Principles of Macroeconomics
Principles of Macroeconomics ECON 103
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CHM 25500 - 001
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This 5 page Class Notes was uploaded by Dr. Elda Schaden on Sunday October 25, 2015. The Class Notes belongs to ECON 103 at University of Nevada - Las Vegas taught by Robinson in Fall. Since its upload, it has received 18 views. For similar materials see /class/228644/econ-103-university-of-nevada-las-vegas in Economcs at University of Nevada - Las Vegas.
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Date Created: 10/25/15
Sample Exam TrueFalse In the Real World banks often make more loans than they are allowed with their reserves but they borrow from each other to make up the difference The Fed is the bank of the United States The Fed is divided into districts a because the Congressmen who created it wanted it based in their states b so the districts can target the unique economy of its states c to spread the distribution of the money supply across the country d to prevent one city or state from dominating the financial markets The Fed is intended to be a controlled by Congress b controlled by the President c controlled by the Secretary of the Treasury d independent of Congress and the President The Chair of the Fed today is named The interest rate that banks charge to each other for overnight loans is the rate The interest rate the Fed charges to banks for loans is the rate Of the answers to 6 and 7 which one is used the most during good economic times a 6 borrowing from other banks b 7 borrowing from the Fed c they are used about equally Today the interest rates in 6 and 7 are a less than one percent b between 1 and 2 percent c between 2 and 3 percent d more than 3 per cent Which of the following is false concerning the Federal Reserve a it was founded after the financial crisis of 1907 b it was the first federal government affiliated bank in US history c the Board of Governors are nominated by the president and approved by the Senate d Las Vegas is in the 12th district The group in the Fed that is responsible for controlling the money supply and setting the interest rates is the To increase the money supply the Fed should bonds If the Fed does that in question 12 interest rates will a rise bi fall c not change di change but we can t be sure in which direction A neo classical economist would say country A should have a higher income per capita than country B if country A has a higher than country B a capital to income ratio bi capital to labor ratio cl labor to capital ratio di income to capital ratio A neo classical economist would say country A should have a growth rate than country B if country A has a higher than country Bi ai invention rate bi population growth rate cl savings rate d exchange rate Countries that have grown dramatically since 1950 such as Japan and Korea all a invested heavily in the human capital of their populations bi shifted away from human capital and toward their physical capital stocks cl put their efforts primarily into stimulating domestic consumption to stimulate growth di used high interest rates to stimulate investment Human capital is the economist s word for a the portion of the labor force that uses capital in its work b the education training and skills of workers c the portion of the labor force that performs unskilled tasks di production when people are substituted for capital as in low income countries Modern growth theory says that the countries that grow the fastest have the most a savings bi capital cl new ideas di iPods Modern growth theory says that human capital ai is identical between workers bi should be eliminated or scaled back c is irrelevant to economic growth d is critical to economic growth TrueFalse The United Nations has maintained that the most significant roadblock to economic growth in developing nations is their treatment of women Modern growth theory would be most worried that future economic growth in the US would be slowed by a lack of savings bi poor math and science ability by US high school students cl lack of manufacturing of durable goods di both a and b about equally ei all of a b and c about equally In a demand recession Real GDP will and inflation will d fall rise In a supply recession Real GDP will and inflation will d fall rise It is the law in the United States that the government is responsible for creating a full employment b stable prices c economic growth d all of the above e none of the above TrueFalse All economists agree that the government can affect the economy where they disagree is on whether or not the government should and how it should The French term Laissez Faire means The group that believes in Laissez Faire is the a classical economists b Keynesian economists The view that Laissez Faire is the correct strategy is based on the existence of a exible interest rates b exible wages and prices c Efficiency Wage theory d capital deepening The correct fiscal policy to end a demand recession would be a cut government spending and increase taxes b cut government spending and cut taxes c increase government spending and increase taxes d increase government spending and cut taxes TrueFalse A Keynesian would argue that the government should use an activist fiscal policy to control the economy The correct fiscal policy to fight all the effects of a supply recession is a cut taxes and increase spending b cut spending and increase taxes c cut taxes and spending both d increase taxes and spending both e nothing there is no fiscal policy that will fight all the effects of a supply recession The correct monetary policy to end a demand recession would be a cut interest rates and increase money supply b cut interest rates and cut money supply c increase interest rates and increase money supply d increase interest rates and cut money supply e nothing it cannot be done The correct monetary policy to end all the effects of a supply recession would be a cut interest rates and increase money supply b cut interest rates and cut money supply c increase interest rates and increase money supply d increase interest rates and cut money supply e nothing it cannot be done A occurs when interest rates are so low lowering them no longer affects the economy The Federal Reserve believes that the key to economic prosperity is a constant money supply growth b minimizing unemployment at all times c long term price stability d maintaining low interest rates Tax cuts work a better than spending changes because the MP0 multiplies them b less well than spending changes because the a declining MPC can neutralize them c by an entirely different process than spending so they may work better or worse d only if the cut is to the highest income levels trickle down The economic growth of the 1990s was due primarily to a constant money supply growth b tight monetary policy c declining technology prices d increasing worker productivity TrueFalse In times of inflation the Fed should raise the money supply and lower interest rates TrueFalse Crowding out means that borrowing money to fight a recession may not work because it raises interest rates The appropriate way to measure the national debt is as a percentage of what Measured correctly the national debt was the largest in which year The economic effects of the national debt do not include a higher interest rates bi large federal expenditures for interest cl increased private savings by bond buyers di large transfers of interest payments to foreigners In the circular flow assuming exports and imports are balanced if the government is running a budget deficit What must be true a savings is smaller than investment bi savings is larger than investment cl investment will increase by the amount of the budget deficit di consumption will decrease by the amount of the deficit The last US president to not have a deficit in the year he left office was a Reagan bi Kennedy cl Clinton di Teddy Roosevelt Describe the Fed s philosophy for controlling the economy and how they go about achieving it Your country has a recession and inflation at the same time Explain step by step what you might do to fix this problemi
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