationshipbetweenconsumptionexpenditureandsaving.
n
D) ositive(direct)relationshipbetweenconsumptionexpenditureand
p
disposableincome.
2) isposableincomeis
D
A) ncomeminustaxesplustransferpayments.
i
B) ncomeplustransferpaymentsminusconsumptionexpenditure.
i
C) ncomeminussaving.
i
D) otalincomedividedbythepricelevel.
t
3) heslopeoftheconsumptionfunctionis
T
A) essthan1.
l
B) egative.
n
C) reaterthan1.
g
D) .
1
4) hichofthefollowingvariablesdoesNOThaveadirecteffectofchanging
W
consumptionexpenditure?
A) isposableincome
d
B) xpectedfutureprofits
e
C) xpectedfutureincome
e
D) ealth
w
5) utonomousconsumption
A
A) sindependentofincome.
i
B) ecreaseswithincome.
d
C) ncreaseswithincome.
i
D) sindependentofincomeandmustbeequaltozero.
i
AUTONOMOUSMEANSITDOESNTDEPENDONANYTHINGELSEIT
CHANGESONITSOWN.ITISEXGOENOUSDETERMINEDBYFACTORSTHAT
WEWILLNOTEXAMINE
6) issavingoccurswhenahousehold
D
A) avesmorethanitspends.
s
B) pendsmorethanitsaves.
s
C) onsumesmorethanitreceivesindisposableincome.
c
D) pendslessthanitreceivesindisposableincome.
s
SAVING=YCSODISSAVING(NEGATIVESAVING)WHENC>YI.E.,
CONSUMINGMORETHANYOURINCOME
7) hendisposableincomeis0,consumptionis$2000.Then
W
A) aving=$2000.
s
B) aving=-$2000.
s
C) aving=$0.
s
D) heMPC=0.2.
t
8) hatisthemarginalpropensitytoconsume?
W
A) hepercentageofincomethatisnotsaved.
t
B) heratioofthechangeinconsumptionexpendituretothechangeindisposable
t
income.
C) neminusthefractionoftotaldisposableincomethatissaved.
o
D) hepercentageofincomethatisconsumed.
t
9) hemarginalpropensitytoconsume
T
A) snegativeifdissavingispresent.
i
B) sbetween0and1.
i
C) xceeds1.
e
D) quals1.
e
10) fconsumptionexpendituresforahouseholdincreasefrom$1000to$1800when
I
disposableincomerisesfrom$1000to$2000,themarginalpropensitytoconsumeis
A) .3.
0
B) .18.
0
C) .2.
0
D) .8.
0
11) orahousehold,themarginalpropensitytosaveplusthemarginalpropensityto
F
consume
A) quals0.
e
B) quals1.
e
C) qualsanumberthatislargerthelargerthehouseholdsdisposableincome.
e
D) qualsanumberthatissmallerthelargerthehouseholdsdisposableincome.
e
12) fwealthincreases,theconsumptionfunction
I
A) hiftsdownward.
s
B) hiftsupward.
s
C) asasteeperslope.
h
D) sunaffected.
i
13) hesumofplannedconsumptionexpenditure,plannedinvestment,planned
T
governmentexpenditures,andplannednetexportsis________.
A) heexpenditureapproachtorealGDP
t
B) ggregateplannedexpenditure
a
C) ggregateexpenditure
a
D) ealGDP
r
14) nyexpenditurecomponentthatdependsonthelevelofrealGDPiscalled
A
A) quilibriumexpenditure.
e
B) utonomousexpenditure.
a
C) puriousexpenditure.
s
D) nducedexpenditure.
i
DEFINITIONINDUCED;EXAMPLESCONSUMPTIONANDIMPORTSWHICH
BOTHINCREASEASINCOMEDOES
15) sanationsGDPincreases,thatnations
A
A) utonomousconsumptionincreases.
a
B) xportsincrease.
e
C) utonomousconsumptiondecreases.
a
D) mportsincrease.
i
IMPORTSAND(NONAUTONOMOUS)CONSUMPTIONINCREASE.
AUTONOMOUSCONSUMPTIONISTHEPARTTHATDOESNOTRESPOND
TOCHANGESINGDP
16) faggregateplannedexpendituresarelessthanrealGDPthen
I
A) irmsinventorieswilldecreaseandrealGDPwilldecreaseasproduction
f
falls.
B) irmsmustincreasetheirplannedexpendituresuntilaggregateplanned
f
expendituresincreasetothelevelofrealGDP.
C) heeconomyremainsindisequilibriumuntilaggregateplanned
t
expenditures increasetothelevelofrealGDP.
D) irmsinventorieswillincreaseandrealGDPwilldecreaseasproduction
f
falls.
IFAD<YTHENINVENTORIESINCREASE(UNINTENDEDINVENTORY
INVESTMENT)ASBUSINESSESSBUY/EATTHEUNSOLDGOODSANDTHEN
CUTBACKOUTOUTPUT
17) heninvestmentislessthanplannedinvestment,aggregateplannedexpenditure
W
is________thanactualaggregateexpenditureandinventoriesare________than
planned.
A) reater;less
g
B) ess;less
l
C) ess;greater
l
D) reater;greater
g
ACTUALINVESTMENT=PLANNEDINVESTMENT+UNINTENDED
INVENTORYCHANGESOIFACTUAL<PLANNED,UNINTENDED
INVENTORYMUSTBENEGATIVE(I.E.,BUSINESSISSELLINGSTUFFOFF
THEIRSHELVESBECAUSEDEMANDISHIGHERTHANTHEYANTICIPATED).
SOAGGEXPENDITURE/DEMANDHIGHERTHANANTICIPATEDAND
INVENTORIESLESS(ASTHEYREDUCETHEMTOMEETDEMAND)
18) ctualaggregateexpenditureequalsrealGDP.
a
B) quilibriumexpenditureisdefinedasthelevelofaggregateexpenditurewhere
E
A) pendingequalsoutput.
s
C) ggregateplannedexpenditureequalsrealGDP.
a
D) otalinventoriesequalzero.
t
AGGREEGATEPLANNEDEXPENDITURE(SAMEASAGGREGATEDEMAND)
EQUALSACTUALOUTPUT(REALGDP).
19) hentheeconomyisinequilibrium,
W
A) hangesinautonomousspendingwillhavenoimpactonrealGDP.
c
B) lannedinvestmentequalsactualinvestment.
p
C) lannedsavingswillequalzero.
p
D) herecanbenounemployment.
t
20) hedifferencebetweenplannedandunplannedspendingis________.
T
A) lwaysnegative
a
B) lwayspositive
a
C) nventories
i
D) nplannedchangesininventories
u
21) hemultipliereffectexistsbecauseachangeinautonomousexpenditure
T
A) romptsfurtherexports.
p
B) illundergoitscompleteeffectinoneround.
w
C) eadstochangesinincome,whichgeneratefurtherspending.
l
D) eavestheeconomyintheformofimports.
l
22) ecauseofthemultiplier,aone-timechangeinexpenditurewill
B
A) ecreasesavingandinvestmentactivityandfutureincome.
d
B) avelittlesecondaryeffectonincome.
h
C) eneratemoreadditionalincomethantheinitialchangeinexpenditure.
g
D) xpandincomebyaninfiniteamount.
e
23) hemultiplierislargerifthe
T
A) arginalpropensitytosaveislarger.
m
B) arginalpropensitytoimportislarger.
m
C) ncometaxrateishigher.
i
D) arginalpropensitytoconsumeislarger.
m
24) hemultiplierisgreaterthan1because
T
A) osthouseholdsareunabletosave.
m
B) nepersonsspendingbecomesanothersincome.
o
C) ouseholdspendingexceedsincome.
h
D) orporatespendingexceedscorporateincome.
c
25) finvestmentincreasesby$300and,inresponse,equilibriumaggregateexpenditure
I
increasesby$600,themultiplieris
A) .5.
0
B) .2.
0
C) .
5
D) .
2
26) ftherearenoincometaxesorimports,themultiplierequals
I
A) /(1-marginalpropensitytoimport).
1
B) /(1-marginalpropensitytoinvest).
1
C) /(1-marginalpropensitytoconsume).
1
D) /(1-marginalpropensitytosave).
1
27) hichofthefollowingisconsideredapurposeofthefederalbudget?
W
I.
Tohelptheeconomyachievefullemployment.
II.
Tofinancetheactivitiesofthefederalgovernment.
III.
Topromotesustainedeconomicgrowth.
A) andIII
I
B) andII
I
C) IandIII
I
D) ,IIandIII
I
28) hichbranchesofthegovernmentplayaroleintheenactingthefederalbudget?
W
I.
thePresident.
II.
theHouseofRepresentatives.
III.
theSenate.
A) ,IIandIII
I
B) IandIII
I
C)
I
D) andII
I
29) hepurposeoffiscalpolicyisto
T
A) chievefullemployment.
a
B) aintainpricelevelstability.
m
C) romoteeconomicgrowth.
p
D) lloftheaboveanswersarecorrect.
A
30) hepurposeoftheEmploymentActof1946wasto
T
A) etuptheFederalReserveSystem.
s
B) ettargetsfortheunemploymentratetobeachievedbythepresident.
s
C) stablishanunemploymentcompensationsystem.
e
D) stablishgoalsforthefederalgovernmentthatwouldpromotemaximum
e
employment,purchasingpower,andproduction.
31) helargestsourceofgovernmentrevenuesis________.
T
A) orporateincometaxes
c
B) ocialsecuritytaxes
s
C) ersonalincometaxes
p
D) ndirecttaxes
i
32) llofthefollowingaregovernmentoutlaysEXCEPT
A
A) urchasesofgoodsandservices.
p
B) urchasesofcorporatebonds.
p
C) nterestonthegovernmentsdebt.
i
D) ransferpayments.
t
33) hegovernmentsbudgetdeficitorsurplusequalsthe
T
A) hangeinoutlaysdividedbychangeinrevenue.
c
B) hangeinrevenueminuschangeinoutlays.
c
C) verageoutlaydividedbyaveragerevenue.
a
D) otaltaxrevenueminustotalgovernmentoutlays.
t
34) heneverthefederalgovernmentspendsmorethanitreceivesintaxrevenue,then
W
bydefinitionit
A) ncreaseseconomicgrowth.
i
B) unsabudgetsurplus.
r
C) unsabudgetdeficit.
r
D) peratesabalancedbudget.
o
35) hichofthefollowingstatementsregardingtheU.Sgovernmentsbudgetsurpluses
W
anddeficitsiscorrect?
A) udgetdeficitstendtoshrinkduringperiodsofrecession.
B
B) ftaxrevenuesexceedoutlays,thegovernmenthasabudgetdeficit.
I
C) uringthe1980slargedeficitsarosefromacombinationoftaxcutsand
D
expenditureincreases.
D) ince1970,federaltaxrevenueshavegenerallyexceededoutlays.
S
36) hesumofpastbudgetdeficitsinexcessofthesumofpastbudgetsurplusesrefers
T
to
A) hecyclicallyunbalancedbudget.
t
B) hefederalgovernmentnetworth.
t
C) hetradedeficit.
t
D) henationaldebt.
t
37) upposeacountryhasbeenrunningapersistentgovernmentbudgetdeficit.If
S
thedeficitisreduced,butremainspositive,
A) overnmentdebtwillincrease.
g
B) overnmentdebtwilldecrease.
g
C) nterestpaymentsonthedebtimmediatelywilldecrease.
i
D) hecountrywillexperienceabudgetsurplus.
t
DEFICITISCURRENTTAXESMINUSCURRENTSPENDING(TG).DEBTIS
ACCULULATEDPILE(STOCK)OFDEFICITS
IFYOUEARN$100ANDSPEND$120AWEEK,YOURDEFICITIS$20.IFYOU
BORROWTHATFROMTHEBANK,YOURDEBTTOTHEMIS$20.IFNEXT
WEEK,YOUSPEND$110WITHINCOMEOF$100,YOURDEFICITHASFALLEN
TO10,BUTYOURDEBTHASRISENTO$30.ANYTIMEYOURUNADEFICIT,
YOURDEBTINCREASES
38) riortotheGreatDepression,thepurposeofthefederalbudgetwasto________.
P
A) inancetheactivitiesofthegovernment
f
B) ecreaseunemployment
d
C) tabilizetheeconomy
s
D) aintainlowinterestrates
m
39) helargestitemofgovernmentoutlaysis________.
T
A) ebtinterest
d
B) ebtreduction
d
C) xpendituresongoodsand
e
D) ransferpayments
t
services
40) heCouncilofEconomicAdvisershavethefollowingrolesexcept________.
T
A) roposingthefederalgovernmentsbudgettoCongress
p
B) eepingthePresidentinformedaboutthecurrentstateoftheeconomy
k
C) onitoringtheU.S.economy
m
D) akingforecastsofwheretheeconomyisheading
m
41) nexampleofadiscretionaryfiscalpolicyiswhen
A
A) oodstamppaymentsrisewhentheeconomyisinarecession.
f
B) axreceiptsfallasincomesfall.
t
C) nemploymentcompensationpaymentsrisewithunemploymentrates.
u
D) ongresspassesalawthatraisespersonalmarginaltaxrates.
C
42) heeffectsofachangeingovernmentexpendituresismultipliedthroughoutan
T
economy
A) nlywhenthereisadecreaseinexpenditure.
o
B) nlywhenthereisanincreaseinexpenditure.
o
C) ecausegovernmentexpendituregenerateschangesinconsumption
b
expenditure.
D) ecausetaxesareleftunchanged.
b
43) heautonomoustaxmultiplieris
T
A) qualtothegovernmentexpendituremultiplier.
e
B) mallerthanthegovernmentexpendituremultiplier.
s
C) egative.
n
D) argerthanthegovernmentexpendituremultiplier.
l
44) nexampleofafiscalpolicydesignedtoincreaserealGDPis
A
A) decreaseingovernmentexpenditure.
a
B) nincreaseintaxes.
a
C) cutintaxes.
a
D) oneoftheaboveanswersiscorrect.
N
45) fthegovernmentwantstoengageinfiscalpolicytoincreaserealGDP,itcould
I
A) ncreasegovernmentexpenditureinordertoincreaseaggregatedemand.
i
B) ncreasegovernmentexpenditureinordertoincreaseshort-runaggregate
i
supply.
C) ecreasegovernmentexpenditureinordertoincreaseshort-runaggregate
d
supply.
D) ecreasegovernmentexpenditureinordertodecreaseaggregatedemand.
d
46) singtheAD-ASmodel,anincreaseingovernmentexpenditure
U
A) asafullmultipliereffectonrealGDP,leavingthepricelevelunchangedin
h
thelongrun.
B) asnoimpactonrealGDP,butwillincreasepotentialGDP.
h
C) ncreasesbothrealGDPandthepricelevel.
i
D) asnoimpactonrealGDP.
h
SKETCHTHISINCREASEINGSHIFTSAGGDTORIGHT,RAISINGREALOUTPUT
(GDP)ANDPRICES
47) ntheabovefigure,iftheeconomyisinitiallyatpointDandgovernment
I
expenditureincreases,theeconomywillmovetopoint
A) ovetopointC.
m
B) tayatpointD.
s
C) ovetopointB.
m
D) ovetopointA.
m
48) nautomaticstabilizer
A
A) nvolvesachangeinpersonaltaxrates.
i
B) nvolvesachangeingovernmentpurchases.
i
C) striggeredbythestateoftheeconomy.
i
D) equiresactionbytheCongress.
r
49) ncometaxesandtransferpayments
I
A) ncreasetherateoflong-runincomegrowth.
i
B) ctlikeeconomicshockabsorbersandstabilizefluctuationsinincome.
a
C) ncreasetheeffectsofinvestmentandimports.
i
D) reventtheeconomyfrommovingtowardequilibrium.
p
50) ecauseofautomaticstabilizers,whenGDPfluctuatesthe
B
A) overnmentsdeficitfluctuatesinverselywithGDPsothatitislargerwhen
g
GDPdecreases.
B) overnmentsbudgetremainsinbalance.
g
C) overnmentsdeficitfluctuatesdirectlywithGDPsothatitislargerwhen
g
GDPincreases.
D) heeconomywillautomaticallygotofullemployment.
t
IFREALGDPFALLS(RECESSION),AUTOMATICSTABILIZERSLIKEUNEMP
INSURANCE,RAISEGANDLOWERT(ASINCOMEFALLS,TAXREVENUES
FALL)THUSTHEDEFICIT(GTINABSOLUTEVALUE)MOVESOPPOSITEREAL
GDP.WHENREALGDPFALLS,DEFICITAUTOMATICALLYRISES
51) nducedtaxes
I
A) arywithrealGDP.
v
B) refixedovertime.
a
C) reautonomous.
a
D) reindependentofrealGDP.
a
52) hestructuraldeficitorsurplusisthe
T
A) ifferencebetweenactualgovernmentoutlaysandactualgovernmentreceipts.
d
B) overnmentbudgetdeficitorsurplusthatwouldoccuriftheeconomywereat
g
potentialGDP.
C) ctualgovernmentbudgetdeficitorsurplusminusexpendituresforcapital
a
improvements.
D) hangeinnationaldebtthatwillresultfromcurrentbudgetarypolicies.
c
53) cyclicalsurplusisa
A
A) ominal,asopposedtoreal,budgetsurplus.
n
B) udgetsurplusonlybecauserealGDPisequaltopotentialGDP.
b
C) udgetsurplusonlybecauserealGDPisgreaterthanpotentialGDP.
b
D) udgetsurplusonlybecauserealGDPislessthanpotentialGDP.
b
SURPLUSCAUSEDBYAUTOMATICSTABILIZERSCUTTINGINWHEN
ECONOMYISOVERHEATED,I.E.,REALGDPABOVEFULLCAPACITY.THUS,
WITHOVERHEATEDECONOMY,TUP,GDOWN(LESSONUNEMP
INSURANCE)ANDBUDGETSURPLUSRESULTS.
54) fthegovernmentsbudgetisinsurplusevenwhentheeconomyisatfull
I
employment,thesurplusissaidtobe
A) yclical.
c
B) iscretionary.
d
C) ersisting.
p
D) tructural.
s
STR
UC
TU
RAL
,BY
DEF
INI
TIO
N.
A
STRUCTURALDEFICIT/SURPLUSISWHENTHE
ECONOMYISORWOULDBEINDEFICIT
(SURPLUS)IFWEWEREATFULLEMPLOYMENT.