Econ 202 Midterm

Econ 202 quiz 1. Econ 202 quiz 2. Econ 202 quiz 3. Econ 202 quiz 4. Econ 202 quiz 5. Econ 2302 econ/2302 econ2302 final exam. Econ 101 week 4 midterm exam. Gdp: total market value of all final goods and services produced in country during given period of time. Trillion 2nd quarter of 2017, annually, previous. ECON 202 Week 3 Class Notes. These are the notes from lecture on MW February 6 - 10 2017. The stars next to the material means that the information is going to be on the exam and you should know it! The green highlight indicates an important definition!

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  • ECON 202 MIDTERM 1 STUDY GUIDE.docx. Exercise 05 2013-04-16 w solutions to exercise 5 University of Oregon Economics 202 ECON 202 - Spring 2013 Register Now exercise 05 2013-04-16 w solutions to exercise 5. Chapter5 University of Oregon.
  • ECON 202 Midterm 3. LAS Econ 2019, SF native. ECON 202 Midterm 3. Found out I bombed it! Now have a 69% average on the tests. What should I do? For the record, I know all of the shit. Its just the way that Schultz presents it on exams that gets me. Also, I am only a first semester freshman.

Exam 1 Study Guide


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Econ 202 Quizlet Midterm

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Exam 1 Study Guide

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MACROECONOMICS


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6
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Study Guide
School:
North Dakota State University
Course:
Econ 202 - Principles of Macroeconomics

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ECON 202 1st Edition Exam 1 Study Guide Chapter 1 4 Chapter 1 Individual Choice The 12 Principles 1 Choices are necessary because resources are scarce Resource anything that can be used to produce something else Scarce in short supply a resource is scarce when there is not enough of the resource available to satisfy all the various ways a society wants to use it 2 The true cost of something is its opportunity cost Opportunity cost What you must give up in order to get something 3 How much is a decision at the margin 1 Trade off Comparison of the costs and the benefits of doing something a Example eating a candy bar cost and benefit Marginal decision decision made at the margin of an activity about whether to do a bit more or a bit less of that activity Marginal analysis the study of marginal decisions Ex taxing or banning soda because of its negative health 4 People usually respond to incentives exploiting opportunities to make themselves better off Interaction and Individual Choice Specialization 5 There are gains from trade Trade allows us all to consume more than we otherwise could Specialization the situation in which each person specializes in the task that he or she is good at performing 6 Markets move toward equilibrium Equilibrium An economic situation in which no individual would be better off doing something different 7 Resources should be used efficiently to achieve society s goals Efficient taking all opportunities to make some people better off without making other people worse off Equity a condition in which everyone gets his or her fair share There are many definitions of equity Equity and efficiency are often at odds 8 Markets usually lead to efficiency People normally take opportunities for mutual gain 9 When markets don t achieve efficiency government intervention can improve society s welfare Sometimes markets fail and need correction Economy Wide Interactions 10 One person s spending is another person s income During recessions a drop in business spending leads to Less income less spending and further drops in business spending layoffs and rising unemployment 11 Overall spending sometimes gets out of line with the economy s productive capacity 12 Government policies can change spending Chapter 2 Supply and Demand and PPF A competitive market has many buyers and sellers of the same good or service none of whom can influence the price The supply and demand model is a model of how a competitive market behaves Demand represents the behavior of buyers o A demand curve shows the quantity o Demanded at various prices o The quantity demanded the quantity that buyers are willing and able to purchase at a particular price a change in demand does NOT equal a change in quantity demanded The Law of demand a higher price for a good or service leads people to demand a smaller quantity Understanding Shifts of the Demand Curve Important demand shifters 1 Changes in the prices of related goods or services 2 Changes in income 3 Changes in tastes 4 Changes in expectations 5 Changes in the number of consumers Changes in Price of Related Goods Substitutes Two goods are substitutes if a decrease in the price of one leads to a decrease in demand for the other or vice versa What happens to the demand for travel in Hawaii if the perceived safety cost of traveling to Mexico increases Changes in Price of Related Goods Complements Two goods are complements if a decrease in the price of one good leads to an increase in the demand for the other or vice versa Consumers often have to buy goods together An increase in price of gasoline will decrease the demand for SUVs Changes in Income The effect of changes in income on demand depends on the nature of the good in question o A normal good Demand increases when income increases and vice versa o An inferior good Demand decreases when income increases and vice versa Change in taste Taste in preferences are subjective and vary among consumers Seasonal changes or fads have a predictable effects on demand What happens to demand for boots in October Change in expectation If consumers have a choice about the timing of a purchase they buy according to expectations Buyers adjust current spending in anticipation of the direction of future prices in order to obtain the lowest possible price o If prices for Xbox 360 consoles are expected to drop right before Christmas what will happen to sales during November Change in number of customers As the population of an economy changes the number of buyers of a particular good also changes thereby changing its demand o What happens to the demand for diapers in Russia as birth rates drop Supply Supply represents the behavior of sellers A supply curve shows the quantity supplied at various prices The quantity supplied is the quantity that producers are willing and able to sell at a particular price Understanding Shifts of the Supply Curve Important supply shifters include changes in 1 input prices 2 the prices of related goods or services 3 technology 4 expectations 5 the number of producers Chapter 3 Interference in markets has consequences I Price controls a Price controls legal restrictions on how high or low a market price may go There are two main types b Price ceiling a maximum price sellers are allowed to charge for a good or service usually set BELOW equilibrium c Price floor a minimum price buyers are required to pay for a good or service usually set ABOVE equilibrium II How Price Ceilings Cause Inefficiency a Price ceilings cause predictable side effects i Inefficiently low quantity ii Inefficient allocation to customers iii Wasted resources iv Inefficiently low quality v Black markets III IV V VI Inefficiently Low Quantity a When prices are held below the market price shortages are created b The lower the controlled price relative to the market equilibrium price the larger the shortage Inefficient Allocation to Customers a Price controls distort signals that would help the goods get allocated their highest valued uses b Consumers who value a good most don t necessarily get it So producers have no incentive to supply the good to the right people first i As a result goods are misallocated Wasted Resources a Price controls that create shortages lead to bribery and wasteful lines b Shortages not all buyers will be able to purchase the good c Normally buyers would compete with each other by offering a higher price d If price is not allowed to rise buyers must compete in other ways waiting in line illegal

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ECON 202 Midterm 2

economic fluctuations, movements of GDP away from potential output, and periods in which real GDP grows too slow or too fast.

A period when economic growth is negative for at least six months is called a:

Which of the following economic measures is/are procyclical?

investment spending, consumption, and price of stocks

Which of the following economic measures is countercyclical?

Real business cycle theory emphasizes the role of:

technology shocks as a cause of economic fluctuations

Suppose consumer tastes and preferences shift from desire to ski to snowboarding. If skis and snowboards are produced by different firms, then firms that produce snowboards will:

experience a rise in prices, inducing them to increase production and the number of workers

Which of the following is a problem with the price system that can lead to a break down in the coordination of economic activity.

Prices for industrial commodities such as steel rods or machine tools are

economic activity will not be coordinated efficiently

Workers often have --- contracts and so their wages are ---

The short run in macroeconomics is the period in which

prices do not change (or at least do not change much) and demand determines output

Aggregate demand refers to the relationship between

the price level and the quantity of real GDP demanded

Which of the following does NOT shift the aggregate demand curve

Which of the following cause an increase in aggregate demand?

Which of the following would cause a decrease in aggregate demand?

Assuming long-run classical aggregate supply curve, a decrease in the money supply results in --- in output and --- in prices

Assuming long-run aggregate supply curve, an increase in Japanese GDP results in --- in output and --- in prices

Which of the following factors influence the position of the long-run classical aggregate demand curve?

Assuming short-run Keynesian aggregate supply curve, an increase in government spending results in --- in output and --- in prices

Which of the following curves reflects the idea that in the short-run, prices are sticky and firms adjust production to meet demand?

Assuming short-run Keynesian aggregate supply curve, an increase in the money supply results in --- in output and --- in prices

Assuming short-run Keynesian aggregate supply curve, a decrease in German GDP results in --- in output and --- in prices

The level of output determined by the intersection of the short-run Keynesian aggregate supply curve and the aggregate demand curve:

may be above, below, or equal to full employment output.

Assuming short-run Keynesian aggregate supply curve, a massive crop failure results in --- in output and --- in prices

Using fig. 9.2 and economy-wide decrease in manufacturing costs is represented by a movement from points:

policies taken to move the economy closer to potential output

work without the need doe decisions from Congress or the White House

Increases in government spending and/or decreases in taxes will --- aggregate demand

If the government wants to reduce unemployment, government spending should be __________ and/or taxes should be __________.

he basic idea of the fiscal multiplier is that an initial increase in government spending will have a:

Congress and the President typically use what kind of spending to conduct fiscal policies that affect the economy?

Who sets the rules for 'entitlements' when spending is authorized under this category?

What is the largest single component of federal revenue?

The largest category of discretionary federal spending is:

In a situation where the government is operating on a budget surplus, it can reduce its overall debt by _________.

If the budget were balanced and the economy entered a period of recession, what kind of budget would likely result?

Budget deficits tend to be procyclical for all the following reasons except:

the selling of government securities to pay for the deficit spurs private investment spending

Although running a budget deficit during a recession should not be a source of concern, running a budget deficit when there is no recession is a bad policy due to:

According to Keynes, in the short-run the level of output is determined by

In the Keynesian cross model, the 45 degree diagonal line represents the

In a simple demand-side model with only consumers and firms, each of which demands a fixes amount of goods, equilibrium occurs where the C+I line

If the demand for goods and services is less than output, then there will be

If firms experience an unplanned increase in inventories, they are likely to

In fig. 10.1 if y0 is the level of output, unplanned inventories will

If the consumption function is C=50+.75y then the marginal propensity to consume is:

If the consumption function is C=50+.75y, then the level of autonomous consumption is

Decrease in consumer confidence shifts the consumption function in fig. 10.2 from

consumers' perceptions of change in their incomes and changes in tax rates

In figure 10.1, if y2 is the level of output, firms will --- production

In fig. 10.3, a decrease in the marginal propensity to save is represented by a change in the consumption function from

C1 to C2

MPC= 1-MPS, so when MPS is smaller the slope is steeper

Let C =100 + 0.6y and I = 150. Then the equilibrium level of income y* is

Let C =100 + 0.6y and I = 150. At the equilibrium level of income y*, the level of savings is

In the simple Keynesian cross model with no government or foreign sectors, the value of the multiplier is defined as

Let C =25 + 0.75y and I = 50. Assume no government or foreign sectors. If investment increases by 150, then the value of the multiplier is

The multiplier --- as autonomous consumption increases

The following questions are based upon the Keynesian model below.

C = 50 + 0.8(y -T)

I = 200

G = 150

T = 100

What is the equilibrium level of output

The following questions are based upon the Keynesian model below.

C = 50 + 0.8(y -T)

I = 200

G = 150

T = 100

What is the value of the government spending multiplier?

The following questions are based upon the Keynesian model below.

C = 50 + 0.8(y -T)

I = 200

G = 150

T = 100

If taxes decrease by 50, then the change in output is

Suppose the MPC for the US is 0.7. If the policy makers wish to increase GDP by $50 billion, how much does government spending have to increase to meet this target?

$15 million

multiplier = 1/(1-.7) = 3.3

change in y* divided by ? is equal to 3.3 and solve

Refer to fig. 10.4. Which diagram illustrates the effect if an increase in the income tax rate?

Refer to fig. 10.4. Which diagram illustrates the effect if an increase in government spending?

Which of the following is an example od an automatic stabilizer?

more unemployment benefits are paid during a recession

The following questions are based upon the Keynesian model below.

C = 100 + 0.75(y -T)

I = 100

G = 150

T = 100

X = 75

M = 0.10y

What is the marginal propensity to consume?

A decrease in the level of imports --- the demand for goods and services produced in the US

The following questions are based upon the Keynesian model below.

C = 100 + 0.75(y -T)

I = 100

G = 150

T = 100

X = 75

M = 0.10y

What is the value of the government spending multiplier?

The following questions are based upon the Keynesian model below.

C = 100 + 0.75(y -T)

I = 100

G = 150

T = 100

X = 75

M = 0.10y

What is the equilibrium level of output?

The following questions are based upon the Keynesian model below.

C = 100 + 0.75(y -T)

I = 100

G = 150

T = 100

X = 75

M = 0.10y

If the exports increase by 100 (X=175), what is the new equilibrium level of output?

The following questions are based upon the Keynesian model below.

C = 100 + 0.75(y -T)

I = 100

G = 150

T = 100

X = 75

M = 0.10y

If the marginal propensity to import increases to 0.2 (M = 0.20) what is the new level of equilibrium output?

real interest rate = nominal interest rate - inflation

firms that receive funds from savers and channel them to investors

Firms are likely to --- investment spending when they believe that growth in real GDP will ---

The model in which downturn in real GDP leads to a sharp fall in investment, which further reduces GDP through the multiplier, is known as the --- model

the interest rate on a loan will be --- as its risk --- and its maturity ---

Compared to a 30 yr. US Treasury, the interest rate on a 30 year fixed mortgage will be --- because it is a loan with ---

If the nominal interest rate is 8% and the inflation rate is 5% then the real rate of interest is

If you have $200 to invest at a nominal interest rate of 8% and the inflation rate is 3%, then the real return on your investment is

If you have $300 and the inflation rate is 6%, in order to earn a real return of $18 on your investment, the nominal interest rate must be

interest rates quoted in the market minus the expected inflation rate

If the nominal interest rate is 7%, the expected real interest rate is 3%, and the inflation rate for the past year was 3%, then the expected inflation rate is --- the past inflation rate

greater than, nom. - expected is greater than 3 (past year's rate)

Referring to table 11.2 , if the nominal interest rate is 9% and there is no inflation, which investment should be undertaken?

Referring to table 11.2 , if the nominal interest rate is 3% and there is no inflation, which investment should be undertaken?

Table 11.3 represents all the investments available to the economy, the nominal interest rate is 10 % and there is no inflation, what will(should) be the level of investment in the economy?

As the real interest rate ---, the real investment spending ---

increases, decreases and decrease, increases

inverse relationship

Referring to fig. 11.1, if the real interest rate is 5% then the level of investment is

emphasizes the role of real interest rates and taxes

Financial intermediaries are institutions that facilitate the movement of funds from savers to investors because they

reduce costs of negotiating transactions, monitor investments, reduce risks, and provide liquidity

investing in a large number of projects with independent return, and expertise

Insurance companies can reduce risk by accepting premiums from:

the government guarantees banks' accounts up t0 $100,000

The supply of money in the economy is determined primarily by

the banking system and the actions of the Federal Reserve

In the --- increases in the supply of money will ---

short run, raise total demand and output and long run, lead to higher prices

anything that is regularly used in economic transactions or exchanges

Money solves the dilemma of a double coincidence of wants by serving as a

When money is used to express the value of goods and services it is functioning as a

As inflation rates increase, money becomes less useful as a

Suppose after a semester ends, you take a trip to an island. Upon arriving you make a stop at a market and notice everyone is carrying around jars of small turtles. You also notice the person in line in front of you just paid for a bottle of rum with 6 turtles, and someone else a straw hat with 2 turtles. You can conclude that

the little turtles are serving the function of money

Checking accounts that pay interest are included in the

it is not clear how citizens use money market accounts

From the point of view of a commercial bank, a --- is a(n) ---

Given the following information:

Assets $2,500

Liabilities $2,100

A bank's net worth is

The fraction of deposits that banks are required by law to hold and not lend out are called

Suppose that while vacationing in Monaco, you won 25,000 French fans which is = to $5,000. When you return to the US you deposit $5,000 into your checking account. The effect (assuming the required reserve ratio is 20%) is

to increase your bank's liabilities by $5,000, increase your bank's excess reserves by $4,000, lead to a multiple expansion in the money supply(checking account balances) by $25,000, and increase your bank's required reserves by $1,000.

Meg digs out $100 from under her bed and deposits it into a bank. As a result of this single transaction, M1 has

not changed, because the money was already in circulation even if she didn't know it

Given the information about Acme Bank

Bank Deposits $30,000

Loans $20,000

Reserves $5,000

Reserve Requirement 10%

Econ 202 Exam 1

Acme bank is holding --- in excess reserves

Midterm

Suppose a bank has $200,000 in deposits, a required reserve ratio of 5%, and a bank reserve of $12,000. The bank can make new loans in the amount of

Suppose a bank has $2 million in deposits, a required reserve ration of 15%, and bank reserves of $320,000. The bank can make new loans in the amount of

none of the listed answers, $20,000 is the correct amount

Suppose Barry deposits $10, 000 in his bank. If the reserve ratio is 20%, this will lead to an increase of --- in his checking account balances

Suppose Kirk deposits $5,000 in his bank. If the reserve requirement is 25%, this will lead to an increase of --- in M1

If the banking system has a required reserve ratio of 5%, then the money multiplier will be

bank customers prefer to hold a bigger amount of their money as cash and banks prefer to lend out 95% of their excess reserves instead of 100%

Which of the following is responsible for buying government securities in order to influence monetary policies?

decreases the total amount of reserves in the banking system

If the Fed sells $7.5 million of US bonds and the reserve requirement is 25%, M1 will eventually

none of the listed answers, it will decrease by $30 million

If the Fed by $60,000 of US bonds and the reserve requirement is 10%, M1 will eventually

In the federal funds market --- will barrow or lend reserves to ---

increases the cost of reserves borrowed fro the Fed

In practice, the Federal Reserve keeps the discount rate close to the --- rate in order to avoid large swings in borrowed reserves by banks

members of the Federal Reserve Board of Governors are

appointed to 14 yr. terms, confirmed by the Senate, members of the Federal Open Market Committee, and serve in Washington DC

Which of the following is responsible for decisions on monetary policy?

the members of the Board of Governors and all the Presidents of the 12 Federal Reserve banks

The president of the --- Federal reserve Bank is always a member of the FOMC

In the short run when prices don't have enough time to change, the Federal reserve

can influence the level of interest rates in the economy

Econ 202 midterm 2

Generally when the Federal Reserve lowers interest rate, investment spending --- and GDP ---

Decreased investment spending in the economy would be a possible result of

The transactions demand for money comes mostly from the fact that

the return that could have been earned from holding wealth in other assets

a leftward movement up along the demand for money curve

The demand for money curve has shifted left. This may be the result of

a decrease ub the level of prices and a decrease in real GDP

Speculative demand for money is the demand for money that arises

If the quantity of money demanded = the quantity of money supplied then the

If the Federal Reserve conducts an open market sale then the

Based on the model of the money market, when prices in the economy increase, the equilibrium interest rate should

Based on the model of the money market, when real income decreases, the equilibrium interest rate should

Based on the model of the money market, when the risk associated with holding other assets increases, the equilibrium interest rate should

If a bond were to pay off one yr. from now for $200 and the interest rate is 10%, that is the price of the bond (rounded)?

Ifa bond were to pay off one yr. later for $200 and was purchases for 4182, what is the interest rate

Actions by the Federal reserve to influence the level of GDP are known as

A decrease in the money supply and increase in GDP are consistent with

none of the listed answers,

An increase in the money supply should increase output

An increase in the money supply and a decrease in GDP are consistent with

increase in the reserve requirement or conduct an open market sale

the rate at which one currency trades for another currency

Higher US interest rates cause the value of the dollar to

rise, making US goods relatively more expensive on world markets

An open market purchase by the Fed causes the value of the dollar to

The depreciation of the dollar will make US goods --- to foreigners and make exports --- for US residents

Policies taken to move the economy closer to potential output are called