ECON 204 Final Exam

The main difference between M1 and M2 is that: a. M1 includes some less liquid assets in addition to the assets in M2. b. M1 includes more liquid assets in addition to the assets in M2. c. M2 includes some less liquid assets in addition to the assets in M1. d. M2 includes more liquid assets in addition to the assets in M1.

c. M2 includes some less liquid assets in addition to the assets in M1.

Inflation typically arises from: a. a sufficiently rapid contraction of the money supply b. a constant money supply c. a sufficiently rapid increase in the money supply d. an increase in the price level

c. a sufficiently rapid increase in the money supply

Policymakers who control monetary and fiscal policy and want to offset the effects on output of an economic contraction caused by a shift in aggregate supply could use policy to shift a. aggregate supply to the right. b. aggregate supply to the left. c. aggregate demand to the right. d. aggregate demand to the lef

c. aggregate demand to the right

what are the four determinate of productivity that combine to contribute to the wealth of nations? a. incentives, institutions, organizations, technical knowledge b. international trading partners, natural resources, efficient govt, low taxes c. human capital, physical capital, technical knowledge, natural resources d. property rights, honest govt, political stability, a dependable legal system

c. human capital, physical capital, technical knowledge, natural resources

Which is NOT a function of the Federal Reserve? A. serving as the lender of last resort B. regulating the U.S. financial system C. regulating the U.S. money supply D. providing loans to small businesses

providing loans to small businesses

(Table: Statistics for a Small Economy) Refer to the table. The table shows some statistics for a small economy. Using only the information provided, M1 in this country amounts to: Cash held by public- 7 million small time deposits- 30 million money market mutual funds - 18 checkable deposits - 36 million currency and total reserves at the fed- 12 large time deposits 20 demand deposits- 14 million $69 million. $57 million. $43 million. $50 million. part 2 (Table: Statistics for a Small Economy) Refer to the table. The table shows some statistics for a small economy. Using only the information provided, M2 in this country amounts to: $105 million. $121 million. $137 million. $129 million.

57 million, 105 million

Jacob and Mason go to a diner that sells burritos for $5 and tacos for $3. They agree to split the lunch bill evenly. Masons choses a taco. The marginal cost to Jacob ordering a burrito instead of a taco is a. $1 b. $2 c. $2.50 d. $3

a. $1

In small economy, the money supply is $400,000 and the velocity of money is is 3. The current average price level in the economy is 1. What is the level of real GDP in this economy? a. 1.2 million b. 1.6 million c. $400,000 d. $133,333

a. 1.2 million

If the CPI increased for 215 to 218 between the years 2012 and 2013, while the nominal interest rate decreased from 3.25% to 3.80%, what is the real interest rate in 2013? a. 2.4% b. 3% c. 1.5% d. 2.95%

a. 2.4%

Which of the following is an example of crowding out? a. An increase in government spending increases interest rates, causing investment to fall. b. A decrease in private savings increases interest rates, causing investment to fall. c. A decrease in the money supply increases interest rates, causing investment to fall. d. An increase in taxes increases interest rates, causing investment to fall.

a. An increase in government spending increases interest rates, causing investment to fall

Which of the following provide benefits to society at large and not just to the person's who pursue it? a. Both technological knowledge that is a public good and communication b. technological knowledge that is a public goos, but not education c. education, but not technological knowledge that is a public goos d. neither education, nor technological knowledge that is a public good

a. Both technological knowledge that is a public good and communication

________ is a decrease in the average level of prices, whereas _______ is a reduction in the inflation rate. a. Deflation; disinflation b. disinflation; deflation c. stagflation; disinflation d. deflation; stagflation

a. Deflation; disinflation

Identify which of the following are included in the government purchases component of GDP. i. the salary paid to a state court judge ii. unemployment insurance benefits iii. the payment made by federal government for a jet fighter iv. social security payments v. a county builds a jail building a. I, iii, v b. I, ii, iii c. ii, iv, v d. all of them

a. I, iii, v

People had been expecting the price level to be 120 but it turns out to be 122. In response Robinson Tire Company increases the number of workers it employs. What could explain this? a. Both sticky price theory and sticky wage theory b. Sticky price theory but not sticky wage theory c. Sticky wage theory but not sticky price theory d. Neither sticky wage theory nor sticky price theory

a. both sticky price theory and sticky wage theory

When a union margins successfully with employers, in that industry a. both wages and unemployment rises b. wages increases and unemployment decreases c. wages decrease and unemployment increases d. both wages and unemployment decreases

a. both wages and unemployment rises

To reduce the money supply in the economy, the Fed would: a. engage in actions to increase interest rates. b. carry out open market purchases. c. carry out open market sales and lower the interest rate. d. carry out open market purchases and increase the interest rate paid on reserves.

a. engage in actions to increase interest rates.

When the Fed buys government bonds, the reserves of the banking system a. increase, so the money supply increases. b. increase, so the money supply decreases. c. decrease, so the money supply increases. d. decrease, so the money supply decreases.

a. increase, so the money supply increases

One measure of student output is number of completed math problems produced. Using pen and paper only a student can complete 50 math problems in 2 hours. Using pen and paper, and a calculator, the same student can complete 100 math problem in 2 hours. This scenario illustrates the use of which factor of production? a. physical capital b. human capital c. technological knowledge d. both human capital and technological knowledge

a. physical capital

In order to promote growth in living standards, policy makers must a. protect property rights and maintain political stability b. minimizes accumulation of factors of production c. rise taxes to increase government revenue d. promote bureaucracy

a. protect property rights and maintain political stability

A country increases its technological knowledge by engaging in: a. research and development b. education c. programs that improve workers' health d. investments in physical capital

a. research and development

Use the figure in which both Mexico and the inited stated each hove 24 units of labor. If the countries were to specialize the products they have comparative advantage in, which of the following answers identifies a trade price that both countries would find acceptable? a. six shirts for one computer < trade price < one shirt for one computer b. one shirt for one computer < trade price< six shirts for one computer c. 5 computer for one shirt < trade price < 8 computers fr one shirt d. one shirt for one computer < trade price < three shirts for one computer

a. six shirts for one computer < trade price < one shirt for one computer

Which of the following is NOT TRUE regarding the production possibilities frontier (PPF)? a. the PPF shows the combinations of goods that a country can produce given its current productivity and supply of resources b. the PPF illustrates the trade-offs that exist in the production of good c. the PPF shoes is that gains from trade are maximized when countries produce goos for which they have absolute advantage in production d. the PPF illustrates the fundamental ideas of scarcity and opportunity costs

a. the PPF shows the combinations of goods that a country can produce given its current productivity and supply of resources

The Federal Open Market Committee is a. the group at the Federal Reserve that sets purchase and sale of bonds within the monetary policy. b. in charge of tax collection. c. the group that sets the amount of government spending. d. the group that reviews income assistance programs.

a. the group at the federal reserve that sets purchase and sale of bonds within the monetary policy

The government builds a new water-treatment plant. The owner of the company that builds the plant pays her workers. The workers increase their spending. Firms from which the workers buy goods increase their output. This type of effect on spending illustrates a. the multiplier effect. b. the crowding-out effect. c. the Fisher effect. d. the wealth effect.

a. the multiplier effect

Which of the following is included in the calculation of GDP? a. the purchase of tutoring serviced from a tutor who holds citizenship outside the country but resides within the country b. the purchase if a new edition foreign textbook that was produced in a different nation c. the purchase of ink and paper supplies by a textbook company for the production of a new textbook d. the purchase of a used textbook from a friend who took the same class last year

a. the purchase of tutoring serviced from a tutor who holds citizenship outside the country but resides within the country

What do economist mean when they states that a good is scarce? a. there is a shortage of insufficient supply of the good at the existing price b. it is impossible to expand that availability c. people will want to buy more of the goos regardless of the price of the good d. the amount of the good that people would like exceeds the supply freely available from nature

a. there is a shortage of insufficient supply of the good at the existing price

If the price level in 2018 is 150 and it rises 50 165 on 2019, what is the rate of inflation between 2018 and 2019? a. 9% b. 10% c. 15% d. 165%

b. 10%

Personal consumption expenditure $600 Government consumption and gross investment 230 rent income 150 net investment expenditure 200 gross imports 30 personal savings 250 gross exports 20 depreciation 100 Gross domestic product equals: a. $1100 b. 1120 c. 1190 d. 1220

b. 1120

If real GDP per capita in a country was 14,000 in year 1 and 14,280 in year 2, then the economic growth rate for this country from year 1 to year 2 a. 1% b. 2% c. 3% d. 4%

b. 2%

Which of the following illustrates how the investment accelerator works? a. An increase in government expenditures increases the interest rate so that the Hardware Plus chain of hardware stores decides to build fewer new stores. b. An increase in government expenditures increases aggregate spending so that Hardware Plus finds it profitable to build more new stores. c. An increase in government expenditures increases the interest rate so that the demand for stocks and bonds issued by Hardware Plus increases. d. An increase in government expenditures decreases the interest rate so that Hardware Plus decides to build more new stores.

b. An increase in government expenditures increases aggregate spending so that Hardware Plus finds it profitable to build more new stores

The interest rate commercial banks charge each other on overnight loans is called the: a. prime rate. b. Federal Funds rate. c. nominal rate. d. Treasury bill rate.

b. Federal Funds rate.

Which statement best describes the cross country evidence on the relationship between a nation's GDP per capita and standard measures of societal well-being? a. GDP per capita is negatively related to measure of societal well-being b. GDP per capita is positively related to measures of societal well-being c. there is no relationship between GDP per capita and measures of societal well-being d. the relationship between GDP per capita and societal well being is positive at times and negative at times

b. GDP per capita is positively related to measures of societal well-being

Which of the following is the best example of frictional unemployment? a. John, a coal miner, was laid off because of a lack of demand for workers in his industry. He is looking into new opportunities in computer programming, but they require him to gain some new skills. b. Heather recently graduated with her doctorate in economics. She is searching for a job that matched he skills. c. Peter, a highly skilled construction worker, lost his job when the recession began. He is looking for work, but demand in construction industry is low. d. Allison, a recent high school graduate with high aspirations, is seeking a job as the CEO of a Fortune 500 company.

b. Heather recently graduated with her doctorate in economics. She is searching for a job that matched he skills.

Suppose a country increases trade restrictions, this country would be pursuing a. an inward-oriented policy, which most economist believe has beneficial effect on the economy b. an inward-oriented, which most economist believe has adverse effects on the economy c. an outward-oriented policy, which most economist believe has beneficial affects on the economy d. an outward oriented policy, which most economist believe has adverse effects on the economy

b. an inward-oriented, which most economist believe has adverse effects on the economy

Suppose there is a tax decrease. To stabilize output, the Federal Reserve could a. decrease government spending. b. decrease the money supply. c. increase government spending. d. increase the money supply.

b. decrease the money supply

The wealth effect along an aggregate-demand curve stems from the idea that a higher price level a. increases the real value of households' money holdings. b. decreases the real value of households' money holdings. c. increases the real value of the domestic currency in foreign-exchange markets. d. decreases the real value of the domestic currency in foreign-exchange markets.

b. decrease the real value of households' money holding

What basket of goods and services is used to construct the CPI? a. a random sample of all goods and services produced in the economy b. goods and service that are typically bought by consumers as determined by government surveys c. only food, clothing transportation , entertainment, and education d. the last expensive and the most expensive goods and service in each major category of consumer expenditure

b. goods and service that are typically bought by consumers as determined by government surveys

A business firm that pays for its workers to attend a technical college is increasing its: a. physical capital b. human capital c. organizational skills d. technological knowledge

b. human capital

In the circular-flow diagram, a. transfer payment flow from firm to households b. income payments flow from firms to households c. goods and services flow from households to firm d. input and outputs flow in the same direction as the flow of dollars, from household to firms

b. income payments flow from firms to households

Hyperinflation refers to the case in which inflation: a. remains relatively constant b. is extremely high c. is extremely low d. is extremely unpredictable

b. is extremely high

Inflation hurts the economy because: a. raises all prices in the economy b. it affects the airily of market preaches to send signals about the value of resources c. all can perfectly see the increase in prices d. higher prices reduce real output

b. it affects the airily of market preaches to send signals about the value of resources

The catch-up effect reverse to the idea that a.. saving will always catch-up with investment spending b. it is easier for a country to grow fast and so catch-up if it starts out relatively poor c. population eventually matched yp with increased output d. in investment is spending is low, increased savings will help investments catch-up

b. it is easier for a country to grow fast and so catch-up if it starts out relatively poor

During periods of deflation, the nominal interest rate will be a. higher than real interest rate b. lower than the real interest rate c. the same as the real interest rate d. possibly higher, lower, or the same as the real interest rate. the answer depends on how much deflation there is in the economy

b. lower than the real interest rate

The classical dichotomy and monetary neutrality are represented graphically by a. an upward-sloping long-run aggregate-supply curve. b. a vertical long-run aggregate-supply curve. c. an upward-sloping short-run aggregate-curve. d. a downward-sloping aggregate-demand curve.

b. vertical long rune aggregate supply curve

Which of the following would most likely NOT be counted in GDP? a. marijuana is legally sold for medical purposes in the state of California b. you build a shed in your back yard to store your lawn mower c. an outside company is hired to clean up a chemical spill at a local factory d. you pay a fee to snorkel with manatees while on vacation in Florida

b. you build a shed in your back yard to store your lawn mower

The CPI differs from the GDP deflator in that a. the CPI is a price index, while the GDP deflator is and inflation index b. substitution bias is not a problem with CPI, but is a problem with GDP deflator c. increase in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator d. increases in the prices of domestically produced goods that are sold to the US government show up in CPI but not the GDP deflator

c. increase in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator

The term business fluctuations refers to: a. the different stages of a product cycle. b. changes in the prices of goods and services over time. c. movement in real GDP around its long-term trend. d. the trend in real GDP over a long period of time.

c. movement in real GDP around its long-term trend

Candaice is planning her activities for a hot summer day. She would like to go to a local swimming pool and see the latest blockbuster movie but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that: a. people respond to incentives b. rational people thing at the margin c. people face trade-offs d. Improvements in efficiency sometimes come at the expense of equality

c. people face trade-offs

one problem with consumer price index stems from the fact that, overtime, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of good that have become relatively more expensive. This problem is called a. price-change neglect b. unmeasured quality change c. substitution bias d. relative bias

c. substitution bias

The supply of money increase when a. the price level falls b. the interest rate increases c. the fed makes open market purchases d. money demanded increases

c. the fed makes open market purchases

The presence of discouraged workers causes the measured unemployment rate to be: a. correctly stated b. overstated c. understated d. either overstated, understated, or correctly stated

c. understated

If the nominal interest rate is 8% while the inflation rate us 10% then the real interest rate of return for lenders is? a. 18% b. 10% c. 2% d. -2%

d. -2%

If the prices index was 90 in year 1, 100 in year 2, and 95 in year 3, then the economy experienced a. 10 inflation between year 1 and 2 and 5% inflation between years 2 and 3 b. 10% inflation between years 1 and 2 and 5% deflation between years 2 and 3 c, 11.1% inflations between years 1 and 2, and 5% inflation between years 2 and 3 d. 11.1% inflation between years 1 and 2, and 5% deflation between year 2 and 3

d. 11.1% inflation between years 1 and 2, and 5% deflation between year 2 and 3

If the reserve ratio is 4%, the money multiplier is: a. 1 b. 16 c. 20 d. 25

d. 25

When we examine data from different countries, higher money growth has consistently been associated with: a. deflation b. disinflation c. hyperinflation d. higher inflation

d. Higher inflation

which of the following is considered unemployed? a. Jason, a full-time college student, has part-time job b. Julie, a full-time housewife, was searching for a part-time position two months ago, but hasn't since c. Joe, a retired college professor, does community volunteer work d. John, on temporary layoff from his work, awaits payroll

d. John, on temporary layoff from his work, awaits payroll

In times when prices rise unexpectedly: a. producers are mode better off at the expense of consumers b. consumers are made better off at the expense of producers c. lenders are made better off at the expense of borrowers d. borrowers are made better off at the expense of the lenders

d. borrowers are made better off at the expense of the lenders

Which of the following would not be directly included in aggregate demand? a. An increase in firms' inventories b. Purchases of goods by households c. Firms' purchases of newly produced machinery d. Government's tax collections

d. government tax collection

A policy that increases the saving will: a. worked economic growth, but improve health outcome s b. worsen economic growth and health outcomes c. improve economic growth but worsen health outcomes d. improve economic growth and health outcomes

d. improve economic growth and health outcomes

The cost of changing price tags and price listing are known as a. inflation-induced tax distortions b. relative-price variability costs c. shoelether costs d. menu costs

d. menu costs

Which is NOT an example of physical capital? a. cell phones b. tractors c. computers d. money

d. money

When economist state that "money is neutral" they mean that the: a. overall price level has no effect in consumers; only relative prices do b. Overall price level has no effect in people's inflation expectations c. Monet supply does not affect inflation or nominal GDP d. money supply does not affect real GDP or unemployment

d. money supply does not affect real GDP or unemployment

According to the quantity theory of money, an increase in the money supply causes an increase in ________ over the long run a. production b. velocity of money c. real GDP d. prices

d. prices

Increase in ___ are considered the beast measures of increased living standards because they measure only increases in production a. national wealth b. consumer spending c. nominal GDP d. real GDP per capita

d. real GDP per capita

A worker repairing VHS cassette-tapes players was laid off because most of his customers have started using DVD players and streaming services. This worker is now: a. a discouraged worker b. frictionally unemployed c. cyclically unemployed d. structurally unemployed

d. structurally unemployed