1. Review for
Exam 3
2016

2. *Unemployment that results because it take time for workers to search for the jobs that best suit their tastes and skills is called what?
You have a choice among structural unemployment, frictional unemployment,
and cyclical unemployment.

3. *Suppose a bank has a 10 percent reserve requirement, $5,000 in deposits, and has lent all it has.  What is the dollar value of the required reserves and how much has been lent?
Assets
Liabilities
$5000 cash
$5000 Demand Deposits
If you can’t figure out the answer, click on the link below
and go to reserve requirement.

4. *What three tools can the FED use to increase the money supply?

5. *What is the difference between the Federal Funds Rate and the Discount Rate?
Click on Discount Rate on the link below.

6. *What monetary and fiscal policies shift the aggregate demand curve to the left or to the right?  (two questions)
Fiscal Policy
Monetary Policy
Lesson on Fiscal Policy and Stabilization Policies:  
Lesson on Stabilization Policies of Monetary Policy:  

7. *What happens to price and output if the LRAS curve shifts to the left or to the right?  (Monday's Lecture)
Shift the LRAS and figure out what happens to PL and RGDP

8. *What shifts the SRAS curve to the left or to the right?  
Find the answer inside Monday’s lecture.

9. *If the expenditure multiplier is 10, then what is the Marginal Propensity to Consume (MPC) and the Marginal Propensity to Save (MPS)?  (Monday's lecture)
Lesson on Expenditure Multiplier:   
Activity on Expenditure Multiplier:   

10. *What is the definition of the civilian labor force?

11. *Know the difference between an employed person and an unemployed person.

12. *If the economy is at full employment, what type of unemployment exists?
What type of unemployment occurs at Yf?

13. *Who benefits and who is hurt by inflation?  (two questions)

14. *What does the LRAS indicate?

15. *If aggregate demand shifts to the right or to the left, what happens to PL, RGDP, employment, and unemployment?
Play with the graph and figure this out.

16. *If the economy is in long-run equilibrium and the aggregate demand expands quickly without corresponding growth in the economy.
So if AD expands quickly without corresponding growth in the economy,
then the demand curve moves up the LRAS curve. (hint)

17. *Using the model of aggregate demand/supply, what happens to real GDP, the price level, and unemployment when consumption spending C increases?
You should know this answer by now.

18. *Stagflation most likely results from:
Look up the term stagflation and show it on this graph.

19. *Equilibrium real GDP is below full employment and the government lowers household taxes. What happens to RGDP, output, PL, employment, unemployment?
Use the graph to answer this question.

20. *Which of the following would NOT be an example of contractionary fiscal policy?
Contractionary policy happens with both fiscal and monetary policy.
There are two tools of fiscal policy and three tools of monetary policy.

21. *If a bank has $1000 in checking deposits and the bank is required to reserve $100, what is the reserve ratio? How much does the bank have in excess reserves?
Assets
Liabilities
$1000 cash
$1000 Demand Deposits
If you can’t figure out the answer, click on the link below
and go to reserve requirement.

22. *Which is NOT a way that the FED can affect the money supply?
If you know the three tools of the federal reserve,
you should be able to answer this question.

23. The economy is “overheating” or also known as “over full employment
*The economy is “overheating” or also known as “over full employment.” To move the economy closer to full employment, the central bank decides that the federal funds rate must be increased. The appropriate open market operation is to ___, which ___ the money supply, ___ aggregate demand, and fights ___.
Can’t help you with this question. Sorry.

24.  *Given that in a particular country the:
Population is 100
Given the number of individuals who are employed
Given the number of individuals who are considered officially unemployed
Given the number of individuals who are non-institutionalized civilians over the age of 16
Then the labor force participation rate is:

25. Assume that an economy is in a recession
* Assume that an economy is in a recession. Which policy is likely to create more problems in the short-run?
Know your fiscal and monetary policies that can correct a recessionary gap.

26. * What is the complete definition of Real Gross Domestic Product

27. Assume that an economy is in a recession
* Assume that an economy is in a recession. Which fiscal or monetary policy is likely to create more problems in the short-run?
Know your fiscal and monetary policies that can correct a recessionary gap,
but then know which of these policies could create problems.

28. * Imagine that businesses in general believe that the economy is likely to head into recession and so they reduce investment (capital purchases). Their reaction would initially shift which curve?
You should be able to figure this out.

29. * The Federal Reserve Bank requires all banks to keep 10 percent of transaction deposits as required reserves. What are the required reserves for LizNedko Community Bank when given the Demand Deposits?
Scroll down to the 3rd activity,
Balance Sheet of Commercial Bank
Interactive.

30. * Given the following data, what is this country’s gross domestic product?
Consumption - $22
Investment - $8
Government Purchases - $12
Exports - $5
Imports - $8

31. * Know what happens when an economy is on the horizontal segment of the aggregate supply curve and there is a slight increase in AD
Go ahead and answer this question by using the graph above.

32. * If the nominal interest rate is ten percent and the inflation rate is three percent, then the real interest rate is: 
Nominal Interest Rates vs. Real Interest Rates:  

33. * If $100 of new autonomous private investment were added to an economy with a marginal propensity to consume of .80, what is the maximum increase in Real GDP?

34. *What is supply side economics?
When aggregate supply (both long run and short run) move to the right.

35. *Which of the following is most likely to indicate the possibility of a recession occurring?  (increase or decrease in inventories)
Inventory not moving (increasing inventories)
Inventory moving out (decreasing inventories)

36. *A graph that captures the GDP or the GDP growth rate of a country at various times throughout a period of years is a _____________.

37. *What are the four parts of a business cycle?

38. *What is the largest component of aggregate demand?
Lecture notes or video or find it on the Internet.

39. *A change in input prices will affect which curve?
You should know the components of AD and what
shifts the SRAS and the LRAS

40. *Which combination of fiscal and monetary policies is most likely to have the greatest impact fighting inflation successfully?
Lesson on Fiscal Policy and Stabilization Policies:  
Lesson on Stabilization Policies of Monetary Policy:  

41. *Which of the following would not affect long-run aggregate supply?
The same variables that shift the PP curve, shift LRAS.