Macro Exam Three

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Macro Exam Three
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2014-11-11 13:41:37
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Macro Exam Three
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  1. Suppose that last week 100,000 poeple lost (or quit) their jobs and sought employment, while 10,000 new job seekers entered the labor market and began to look for work too
    All these 110,000 people are officially counted as unemployed
  2. Refer to Table 28. The labor force participation rate of Wrexington in 2005 was
    63.3%
  3. Zoeman is a college student who is not working or looking for a job. The BLS counts Zoeman as
    Neither in the labor force nor unemployed
  4. Most spells of unemployment are
    Short, but most unemployment observed at any given time is long term
  5. The avg of unemployment that an economy normally experiences is called the
    Natural rate
  6. Economists would predict that other things the same, the more generous unemployment compensation a country has,
    the longer the duration, the higher the unemployment rate
  7. The theory of efficiency wages explains why
    it may be in the best interest of firms to offer wages above the equilibrium level
  8. Natural unemployment includes
    both frictional and structural unemployment
  9. People who are unemployed because wages are, for some reasons, set above the level that brings labor supply and demand into equilibrium are best classified as
    structurally unemployed
  10. In 2002, the demand for construction workers increased and the demands of for textile and steel workers diminished. This is an example of
    frictional unemployment created by sectoral shifts
  11. The money supply is controlled by
    the Federal Reserve
  12. Which list ranks assets from the most to least liquid?
    Currency, stocks, fine art
  13. >Decisions by policymakers concerning the money supply constitutes
    monetary policy
  14. Reserve requirements are regulations concerning
    the amount of reserves banks must hold against deposits
  15. If the reserve ratio for all banks is 20%, then $100 of new reserves can generate
    $500 of new money in the economy
  16. Which of the following both decrease money supply
    make open market sales, raise the reserve requirements
  17. Discount rate
    the interest rate the federal charges the bank
  18. decisions by policymakers concerning
    monetary policy
  19. The bank's reserve ratio is (refer to table 29-2)
    7.5 percent (Reserves=$750 Deposits=$10,000)
  20. Today bank rates (runs) are
    Uncommon because of the FDIC deposit insurance
  21. The money demand depends on
    The interest rate, but not the price level
  22. Refer to figure 30-3 The relevant money-supply curve is the one labeled MS, then
    when the money market is in equilibrium, one dollar purchases about one-third of a basket of g&s
  23. M = 3000, P = 2, Y = 12000, Velocity?
    8
  24. On a given morning, Franco sold 40 pairs o shoes for a total of $80 at his shoe store.
    $80 is nominal variable. Quantity of shoes sold is a real variable
  25. During periods of inflation,
    those people whose nominal income rises fasten than the general price level are not hurt
  26. The inflation tax
    All of the above (IS an alternative to income taxes and gov borrowing, taxes most those who hold the most money, is the revenue created when the gov prints money)
  27. In the US people are required to pay taxes on
    nominal interest earnings, irrespective of their real interest earnings
  28. High and unexpected inflation has a greater cost
    for those who save than for those who borrow
  29. You put money in the bank. The increase in the dollar value of your savings
    is a nominal variable, but the change in the number of goods you can buy with your savings is a real variable
  30. According to the classical dischotomy, when the money supply doubles, which of the wfollowing doubles?
    the price level and nominal wages
  31. Unemployment rate
    100 x 
  32. Labor Force participation Rate
    100 x (labor force/adult population)
  33. Labor Force
    Unemployed + Employed
  34. Frictional unemployment
    • §occurs
    • when workers spend time searching for the jobs that best suit their skills and
    • tastes

    • §short-term
    • for most workers
  35. Structural unemployment
    • §occurs
    • when there are fewer jobs than workers

    • §usually
    • longer-term
  36. Sectoral shifts
    • are changes in the composition of demand
    • across industries or regions of the country
  37. Unemployment insurance
    • a govt program that partially protects
    • workers’ incomes when they become unemployed UI increases frictional unemployment
  38. The theory of efficiency wages
    • §Firms
    • voluntarily pay above-equilibrium wages to boost worker productivity.
  39. Monetary policy
    • §:  the setting of the money supply by
    • policymakers in the central bank
  40. Reserve Ratio
    Total Reserves over Total Desposits
  41. Money Supply
    Currency(Loans) + Deposits
  42. Money Multiplier
    1/R
  43. Leverage Ratio
    Bank Assets/Capital
  44. Capital requirement
    • a govt
    • regulation that specifies a minimum amount of capital, intended to ensure banks
    • will be able to pay off depositors and debts.
  45. Money Supply (2)
    Money Multiplier x Bank Reserves
  46. relative price
    • is the price of one good relative to
    • (divided by) another
  47. Real Wage
    w/p
  48. Monetary neutrality
    • the
    • proposition that changes
    • in the money supply do not affect real variables
  49. Velocity Formula
    Nominal GDP (Price LvelpxReal GDPy)/Money Supply
  50. Quantity Equation
    MxV=PxY
  51. Inflation Rate
    New price-Old price/Old price
  52. Fisher Effect
    Real value=real interest rate

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