ECON FINAL
In the calculation of the CPI, tea is given greater weight than beer if
consumers buy more tea than beer
A national chain of grocery stores wants to finance the construction of several new stores. The firm has limited internal funds, so it likely will
demand the required funds by selling bonds.
Another term for factors of production is
inputs
In the circular-flow diagram, which of the following items represents a payment for a factor of production?
interest
The introduction of the video cassette recorder in the 1970s exemplified a problem in measuring the cost of living; that problem is the problem of
introduction of new goods.
When public saving falls by $2b and private saving falls by $1b in a closed economy,
investment falls by $3b.
A farmer has the ability to grow either corn or cotton or some combination of the two. Given no other information, it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton
is equal to 1.
In the United States in 2015, government purchases of goods and services were
larger than investment, but smaller than consumption.
Refer to Figure 2-8. Point K represents an outcome in which
the economy is using all of its resources to produce hammers.
The "invisible hand" refers to
the free market.
Years ago, thousands of country music fans risked their lives by rushing to buy tickets for a Willie Nelson concert at Carnegie Hall. This behavior indicates
the ticket price was below the equilibrium price
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 2013, ABC Corporation had total earnings of $200 million and 40 million shares of the corporation's stock were outstanding. If the price-earnings ratio for ABC is 20, then what is the price of a share of its stock?
$100
Tim mows the yard for his neighbors. He spends $1 on gas and charges them $20 for each lawn he mows. What's the total contribution to GDP each time Tim mows a yard?
$20
Refer to Table 24-12. Will's 2009 food expenditures in 2010 dollars amount to
$5,250
Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in 2001 and 221.25 in 2006. Ruben's 2006 salary in 2001 dollars is
$64,000; thus, Ruben's purchasing power increased between 2001 and 2006.
Refer to Figure 2-6. The opportunity cost of this economy moving from point I to point F is
120 pillows
In 2013, XYZ Corporation had total earnings of $500 million and XYZ retained 20 percent of its earnings for future investments. If the price of a share of XYZ stock is $70 and if 100 million shares of its stock is outstanding, then what is the price-earnings ratio?
14.0
In 2009, the imaginary nation of Mainland had a population of 7,000 and real GDP of 210,000. In 2010 the population was 7,300 and real GDP of 223,380. Over the year in question, real GDP per person in Mainland grew by
2 percent, which is about the same as average U.S. growth over the last one-hundred years.
Refer to Table 3-24. The opportunity cost of 1 unit of bread for Spain is
2 units of cheese.
A farmer sells $25,000 worth of apples to individuals who take them home to eat, $50,000 worth of apples to a company that uses them all to produce cider, and $75,000 worth of apples to a grocery store that will sell them to households. How much of the farmer's sales will be included as apples in GDP?
25,000
For the general population, a 10 percent increase in the price of cigarettes leads to a
4 percent reduction in the quantity demanded of cigarettes
Refer to Figure 3-13. Suppose Peru decides to increase its production of emeralds by 2. What is the opportunity cost of this decision?
60 rubies
You deposit $3,000 into an N-year certificate of deposit that pays 4.5 percent annual interest, and at the end of the N years you have $4,082.59. What is the number of years, N?
7
Refer to Figure 2-1. Raymond buys a refrigerator for his new home. To which of the arrows does this transaction directly contribute?
A and B
Which of the following is a financial-market transaction?
A saver buys a bond a corporation has just issued so it can purchase capital.
Which of the following is not a characteristic of a perfectly competitive market?
All of the above are characteristics of a perfectly competitive market.
In a simple circular-flow diagram, households buy goods and services with the income they get from
All of the above are correct
Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base year. In 2012, the basket's cost was $80.00; in 2013, the basket's cost was $84; and in 2014, the basket's cost was $87.60. The value of the CPI was
All of the above are correct
Which of the following statements about mutual funds is correct?
All of the above are correct
Otherwise legal transactions that go unreported or unrecorded are called
All of the above are correct.
Risk aversion helps to explain various things we observe in the economy, including
All of the above are correct.
Writing in the Wall Street Journal in 2009, economist Jeremy Siegel argued that, in the years leading up to the financial crisis of 2008-2009,
All of the above are correct.
Which of the following transactions adds to U.S. GDP for 2015?
All of the above transactions add to U.S. GDP for 2015.
Refer to Figure 2-16. Inefficient production is represented by which point(s)?
B,E
Last year the imaginary country of Basova had a population of 10,000, 6,000 people worked 8 hours a day, and produced a real GDP of $30,000,000. The imaginary country of Andovia had a population of 12,000, 8,000 people worked 8 hours a day, and produced a real GDP of $38,000,000. Which of the following is correct?
Basova had the higher productivity while Andovia had the higher real GDP per person.
Which of the following characteristics is required for a perfectly competitive market?
Both a and b are correct.
If macaroni and cheese is an inferior good, what would happen to the equilibrium price and quantity of macaroni and cheese if consumers' incomes rise?
Both the equilibrium price and quantity would decrease.
If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium price and quantity of lattés if the price of cappuccinos rises?
Both the equilibrium price and quantity would increase.
Over the period 1900-2014, which of the following countries experienced the highest average annual growth rate of real GDP per person?
Brazil
Refer to Figure 27-2. From the appearance of the utility function, we know that
Britney is risk averse.
Economists speaking like scientists make
Claims about how the world is
Suppose the government passes a law eliminating holidays and, as a result, the production of goods and services increases because people work more days per year (and thus enjoy less leisure per year). Based on this scenario, which of the following statements is correct?
GDP would definitely increase because GDP excludes leisure.
U.S. GDP and U.S. GNP are related as follows:
GNP = GDP - Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad.
Which country has had a higher growth rate than the US over about the last 120 years?
Germany
DeShawn has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $900 once the repairs are complete. DeShawn discovers that, in addition to the $600 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $900 to potential buyers. He can sell the boat as it is now for $400. What should he do?
He should complete the repairs and sell the boat for $900.
For an imaginary economy, the consumer price index was 80 in 2014, 100 in 2015, and 140 in 2016. Which of the following statements is correct?
If the basket of goods that is used to calculate the CPI cost $25 in 2015, then that basket of goods cost $35 in 2016.
You are expecting to receive $750 at some time in the future. Which of the following would unambiguously decrease the present value of this future payment?
Interest rates rise and you have to wait longer for the payment.
Halvorson Construction has an investment project that would cost $150,000 today and yield a one-time payoff of $167,000 in three years. What is the highest interest rate at which Halvorson would find this project profitable?
It is not profitable at any of these interest rates.
Refer to Figure 2-4. Efficient production is represented by which point(s)?
R,U
Suppose that when the price of a 16 oz. to-go cup of gourmet coffee is $4.25, students purchase 750 cups per day. If the price decreases to $3.75 per cup, which of the following is the most likely outcome?
Students would purchase more than 750 cups per day.
Suppose that Congress were to repeal an investment tax credit. What would happen in the market for loanable funds?
The demand for loanable funds would shift left.
In a certain economy, jam and bread are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more jam and more bread, relative to the quantities of those goods that are being produced now?
The economy experiences economic growth.
Refer to Table 2-5. Table 2-5 shows one set of production possibilities. Which of the following statements is correct?
The opportunity cost of a bushel of corn increases as more corn is produced.
Last year the imaginary nation of Panglossia had real GDP of 400 billion. This year it had real GDP of 472.5 billion. Which of the following changes in population is consistent with a 5 percent growth rate of real GDP per person over the last year?
The population increased from 80 million to 90 million.
Which of the following statements is true?
The prices of most natural resources are stable or falling relative to other prices.
Suppose an economist advises a city's mayor to begin charging drivers a fee to drive on a busy highway during congested times. The mayor does not implement the policy because it would not be popular with voters. Which of the following statements best describes the scenario?
This is a common occurrence. The policymaker knows the best policy but chooses not to institute it for other reasons.
If a firm is a price taker, it operates in a
competitive market
Popeye produces 20 cans of spinach in 8 hours. Wimpy produces 15 hamburgers in 10 hours. If each hamburger trades for 1.5 cans of spinach, then
Wimpy's production is greater than Popeye's, but his productivity is less.
A perpetuity is
a bond that pays interest forever.
Which of the following changes would not shift the supply curve for a good or service?
a change in the price of the good or service
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.
A checking deposit functions as
a medium of exchange and as a store of value.
Most studies indicate that tobacco and marijuana tend to be
complements.
The shift from Da to Db is called
an increase in demand.
For the Bureau of Labor Statistics to place someone in the "unemployed" category, that person must
be available for work.
Which of the following is a certificate of indebtedness?
bonds but not stocks
In the 1990s, Fed Chairperson Alan Greenspan questioned whether the stock market
boom at that time reflected "irrational exuberance."
Prices usually reflect
both the value of a good to society and the cost to society of making the good.
In a market economy, supply and demand are important because they
can be used to predict the impact on the economy of various events and policies.
Communist countries worked under the premise that
central planners were in the best position to determine the allocation of scarce resources in the economy.
Foreign saving is used for domestic investment when foreigners engage in
either foreign direct investment or foreign portfolio investment.
Other things the same, an increase in the interest rate makes the quantity of loanable funds demanded
fall, and investment spending fall.
If an American-based firm opens and operates a new clothing factory in Honduras, then it is engaging in
foreign direct investment.
The labor-force participation rate tells us the fraction of the population that
has chosen to participate in the labor market.
Abby buys health insurance because she knows that she has health risks that wouldn't be obvious to an insurance company. Brad buys home owners insurance and then is less careful to make sure he's put out his cigarettes. The example with Abby
illustrates adverse selection; the example with Brad illustrates moral hazard.
Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru total annual output is worth $800 million and people work 50 million hours. Productivity is higher
in Brazil. Most variation in the standard of living across countries is due to differences in productivity.
If these are the only four sellers in the market for ice cream, then when the price increases from $4 to $6, the market quantity supplied
increases by 10 gallons.
You love peanut butter. You hear on the news that 50 percent of the peanut crop in the South has been wiped out by drought and that this will cause the price of peanuts to double by the end of the year. As a result, your demand for peanut butter
increases today
An increase in capital will increase real GNP per person
more in a poor country than a rich country. The increase in real GNP per person will be larger if the addition to capital is from domestic rather than foreign investment.
Compared to short-term bonds, other things the same, long-term bonds generally have
more risk and so they pay higher interest rates.
If Max experiences a decrease in his income, then we would expect Max's demand for
normal goods to decrease
Jim buys a $1000 bond from ABC Company. ABC Company uses the $1000 to purchase a new piece of machinery. Whose spending would be an act of investment in the language of macroeconomics?
only ABC Corporation's
The income of a typical worker in a country is most closely linked to which of the following?
productivity
The fact that different countries experience different standards of living is largely explained by differences in those countries'
productivity levels.
Your company discovers a better way to produce mousetraps, but your better methods are not apparent from the mousetraps themselves. Your knowledge of how to more efficiently produce mousetraps is
proprietary technological knowledge.
In a closed economy, if Y and T remained the same, but G rose and C fell but by less than the rise in G, what would happen to public and national saving?
public and national saving would fall
Because of its effect on the amount of capital per worker, in the short term an increase in the working population is likely to
reduce productivity. Other things the same, this decrease will be larger in a poor country.
If Congress instituted an investment tax credit, the equilibrium quantity of loanable funds would
rise
If Congress instituted an investment tax credit, the interest rate would
rise and saving would rise.
A company that produces wallpaper is considering buying some new equipment that it expects will increase future profits. If the interest rate falls, then the present value of these future earnings
rises. The company is more likely to buy the equipment.
Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should
sell the ticket because the marginal benefit exceeds the marginal cost.
Refer to Figure 4-20. If the price is $10, then there would be a
shortage of 600 units, and price would rise.
Social Security payments are indexed for inflation using
the CPI
Which government entity computes U.S. GDP every three months?
the Department of Commerce
Suppose the city of Des Moines has a high credit rating, and so when Des Moines borrows funds by selling bonds,
the city's high credit rating and the tax status of municipal bonds both contribute to a lower interest rate than would otherwise apply.
Which of the following is an example of physical capital?
the computer a secretary uses
In which of the following cases can we be certain that a natural resource has become scarcer?
the demand for the resource has increased and the supply has decreased.
Index funds
typically have a higher rate of return and lower costs than managed mutual funds.
Michelle bought word-processing software in 2009 for $75. Michelle's cousin, Barry, bought an upgrade of the same software in 2010 for $75. To which problem in the construction of the CPI is this situation most relevant?
unmeasured quality change
