ECON Final

ch 1 If this economy devotes all of its resources to the production of dryers, then it will produce

80 dryers and 0 washers. (refer to graph)

ch 5 Consider the following Keynesian Economy: C = 200 +.8Y I = 200 G = 300 EX - IM = 400 What is the level of household saving?

900 (look at notes)

ch 2 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

ch 2 Which of the following changes would not shift the demand curve for a good or service?

A change in the price of the good or service.

ch 1 Which of the following is an example of a capital input?

A computer

ch 2 In GDP accounting, the value of goods added to a firm inventories are recorded as:

Investment

ch 2 If the price of a dress is three times the price of a pair of shoes, then a pair of shoes contributes

exactly one-third as much to GDP as does a dress.

ch 2 Social Security payments are

excluded from GDP because they do not reflect the economy's production.

ch 4 An increase in household saving causes consumption to

fall and aggregate demand to decrease.

ch 4 An increase in household saving causes consumption to

fall and aggregate demand to left.

ch 1 Economists make assumptions to

focus their thinking on the essence of the problem at hand.

ch 2 If an economy's GDP falls, then it must be the case that the economy's

income and expenditure both fall.

ch 2 GDP measures the value of production. It also equals:

income.

ch 4 What do you think caused the economic boom of the early 1940s?

increased government purchases.

ch 3 The CPI differs from the GDP deflator in that

increases 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.

ch 1 Prices direct economic activity in a market economy by

influencing the actions of buyers and sellers.

ch 1 Another term for factors of production is

inputs.

ch 1 An economy's production of two goods is efficient if

it is impossible to produce more of one good without producing less of the other.

ch 1 In the circular-flow diagram,

labor flows from households to firms.

ch 4 The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected, production is

more profitable and employment and output rises.

ch 4 The effect of an increase in the price level on the aggregate-demand curve is represented by a

movement to the left along a given aggregate-demand curve.

ch 4 If the economy starts at A and moves to D in the short run, the economy

moves to C in the long run. (refer to graph)

ch 4 If the economy is at A and there is a reduction in aggregate demand, in the short run the economy

moves to D. (refer to graph)

ch 2 In a perfectly competitive market:

no individual buyer or seller has any significant impact on the market price.

ch 3 The labor force equals the

number of people employed plus the number of people unemployed.

ch 4 In the short-run an increase in the costs of production makes

output fall and prices rise.

ch 4 Other things the same, if technological know-how increases, then in the long run:

output is higher and prices are lower.

ch 4 An increase in business investment spending is:

part of aggregate demand because it is the purchase of new capital.

ch 4 Starting from point B and assuming that aggregate demand is held constant, in the long run the economy is likely to experience a

rising price level and a falling level of output, as the economy moves to point A. (refer to graph)

ch 1 Efficiency means that

society is getting the most it can from its scarce resources.

ch 2 What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?

Price would fall, and the effect on quantity would be ambiguous.

ch 2 In what sense is the equilibrium price and quantity of supply and demand for a particular product considered to be a "socially optimal" result?

That point maximizes the sum of consumer and producer surplus, which is the combined total welfare of buyers and sellers.

ch 4 Which of the following would not be directly included in aggregate demand?

The Government's annual amount of tax collections

ch 2 Which of the following would shift the supply of Atlanta Falcon football jerseys to the left? (Hint: draw supply and demand and shift the supply to the left and think about it.)

The cost of the fabric used to make the jerseys increases.

ch 3 Out of the following economic statistics, which is the best measure of economic standard of living?

The level of real GDP per capita

ch 5 Fiscal policy affects the economy

in both the short and long run.

ch 3 In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 237 for 2015. President Hoover's 1931 salary was equivalent to a 2015 salary of about

$1,247,368.

ch 2 If in some year nominal GDP was $40 billion and the GDP deflator was 50, what was real GDP?

$80 billion

ch 5 If the multiplier is 3, then the MPC is

2/3.

ch 5 Consider the following closed Keynesian Economy: C = 500 + .75Y I = 300 G = 400 What is the level of Consumption?

4100 (look at notes)

ch 5 Consider the following Keynesian Economy: C = 200 +.8Y I = 200 G = 300 EX - IM = 400 What is the level of consumption?

4600 (look at notes)

ch 5 Consider the following closed Keynesian Economy: C = 500 + .75Y I = 300 G = 400 What is equilibrium GDP?

4800 (look at notes)

ch 5 Consider the following Keynesian Economy: C = 200 +.8Y I = 200 G = 300 EX - IM = 400 The spending multiplier in this economy is:

5

ch 5 If the MPC = 4/5, then the government purchases multiplier is

5.

ch 3 The price index was 120 in Year 1 and 126 in Year 2. What was the inflation rate?

5.0 percent

ch 5 Consider the following Keynesian Economy: C = 200 +.8Y I = 200 G = 300 EX - IM = 400 What is the equilibrium GDP?

5500 (look at notes)

ch 5 Consider the following closed Keynesian Economy: C = 500 + .75Y I = 300 G = 400 What is the level of saving?

700 (look at notes)

ch 4 If the economy starts at Y, then a recession occurs when

AD shifts left to a short-run equilibrium at W. (refer to graph)

ch 1 The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

Adam Smith

ch 5 Which of the following events shifts aggregate demand rightward?

An increase in government expenditures, but not a change in the price level

ch 4 Which of the following would shift the long-run aggregate supply curve right?

An increase in the capital stock, but not an increase in the price level

ch 4 A decrease in taxes would move the economy from C to

B in the short run and A in the long run. (refer to graph)

ch 4 If the economy is in long-run equilibrium, then an adverse shift in short-run aggregate supply would move the economy from

C to D (refer to graph)

ch 4 If the economy starts at point A, a short-run fall in output would be consistent with a movement to point

D, and according to the Laissez-Faire model, a long-run move to point C (refer to graph)

ch 1 Which of the following is true?

Efficiency refers to the size of the economic pie; equality refers to how the pie is divided.

ch 3 Lily does not currently have a job, but she has applied for several jobs in the previous week. Ellie is an unpaid stay-at-home mom who has not searched for work in recent years. Who does the Bureau of Labor Statistics count as "not in the labor force"?

Ellie but not Lily

ch 2 Suppose there is an increases in the number of buyers in a market, and at the same time, a technological advancement occurs. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

ch 3 The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:

Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.

ch 5 Consider the following closed Keynesian Economy: C = 500 + .75Y I = 300 G = 400 Who is borrowing the savings?

Government and Businesses

ch 4 There can only be one LRAS curve. Which one of the long-run aggregate-supply curves above is consistent with a picture of an economy in a recession?

LRAS3 (refer to graph)

ch 2 Assume Leo buys coffee beans in a competitive market. It follows that

Leo cannot influence the price of coffee beans even if he buys a large quantity of them.

ch 4 The downward sloping aggregate demand curve implies that as the price level decreases:

More real goods and services are purchased

ch 2 Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his backyard. Regarding these two practices, which of the following statements is correct?

Only Joe's and Jim's grocery store purchases are included in GDP.

ch 4 In which case can we be sure aggregate demand shifts left?

People and businesses both want to save more.

ch 2 Which of the following is not a determinant of the demand for a particular good?

The prices of the inputs used to produce the good

ch 2 Which of the following is included in the calculation of GDP?

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

ch 2 When a market price is below the equilibrium price, the quantity of the good demanded exceeds the quantity supplied and market forces will tend to push the price higher

True

ch 4 When output rises, unemployment falls.

True

ch 1 This economy fully employs its resources when it produces 35 dishwashers and zero doghouses.

True (refer to graph)

ch 4 Monetary is neutral in the sense that money is not an input into the production process. In the AD/AS framework, this is represented by:

a vertical long-run aggregate-supply curve.

ch 2 GDP per person tells us the income and expenditure of the

average person in the economy.

ch 2 Changes in real GDP reflect

changes in the amount of production.

ch 1 Making rational decisions at the margin means that people

compare the marginal costs and marginal benefits of each decision.

ch 2 Real GDP is the yearly production of final goods and services valued at:

constant prices.

ch 2 A decrease in the price of a good will

decrease quantity supplied.

ch 4 The initial impact of an increase in an investment tax credit is to shift aggregate

demand right.

ch 1 The production possibilities frontier provides an illustration of the principle that

economies face trade-offs.

ch 1 A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. However, redistributing income from rich to poor reduces the reward for working hard. Therefore, society faces a tradeoff between

efficiency and equality.

ch 1 When society gets the most it can from its scarce resources, then the outcome is called

efficient.

ch 1 The "invisible hands" ability to coordinate the decisions of the firms and households in the economy can be hindered by

government actions that distort prices.

ch 1 The basic principles of economics suggest that

government should become involved in markets when those markets fail to produce efficient or fair outcomes.

ch 2 A transfer payments are payments made by

government, but not in exchange for a currently produced good or service.

ch 2 What sector(s) purchase the goods and services produce in an economy?

households, firms, and the government.

ch 3 The equipment and structures available to produce goods and services are called:

physical capital.

ch 1 Production is

possible at points J, K, L, and M, but efficient only at points J, L, and M. (refer to graph)

ch 3 In order to promote growth in living standards, policymakers must

protect property rights and maintain political stability.

ch 1 The phenomenon of scarcity stems from the fact that

resources are limited.

ch 4 Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in aggregate demand causes price expectations to

rise. This rise in price expectations shifts the short-run aggregate supply curve to the left.

ch 3 One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called

substitution bias.

ch 5 Fiscal Policy involves using to manage the economy.

taxes and government spending

ch 1 In most societies, resources are allocated by

the combined actions of millions of households and firms.

ch 5 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

the multiplier effect.

ch 5 What is assume fixed in the extreme Keynesian Model?

the price level

ch 4 Aggregate demand includes

the quantity of goods and services the government, households, firms, and customers abroad want to buy.

ch 1 A production possibilities frontier will be bowed outward if some of the economy's resources are better suited to producing one good than another.

true

ch 1 Production possibilities frontiers can be used to illustrate scarcity, trade-offs, opportunity cost, efficiency, unemployment, technological advances, and economic growth.

true

ch 1 The production possibilities frontier shows the opportunity cost of one good as measured in terms of the other good.

true

ch 1 Economics is the study of how society manages its

unlimited wants and limited resources.

ch 2 GDP is defined as the

value of all final goods and services produced within a country in a given period of time.

ch 1 The opportunity cost of an item is

what you give up to get that item.