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1) The document provides information about economic concepts such as nominal GDP, cyclical unemployment, structural unemployment, productivity, and factors that affect economic growth.
2) It tests understanding of opportunity cost, present value calculations, aggregate supply and demand, fiscal and monetary policy, and international trade.
3) Multiple choice questions assess knowledge of topics like crowding out, automatic stabilizers, exchange rates, and the effects of interest rates on currency values.
1) The document provides information about economic concepts such as nominal GDP, cyclical unemployment, structural unemployment, productivity, and factors that affect economic growth.
2) It tests understanding of opportunity cost, present value calculations, aggregate supply and demand, fiscal and monetary policy, and international trade.
3) Multiple choice questions assess knowledge of topics like crowding out, automatic stabilizers, exchange rates, and the effects of interest rates on currency values.
1) The document provides information about economic concepts such as nominal GDP, cyclical unemployment, structural unemployment, productivity, and factors that affect economic growth.
2) It tests understanding of opportunity cost, present value calculations, aggregate supply and demand, fiscal and monetary policy, and international trade.
3) Multiple choice questions assess knowledge of topics like crowding out, automatic stabilizers, exchange rates, and the effects of interest rates on currency values.
real GDP in the base year. The deviation of unemployment from its natural rate is called: cyclical unemployment. Structural unemployment would NOT be caused by: a minimum wage set below the equilibrium wage. Which of the following will NOT increase the productivity of labor? an increase in the size of the labor force
years from now. The interest rate is 15 percent. Rank
these three options from highest present value to lowest present value. Option 2; Option 3; Option 1 Response In order to solve this problem, you need Feedback to calculate the present value for each : option using the following equation: PV(Y)=$Y/(1+r)^N. Option 1: $900 immediately, so PV = $900.
The book cites which factor for slow growth in Latin
America countries? excessive government intervention in the economy
Option 2: $1200 in 1 year: PV($1200)=$1200/(1+.15) which equals $1043.48.
Which of the following will NOT increase the
productivity of labor? an increase in the size of the labor force Crowding out is a phenomenon: where an increase in the government's budget deficit causes overall investment spending to fall. The present value of a future payment decreases if the: period between the present and the future increases. A creditor of a corporation holds- bonds sold by the corporation. If the corporation experiences financial difficulties bond holders are paid before stock holders.
Option 3: $2000 in 5 years: PV($2000)=$2000/(1+.15)^5 which equals $994.35.
You have a choice among three options. Option 1:
receive $900 immediately. Option 2: receive $1,200 one year from now. Option 3: receive $2,000 five
In which of the following cases would it necessarily be
true that government saving and national saving are equal for a closed economy? After paying their taxes and paying for their consumption, households have nothing left. If the economy experiences a decrease in consumer spending it was most likely caused by: an expected increase in personal income taxes in the future. If real GDP (output produced) is less than aggregate expenditure, then inventories will: fall, and firms will increase their future production.
The aggregate supply curve shows the relationship
between the: aggregate price level and the quantity of aggregate output supplied.
1200 = Multiplier * 600, so the multiplier equals 2
What is the long-run effect of producing beyond
potential GDP in the short run? Nominal wages will rise. In the United States during the 1970s, oil prices increased dramatically and caused: SRAS to shift left.
The MPC is the fraction of additional income a
household consumes rather than saves. When a persons income increases by $1,000 and they decide to spend $750, or 75% of the increase, the MPC is equal to 0.75. To find the multiplier, you plug the MPC into the equation: the multiplier = 1/(1-MPC) = 1/(10.75) = 4. Which of the following is an expansionary fiscal policy? an increase in unemployment benefits Expansionary fiscal policy increases aggregate demand Automatic stabilizers: are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession. A central bank trying to depress the value of its currency on the foreign exchange market will follow a policy of: buying foreign assets. U.S. exports as a percentage of GDP have more than doubled since 1950. The U.S. currently has a trade deficit.
A recessionary gap will be eliminated because there is
_______ pressure on wages, causing the _______ . downward; short-run aggregate supply curve to shift rightward Due to the multiplier effect, the total effect of an increase in any component of GDP is given by Total effect = Multiplier * Initial Increase Even if products are exported, the money paid for those goods go to domestic producers and that income is multiplied. If exports increase by $600 million and U.S. GDP eventually increases by between 1.2 billion and $1.8 billion, then the equations are:
1800 = Multiplier * 600, so the multiplier equals 3.
The equation for the real exchange rate is
E = (nominal exchange rate * Domestic Price Level)/
(Foreign Price Level). Recall the percentage change approximation rule: if W = X*Y/W, then %W %X +Y %W. Using the rule, we can find that: Therefore, the multiplier must be between 2 and 3. A floating exchange rate is: set by the market forces of supply and demand. A decrease in U.S. interest rates leads to a depreciation of the dollar that leads to greater net exports. When the value of 1 goes up from $1.25 to $1.50, the value of $1 goes down from 1/1.25 = 0.8 to 1/1.50 = 0.67.
Political instability, like that in Mexico in 1994, makes
the world financial market uneasy. The resulting capital flight caused which of the following? The peso depreciated.
Which of the following would NOT be a method by
which a country could effectively maintain a fixed exchange rate? passing a law requiring that the exchange rate remain fixed If U.S. interest rates decrease, then U.S. residents will want to purchase more foreign assets and foreign residents will want to purchase fewer U.S. assets When a nation's currency appreciates, it is likely that: this will lead to a deficit in the current account. Which of the following is most likely to result if foreigners stop buying U.S. government bonds because they believe the U.S. government will soon default on its debt? US exports will rise
% in real exchange rate % in nominal exchange
rate + % in domestic price level % in foreign price level = ( 5%) + (7%) 0% = 2%. So the real exchange rate increased, meaning that U.S. goods became more expensive relative to goods made in Mexico. If the U.S. government goes from a budget deficit to a budget surplus next year, then the U.S. interest rate would decrease and the dollar will depreciate.