ECN 201;PRINCIPLES OF MACROECONOMICS;DR.

STEIN;spring 2012 Use the following answers to respond to the next five questions: a)frictional unemployment b)structural unemployment c)cyclical unemployment d)natural unemployment e)none of these is correct 1. 2. 3. 4. 5. 6. Individuals who are temporarily between jobs represent this type of unemployment. The kind of unemployment we saw during the Great Depression. The type of unemployment that results when an unemployed person does not have the skills required for available jobs The type of unemployment associated with discouraged workers. The kind of unemployment we see when the economy is at full employment. Consider an economy made up of 130 people, 94 of whom hold jobs and 6 of whom have no jobs but are actively seeking work. The unemployment rate is: a)4.6% b)6% c)9.4% d)14% e)25% f)none of these The concept of inventories which is a part of gross private domestic investment is [Pick One: (a)change in business inventories (b)total inventories (C) both (a) and (b) (d)none of the above]. The total market value of all intermediate goods produced in the economy during a one year period and valued at current year prices is called [pick one: (a)nominal gdp (b)real gdp (c)natural gdp (d)none of the above] Total exports is equal to [pick one: (a) net exports plus imports (b)net exports minus imports (c)net exports divided by imports (d)none of these] Nominal gdp equals real gdp [(a)multiplied by, (b)divided by (c)plus] a price index known as the GDP DEFLATOR.

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11. The estimated market value of do- it-you self work on ones own home [pick one: (a) is (b) is not ] part of gross domestic product. Use the following data to answer the next two questions: YEAR 2000 2010 BEER P Q $4 8 $10 4 PIZZA P Q $7 4 $15 2 BOOKS P Q $40 15 $7 20

Assume that 2000 is the base year. Compute: 12. The gdp deflator for 2000 [Pick one (a) 100.00 (b)31.82 (c) none of these] 13. Real gdp for 2010 [Pick one: [a)$830 (b) $245 (c)210 (d)none of these] Consider the following: Income: $150 $151 Consumption: $100.00 $100.90 14. What is the marginal propensity to consume (mpc)? [pick one: a)0.90 b)100/150 c)150/151 d)none of these ]

15. The tax multiplier in the simple fixed price Keynesian model in the question above is (a)-3 (b)-4 (c)-9 (d)-10 16. In the simple Keynesian fixed price model, if the mpc is .90, a $100 rise in government spending on final goods and services will (a)raise real gdp by $500 {b) lower real gdp by $500 (c)raise real gdp by $1000 (d) lower real gdp by $1000

(e)raise real gdp by $900 (f)lower real gdp by $900

17. In the simple Keynesian model, if real gdp is $900 short of its natural level (aka full employment level), by how much should taxes be cut to return real gdp to its natural level if the marginal propensity to consume is 0.50 [pick one: (a)$90 (b)$450 (c)$900 (d)$1000 (e) none of these] 18. a $15000 price tag on a new car is an example of money as a (a)medium of exchange (b)unit of account) (c)store of value (d)standard of deferred payments 19. Which of the following is NOT a part of the M2 definition of the money supply? a)paper currency b)coins c)checking account deposits d)cash in a banks vault 20. Open market operations are directed by a)the U.S. Treasury b)private commercial banks c)the Board of Governors of the Federal Reserve d)the FOMC (Federal Open Market Committee) 21. If the money supply is equal to $200, and nominal gdp is $800, then velocity is a)4 b)8 c)0.33 d)3 e)10 22. If the real rate of interest is 5% and the inflation rate is 3% what is the nominal rate of interest? a)2% b)8% c)-2% d)15%

23. According to the Keynesian school, the Great Depression was caused by a)a collapse in investment spending b)a decline in the money supply c)a rise in the price of oil d)a collapse in consumer confidence

24. The Keynesian mechanism for the transmission of a change in the money supply to economic activity (Let M=money supply Y = real gdp I=investment r=interest rate) a)M to I to r to Y b)M to r to I to Y c)M to r to Y to I d)r to M to I to Y

25. The most important of the Fed's tools of monetary policy is a)reserve requirement changes b)open market operations c)discount rate policy d)moral suasion 26. The Board of Governors of the U.S. Federal Reserve System has a)7 members with 14 year terms b)14 members who serve 7 year terms C)12 members who serve 4 year terms d)4 members who serve 12 year terms e)none of these

27. When the Fed conducts open market operations, it buys already outstanding government securities. Where does it get the money for the purchase? a)from the U.S. Treasury b)from the Congress c)from the U.S. Mint d)it writes a check on itself