2013macro sample exam questions 97-03

B in 2009 the gdp deflator equals 100 4200 3600 11667

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b. In 2009, the GDP deflator equals (100)  ×  ($4,200  ÷  $3,600)  =  116.67.  15) 
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The  unem ploym ent  rate  equal s (6  millio unem ploye ÷   139  millio labor  force)  ×  100  =  4.3  perce nt.  1 6
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a. The  only  depos it that  is in  M1 is  the  check ing  depos its, so  the  amou nt of  this  bank's  depos its  that  are in  M1 is  $400. b. Depo sits in  M2  includ check ing  depos its,  savin depos its,  and  time  depos its.  Therefore the amount of this bank's deposits that are in M2 equals $400  +  $900  +  $900  =  $2,200. c. Reserves are the sum of the currency in the bank's vault plus its deposits in its reserve account at the  Fed. Therefore the bank's reserves are $40  +  $40  =  $80.  24) 
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When  the  bank  receiv es a  new  depos it of  $10,0 00, it  will  loan  some  of the  depos it.  The  proce eds of  the  loan  will  be  depos ited in  anoth er  bank,  which  will  then  loan  some  of its  new  depos its.  Henc e an  initial  depos it at  one  bank leads to deposits at other banks. With the required reserve ratio of 10 percent, the first bank must keep $1,000 as reserves (10  percent of $10,000) and it can loan the remainder, $9,000. Thus the deposit at the second round bank will  be $9,000. The second round bank must keep $900 as reserves (10 percent of $9,000) and can loan the  remainder, $8,100. The deposit in the third round bank will be $8,100.  26) 
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The  before - tax  intere st rate  equal s the  nomi nal  intere st rate  minus  the  inflati on  rate,  or 8  perce nt  -  3  perce nt  =  5  perce nt.  For  the  after - tax  real  intere st  rate,  note  that  Georg must  pay  tax on  the  entire  perce nt  (nominal) interest. Hence George pays (8 percent interest rate  ×  28 percent tax rate)  =  2.24 percent as  taxes. Therefore his after - tax real interest rate equals his before - tax real interest rate, 5 percent, minus  what he pays in taxes, or 5 percent  -  2.24 percent  =  2.76 percent as his after - tax real interest rate.  27) 
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a. There  is a  move ment  upwar along  the  aggre gate  dema nd  curve.  The  aggre gate  dema nd  curve  does  not  shift. b. The  aggre gate  dema nd  curve  shifts  right ward. c. The  aggre gate  dema nd  curve  shifts leftward. d. The aggregate demand curve shifts leftward.  28) 
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The  equili brium  is  where  the  aggre gate  dema nd  and  aggre gate  suppl curve inters ect.  Thus  the  equili brium  price  level  is 110  and  equili brium  real  GDP  is $10  trillio n.  Real  GDP  excee ds  potent ial  GDP,  so the  econo my has an inflationary gap. The aggregate supply curve will shift leftward as the economy adjusts to full 
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