ECN 151 Final Exam

The broadest-based price index available is the

GDP deflator.

The equation for GDP using the expenditure approach is

GDP = C + I + G + EX - IM.

If the number of people classified as unemployed is 20,000 and the number of people classified as employed is 620,000, what is the unemployment rate?

3.1%.

Krystal can write 8 poems or 2 TV commercials. Mark can write 12 poems or 4 TV commercials. For Krystal, the opportunity cost of writing one TV commercial is

4 poems.

Estimates for the natural rate of unemployment in the United States range from

4% to 6%.

Which of the following would be most likely to cause the demand for Dr. Pepper to shift from D0 to D1, to the left?

A decrease in income, assuming that Dr. Pepper is a normal good.

While targeting the deficit, which of the following is likely to occur after a positive aggregate demand shock?

AD↑ ⇒ Y↑ ⇒ T↑ ⇒ deficit↓ ⇒ G↑ ⇒ AD↑ ⇒ Y↑.

An economy is not able to develop because of a lack of capital. Which of the following strategies would you suggest this economy pursue?

Increase the political stability of the economy.

The US can produce 600 bushels of alfalfa or 300 bushels of soybeans. Canada can produce 200 bushels of alfalfa or 200 bushels of soybeans. Which of the following statements about advantage is true?

The United States has an absolute advantage in the production of soybeans and alfalfa, but a comparative advantage only in the production of alfalfa.

Which of the following is NOT a tool available to the Fed to change the supply of money?

The income tax rate.

The US can produce 600 bushels of alfalfa or 300 bushels of soybeans. Canada can produce 200 bushels of alfalfa or 200 bushels of soybeans. Which of the following statements about trade is true?

Trade will benefit both countries because the United States has a comparative advantage in the production of alfalfa and Canada has a comparative advantage in the production of soybeans.

Economic theory does not assume that people are more interested in money compared to love, wisdom, or honor:

True.

A checking deposit in a bank is considered ________ of that bank.

a liability

A price ceiling is

a maximum price sellers are allowed to charge for a good or service.

A decrease in supply means

a shift to the left of the entire supply curve.

The quantity of output supplied at different price levels is represented by the

aggregate supply curve.

An increase in aggregate demand when the economy is operating at high levels of output is likely to result in

an increase in the overall price level but little or no increase in output.

Diminishing returns to a factor implies that with capital fixed,

as labor increases, labor productivity eventually decreases.

Nominal GDP is gross domestic product measured in

current dollars.

When the Fed raises the required reserve ratio, the banks' excess reserves will initially _________ and the money supply _______.

decrease; decreases

Among the factors that determine the price of a share of stock in a firm is

expected dividends.

A firm might issue stock to

finance a capital project.

If the central bank decreases the money supply, it is conducting

monetary policy.

Convergence theory suggests that gaps in ________ tend to close over time.

national income

The transactions demand for money is

negatively related to the interest rate.

Labor productivity growth is the growth rate of output

per worker in the economy.

If unplanned inventory investment is positive, then

planned aggregate spending must be less than aggregate output.

When there is a shortage of a product in an unregulated market, there is a tendency for

price to rise.

According to the law of demand, as prices rise, ceteris paribus,

quantity demanded decreases.

The reason that opportunity costs arise is that

resources are scarce.

Positive economics is an approach to economics that

seeks to understand behavior and the operation of systems without making judgments.

An individual who cannot find a job because his or her job skills have become obsolete is an example of

structural unemployment.

A decrease in the wage rate of pizza makers will cause a movement from Point B on supply curve S2 to

supply curve S3, down.

Opportunity cost is

that which we forgo, or give up, when we make a choice or a decision.

England can produce 60 cars or 40 trucks. The US can produce 80 cars or 20 trucks. The theory of comparative advantage suggests that

the United States should export cars and import trucks.

Economists study

the actions, interactions, and consequences that emerge when people face scarcity.

If no foreign companies produce in a country, but many of the country's companies produce abroad, then

the country's GNP will tend to exceed its GDP.

Macroland is currently operating at Point A, which is within it PPF curve. The best explanation for this is that

the economy's resources are being used inefficiently.

The number of people unemployed equals

the labor force minus the number of people employed.

A "brain drain" is

the tendency of talented people in developing countries to get education in developed countries and to stay there after graduation.

Gross domestic product measures

the total income of everyone in the economy, the total spending of everyone in the economy, and the value of all output in the economy.

The government decides to impose a price ceiling on a good because it thinks the market-determined price is "too high." If it imposes the price ceiling above the equilibrium price

there will be no change to either the price or quantity in the market.

In the circular flow diagram, the different payments made by firms to households include

wages and profits.