Multiple Choice Questions
Which of the following does NOT add to US GDP? A developer builds a new shopping mall A state government resurfaces a highway The federal government issues a Social Security check The Chinese government buys wheat from a US-based grain company
A US-based company buys wine produced in France. What is the impact on the US national income accounts? Net exports and GDP both rise Net exports rise and GDP falls Net exports fall and GDP rises Net exports and GDP both fall
You deposit $12,000 in a savings account, and a year later you have $12,960. Meanwhile the consumer price index (CPI) rises from 180 to 189. In this case, the nominal interest rate is _____________ and the real interest rate is _________________. 8, 5 3, 8 5, 8 8, 3
Assume the adult population of a country is 40 million: 23 million work full-time; 5 million work part-time but would prefer to work full-time; 4 million are currently looking for a job; 3 million would like to work but are so discouraged they have given up looking, and; 5 million are retired. What is the number (in millions) of unemployed? 7 9 4 12
Using the numbers from the previous question, what is the size (in millions) of the country's labor force? 32 23 28 35 ANSWER: _______ If the reserve requirement is 12%, and the central bank increases the quantity of reserves in the banking system by $9 billion, the money supply increases (in billions of dollars) by: 0 1.08 75 9
A bank has capital of $50 million, and a leverage ratio of 8. If the value of the bank's assets decline by 10%, then its capital will be reduced to (in millions of dollars): 450 10 80 0
Which of the following actions by the Fed would increase the money supply? A decrease in the discount rate on Fed lending An increase in the interest rate paid on reserves An increase in banks' reserve requirements An open market sale of government bonds
A sudden increase in the stock market: Shifts the AD curve to the ri*ght Shifts the AD curve to the left Shifts the short-run aggregate-supply curve to the right Shifts the long-run aggregate-supply curve to the right
The idea that governments could manage business cycles by influencing AD was first developed by John Maynard Keynes during the: 1970s 1700s 1930s 1860s
Longer Question # 1 For each of the following events, explain both the short-run and long-run effects on i) output (Y), and ii) the price level A decrease in the federal government's military spending An economic boom in Canada, increasing the wealth of Canadians, and allowing them to buy more US-made goods The stock market declines, decreasing the wealth of US consumers The Fed increases the money supply
Longer Question # 2 Which of the components (C, I, G, NX) of US GDP (if any) would each of the following transactions effect? You buy a watch from a Swiss manufacturer You buy a used/"pre-owned" vehicle (2011 model-year) from a local car dealership You buy season tickets to the symphony The federal government increases the salaries of all of its employees by 5%
Longer Question # 3 Assume a country produces only two goods: wheat and corn. Below are data for that country over a two year period.
|
Year
|
Price of Wheat
|
Quantity of Wheat
|
Price of Corn
|
Quantity of Corn
|
|
2013
|
$ 5
|
200
|
$2
|
1200
|
|
2014
|
$ 8
|
220
|
$3
|
1300
|
Using 2013 as the base year, compute for both years: Nominal GDP Real GDP The GDP deflator (to two decimal places - Example: 109.34)
Longer Question # 4 Assume that consumers purchase only two items: smart phones and tablets. Below are data for those items over a three year period.
| Year |
Price of Smart Phones |
Total Quantity of Smart Phones Purchased |
Price of Tablets |
Total Quantity of Tablets Purchased |
| 2012 |
$200 |
4,000 |
$480 |
1,000 |
| 2013 |
$210 |
4,800 |
$476 |
2,400 |
| 2014 |
$235 |
5,900 |
$490 |
3,900 |
Using 2012 as the base year, and fixing the total market basket at 4,000 smart phones and 1,000 tablets (i.e. the 2012 quantities), calculate: the Consumer Price Index (CPI) for 2012 (i.e. the base year) the Consumer Price Index (CPI) for 2013 the Consumer Price Index (CPI) for 2014 the rate of inflation from 2013 to 2014 (to two decimal places - Example: 1.92%). Why might this rate you calculated overstate the actual increase in the cost of living for consumers?
Longer Question # 6 Identify and briefly discuss 3 reasons why the short-run aggregate supply-curve slopes upward. In other words, why is there a positive relationship between the price level (P) and the quantity of output supplied (Y) in the short run?