Macroeconomics final Thursday may 8

th
(noon)

50 multiple

M1 -4
M1 The financial assets that are the most liquid.
o consists of currency held by the nonbank public, travelers checks, demand
deposits, and other checkable deposits. Demand deposits and other
checkable deposits are transactions accounts (A checking account at a bank
or other financial institution that can be drawn on to make payments.); they
can be used to make direct payments to a third party
o CURRENCY,TRAVELERS CHECKS, NOW ACCOUNTS, ATS CHECKING
ACCOUNTS, AND DEMAND DEPOSITS
M2 M1 plus less liquid assets.
o the money supply that includes assets in somewhat less
liquid forms.
o M1 money supply plus savings deposits, small-denomination time deposits,
and balances in retail money market mutual funds.
o M1+ SAVINGS DEPOSITS AND RETAIL MONEY MARKET
MUTUAL FUNDS


Asset Amount in millions
Currency $550
Travelers' Checks $ 20
Savings Deposits $180
Eurodollar Deposits $265
NOW Accounts $185
Large-Denomination Time Deposits $620
Retail Money Market Mutual Funds $605
ATS Checking Accounts $180
Demand Deposits $210



9. What is M2 in the table above?
A) $1,295 million.
B) $2,815 million.
C) $1,145 million.
D) $1,590 million.
E) $1,930 million.


10. What is M1 in the table above?
A) $550 million.
B) $1,145 million.
C) $570 million.
D) $1,125 million.
E) $780 million.


Unemployment 4

2. The official unemployment rate is
A) the number of unemployed people divided by the number of employed people.
B) the number of unemployed people divided by the size of the labor force.
C) the number of unemployed people divided by the total size of the population.
D) the number of unemployed people divided by the size of the non-institutionalized
population.
E) the number of unemployed people divided by the size of the non-institutionalized
population, age 16 or older.

7. Structural unemployment is the result of
A) short-term movement of workers between jobs.
B) business cycle fluctuations.
C) recurring changes in the hiring needs of certain industries.
D) job search for first-time job seekers.
E) technological change or permanent changes in industry demand.
Seasonal unemployment
A product of regular, recurring changes in the hiring needs of certain
industries on a monthly or seasonal basis
Frictional unemployment
A product of the short-term movement of workers between jobs and of first-
time job seekers
Structural unemployment
A product of technological change and other changes in the structure of the
economy
Cyclical unemployment
A product of business-cycle fluctuations
During the great depression (1929-1939)
25% of the labor force was unemployed
Date Unemployment rate (%) Price of gold (per troy
ounce)
Feb 20, 2014 6.6 1,323.00
Feb 25, 2014 6.6 1,341.60
Feb 27, 2014 6.6 1,331.80
March 4, 2014 6.6 1,334.40
March 6,2014 6.6 1,350.40
March 18, 2014 6.7 1,355.50
March 20, 2014 6.7 1,328.50

AD-AS-8



Business cycle -8

BUSINESS CYCLE TROUGHS
At business cycle troughs, we observe:
1. High levels of unemployment.
2. Low levels of employment.
3. Low levels of output of the economy.
4. Low and falling input prices and prices of goods and services.
5. Low and falling interest rates
BUSINESS CYCLE PEAKS
At business cycle peaks, we observe:
Low levels of unemployment.
2. High levels of employment.
3. High levels of output of the economy.
4. High and rising input prices and prices of goods and services.
5. High and rising interest rates.


1. Since 1920, the NBER (National Bureau of Economic Research) has tracked the business
cycles in the U.S. economy that occurred between 1854 and the present time.
Approximately how many (complete) business cycles occurred in the U.S. during the
period 1854-2014?
A) 43
B) 33
C) 12
D) More than 50.
E) 32


8. A real business cycle is likely to be the result of
A) expansionary monetary policy.
B) a manipulation of the business cycle shortly before national elections.
C) shocks to the demand side of the economy.
D) discretionary fiscal policy.
E) shocks to the supply side of the economy.






Markets (tempe) -12

Demand --- price quantity

Demand ---price quantity

Supply---price quantity

Supply ---price quantity

Demand supply --- price ?? quantity

Demand supply---price ?? quantity

Demand supply---price quantity ??

Demand supply----price quantity ??






4.


Increase


What would happen in the Tempe pizza market if there occurred a technological advancement in
the production process for pizza?
A) The price of pizzas would decrease, while the quantity produced and exchanged of pizzas
would decrease.
B) The price of pizzas would increase, while the quantity produced and exchanged of pizzas
would decrease.
C) The price of pizzas would decrease, while the quantity produced and exchanged of
pizzas would increase.
D) The price of pizzas would increase, while the quantity produced and exchanged of pizzas
would increase.
E) There is not enough information provided to answer the question.

5. New federal laws requiring that margarine producers change their labeling practices have driven
up the price of margarine. The laws do not affect butter producers. Which of the following will
happen?
A) The demand for margarine will increase, and the demand for butter will increase.
B) The quantity demanded of margarine will decrease, and the demand for butter will
increase.
C) The quantity demanded of margarine will increase, and the demand for butter will increase.
D) The demand for margarine will increase, and the quantity demanded of butter will increase.
E) The quantity demanded of margarine will increase, and the quantity demanded of butter
will increase.


7. Which of the following will not cause an increase in the demand for pizza in the Tempe pizza
market?
A) Consumers' incomes rise, and pizza is a normal good.
B) Consumers expect the price of pizzas to increase in the future.
C) The prices of other Italian dinners rise.
D) New studies indicate that eating pizza reduces the chance of getting colon cancer.
E) The price of pizzas falls.


16. What would happen in the Tempe pizza market if there occurred a technological advancement in
the production process for pizza, while at the same time there occurred an increase in the price
of beer? Assume beer and pizza are complements.
A) The price of pizzas would increase, while the change in the quantity produced and
exchanged of pizzas is uncertain.
B) The quantity produced and exchanged of pizzas would decrease, while the change in the
price of pizzas is uncertain.
C) The price of pizzas would decrease, while the change in the quantity produced and
exchanged of pizzas is uncertain.
D) The quantity produced and exchanged of pizzas would increase, while the change in the
price of pizzas is uncertain.
E) The quantity produced and exchanged of pizzas would increase and the price of pizzas
would increase.


17. What happens in the Tempe pizza market during Super Bowl Weekend each year?
A) The price of pizzas decreases, while the quantity produced and exchanged of pizzas
increases.
B) The price of pizzas increases, while the quantity produced and exchanged of pizzas
decreases.
C) The price of pizzas increases, while the quantity produced and exchanged of pizzas
increases.
D) The price of pizzas decreases, while the quantity produced and exchanged of pizzas
decreases.
E) There is not enough information provided to answer the question.


25. What would happen in the Tempe pizza market if there occurred an increase in the price of
inputs used in the production process for beer? Assume beer and pizza are complements.
A) The quantity produced and exchanged of pizzas would increase, while the change in the
price of pizzas would decrease.
B) The quantity produced and exchanged of pizzas would decrease and the price of pizzas
would increase.
C) The price of pizzas would decrease, while the change in the quantity produced and
exchanged of pizzas is uncertain.
D) The price of pizzas would increase, while the change in the quantity produced and
exchanged of pizzas would increase.
E) The price of pizzas would decrease, while the change in the quantity produced and
exchange of pizzas would decrease.


18. What would happen in the Tempe pizza market if there occurred an increase in the input prices
of the resources used to produce pizza?
A) The price of pizzas would increase, while the quantity produced and exchanged of pizzas
would increase.
B) The price of pizzas would decrease, while the quantity produced and exchanged of pizzas
would decrease.
C) The price of pizzas would decrease, while the quantity produced and exchanged of pizzas
would increase.
D) The price of pizzas would increase, while the quantity produced and exchanged of
pizzas would decrease.
E) There is not enough information provided to answer the question.


19. What would happen in the Tempe pizza market if pizza and sub sandwiches are substitutes, and
there occurred a decrease in the input prices of the resources used to produce sub sandwiches?
A) The price of pizzas would decrease, while the quantity produced and exchanged of pizzas
would increase.
B) The price of pizzas would increase, while the quantity produced and exchanged of pizzas
would increase.
C) The price of pizzas would decrease, while the quantity produced and exchanged of
pizzas would decrease.
D) The price of pizzas would increase, while the quantity produced and exchanged of pizzas
would decrease.
E) There is not enough information provided to answer the question.
























GDP- (nominal/real) -2
Nominal GDP- A measure of national output based on the current prices of goods and
services
Real GDP- A measure of the quantity of final goods and services produced, obtained by
eliminating the influence of price changes from the nominal GDP statistics
12. Gross domestic product constitutes
A) the total monetary transactions in an economy.
B) the total spending in an economy.
C) the total quantitative output in an economy.
D) the current market value of all final goods and services produced in a given year
within a country's borders.
E) the current market value of all goods and services produced in a given year.
Production Data
Prices per Unit Output
Production 1995 2003 1995 2003
Vegetables
Meat
$2
$8
$4
$12
250
500
300
550



14. Refer to the table above. What is nominal GDP for 2003?
A) $7,800
B) $5,000
C) $16
D) $4,500
E) $750


15. Refer to the table above. What is the real GDP growth from 1995 to 2003 using 1995 as the
base year?
A) 73.3 percent
B) 11.1 percent
C) 13.6 percent
D) 11.4 percent
E) 55.5 percent


16. Refer to the table above. What is nominal GDP for 1995?
A) $10
B) $4,500
C) $500
D) $5,400
E) $750

17. Refer to the table above. What is the real GDP growth from 1995 to 2003 using 2003 as the
base year?
A) 11.0 percent
B) 73.3 percent
C) 13.6 percent
D) 55.5 percent
E) 11.4 percent


Bank balance sheets- 6





































Production Possibility Curve- 6




11. Consider the PPC in the figure above, describing a firm that can produce good X and good Y. This
figure indicates
A) that greater production of one type means that smaller and smaller amounts of other
products must be forgone.
B) that resources are less efficiently utilized when more of one type of product is produced.
C) that resources are perfectly adaptable to alternative uses.
D) that both types of products are equally important to society.
E) None of these


12. Consider the figure above, which describes a firm that can produce good X and good Y. Which of
the following is true?
A) The firm should produce 10 units of X and 10 units of Y.
B) The firm must produce inside the boundary.
C) The firm is able to produce 10 units of X or 10 units of Y.
D) The firm will produce 10 units of X or 10 units of Y.
E) The firm must produce outside the boundary.

0 2 4 6 8 10 12
Good X
12
10
8
6
4
2
G
o
o
d

Y
13. Consider the PPC in the figure above, which describes a firm that can produce both good X and
good Y. Which of the following is true?
A) The opportunity cost of the first unit of good X is 2 units of good Y.
B) The opportunity cost of the ninth unit of good X is 9 units of good Y.
C) The opportunity cost of the tenth unit of good X cannot be determined from the information
given.
D) The opportunity cost of one unit of good X is 10 units of good Y.
E) The opportunity cost of the first unit of good X is 1 unit of good Y.