When tracking economic growth, why do economists prefer real GDP per capita over: a. real GDP?

Population size and a rough measure of the income of an average person in the country

Many impoverished nations struggle with diseases like malaria. How would a reduction or the elimination of malaria contribute to long-run economic growth?

Population and productivity would increase

According to the wealth effect, when prices decrease, the purchasing power of assets:

increases and consumer spending increases.

decreases and consumer spending decreases.

increases and consumer spending decreases.

decreases and consumer spending increases.

According to the interest rate effect, an increase in the price level causes people to:

increase their money holdings, which increases interest rates and decreases investment spending.

decrease their money holdings, which increases interest rates and decreases investment spending.

increase their money holdings, which decreases interest rates and decreases investment spending.

decrease their money holdings, which decreases interest rates and increases investment spending.

Suppose that the stock market crashes. Which of the following is most likely to occur?

the aggregate demand curve shifts to the left

the aggregate demand curve shifts to the right

a movement up the aggregate demand curve

a movement down the aggregate demand curve

Which of the following factors cannot shift the aggregate demand curve?

changes in stock market indices

The aggregate demand curve would shift to the left for all the following reasons EXCEPT:

a decrease in the amount of money in circulation.

more pessimistic consumer expectations.

If the Fed decreases the quantity of money in circulation:

interest rates increase, investment decreases, and the aggregate demand curve shifts to the left.

interest rates decrease, investment increases, and the aggregate demand curve shifts to the right.

interest rates decrease, investment decreases, and the aggregate demand curve shifts to the left.

interest rates increase, investment decreases, and the aggregate demand curve shifts to the right.

Which of the following would likely cause the short-run aggregate supply curve to shift to the left?

an increase in the price of imported oil

a decrease in consumer spending

a decrease in the price of imported oil

an increase in consumer spending

A rise in labor productivity will most likely result in:

an increase in aggregate supply.

an increase in aggregate demand.

a decrease in aggregate demand.

a decrease in aggregate supply.

The long-run aggregate supply curve is vertical because in the long run:

technological progress outpaces raises in nominal wages.

all factors of production increase.

the price of labor is flexible, while the price of physical capital is fixed.

Inflationary and recessionary gaps are closed by self-correcting adjustments that shift:

both the SRAS curve and the LRAS curve

A recessionary gap is when:

aggregate output is below potential output.

potential output is below aggregate output.

aggregate output is above potential output.

(Figure: An Increase in Aggregate Demand) The short-run equilibrium at Y2 and P2:

results in an inflationary gap.

creates pressure for nominal wages to fall as workers seek to restore lost purchasing power.

creates pressure for prices to fall, since real GDP exceeds the potential real GDP.

(Figure: An Increase in Aggregate Demand) Because of the pressures existing at the short-run equilibrium at Y2 and P2:

the SRAS curve will shift to the left

the SRAS will shift to the right.

If the economy is in a recessionary gap, then:

nominal wages will fall and SRAS will shift to the right until the economy is at full employment.

the economy will remain in a recession forever without any kind of government intervention.

AD will shift to the right and prices of goods will rise until the economy goes back to producing potential output.

nominal wages will rise and SRAS will shift to the left and the economy will eventually restore itself.

If there is an inflationary gap, which of the following accurately describes the adjustment to long-run equilibrium?

Nominal wages rise, and the short-run aggregate supply curve shifts left until the economy reaches long-run equilibrium.

Nominal wages fall, and the aggregate demand curve shifts left until the economy reaches long-run equilibrium.

Nominal wages rise, and the aggregate demand curve shifts right until the economy reaches long-run equilibrium.

Nominal wages fall, and the short-run aggregate supply curve shifts right until the economy reaches long-run equilibrium.

Probably the most important feature of deposit insurance is that it:

protects the economy against bank runs.

is paid for by the federal government.

costs so little to buy the policies to keep your money safe.

ensures that banks will always make a profit.

To _______ the money supply, the Federal Reserve could ________.

increase; conduct open-market purchases

increase; decrease the money multiplier

decrease; lower the reserve requirements

decrease; lower the discount rate

If it looks like a bank won't meet the Federal Reserve Bank's reserve requirement, normally it will first turn to the:

other member banks and borrow money at the federal funds rate.

Federal Reserve and borrow money at the discount rate.

open market and borrow money there.

If the Federal Reserve conducts an open-market purchase:

bank reserves increase and the money supply increases.

bank reserves decrease and the money supply decreases.

bank reserves decrease and the money supply increases.

bank reserves increase and the money supply decreases.

When the Federal Reserve decreases bank's reserves through an open-market operation:

the monetary base decreases, loans decrease, and the money supply decreases.

deposits increase, currency in circulation increases, and the monetary base remains the same.

the monetary base decreases, the money multiplier decreases, and the money supply increases

loans increase, the federal funds rate rises, and the discount rate rises

Using gold or silver as an example, what is the difference between commodity money and commodity-backed money?

decreased the demand for money.

increased the demand for money.

increased the demand for credit card transactions but had no impact on the demand for money

decreased the demand for credit card transactions but had no impact on the demand for money.

If inflation increases from 2% to 5%, the money demand curve will:

Remain constant, but the quantity of money demanded will decrease

The Federal Reserve affects interest rates by:

open market operations that shift the money supply curve.

open market operations that shift the money demand curve.

If the Federal Reserve wants to lower the interest rate, it will:

keep the money supply unchanged.

If the target rate of interest is higher than the current equilibrium interest rate, the Federal Reserve will:

sell Treasury bills in the open market, decrease the supply of money, and raise the interest rate to the target rate.

sell Treasury bills in the open market, increase the supply of money, and lower the interest rate to the target rate.

buy Treasury bills in the open market, increase the supply of money, and lower the interest rate to the target rate.

buy Treasury bills in the open market, decrease the supply of money, and raise the interest rate to the target rate.

A rise in interest rates due to a decrease in the money supply will _______ AD.

decrease aggregate supply in the short run but increase immediately the level of

What is the goal of expansionary monetary policy, and how does it work in the short run? Explain all the steps in the process. Start with the initial action by the Fed and end with the change to AD.

The goal of expansionary monetary policy is to increase spending. To do this the Fed wants to increase the money supply. So, they set a lower target for the fed funds int. rate and to achieve this target, they start buying bonds which will get more cash into the banking system. When banks have more cash, they then make more loans. Thus, businesses will take out more loans from banks at the more attractive lower interest rate and investment spending will increase. This increased investment spending becomes someone's income who then increase consumption spending. Both this increase in I and C increase AD (spending).

Increase spending, increase money supply, lower target, interest rate, bonds, cash, loans, investment spending, consumption spending

Macroeconomics Final Study Guide

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Labor productivity growth can be attributed to:

improvement in technological process.

a decline in university attendance.

an increase in population growth.

a decline in the physical capital per worker.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The most important driver for economic growth appears to be:

increases in physical capital.

increases in human capital.

technological progress.

Jeff Gordon.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following will NOT increase the productivity of labor?

technological improvements

an increase in the capital stock

improvements in education

an increase in the size of the labor force

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Workers today are more productive than workers in the past because:

workers now are physically stronger on average.

workers now have more physical capital embodying better technology to work with.

more workers now working with the same number of machines than in the past.

they are paid more.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Diminishing returns to physical capital means that when the amount of human capital per worker and the state of technology are held fixed, each increase in the amount of physical capital per worker leads to:

a smaller increase in the marginal product of labor.

a decrease in the total amount of output produced.

negative marginal product .

a constant amount of total output.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In the long run, an increase in savings will generally:

reduce the rate of economic growth.

leave the rate of economic growth unchanged.

increase the rate of economic growth.

increase consumption simultaneously.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Economies with higher growth rates tend to be those that have:

large amounts of natural resources.

a stable government that protects property rights.

high levels of government regulation.

a large defense budget.

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Macroeconomics Final Study Guide

Labor productivity growth can be attributed to:

The most important driver for economic growth appears to be:

Which of the following will NOT increase the productivity of labor?

Workers today are more productive than workers in the past because:

Diminishing returns to physical capital means that when the amount of human capital per worker and the state of technology are held fixed, each increase in the amount of physical capital per worker leads to:

In the long run, an increase in savings will generally:

Economies with higher growth rates tend to be those that have:

(Figure: Productivity) An improvement in technology with everything else remaining unchanged is shown on the diagram as:

(Figure: Productivity) An increase in physical capital per worker with everything else remaining unchanged is shown on the diagram as:

When tracking economic growth, why do economists prefer real GDP per capita over: a. real GDP?

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