econ exam 3

annual per capita gross domestic product in the United States is approximately

60,000

In some countries it is time consuming and costly to establish ownership of property. Reforms to reduce these costs would likely

raise GDP and productivity

In the work-leisure model, suppose consumption and leisure are both normal goods. The income effect of a wage increase results in the worker choosing to

work less than before

Queen City Sausage stock is selling at $40 per share, it has retained earnings of $1.00 per share, and dividends of $1.00 per share. What is the price-earnings ratio and what is the dividend yield?

20, 2.5%

Which of the following represents a problem in measuring inequality?

A normal life-cycle pattern causes inequality in the income distribution but may not reflect inequality in living standards.

Who among the following individuals most likely experiences the largest nonmonetary reward as a supplier of labor? Assume all of the four individuals have the same level of education and work the same number of hours per week.

Albert, who prefers not to socialize and works at home by himself

Two bonds have the same term to maturity. The first was issued by a state government and the probability of default is believed to be low. The other was issued by a corporation and the probability of default is believed to be high. Which of the following is correct?

Because of the differences in tax treatment and credit risk, the corporate bond should have the higher interest rate.

Suppose you know the value of the consumer price index (CPI) in year 1 as well as the inflation rate in year 2. Which of the following equations is valid for the CPI in year 2?

CPIinyear2= [(CPIinyear1xInflationrateinyear2)+(100xCPIinyear1]/100

Which of the following is not an example of efficiency wages

More productive workers are paid more to reflect their higher output.

Which of the following events could explain the decrease in interest rates together with an increase in investment?

The government reduced the tax rate on savings

The U.S. government increases its budget deficit, but at the same time Congress eliminates an investment tax credit. Which of the following is correct?

The interest rate may increase or decrease; investment will decrease.

Assume most athletic apparel bought by U.S. consumers is imported from other nations. If all else is constant, an increase in the price of foreign-made athletic apparel will cause the

U.S. consumer price index to increase more than the GDP deflator.

When an American household purchases a bottle of Italian wine for $100

U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does not change.

GA wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in Connecticut that uses workers who live in Connecticut. As a result,

U.S. investment and GDP increase by the same amount, but U.S. GNP increases by a smaller amount.

The substitution effect of a price change is depicted by

a movement along the original indifference curve to the point where the marginal rate of substitution equals the price ratio for the new set of prices.

Utilitarian

aims for happiness of the society

Investment tax credits

basically a federal tax incentive for business investment

When looking at a graph of nominal and real interest rates you notice the graph for nominal rates and the graph for real rates cross each other many times. From this you conclude

consumer prices sometimes rose and sometimes fell in the time frame represented on the graph

The substitution effect of an increase in the interest rate will result in an increase in

consumption when old and an increase in savings when young.

Libertarians

do not care as much about the wide income gap

The statement "a rising tide lifts all boats" illustrates how

economic growth reduces the number of people with income levels below the poverty line.

If over a short time a large number of teenagers become old enough to find employment and a much smaller number of people retire, then productivity

falls but real GDP per person rises.

the likelihood that a country will experience a relatively-high level of income is greater if the country

has natural seaports

Suppose the price of good X falls. As a result, the quantity demanded for good X increases for a particular consumer. For this consumer, the substitution effect induced the consumer to purchase more X while the income effect induced the consumer to purchase less X. We can infer that X is an

inferior good

Effective minimum wage laws create a surplus of labor

means unemployment

An increase in capital will increase real GDP per person

more in a poor country than a rich country. The increase in real GDP per person will be the same whether the addition to capital is from domestic or foreign investment.

Libertarians are

opposed to redistribution income

If over a short time there is an increase in the number of people retired and a decrease in the number of people working, then productivity

rises but real GDP per person falls.

substitution effect

shifts along the indifference curve

Income effect

shifts to a different indifference curve

transitory income

short lived income

Critics of the welfare system argue

that it breaks up families

Suppose that some people report themselves as unemployed when, in fact, they are working in the underground economy. If these persons were counted as employed, then

the unemployment rate would be lower, and the labor-force participation rate would be unaffected.

If there is a surplus of loanable funds

then neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.

An economy's production function has the constant-returns-to-scale property. If the economy's labor force doubled and all other inputs stayed the same, then real GDP

would increase but not by exactly 50 or 100%