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WorksheetsMacro Final Exam Clemson
Total questions: 89
Worksheet time: 45mins
Consumption (C) $6000
Government expenditure (G) $1500
Investment (I) $1,800
Exports $900
Total GDP (Y) (via expenditure approach) $9,000
Using the numbers from the table, answer what was the value of imports in this economy?
200
1200
2200
720
GNP measures the market value of all final goods and services produced by a country’s permanent residents, wherever located, within a year.
true
false
uncertain
In the Solow model, if the first unit of capital increases output by one unit, then the second unit of capital will cause output to:
increase, but by less than one unit
increase, by more than one unit
decrease
remain the same
In the Solow model, if a country's saving rate (s) increased from 10% to 12% and it was operating at its steady state before the change, we would expect to see:
a decrease in both the capital stock and output.
an increase in the capital stock only
an increase in both the capital stock and output.
None of the above
year $of computers quantity $of watches quantity
2003 $5 10 $5 10
2004 $10 12 $6 13
2005 $15 15 $8 12
In this economy composed of two goods (computers and watches), what is the Nominal GDP for the Year 2005?
$344
$321
$264
$252
year $of computers quantity $of watches quantity
2003 $5 10 $5 10
2004 $10 12 $6 13
2005 $15 15 $8 12
In this economy composed of two goods (computers and watches), what is the Real GDP for the year 2005 using 2003 as base year?
$344
$321
$175
$135
year $of computers quantity $of watches quantity
2003 $5 10 $5 10
2004 $10 12 $6 13
2005 $15 15 $8 12
In this economy composed of two goods (computers and watches), what is the Real GDP for the year 2004 using 2003 as base year?
$344
$125
$135
$120
Using the answers obtained from questions 6 (real GDP for 2005 using 2003- 135) and 7(real GDP for 2004 using 2003-125) , what is the growth rate of real GDP from 2004 to 2005?
8%
10%
8.5%
11%
If a nation doubles its real GDP per capita in 56 years, what is its annual growth rate?
1.5%
1.25%
2.5%
5%
What are the institutions that help foster the appropriate incentives for economic growth?
regulated labor and credit markets; and unions
communal property rights and absence of a profit-loss system
a dependable legal system, property rights, and competitive and open markets
production and export quotas; and supply and demand
If 2018 nominal GDP = $12 trillion and 2018 real GDP (in 2010 dollars) = $11 trillion, then the GDP deflator is equal to
1.09
10.9
109
none of the above
If 2018 nominal GDP = $12 trillion and 2018 real GDP (in 2010 dollars) = $11 trillion, then we conclude that prices in 2018 were ____ % greater than 2010 prices.
9
0.9
0.09
90
A man buys an antique desk from his neighbor. Will this transaction be included in the current year’s GDP?
yes
no
Decreases in political stability in a country will typically result in
Higher levels of real GDP per capita
Lower levels of real GDP per capita.
no impact on real GDP per capita
increase GDP per capita only at low levels of income
The sale of sugar will contribute to GDP when the buyer is an ice cream parlor across the street from campus.
true
false
uncertain
The type of growth promoted by only physical capital accumulation is known as:
catching up growth
cutting edge growth
imitation growth
none of the above
Which of the following services does not count towards the GDP?
A doctor treats a patient in a hospital.
An economics professor educates her students in a classroom
Your real estate agent sells your house for you.
none of the above
The factor income approach to calculating GDP can be summarized as the summation of
consumption, investment, government purchases, and exports.
consumption, investment, government purchases, and net exports.
consumption, investment, government purchases, and imports.
wages, interest, rent, and profit.
wages, interest, imports and rents
Sydney buys a used car from Lemon Drop Used Cars in 2015 for $3,000. Francis, a salesperson at Lemon Drop, receives $200 in commission for selling the car to Sydney. How much does this transaction contribute to 2015 GDP?
$0
$200
$3000
$3200
Because some economic activities in the underground economy go unreported, real gross domestic product is
understated
overstated
accurate
none of the above
In the long run, real GDP growth can continue because _______.
Capital stops depreciating and becomes constant
new ideas allow the factors of production to be used more efficiently.
all of the above
none of the above
Which of the following can be termed as ultimate cause of economic growth?
institutions
physical capital
human capital
none of the above
A business cycle refers to ___________ movements in _________ around ________.
short-run; unemployment; a long-term trend in real GDP
short-run; real GDP; a long-term trend in real GDP
short-run; real GDP; a long-term trend in unemployment rates
long-run; real GDP; short-run real GDP
From 1993 to 2003 the United States experienced an average growth rate of real GDP of 3.5%. Guatemala had an average growth rate of real GDP of 3.6% from 1993-2003. Can you say that Guatemala's standard of living grew more than the United States' standard of living from 1993 to 2003?
No, because we do not know the population growth rates of either country.
Yes, clearly 3.6% is greater than 3.5%.
No, because we have no information on inflation rates.
none of the above
If nominal GDP increases in 2014, we know that
the quantity of goods produced in the US increased.
the prices of goods in the US increased.
the prices of goods and/or the quantity of goods increased.
None of the above
John / Paul / George / Ringo / GDP / GDP per capita
Year 1 / 10 / 20 / 30 / 40 / 100 / 25
Year 2 / 11 / 22 / 33 / 44 / 110 / 27.5
Given the information in the above table, what can be inferred about the change in income inequality across the two years?
Income inequality has increased
Income inequality has decreased
Income inequality has remained same
In a hypothetical economy, the per-capita production function is given by y = √𝑘. Output produced (y) can either be consumed or invested (saved). The savings rate (s) is 0.27 (27% of the produced output (y)). The population growth rate (n) is 0.04 and the depreciation rate (d) is 0.05. At the steady state, I = (n + d)k where I = s*√𝑘. What is the steady state level of capital (kss)?
3
9
27
0.9
Based on your value of the steady state level of capital (kss) in the previous question, what is the corresponding steady state level of output (yss)?
3
9
27
0.9
Suppose you currently have $600 worth of music on your computer, and each year you invest (I) $300 dollars’ worth in FLAC music files. Either because the songs go out of fashion or they somehow get damaged each year you lose 5 percent (0.05) of your music catalog; that is, the depreciation rate is 5 percent (0.05). What is the steady-state value of your music catalog?
$900
$6000
$6900
$5100
The difference between nominal and real GDP is that nominal GDP is valued in _______ year prices and real GDP is valued in _______ year prices.
Base, current
Current, base
Current, Previous
None of the above
According to the quantity theory of money, a nation that increases its money supply by 15 percent should expect its price level to increase by approximately
15%
30%
45%
60%
What is the Fisher effect?
the tendency of nominal interest rates to fall with higher expected inflation rates
the tendency of nominal interest rates to rise with higher expected inflation rates
the tendency of real interest rates to fall with higher expected inflation rates
the tendency of real interest rates to rise with higher expected inflation rates
Consider countries X and Y with similar labor force and average wage of workers. In country X the minimum wage is 25 percent below the average wage, and in country Y the minimum wage is 50 percent below the average wage. As a result, the minimum wage will likely affect more workers in country ___________and create more unemployment in country ________.
Y;Y
X;X
X;Y
Y;X
The real rate of interest is the nominal rate of interest
Minus the price level.
Plus the real GDP
Plus the inflation rate
Minus the inflation rate.
When economists state that money is neutral in the long run, they mean that the:
nominal price level impacts consumers more than relative prices do.
money supply does not affect the inflation rate.
money supply does not affect real GDP growth rate.
None of the above
If spending growth (money supply growth plus the growth rate of velocity) is 7 percent and the growth rate of real GDP increases from 3 percent to 6 percent, then, the inflation rate will
increase from 4 percent to 7 percent.
increase from 10 percent to 13 percent.
decrease from 10 percent to 7 percent.
decrease from 4 percent to 1 percent.
In a small economy, the rate of money growth for the current year is 6%. The velocity of money in circulation has remained constant. Inflation is expected to be about 4% over the current year. What is the real GDP growth rate?
1%
2%
3%
4%
Melissa has been arranging travel plans at Martha’s Travel Agency for the last 18 years. Recently she has lost her job because most people now take virtual tours from Mandy’s Virtual Travel. We classify Melissa as
a discouraged worker.
frictionally unemployed.
cyclically unemployed.
structurally unemployed
The long run aggregate supply schedule (LRAS curve)
depicts a negative relationship between the growth rate of the real GDP and the inflation rate.
depicts a positive relationship between the growth rate of the real GDP and the inflation rate.
depicts a negative relationship between the growth rate of the real GDP and money growth.
none of the above
Which of the following is included in the labor force?
Discouraged Workers
Military personnel
Underemployed workers
Both a and c
all of the above
If the velocity of money is 8, the price level is 150, and real GDP is 100, then the money supply is
242
2500
1875
300
The labor force participation rate of a country tends to be higher if the government
allows retirees to work only if they give up their government pensions
allows retirees to work only when they pay higher income taxes than younger workers.
does not allow retirees to work at all
allows retirees to work and receive their government pension without penalty.
A labor union _______ wages received by workers, thus increasing the _______.
Increases; inflation rate
Decreases; unemployment rate
Increases; unemployment rate
Decreases; inflation rate
How can people who are laid off from work due to a recession eventually turn into structurally unemployed people?
by staying unemployed so long that their skills become outdated
by failing to file for unemployment benefits
by becoming discouraged workers
by receiving food stamps
A major advantage of employment protection laws is that they make labor markets more flexible and dynamic.
true
false
uncertain
2001 2021
price of gas $1.30 $3
CPI 106 210
. Based on the information given in the above table, what is the real price of gas in 2001 using 2021 dollars (approximately)?
$2.57
$5.94
$0.65
$1.50
Suppose in the next few years, a large fraction of college graduates opts to pursue full-time PhD programs (education degree) instead of accepting offers for financial analyst and consultant positions. All else equal, what is likely to happen to the labor force participation rate in those coming few years?
It will increase, due to a more educated population.
It will stay the same, because being a PhD student counts as a full-time job.
It will decrease, due to more adults in their working prime opting out of jobs
None of the above
In an economy, the labor force participation rate is 60% and the total number of people in the labor force is 1500. What is the adult population of the economy? (Hint: Use the formula for Labor force participation rate and plug in the values)
2000
2500
3000
3500
According to the New Keynesian model, wages and prices are fully flexible and adjust instantaneously when the economy experiences a shock.
true
false
uncertain
In a given year, it was found that, over the period of a month, there were 1.5 million unemployed workers who found jobs and got hired. As a result, one would expect the labor force to
Decrease by 1.5 million
Increase by 1.5 million
Remain the same.
During recessions, we observe a dramatic increase in the natural rate of unemployment
true
false
uncertain
Which of the following would shift the Solow growth (LRAS) curve to the right?
a decrease in the rate of inflation
the invention of a new computer chip that makes assembly production twice as fast
a severe drought that decreases crop production and as a result raises prices
None of the above
As a result of the rightward shift of the LRAS curve, we see
Increase in inflation rate, increase in the Solow growth rate
Decrease in inflation rate, increase in the Solow growth rate
Increase in inflation rate, decrease in the Solow growth rate
Decrease in inflation rate, decrease in the Solow growth rate
year inflation rate
1994 5%
1995 3%
1996 4%
Based on the information above, which of the years experienced deflation?
1994
1995
1996
none of the above
Inflation refers to an increase in the:
relative prices of some goods as compared to other goods.
food and energy prices.
standard of living
overall cost of some goods
None of the above
The consumer price index measures the average price of:
all final goods and services purchased by American consumers
a basket of goods and services bought by a typical American consumers.
intermediate as well as final goods.
None of the above
An increase in inflation will cause the Solow growth curve to:
Flatten and rotate counter clockwise.
shift inward (towards the left)
shift outward (towards the right)
not shift at all
flatten and rotate clockwise.
In 2014 and 2015, GDP growth decreased because of unusually cold weather in the Midwest and Northeast. In the Real Business Cycle framework, we would depict this as inward shift of the _________ which would result in ____________ inflation and ____________ GDP growth.
Solow Growth Curve, lower, lower
Dynamic Aggregate Demand Curve, lower, lower
Solow Growth Curve, higher, lower
Dynamic Aggregate Demand Curve, higher, lower
Alice, who works at the counter at the local Burger-Fila, was laid off because it was possible to replace her with machines that can take customers’ orders. She is looking into new opportunities as an accountant, but they require her to gain some new skills. We can conclude that Alice is experiencing frictional unemployment.
true
false
uncertain
An increase in the number of discouraged workers will end up raising the unemployment rate.
true
false
uncertain
In the New Keynesian model, suppose the Fed reacts to an economic shock and quickly
restores the economy to the Solow growth rate. The shock most likely
an aggregate demand shock
a real shock
a productivity shock
none of the above
Using the simple money multiplier assume that a bank keeps 12.5% of their deposits in the
form of reserves and the Fed credits Alex's bank account with $8,000, how much does the
money supply increase?
$1000
$4000
$16000
$64000
When facing a real shock, a central bank will encounter a dilemma that forces it to choose
between
too low a rate of growth or too high a rate of inflation.
too high a rate of growth or too low a rate of inflation.
too low a rate of growth or too low a rate of inflation.
too high a rate of growth or too high a rate of inflation
If the required reserve ratio is 25 percent, the money multiplier is
4
16
20
25
An open market operation occurs when:
banks loan funds to each other
banks increase the reserve ratio
the Fed buys or sells government bonds
the Fed enforces regulations on the banking industry
When the Fed wants to increase interest rates, it:
instructs banks across the nation that they must raise their rates
sells bonds in the open market
buys bonds in the open market
adjusts the fractional reserve ratio
recessions can be defined as
significant and widespread declines in real GDP per capita and falling unemployment
significant and widespread declines in nominal GDP
a significant and widespread decline in economic activity with falling real GDP, rising unemployment, falling production, and falling sales
none of the above
Quantitative easing occurs when the
Fed sells long-term securities
Fed buys long-term securities
government lowers income and other taxes
government raises income and other taxes
The Federal Reserve can influence the economy by shifting:
SRAS curve
Dynamic AD Curve
The Solow Growth Model
None of the above
The Federal Reserve is the:
Federal government’s bank
US central bank
Banker’s bank in the US
All of the above
f businesses react to a pessimistic outlook and decrease spending, the Fed can counteract
this by:
decreasing money supply to spur the economy out of the recession.
increasing money supply, which may lower real interest rates and encourage
borrowing.
increasing government expenditures to spur the economy out of the recession.
decreasing corporate taxes to encourage firms to increase their spending.
Why is monetary policy not fully effective in combating a negative supply shock?
The Fed has no tools with which to stimulate an economy after the Solow growth curve
shifts to the left.
When countering a negative supply shock, Fed action will cause deflation.
When countering a negative supply shock, Fed action will raise unemployment.
When countering a negative supply shock, Fed action will raise inflation.
What would be the likely outcome if the Federal Reserve decided to lower the required
reserve ratio?
The money multiplier would increase and M1 would shrink.
The money multiplier would increase and M1 would expand.
The money multiplier would decrease and M1 would shrink.
The money multiplier would decrease and M1 would expand.
Before the turn of the century, there was a concern about how computers would function
in the next “century”. In response to the heightened uncertainty surrounding Y2K, the
Federal Reserve
decreased its lending to banks
increased its lending to banks
decreased its lending to individuals
increased its lending to individuals
What are the three main sources of funds for the U.S. federal government?
individual income taxes, corporate income taxes, and Social Security and
Medicare taxes
interest on government bonds, corporate income taxes, Social Security and Medicare
taxes
interest on government bonds, individual income taxes, Social Security and Medicare
taxes
interest on government bonds, individual income taxes, corporate income taxes
The money you pay into Social Security goes to:
an individual account
a trust that earns interest to help pay your benefits
pay current beneficiaries
the investment fund of your choice
Which of the following accounts for the largest source of tax receipts for the U.S. federal
government?
excise tax
corporate income tax
social security tax
individual income tax
the marginal tax rate is
the tax rate paid on an additional dollar of income.
higher on people with higher incomes
the total tax payment divided by total income
a separate income tax code begun in 1969 to prevent the rich from paying income taxes.
the average tax rate is
the tax rate paid on an additional dollar of income.
higher on people with higher incomes.
the total tax payment divided by total income.
separate income tax code begun in 1969 to prevent the rich from paying income taxes.
Which of the following is NOT a function of the Federal Reserve?
serving as the lender of last resort
regulating the U.S. financial system
regulating the U.S. money supply
providing loans to small businesses
If the Federal Reserve buys government bonds, it will increase both money supply and
interest rates
true
false
uncertain
The Federal Funds market is where the Fed buys government bonds.
true
false
uncertain
Shortly after September 11, 2001, the Federal Reserve
increased its lending to banks.
decreased its lending to banks.
increased its lending to individuals.
decreased its lending to individuals.
The National Debt is the yearly difference between what the government is spending and
what the government is collecting in revenues.
true
false
uncertain
If the tax rate is 10% on income up to $30,000 and 15% on income up to 60,000, what is
the total tax payment for someone earning $55,000?
$5750
$6750
$6500
$5500
If the tax rate is 10% on income up to $30,000 and 15% on income up to 60,000, what is
the average tax rate for someone earning $55,000?
10.33%
12.27%
14.56%
21.57%
The FICA tax funds ...
Medicare
Medicaid
Social Security payments
all of the above
In an economy, suppose individuals decide to hold more cash (and less checkable deposits)
and banks decide to hold more excess reserves. In order to "offset" the economic impact,
we might expect the Federal Reserve to _________________.
require banks to charge lower interest rates on loans
increase the monetary base
increase the public's holdings of money market mutual funds
conduct an open market sale
The reserve ratio (RR) is the
amount the money supply expands with each dollar increase in reserves.
overnight lending rate from one major bank to another
ratio of deposits to reserves.
ratio of reserves to deposits.
