econ exam 1

The term "market failure"

refers to the failure of a market to produce an efficient allocation of resources.

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

$1.5 trillion and $2.5 trillion, respectively

In the economy of Talikastan in 2015, consumption was $800, GDP was $2000, government purchases were $400, and investment was $600. What were Talikastan's net exports in 2015?

$200

In the United States, what has been the approximate average growth rate of output per person over the last 150 years?

2%

The Federal Reserve aims to keep inflation in the vicinity of

2%

If the consumer price index changes from 125 in September to 150 in October, what is the rate of inflation?

20.0%

If in some year nominal GDP was $10 trillion and real GDP was $4 trillion, what was the GDP deflator?

250

The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2013 . In 2012, this country's GDP deflator was

74.2

If nominal GDP is $8 trillion and real GDP is $10 trillion, then the GDP deflator is

80, and this indicates that the price level has decreased by 20 percent since the base year.

The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct?

A change in the price of Korean televisions is reflected in the U.S. consumer price index but not in the U.S. GDP deflator.

The difference bewteen measuring inflation with the PCE versus with core PCE is

Core PCE does not include food and energy prices

Economic efficiency requires certain market conditions be met. Which of the following is NOT one of those conditions

Productivity grow at 2% per year

Who of the following would be included in the Bureau of Labor Statistics' "unemployed" category?

Kevin, who is on temporary layoff

Who is not included in the labor force by the Bureau of Labor Statistics?

Lauren, who has retired and is not looking for work

Prior to the economic conditions created by the pandemic, if GDP growth were reported to be 2.5%, you would characterize this growth rate as which of the following:

Similar to recent growth rates since the Great Recession and prior to the pandemic

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was lower between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption?

The CPI was 100 in 2003, 120 in 2004, and 135 in 2005.

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

The supply of loanable funds would shift rightward and investment would increase.

If a U.S. company buys an electrical generator made in Japan by a Japanese firm, and the Japanese firm uses the payment to buy stocks issued by a U.S. company then

U.S. imports but not U.S. exports increase.

Crowding out occurs when investment declines because

a budget deficit makes interest rates rise.

When the relative price of a good decreases, consumers respond by buying

a larger quantity of that good and a smaller quantity of substitutes for that good.

If we graph the production function with capital on the horizontal axis and then there is an increase in the capital stock, this would be illustrated with the production function by

a movement along the production function from right to left

The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. Which of the following movements shows the effects of households' decision to save more?

a movement from Point C to Point F

Which of the following people would be classified as unemployed.

a restaurant worker laid off because of the pandemic

The consumer price index is

a useful measure, but not a perfect measure, of the cost of living.

An economy's institutions are a key determinant for economic growth because

all of the above

Cyclical unemployment

all of the above are correct

Insurance markets often include a mandate because

all the above

The "headline" unemployment rate (U-3) does not include which of the following

all the above

Changes in nominal GDP reflect

both changes in prices and changes in the amounts being produced.

A macroeconomist (and the Federal Reserve) trying to determine the underlying and general supply and demand pressures in the economy prefers to look at which measure of inflation

core PCE

If the marginal product of capital increases, we would expect________________ the long-run interest rate to _____________.

demand for loanable funds to increase, increase

Sustained growth cannot occur through capital accumulation alone because of

diminishing marginal product of capital

The unemployment rate is computed as the number of unemployed

divided by the labor force, all times 100.

Recessions are periods when

economic shocks take the economy below its long-run growth trend

When society gets the most it can from its scarce resources, then the outcome is called

efficient.

Government purchases include spending on goods and services by

federal, state, and local governments.

Which of the following are human capital and physical capital, respectively?

for an accounting firm: the accountants' knowledge of tax laws and computer software

Productivity is defined as the quantity of

goods and services produced from each unit of labor input.

Which of the following is not a major macroeconomic market

goods market

Since 1950, South Korea, Taiwan, Singapore, Hong Kong and Japan have

have grown from low-income to high-income economies

The demand for loanable funds is negatively related to the real interest rate because

higher real interest rates raise the cost of capital

Since the Great Recession, real interest rates have been at historically low levels. Which of the following is NOT a possible reason for the low rates?

increased internet access has created better information for consumers

If there are diminishing returns to capital, then

increases in the capital stock increase output by ever smaller amounts.

A market with too little competition between firms tends to

inefficiently allocate resources because the price to consumers tends to be higher than the most efficient price

If Congress instituted an investment tax credit

it would make buying capital goods more desirable, so the demand for loanable funds would shift.

The financial crisis generated large economic "shocks" that created the Great Recession. Which of the following was NOT part of the shocks that caused the Great Recession

monetary policy lowered interest rates dramatically

the CPI is calculated

monthly

Prior to the financial crisis that led to the Great Recession, the share of sub-prime mortgages increased from about 10% of all mortgages to nearly 25% of all mortgages. This sharp increase can be attributed to which of the following

mortgage securitization was a new financial innovation

In the long run, a higher saving rate

none of the above is correct

Production is efficient if the economy is producing at a point

on the production possibilities frontier.

Changes in the GDP deflator reflect

only changes in prices.

Changes in real GDP reflect

only changes in the amounts being produced.

Real GDP will increase

only when output increases

The production function is upward sloping because of ________________ and has a decreasing slope because of ________________________

positive marginal product, diminishing marginal product

In a closed economy, what does (Y - T - C) represent?

private saving

Which of the following represents an institution that influences an economy's productivity and economic development (check all that apply!)

property right, corruption, rule of law

The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2015.

real GDP was $1080, and the GDP deflator was 177.8.

Other things the same, higher population growth

reduces the amount of physical capital per worker, but there is some evidence that it raises the pace of technological progress.

The substitution bias in the consumer price index refers to the

substitution by consumers toward goods that have become relatively less expensive and away from goods that have become relatively more expensive.

Core CPI is​

the CPI excluding food and energy.

The CPI is a measure of the overall cost of

the goods and services purchased by a typical consumer.

Assuming diminishing returns,

the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, poor countries should grow faster than rich ones.

The percentage change in the price level from one period to another is called

the inflation rate

To calculate the CPI, the Bureau of Labor Statistics uses

the prices of some consumer goods.

One of the reasons that CDO's became popular financial investment assets was because

the ratings agencies rated CDO's as very safe

Which of the following is included in government purchases?

the services of a U.S. government attorney valued at the cost of her salary

Congress and the Federal Trade Committee are investigating Facebook the business controls a large segment of the social media market. From the standpoint of market efficiency, which of the following conditions may Facebook's size violate:

too little competition