Econ - Chapters 2 Flashcards

Terms Definitions
Total Reserves= $100,000 Demand Deposits= $100,000

The data above represents a bank's balance sheet. Suppose it is the only bank in town and individuals in town hold no cash. Assuming the reserve ratio is 10 percent, what will be the bank's loans at the
$900,000
a factor that can change
variable
fixed costs plus variable costs
total cost
limited quantities of resources to meet unlimited wants
scarcity
Unlike Classical growth theory, new growth theory emphasizes the importance of:
technology.
a price ceiling placed on rent
rent control
a situation in which the quantity demanded is greater than the quantity supplied, also known as excess demand
shortage
During the Reagan Administration (1981-1989), tax rates were reduced significantly, while federal defense spending rose by 80 percent. The effect of these policies on the AD curve is:
A. Shifted left
B. Stayed the same.
C. Went flat
D. Shifted right
D. Shifted right
Keeping total employment the same, an increase in the number of people available and looking for work will:
_______ the labor force participation rate but ________ the employment-population ratio.
increase
decrease
the line on a production possibilities graph that shows the maximum possible output
production possibilities frontier
Expansionary monetary policy is designed to:
A. reduce investment spending.
B. shift the aggregate demand curve to the left.
C. raise interest rates.
D. lower interest rates.
D. lower interest rates.
GDP is $7 trillion. If consumption is $3.5 trillion, investment is $1.4 trillion, and government purchases are $2.1 trillion, then exports are ________ to imports.
equal
the total amount of money a firm receives by selling goods or services
total revenue
a good that consumers demand more of when their income increases
normal good
the amount a supplier is willing and able to supply at a certain price
quantity supplied
an income level below which income is insufficient to support families or households
poverty threshold
If the reserve ratio is 0.08, the simple money multiplier is:
A. 1.
B. 8.
C. 10.5.
D. 12.5.
D. 12.5.
Short-term interest rates and long-term interest rates are determined in the ____________ and ____________, respectively.
money market, loanable funds market
If the required reserve ratio is 0.20 and individuals hold no cash, a $5 million cash deposit in the banking system will increase the money supply by:
$25 million.
A price index in its base year is always equal to:
100
Net domestic product equals:
consumption + investment + government purchases + net exports - depreciation.
The current recession (Dec. 2007 to ?) has resulted in a large number of individuals who have quit looking for work and are classified as discouraged workers. These people are/are not counted in the labor force
are not
a graph that show alternative ways to use an economy's resources
productions possibilites curve
Non-liquid assets are able to perform which of the following functions?
A. Medium of exchange.
B. Cash for transactions.
C. Store of value.
D. Trade without bartering.
C. Store of value.
The lowest sustainable rate of unemployment that policy makers believe is achievable under existing conditions is called:
the target rate of unemployment.
John has received a 3% pay increase but the rate of inflation is 6%. Economists would tell John that his real wage has:
fallen by 3%.
a graph of the quantity supplied of a good by all suppliers
market supply curve
the change in output from hiring one additional unit of labor
marginal product of labor
Suppose the money multiplier in the U.S. is 4. If the Fed buys $10 million dollars of government securities, the money supply will:
A. decrease by $2.5 million.
B. increase by $2.5 million.
C. decrease by $40 million.
D. increase by $40 mi
D. increase by $40 million.
When a cashier gives you a pair of jeans for your $20 bill, money is serving which function?
Medium of exchange.
According to the convergence hypothesis:
A. countries with higher per capita incomes should eventually grow faster than countries with lower per capita incomes and similar institutional structures
B. countries with higher per capita incomes should even
B. countries with higher per capita incomes should eventually grow slower than countries with lower per capita incomes and similar institutional structures.
Compared to last year, fewer oranges are being purchased and the selling price has decreased. This could have been caused by
A. an increase in demand.
B. an increase in supply.
C. a decrease in demand.
D. a decrease in supply.
C. a decrease in demand.
The study of economic growth focuses on the factors that cause an:
economy's production possibility curve to shift out.
An increase in aggregate demand:
A. raises potential output.
B. reduces potential output.
C. does not change potential output.
D. has an unpredictable effect on potential output.
C. does not change potential output.
When banks offer checking accounts, they are issuing a(n):
A. financial asset that functions as money.
B. financial liability.
C. financial asset that cannot function as money.
D. IOU.
A. financial asset that functions as money.
Over the last three decades, the Chinese government has adopted a series of market-oriented reforms that have shifted control of many parts of the Chinese economy from government officials to market forces. These reforms have most likely stimulated China'
A. they have provided individuals with a greater incentive to be efficient.
The Classical economists argued that:
1. a market economy will never experience unemployment.
2. if unemployment occurs it will not persist because wages and prices will fall.
3. aggregate expenditures may be too low.
4. if inflation occurs it wi
2. if unemployment occurs it will not persist because wages and prices will fall.
Expansionary monetary policy will likely:
1. shift the AD curve in to the left.
2. shift the AD curve out to the right.
3. make the AD curve steeper.
4. make the AD curve flatter.
2. shift the AD curve out to the right.
Does national income accounting have a category capturing the effects of depreciation?
Yes; it is called Capital Consumption Allowance.
Real GDP is designed to measure:
the change in a nation’s output over time.
Suppose the Federal funds rate is 5 percent. If the Fed decides to decrease the target for the Federal funds rate from 5 percent to 4 percent, it should take:
A. a defensive action and raise reserve requirements.
B. a defensive action and reduce r
D. an offensive action and reduce reserve requirements.
In 2008, the Fed followed an extraordinarily expansionary monetary policy, which was evident by the:
A. decrease in the Fed funds rate from 5 percent in 2007 to 0 percent by late 2008.
B. increase in the Fed funds rate from 1.25 percent in 2007 to 6 pe
A. decrease in the Fed funds rate from 5 percent in 2007 to 0 percent by late 2008.
Investment relates to capital in the following way:
A. It is the same thing as capital stock.
B. It causes a decrease in capital over time.
C. It causes an increase in capital over time.
D. It is unrelated to capital.
C. It causes an increase in capital over time.
Economic growth:
A. does not affect living standards at all.
B. has a relatively small effect on living standards over long periods of time.
C. has a relatively large effect on living standards over long periods of time.
D. is the sole determinant of
C. has a relatively large effect on living standards over long periods of time.
Given that diesel cars get much better gas mileage than the typical car, an increase in the price of gasoline would be expected to:
A. increase the demand for diesel cars.
B. decrease the demand for gasoline.
C. decrease the demand for diesel cars.
D.
A. increase the demand for diesel cars.
The law of supply states that, other things equal, as the price of a good goes:
A. up, the quantity supplied goes up.
B. up, the supply goes down.
C. down, the quantity supplied goes up.
D. down, the supply goes down.
A. up, the quantity supplied goes up.
If an economy produces 100 pencils valued at 25 cents apiece and 500 sheets of ruled paper at 1 cent apiece, using GDP as the measure of output:
pencils are weighted as being 25 times more important than ruled paper.
A recessionary gap exists if the price level is:
A. A gap to the left of LAS
B. A gap to the right of LAS
A. A gap to the left of LAS
In what category is the purchase of a computer by a business in national income accounting?
It is a form of investment spending.
/ 49
Term:
Definition:
Definition:

Leave a Comment ({[ getComments().length ]})

Comments ({[ getComments().length ]})

{[comment.username]}

{[ comment.comment ]}

View All {[ getComments().length ]} Comments
Ask a homework question - tutors are online