ECO2013 final exams practice

The Czech Republic has a GDP of 2,000 billion koruny. The exchange rate is 20 koruny per U.S. dollar. The Czech population is 20 million. Calculate the per person GDP of the Czech Republic in U.S. dollars.

$5000

Tom put his savings into a certificate of deposit that paid a nominal interest rate of 5 percent a year. During the​ year, the CPI increased from 240 to 250. What was the real interest rate that Tom earned? Round your answer up to the second decimal. Tom earned a real interest rate of _____ percent a year. Round your answer up to the second decimal.

0.83

What was the growth rate of RGDP from 2010 to 2011? What was the population growth rate from 2010 to 2011? Using the approximation formula calculate the annual growth rate of the RGDP per person in 2011. The growth rate of RGDP from 2010 to 2011 was ______ percent. Round up your answer to the second decimal. The population growth rate from 2010 to 2011 was _____ percent. Round up your answer to the second decimal. Using the approximation formula, the annual growth rate of the RGDP per person in 2011 was ______ percent. Round up your answer to the second decimal.

1.60; 0.75; 0.85

In 2015 the GDP deflator was ________. Round up your answer to a full number. It ________ in comparison with the GDP deflator in 2014.

110; increased

The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2006. The average household spent $34 on juice and $24 on cloth in 2006 when the price of juice was $1 a bottle and the price of cloth was $6 a yard. In the current​ year, 2007, juice is $1.5 a bottle and cloth is still $6 a yard. CPI in 2007 was ______. Round up your answer to a full number. The inflation rate in 2007 was ______ percent. Round up your answer to a full number.

119; 19

The table below shows an hypothetical economy's total production and corresponding prices (you can think of them as average prices) of all the final goods and services it produced in 2015 and 2016. The base year is 2015. Calculate real GDP in 2015 and real GDP 2016. By what percentage did real GDP change in 2016? Real GDP in 2015 was____________________. Real GDP in 2016 was____________________. Real GDP in 2016 changed by _______ percent. Round up your answer to the second decimal.

12,500; 13,650; 9.20

Suppose that the base year is 2009. Real GDP in 2009 was​ $10 trillion​ (in 2009 dollars). The GDP deflator in 2013 was​ 112, and real GDP in 2013 was​ $11 trillion​ (in 2009 dollars). What was the percentage increase in RGDP between 2009 and​ 2013? By what percentage did the cost of living (as measured from GDP Deflator) rise between 2009 and​ 2013? NGDP in 2013 was _____trillion. Round up your answer to the second decimal. The percentage increase in production (RGDP) between 2009 and 2013 is _____ percent. The cost of living (as measured from GDP Deflator) between 2009 and​ 2013 rose by ______ percent.

12.32; 10; 12

The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2006. The average household spent $34 on juice and $24 on cloth in 2006 when the price of juice was $1 a bottle and the price of cloth was $6 a yard. In the current​ year, 2007, juice is $1.5 a bottle and cloth is still $6 a yard. CPI in 2007 was ______. Round up your answer to a full number. The inflation rate in 2007 was ______ percent. Round up your answer to a full number.

129; 29

RGDP in the United States has grown at an average annual rate of 3% in the last couple of decades. If the RGDP annual growth rate were to increase at 7%, calculate how many years earlier will it take the U.S. to double its RGDP when comparing a 7% growth rate to a 3% growth rate. It will take the U.S. _____ years earlier to double its RGDP. Round up your answer to the second decimal.

13.33

The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals:

14.4%

The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2015. The average household spent $34 on juice and $24 on cloth in 2015 when the price of juice was $2 a bottle and the price of cloth was $8 a yard. In the current​ year, 2016, juice is $4 a bottle and cloth is $7 a yard. CPI in 2016 was ______. Round up your answer to a full number. The inflation rate in 2016 was ______ percent. Round up your answer to a full number.

153; 53

A south sea island produces only coconuts. In 2010, the price of a coconut is $1.50 and the quantity produced is 300. In 2012, the price of a coconut is $0.50 and the quantity produced is 350. 2010 is the base year. Real GDP in 2012 is ______.

175

Combined Economic Growth & Rule of 70 In 2005 India's population growth rate was about 1.6 percent a year, while China's population growth rate was only 0.6 percent a year. In 2005 India growth rate of RGDP was about 8 percent a year, while China's growth rate of RGDP was about 9 percent a year. Using 2005 as a starting point, real GDP per person will double during _____ in India, and during _____ in China.

2016; 2014

On Coral Island in 2012, the labor force is 12,000, the unemployment rate is 10 percent, and the labor force participation rate is 60 percent. During 2013, 200 unemployed people found jobs and the working-age population increased by 1,000. The total number of people in the labor force did not change. The working-age population at the end of 2013 was _______. The unemployment rate at the end of 2013 was ________. Round up to the second decimal. The labor force participation rate at the end of 2013 was _________. Round up to the second decimal.

21,000; 8.33; 57.14

XYZ company agreed to pay its workers $40 an hour in 1999 and $43 an hour in 2001. The CPI in 1999 was 166 and in 2001 was 180. Calculate the real wage rate in each year​ (to the nearest​ cent). Did these workers really get a pay raise between 1999 and​ 2001? Round up your answer to the second decimal. The real wage rate in 1999 was $ _____. The real wage rate in 1999 was $ _____.

24.10; 23.89; did not

You deposit​ $200 in a savings account on January​ 1, and the bank pays you interest of​ $10 at the end of the year. During the​ year, the average price level rises by 2 percent. The real interest rate on your savings account is​ ______ percent.

3

Calculate the inflation rates in 2011 and 2014. Inflation rate in 2011 was ______. Inflation rate in 2014 was ______.

3.16; 1.62

First, find if a country's RGDP grows on average at 3% per year, how long will it take for this country to double its RGDP. If, instead, the RGDP average growth rate increases to 3.5%, how many years earlier will this country double its RGDP? This country will double its RGDP_____ years earlier. Round up your answer to the second decimal.

3.33

The unemployment rate was ___ percent. Round up to the second decimal. The labor force participation rate was ___ percent. Round up to the second decimal.

4.88; 62.80

In 1990, the GDP of Canada was $680 billion as measured in Canadian dollars, and the exchange rate was that $1 Canadian was worth 85 U.S. cents. In 2000, the GDP of Canada was $1000 billion as measured in Canadian dollars, and the exchange rate was that $1 Canadian was worth 69 U.S. cents. By what percentage did the GDP of Canada increase from 1990 to 2000 in Canadian dollars?

47%

Quantity Theory of Money and the Exchange Equation Suppose that potential GDP and the velocity of circulation are constant. What is the change in the price level in the long run if the quantity of money increases by 3 percent a​ year? If the quantity of money increases by 3 percent a​ year, the change in the price level is _______ percent a year in the long run. ​If the price level​ decreases, the answer is negative and must include a minus sign. If the price level​ increases, the answer is positive and must not include a plus sign.

5

The table below shows an​ hypothetical economy's total production and corresponding prices (you can think of them as average prices) of all the final goods and services it produced in 2013 and 2014. The base year is 2013. 1) Calculate real GDP in 2013 and real GDP in 2014. 2) By what percentage did real GDP change in​ 2014? Real GDP in 2013 was _______. Real GDP in 2014 was ________. Real GDP in 2014 changed by _______ percent. Round up your answer to the second decimal.

8,065; 9,424; 16.85

In 2005 China's RGDP was 7,394 billion yuan. In 2006 its RGDP was about 8,000 billion yuan. China's population was 1,306.6 million in 2005 and 1,313.1 million in 2006. Calculate China's RGDP growth rate in 2006, the growth rate of real GDP per person in 2006 (using the approximation formula), and the approximate number of years it will take for real GDP per person in China to double if the 2006 economic growth and population growth rates are maintained. China's RGDP growth rate in 2006 was _______ percent. Round up your answer to the first decimal. China's growth rate of real GDP per person in 2006 (using the approximation formula) was ______ percent. Round up your answer to the first decimal. It will take China approximately _______ years to double its real GDP per person. Round up your answer to a full number (no decimals).

8.2; 7.7; 9 years

If the price of corn in the market increases, which of the graph options below best describes what happens in the market for milk? Hint: Corn is feed for the cows, which produce milk.

A graph showing only a shift of Supply to the left.

If the price of durum flour falls, which of the graphs below best describes what happens in the market for pasta? Hint: Flour is an input/resource in the production of pasta.

A graph showing only a shift of Supply to the right.

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:

Andy's demand for beer to increase

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:

Andy's demand for beer to increase.

The reference base period is a period for which the​ _____ is defined to equal​ _____. Currently, the reference base period is​ 1982-1984.

CPI; 100

Ethiopia has a GDP of $8 billion (measured in U.S. dollars) and a population of 55 million. Costa Rica has a GDP of $9 billion (measured in U.S. dollars) and a population of 4 million. Calculate per person GDP for each country.

Ethiopia = $145.00 Costa Rica = $2250.00

The U.S. economy is at full employment when the following event​ occurs: U.S. businesses expect future profits to rise. Explain the effect of this event on the U.S. real GDP and price level using the AD-AS Diagram.

None of the above.

Two economics professors are discussing a measure of inflation over time based on a basket of goods comprised of only the consumption expenditure component of GDP. Which measure is it?

PCE Price Index

__________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.

Price floors.

The U.S. economy is at full employment when the following event​ occurs: A deep recession hits the world economy. Explain the effect of this event on the U.S. real GDP and price level using the AD-AS Diagram.

Real GDP falls, and the price level falls.

Factors That Promote Economic Growth Choose the correct statement. 1. Clearly established and enforced property rights provide people with the incentive to work and save. 2. Economic growth does not occur in the environment of an authoritarian political system. 3. The presence of an incentive system and the institutions that create it guarantees that economic growth will occur. 4. Property rights and markets create incentives for people to save and invest.

Statements 1 and 4 are correct.

Consider the market for desktop computers. Suppose using desktop computers becomes less popular. Using the theoretical concepts in the Supply and Demand model, explain the effect of this event on the quantity of desktop computers demanded and on the demand for desktop computers.

The demand for desktop computers decreases

Suppose using desktop computers becomes less popular. Using the theoretical concepts in the Supply and Demand model explain the effect of this event on the quantity of laptops demanded and on the demand for laptops.

The demand for laptops increases.

Which of the following events in the market for cell phones illustrates the law of​ demand?

The price of a cell phone falls.

Draw a supply and demand graph which illustrates the market for tea. The initial equilibrium is at point A. After one or more​ changes, the new equilibrium moves to point B, which is located to the right of point A and has the same corresponding equilibrium price than point A. You predict that the market for tea was influenced by​ _______.

a rise in household income and an increase in the number of plantations

Any given demand or supply curve is based on the ceteris paribus assumption that __________.

all else is held equal

The term "ceteris paribus" means that:

all variables except those specified are constant.

The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ______________.

business cycle

Making an economically rational decision requires

considering all prospective marginal benefits and marginal costs to oneself.

A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as:

cyclically unemployed.

If both the demand for and the supply of a good or service ​decrease, but we do not have information regarding which shift is greater than the other, then the equilibrium quantity​ ______ and the equilibrium price​ ______. Hint: You are encouraged to draw one or more graphs to help you analyze all the possible scenarios, before making a conclusion.

decreases; might​ rise, fall, or not change

The unemployment rate may overestimate the true extent of unemployment if:

either B) or C) occurs.

When the unemployment rate​ ______ the natural unemployment​ rate, real GDP​ ______ potential GDP.

equals; equals

If both the demand for and the supply of a good or service decrease, and we know that the shift in demand is greater than the shift in supply, then the equilibrium quantity and the equilibrium price Hint: You are encouraged to draw one graph to help you analyze this scenario before concluding

falls; falls

If the demand for a good or service ​increases and the supply for the same good or service decreases, and we know that the shift in demand is smaller than the shift in supply, then the equilibrium quantity​ ______ and the equilibrium price​ ______. Hint: You are encouraged to draw one graph to help you analyze this scenario before concluding.

falls; increases

If a hurricane hits Central Florida, the marginal benefit from visiting Disney World ______, which​ ______ the incentive to visit Disney World.

falls​; weakens

In order to avoid double counting, statisticians just count the __________________.

final goods and services

Differences between RGDP and NGDP Real GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices in _____ year. Nominal GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices of _____ year.

final; a base; final; that same

The extent of _______________________ will depend on how easy it is for workers to learn about alternative jobs, which may reflect the ease of communications about job prospects in the economy.

frictional unemployment

Consumption is the purchase of goods and services by:

households.

Explain how aggregate demand changes when the government increases both expenditure on goods and services and taxes by​ $100 billion after the multiplier effect has occurred. Aggregate demand​ ______ because the increase in government expenditure has​ ______ effect on aggregate demand than the effect of the tax increase.

increases; a larger

Make way for India - the next China China grows at around 9 percent a year, but its one-child policy will start to reduce the size of China's working-age population within the next 10 years. India, by contrast, will have an increasing working-age population for another generation at least. Then answer the following questions: According to classical growth theory, restricting China's population ______ economic growth. According to new growth theory, restricting China's population growth ______ economic growth.

increases; decreases

If both the demand for and the supply of a good or service ​increase, but we do not have information regarding which shift is greater than the other, then the equilibrium quantity​ ______ and the equilibrium price​ ______. Hint: You are encouraged to draw one or more graphs to help you analyze all the possible scenarios, before making any conclusions.

increases; might​ rise, fall, or not change

If a data line on a graph has a slope of zero it means there

is no relationship between x and y.

Economic models focus on _________ of the complex reality, by making assumptions, which are ________ statements that _________ the complex reality, and are not relevant for the main research questions the model is trying to address.

key aspects; false; simplify

Draw a graph showing an economy experiencing a recessionary gap. A shortened workweek is introduced. The effect on the SRAS will be a shift to the ________. The shortened workweek is followed by a cut in​ workers' pay, which has a slightly stronger impact on the SRAS. The effect on the SRAS will be a shift to the ________. The effect on aggregate demand due to the cut in​ workers' pay will be a shift to the _______. After completing your shifts, find the final​ long-run macroeconomic equilibrium point. Comparing it with the original equilibrium point, you found that RGDP ______ and the Price Level __________.

left; right; left; price level fell, but effect on RGDP is undermined

The unemployment rate may underestimate the true extent of unemployment if:

many people become discouraged and cease looking for work.

XYZ company agreed to pay its workers $40 an hour in 1999 and $43 an hour in 2001. The CPI in 1999 was 166 and in 2001 was 180. Calculate the real wage rate in each year​ (to the nearest​ cent). Did these workers really get a pay raise between 1999 and​ 2001? Round up your answer to the second decimal. The real wage rate in 1999 was $ _____. The real wage rate in 2001 was $ _____.

maybe, 24.10; 23.89; did not not, 24.10; 25.00; did

Choose the statement that is incorrect.

not, The underground economy includes production that uses labor that is paid less than the minimum wage.

If you decided to attend class today it must be that:

not, none of the above

Band of America cutbacks may hit 40,000 (Source: The Wall Street Journal, Sept 9, 2011) Bank of America officials have discussed eliminating about 40,000 positions during the first wave of arestructuring, as it closes branches in response to the growth of online banking. Postal Service targets 220,000 job cuts (Source: The Wall Street Journal, Aug 12, 2011) The U.S. Postal Service plans to reduce its workforce by 220,000 jobs to remedy its dire financial situation. The Postal Service, financed mostly by postage, has been struggling as a result of the economic slowdown. Answer the following question. The cut in employment at Bank of America results in ______ unemployment. The cut in employment at the U.S. Postal Service results in ______ unemployment.

not, structural; structural

Alex loses his job as a road construction worker and cannot find another position with equivalent pay and benefits. As a result, he is still checking the want ads and reporting to the unemployment office on a weekly basis. He is considered to be:

not, underemployed.

The Fed Fights a Recession via Expansionary Monetary Policy Suppose the United States economy is experiencing a recession and real GDP is less than potential GDP. Describe the actions taken by the Fed to restore full employment. The New York Fed conducts an open market​ ______ to ​ ______ the supply of money in circulation,​ the Money Supply curve shifts ______ the interest rate​ ______, the Investment Demand _______ and AD shifts ___________. Ultimately, RGDP gap ________, at the cost of ______ Price Level.

purchase; increase; right; decreases; increases; right; decreases; higher

The difference between nominal GDP and real GDP is:

real GDP adjusts for inflation

After performing all the needed calculations fill in the blanks: The price level ________ in 2015 in comparison with 2014. The inflation rate ___________in 2015 in comparison with 2014.

rose; decreased

Calculate the annual growth rate of NGDP and RGDP in 2005. Calculate the annual growth rate of NGDP and RGDP in 2015. The annual growth rate of NGDP in 2015 was ______ than in 2005, and the annual growth rate of RGDP in 2015 was ______ than in 2005.

small; smaller

Calculate the annual growth rate of NGDP and RGDP in 2005. Calculate the annual growth rate of NGDP and RGDP in 2015. The annual growth rate of NGDP in 2015 was ______ than in 2005, and the annual growth rate of RGDP in 2015 was ______ than in 2005.

smaller; smaller

Calculate the annual growth rate of NGDP and RGDP in 2010. Calculate the annual growth rate of NGDP and RGDP in 2013. The annual growth rate of NGDP in 2013 was ______ than in 2010, while the annual growth rate of RGDP in 2013 was ______ than in 2010.

smaller; smaller

If the price is above the equilibrium level, then the quantity supplied will exceed the quantity demanded. This is known as _____________.

surplus (on the supply side).

Marginal benefit is

the additional benefit to a consumer from consuming one more unit of a good or service

Mark decides to spend an hour playing basketball rather than studying. His opportunity cost is:

the benefit to his grades from studying for an hour

Marginal benefit is

the extra benefit of adding one unit

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:

the price of Good Y will increase

In the case of an inverse relationship between two variables, all else remaining constant

the value of the two variables will move in opposite directions from each other.

Making an economically rational decision requires

weighing prospective marginal benefits and marginal costs to oneself.

The house that Jeanne inherited from her mother can rent for $2000/month, but Jeanne decides to allow her brother to stay there for only half of that. This decision carried with it a

zero monetary cost but a $1000 per month opportunity cost.