Reference no: EM131123118
Part 1
1. List the determinants of aggregate demand in the textbox below. (Check lesson 3.03 for help.)
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2. List the determinants of short-run aggregate supply in the textbox below. (Check lesson 3.02 for help.)
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3. For the question below, write an explanation of the short-run effect (including the determinant of AD or AS that is causing the shift, the line that shifts (AD or AS), the direction of the shift (left or right), and the impact on output and price level (increase or decrease) and submit a properly drawn and labeled aggregate demand and aggregate supply graph for the scenario. Make sure your name and assignment number are written on each page of graphs you submit. All text must be written in the text box provided.
An economic crisis increases the degree of excess capacity in a nation.
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4. For the question below, write an explanation of the short-run effect (including the determinant of AD or AS that is causing the shift, the line that shifts (AD or AS), the direction of the shift (left or right), and the impact on output and price level (increase or decrease) and submit
a properly drawn and labeled aggregate demand and aggregate supply graph for the scenario. Make sure your name and assignment number are written on each page of graphs you submit. All text must be written in the text box provided.
Congress passes a sweeping health care reform bill that provides free medical insurance for all Americans. Once the President signs it into law, the government will provide every American with a policy that will pay up to 80% of every medical bill a patient incurs. This change does not impact consumer income.
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5. P1Y1 in this economy reflects that there is
an inflationary gap with high employment.
an inflationary gap with low employment.
a recessionary gap with high employment.
a recessionary gap with low employment.
long-run equilibrium in this economy.
6. At P1Y1, if taxes decrease then consumer spending will
decrease and AD will shift right to long-run equilibrium.
decrease and AD will shift left to long-run equilibrium.
increase and AD will shift right to long-run equilibrium.
increase and AD will shift left to long-run equilibrium.
cannot be determine with information given.
7. If workers are more educated, then short-run aggregate supply will
increase and output and price level will increase as well.
decrease and output and price level will decrease as well.
increase and output will increase but price level will decrease.
increase and output will decrease but price level will increase.
decrease and output will decrease but price level will increase.
8. If Congress increases personal and business taxes to decrease the national debt, then
output and price level will increase.
output will increase and price level will be indeterminate.
output will be indeterminate but price level will decrease.
output will be indeterminate but price level will increase.
output will decrease but price level will be indeterminate.
9. If the degree of excess capacity decreases at the same time nominal interest rates decrease, in the short-run we can expect that
aggregate demand will shift right increasing output and employment.
aggregate demand will shift left increasing output and employment.
aggregate demand will shift right decreasing output and employment.
aggregate supply will shift left decreasing output and employment.
aggregate supply will shift right increasing output and employment.
10. If imports to the United States increased, what would most likely happen to price level and real gross domestic product?
Price Level / Real GDP
Increase / Increase
Increase / Decrease
Indeterminate / Increase
Decrease / Decrease
Decrease / Increase
11. For the question below, write an explanation of the short-run effect (including the determinant of AD or AS that is causing the shift, the line that shifts (AD or AS), the direction of the shift (left or right), and the impact on output and price level (increase or decrease) and submit a properly drawn and labeled aggregate demand and aggregate supply graph for the scenario. Make sure your name and assignment number are written on each page of graphs you submit. All text must be written in the text box provided.
The election of a new Congress causes consumer confidence to soar as expectations of future economic growth are solid.
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12. For the question below, write an explanation of the short-run effect (including the determinant of AD or AS that is causing the shift, the line that shifts (AD or AS), the direction of the shift (left or right), and the impact on output and price level (increase or decrease) and submit a properly drawn and labeled aggregate demand and aggregate supply graph for the scenario. Make sure your name and assignment number are written on each page of graphs you submit. All text must be written in the text box provided.
Congress votes to cut spending on the space program.
Part 2
1. Suppose real GDP per capita in Canada is $25,000 and its annual growth rate is 7%. Real GDP per capita for Canada will double in
5 years.
7 years.
10 years.
20 years.
an indeterminate amount of years with the information given.
2. Economic growth would be reflected by a
rightward shift of LRAS and a leftward shift of the PPC.
rightward shift of LRAS and the PPC.
leftward shift of LRAS and the PPC.
leftward shift of LRAS and a rightward shift of the PPC.
rightward shift of SRAS or AD.
3. In the long-run, a decrease in investment spending would mean
real capital will decrease causing economic growth to decrease.
real capital will decrease causing economic growth to increase.
financial capital will decrease causing economic growth to decrease.
financial capital will increase causing economic growth to increase.
human capital will increase causing economic growth to increase.
4. When looking at the graphs above, which accurately reflects a decrease in economic growth?
V
W
X
Y
Z
5. Economic growth can be stimulated by
a decrease in the cost of energy.
a decrease in productivity.
an increase in deficit spending.
a decrease in the factors of production.
a decrease in the money supply.
6. An increase in savings in the United States would
decrease the rate of economic growth as consumer spending decreases.
increase economic growth as capital investment increases.
decrease the rate of economic growth as resources go unused.
increase economic growth as investment spending increases.
decrease economic growth due to the decrease in GDP.
7. Suppose real GDP per capita in Ireland is $50,000 and its annual growth rate is 5%. Real GDP per capita for Ireland will double in
27.7 years.
14 years.
10 years.
7.1 years.
1.98 years.
8. Suppose real GDP per capita in Belize is $14,000 and its annual growth rate is 7% thanks to a booming tourism industry. During the same time period, the real GDP per capita of Honduras is $4,000 and its annual growth rate is 5%. How much more quickly will Belize double its real GDP than Honduras?
4 years
5 years
7 years
10 years
14 years
9. Economic growth is measured annually using the
change in RGDP for the year.
change in productivity for the year.
percentage change of RGDP for the year.
change in capital investment for the year.
Percentage change in capital investment for the year.
10. After a report that saving in the United States is at an all time low, jeopardizing many family's retirement plans, Americans begin to save in an effort to ensure they are not the ones without the ability to retire. Explain the impact on economic growth.
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11. Twice as many trained workers are permitted to immigrate to the United States as in the past. Explain the impact on economic growth.
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12. A flood destroys the manufacturing and farming ability of a majority of Midwestern towns. Explain the impact on economic growth.
Part 3
1. What is the problem in the economy illustrated in the graph above?
Stagflation
Inflation
Unemployment
Expansion
Economic growth
2. Assume that MPC for an economy is 0.5. If the government decreased personal income taxes and expenditures by the same amount, then
aggregate demand will decrease.
aggregate demand will increase.
aggregate demand will not change.
short-run aggregate supply will decrease.
short-run aggregate supply will increase.
3. Which of the following are beliefs of Keynesian economists?
1. The economy is stable in the long-run
2. The economy is never at full employment of resources
3. Prices and wages are downwardly inflexible
I only
I and II only
I and III only
II and III only
I, II, and III
4. All of the following will cause a change in consumer spending except
taxes.
government expenditures.
disposable income.
savings interest rates.
expectations of future income.
5. If real GDP is $200 billion, full employment GDP is $400 billion, and the marginal propensity to consume is 0.75, then Congress should
decrease taxes by $50 billion.
decrease taxes by $100 billion.
increase taxes by an amount slightly more than $50 billion.
increase government purchases by spending by $50 billion.
increase government purchases by spending by $100 billion.
6. If real GDP is $570 billion, full employment GDP is $300 billion, and the marginal propensity to consume is 0.9, then Congress should
increase taxes by $20 billion.
increase taxes by $30 billion.
increase taxes by $270 billion.
increase spending by $27 billion.
decrease spending by $270 billion.
7. A change in personal income taxes impact gross domestic product through a change in
government spending.
investment spending.
autonomous consumer spending.
disposable income.
net exports.
8. If the government enacts the proper policy to solve the problem in the economy illustrated in the graph above, then the
AD curve would shift left.
SRAS curve would shift left.
AD curve would shift right.
SRAS curve would shift right.
LRAS curve would shift left.
9. The government of an economy in equilibrium above potential output should
increase taxes to close the inflationary gap.
decrease taxes to close the inflationary gap.
increase spending to close the inflationary gap.
decrease spending to close the recessionary gap.
decrease taxes to close the recessionary gap.
10. If real GDP is $500 billion, full employment GDP is $200 billion, and the marginal propensity to consume is 0.75, then Congress should
increase government spending by $100 billion.
decrease taxes by $100 billion.
increase government spending by $75 billion.
increases taxes by $100 billion.
increase government spending by $300 billion.
11. If real GDP is $500 billion, full employment GDP is $300 billion, and the marginal propensity to consume is 0.9, then Congress should
increase taxes by exactly $20 billion.
increase taxes by $200 billion.
decrease spending by $20 billion.
increase spending by $20 billion.
decrease spending by $200 billion.
12. What is the problem in the economy illustrated in the graph above?
Stagflation
Inflation
Unemployment
Contraction
Economic growth
13. If the government enacts the proper fiscal policy to solve the problem in the economy illustrated in the graph above, then the
AD curve would shift left.
SRAS curve would shift left.
AD curve would shift right.
SRAS curve would shift right.
LRAS curve would shift left.
14. Which of the following correctly describes the cause and effect chain for a decrease in personal income taxes?
A decrease in taxes will decrease disposable income which increases consumer spending and shifts AD right.
A decrease in taxes will increase disposable income which increases consumer spending and shifts AD left.
A decrease in taxes will decrease disposable income which decreases consumer spending and shifts AD right.
A decrease in taxes will decrease disposable income which increases consumer spending and shifts AD left.
A decrease in taxes will increase disposable income which increases consumer spending and shifts AD right.
15. Which of the following correctly describes the cause and effect chain for an increase in personal income taxes?
An increase in taxes will decrease disposable income which increases consumer spending and shifts AD right.
An increase in taxes will increase disposable income which increases consumer spending and shifts AD left.
An increase in taxes will decrease disposable income which decreases consumer spending and shifts AD right.
An increase in taxes will decrease disposable income which decreases consumer spending and shifts AD left.
An increase in taxes will increase disposable income which increases consumer spending and shifts AD right.
Part 4
1) Which curve shifts in each of these headlines?
a) Investment spending decreases
b) Cuts in tax rates increase consumer incentive to save
c) Study shows workforce more educated
d) Unions grow more aggressive; wage rates increase
e) New survey shows consumer confidence jumps
1. A nation has a comparative advantage when:
I. it produces the good at a lower opportunity cost than another nation.
II. it produces the good using fewer resources than the other nation.
III. it produces the good more efficiently than another nation.
I and III only.
II only.
I only.
II and III only.
I, II, and III.
2. When people's wants exceed their economic resources, then _________ exists.
opportunity costs
scarcity
specialization
comparative advantage
absolute advantage
3. Brian quit his job because he only wants to work on weekdays. Brian could be considered
cyclically unemployed.
frictionally unemployed.
structurally unemployed.
not employed.
none of the above since he is looking for his first job.
4. We can be sure the economy is not operating at full employment if it is operating at
point A only.
point B only.
point C only.
point A and B only.
point B and C only.
5. If the degree of excess capacity decreases at the same time nominal interest rates decrease, in the short run we can expect that
aggregate demand will
shift left increasing output and employment.
shift right increasing output and employment.
shift right decreasing output and employment.
shift left decreasing output and employment.
not change as this is a determinant of aggregate supply.
6. The formula to calculate the expenditure multiplier is
1/MPC.
1/1-MPS.
1/1-MPC.
MPC/MPS.
MPS/MPC.
7. If the government institutes an effective price ceiling on potato chips, then there will be a
decrease in demand for and an increase in supply of potato chips.
decrease in supply of potato chips.
decrease in quantity supplied of potato chips.
decrease in demand for potato chips.
decrease in quantity demanded for potato chips.
8. In the circular flow diagram
businesses buy goods and services from the product market.
households buy goods and services from the product market.
businesses provide goods and services to the factor market.
households buy goods and services from the factor market.
businesses buy goods and services from the factor market.
9. If nominal GDP was $400 billion in 2009 and real GDP was $320 billion, then the CPI was approximately
1.25.
12.5.
80.
125.
800.
10. A decrease in savings in the United States would
decrease investment causing economic growth to decrease.
decrease capital investment causing economic growth to decrease.
increase investment causing economic growth to decrease.
increase capital investment causing economic growth to decrease.
increase capital investment causing economic growth to increase.
11. Lindsay can either wash two dogs or clean four windows in two hours. Amy can either wash two dogs or clean ten windows in two hours. Based on this information, which of the following is true?
Lindsay has an absolute advantage in washing dogs, while Amy has an absolute advantage in cleaning windows.
Lindsay has a comparative advantage in washing dogs, while Amy has a comparative advantage in cleaning windows.
Lindsay has a comparative advantage in cleaning windows, while Amy has a comparative advantage in washing dogs.
Lindsay has a comparative advantage in the production of both goods.
Amy has a comparative advantage in the production of both goods
12. Laptop LCD TV
Jamestown 1 2
Millersville 3 4
The table above reflects the number of laptops or high definition LCD televisions using the same resources for Jamestown and Millersville. The opportunity cost for Millersville to produce one LCD television is
3/4 laptop.
4/3 laptop.
2 laptops.
3 laptops.
4 laptops.
13. If Shadowland's workers can produce 6 lunch boxes or 18 sandwich containers per hour, then the opportunity cost of 1 lunch box is
3 sandwich containers.
1/4 of a sandwich container.
6 sandwich containers.
½ of a sandwich container.
17 sandwich containers.
14. Which of the following is included in the U.S. financial account?
transactions involving trade between nations.
interest payments for overseas stock purchases.
net transfer payments.
foreign aid payments.
foreign stock purchases by Americans.
15. Which of the following is counted in the U.S. financial account?
a car that was imported from Korea
wheat that was exported to Somalia
a factory site purchased in Ireland
$2 million in U.S. aid to rebuild schools in Afghanistan
$500 in interest earned on Swedish bonds
16. Which of the following would decrease the U.S. financial account?
a new home purchased in Iceland by an American businessman.
a sailboat purchased by a wealthy American entrepreneur.
$500 in interest earned on foreign stocks.
the purchase of $500 of American bonds by a German investor.
the purchase of a foreign car by an American diplomat living in Spain.
17. If actions of the Nepalese government caused a shortage of domestic currency, then the government fixed exchange rate would be
above the market equilibrium and dollars per rupee will tend to rise.
above the market equilibrium and dollars per rupee will tend to fall.
below the market equilibrium and dollars per rupee will tend to rise.
below the market equilibrium and dollars per rupee will tend to fall.
below the market equilibrium and rupee per dollars will tend to rise.
18. The U.S. dollar is currently trading for 1.31 Bulgarian levas (BGN) per dollar. If the exchange rate adjusts to 1.5 Bulgarian levas per 1 U.S. dollar then
the BGN has appreciated.
the U.S. dollar has appreciated.
the U.S. dollar has depreciated.
both the BGN and the U.S. dollar have appreciated.
both the BGN and the U.S. dollar have depreciated.
19. If the demand for the Cyprus pound increases relative to the U.S. dollar, then the
U.S. dollar will appreciate.
supply of U.S. dollars would decrease.
quantity supplied of Cypriot pound would decrease.
Cypriot pound would appreciate.
Cypriot pound will depreciate.
20. When the U.S. dollar appreciates against the Maltese liri, then
American tourists who travel to Malta will benefit from the new exchange rate.
tourists from Malta will benefit from the new exchange rate.
Maltese businessmen will purchase more American intermediate goods.
American businessmen will purchase more American intermediate goods.
there will be a decrease in demand for the U.S. dollar.
21. If the U.S. dollar price of the Danish krone increases, then
the U.S. dollar has appreciated.
the Danish krone has depreciated.
the Danish krone has appreciated.
both the Danish krone and the U.S. dollar have appreciated.
both the Danish krone and the U.S. dollar have depreciated.
22. Suppose disposable income increases more in South Africa than it does in the United States. What is the short-run impact of this change in disposable income on U.S. net exports, the value of the U.S. dollar, and the value of the South African rand?
Net Exports / U.S. dollar / South African rand
Increase / Appreciate / Depreciate
Decrease / Appreciate / Depreciate
Increase / Depreciate / Appreciate
Decrease / Depreciate / Appreciate
Increase / Depreciate / Depreciate
23. Suppose Hondurans began purchasing real assets in the United States. How would this impact the foreign exchange market for the lempira and the dollar price of the lempira?
Demand for lempira / Dollar price of lempira
Increase / Increase
Increase / Decrease
Decrease / Decrease
Decrease / Increase
Decrease / Not Change
24. If the demand for the Costa Rican colone increases relative to the U.S. dollar, then
the U.S. dollar will appreciate.
the U.S. dollar will depreciate.
the quantity supplied of Costa Rican colones would decrease.
the quantity supplied of U.S. dollars would decrease.
the Costa Rican colone will depreciate.
25. If the U.S. experiences an increase in exports, ceteris paribus, then
the U.S. dollar will appreciate because of increased supply of U.S. dollars by foreign nations.
the U.S. dollar will depreciate because of increased supply of U.S. dollars by foreign nations.
the U.S. dollar will appreciate because of increased demand for U.S. dollars by foreign nations.
the U.S. dollar will depreciate because of increased demand for U.S. dollars by foreign nations.
the U.S. dollar will depreciate and the U.S. will import more foreign goods.
26. Suppose Czech businessmen began purchasing American properties. How would this impact the foreign exchange market for the koruna and the dollar? How would the changing value of the dollar impact American exports?
U.S. dollar / Czech koruna / Exports
Appreciate / Appreciate / Decrease
Appreciate / Depreciate / Decrease
Appreciate / Depreciate / Increase
Depreciate / Appreciate / Decrease
Depreciate / Appreciate / Increase
27. What would be the short-run impact of a tariff on all computers imported to the United States?
A higher standard of living
An increase in American production of computers
An increase in foreign production of computers
A decrease in the price of computers
A more efficient use of resources
28. If the United States trades with other nations according to comparative advantage, then
1. Americans would enjoy a higher standard of living.
2. there would be a loss of jobs in import industries.
3. there would be a greater variety of goods.
I only
II only
III only
I and II only
I and III only
29. Suppose the legislature of Louisville voted to impose a protective tariff on chicken. Which of the following would be true in the short-run?
1. There will be a decrease in chicken production in Louisville.
2. There will be a decrease in supply of chicken in Louisville.
3. There will be an increase in chicken production by foreign nations.
I only.
II only.
III only.
I and III only.
II and III only.
30. ABC Corporation argues that it needs a tariff on bread baskets so that it can grow large enough to compete with foreign producers. This is an argument for
an infant industry.
job protection.
national security.
environmental standards.
protection from dumping.
|
Assets
|
Liabilities
|
|
Required Reserves
|
$40,000
|
Checkable Deposits
|
$200,000
|
|
Excess Reserves
|
$25,000
|
|
|
|
Government Bonds
|
$100,000
|
|
|
|
Loans
|
$30,000
|
|
|
|
Building & Fixtures
|
$15,000
|
Owner's Equity
|
$10,000
|
1. Calculate the required reserve ratio. (Show your work)
2. Assume that Pam wants to borrow money to pay for a new car from Sharpeland Bank.
a. What is the maximum amount that Sharpeland Bank can loan out if it wants to keep all of its bonds?
b. What is the maximum amount that the banking system can create given the balance sheet above?
3. Assume instead that Michael withdraws $10,000 in cash from his checking account at Sharpeland.
a. By how much will Sharpeland Bank's reserves change based on Michael's withdrawal? (Be specific.)
b. What is the immediate effect of the withdrawal on the M1 measure of the money supply? Explain.
c. As a result of the withdrawal, what is the new value of excess reserves for Sharpeland Bank based on the reserve requirement from part (a)?
the interviewee's age
• the interviewee's political party affiliation
• explain how the interviewee feels about America having a deficit
• explain the interviewee's beliefs regarding the impact the deficit has on the level of investment spending
• explain how the interviewee feels about America having a large national debt
• explain the interviewee's thoughts about whether the federal government should actively work to prevent recessions/depressions and if so, how should it do that
• explain his or her solutions for solving the national debt
• explain your reaction to the interview, based upon what you have learned thus far in the course (minimum of 200 words for this segment)
If the national unemployment rises to 10%, what fiscal policy would be used to fix the problem? Explain how output, price level, employment and interest rates are impacted?
2. If inflation rises to 9%, what monetary policy would be used to fix the problem? Explain how output, price level, employment and interest rates are impacted?