Econ Final Exam

Based on the transactions that take place in the scenario that follows, how much would be added to U.S. GDP for 2017? Scenario: On October 1, 2017, you win an eBay auction for an antique desk for $1,000. eBay charges a 2 percent commission on the sale, and you have to pay $200 to have it shipped. Both you and the seller are located in the United States and are permanent residents of the United States.

$220 The 2 percent commission is 0.02 × $1,000 = $20. The shipping also counts.

Which event would cause the equilibrium quantity of savings to decrease?

A leftward shift in the demand for loanable funds

Which statement is TRUE?

A(n) IPO is the first time a corporation sells stock to the public in order to raise capital.

Which is (are) TRUE? I. The rule of 70 states that if the annual growth rate of GDP per capita is x percent, it will take (70 ÷ x) years for it to triple. II. For most of recorded human history, there was no long-run growth in real per capita GDP. III. Economic growth refers to the growth rate of nominal per capita GDP.

II only

Which statement is TRUE?

If investors begin to doubt the solvency of an investment bank, it may lead the short-term loans to disappear more quickly because they are rolled over on a very frequent basis.

Investment banks are part of the:

Shadow banking system, and those investments are not government guaranteed.

Why does so much U.S. currency exist?

U.S. dollars are the official currency in some other countries and an unofficial currency in others.

Which statement is TRUE

Washing your own car is not included in GDP.

Which of the following is not an argument for restricting trade?

We don't need to keep certain "key" industries at home because of beneficial spillovers onto other sectors of the economy.

Which statement is TRUE?

When interest rates rise, bond prices fall.

In the year 1, real GDP per capita was:

about $850

For most of recorded human history, long-run economic growth was:

almost nonexistent

The monetary base (MB) refers to:

currency plus total reserves held at the Fed.

Suppose the reserve ratio is 20% for all banks. If the Fed increases bank reserves by $200, then the money supply will:

increase by $1,000

Economists advocate focusing subsidies on "basic science" because _____ is their primary criterion for subsidizing research and development of new technologies.

the size of positive spillovers

The Organization of Petroleum Exporting Countries (OPEC) limits the amount of oil it exports

to raise prices and revenues from the sale of oil. The demand for oil is also likely to be inelastic.

Institutions and incentives are ____ causes, and factors of productions are ____ causes of the wealth of nations

ultimate; immediate

Suppose that the money multiplier is 10. If reserves increase by $1,000, by how much will the money supply increase?

$10,000 $1,000 × 10 = $10,000.

What is something that the Federal Reserve does?

-Protect consumers with disclosure regulations -Manage the nation's check payment system -Issue Money -

Under conditions of free trade, what quantity of the good would be produced domestically?

0

How long is the term for a Board of Governors member?

14yrs

Elimination of sugar tariffs would benefit all of the following individuals except:

An American sugar producer

The application of sugar tariffs would cost all of the following individuals except:

An American sugar producer

Creative destruction is similar to openness to foreign imports in all of the following ways except:

Both tend to decrease aggregate employment

Consumption smoothing is useful for explaining:

Both the supply of savings and the demand to borrow.

If the Fed wants to increase aggregate demand, it should:

Buy bonds in an open market

If the Fed wants to decrease interest rates, it should:

Buy bonds in open market operations.

All else equal, if consumers decide to borrow more, the:

Demand curve in the market for loanable funds will shift to the right.

All else equal, if consumer preferences changed so that they generally decided to borrow less, what would occur?

Demand in the market for loanable funds would decrease, and the interest rate would fall.

Creating incentives to research & development new products while avoiding too much monopoly power is:

Difficult for policymakers

Which condition would NOT lead financial intermediation to fail?

Excessive numbers of banks

A(n) ______ good is one that is sold to the end user and then consumed or held in personal inventories.

Finished

Tariffs on products like sugar cost _____ and benefit domestic producers.

Foreign Producers

The market value of all finished goods and services produced within a country in a year is:

GDP

Which statement is given in the textbook as a problem associated with using GDP as a measure of output and welfare?

GDP does not count environmental costs.

The U.S. Treasury is the world's largest bank customer because it:

Has more income and borrows more than any other bank customer.

Which statement is TRUE?

In a commercial bank the money comes from depositors, while in an investment bank, the money comes from investors.

Currency is part of:

M1, M2, and MB

If the United States tried to use strategic trade protectionism to raise revenues for airplane manufacturers, countries that import U.S.-produced planes would:

Retaliate and place tariffs or quotas on other U.S.-produced goods.

"The Solow model predicts that economic growth in poor countries should grow faster than rich countries." This statement is:

Uncertain. Growth rates depend, ceteris paribus, on how far on close countries are from the steady state

Which statement demonstrates the importance of property rights as an institution to promote economic growth?

Under communal property, effort is divorced from payment, so there is little incentive to work

Capital growth is the difference between:

investment & depreciation

What does RR stand for?

reserve ratio

Suppose that a $50-per-unit tariff is levied on imports. What is the total dollar value of the resources wasted after the tariff is imposed?

$5,625 1/2*50*225

Which statement is FALSE?

-The U.S. Federal Reserve no longer uses interest payments on reserves to control the money supply. -Banks hold reserves only to meet ordinary depositor demands for currency and payment services. -People would be less likely to invest their savings in bank alternatives if the reserve ratio is 100 percent.

Suppose the production function for an economy is Y = √K, Γ = 0.25, and Δ = 0.05. If the present capital stock is equal to 16, the current level of output is:

4 Y = √16 = 4.

If GDP for a certain economy is $1,200 billion at the end of year 1 and $1,300 billion at the end of year 2, the economy's growth rate between the two years is:

8.33% [($1,300 − $1,200) ÷ $1,200] × 100 = ($100 ÷ $1,200) × 100 = 8.33 %

A decrease in labor productivity will lead to:

A decrease in economic growth.

What effect does a decrease in reserves have on the money supply?

A decrease in reserves decreases both M1 and M2.

Which activity would be counted in the investment category of national spending?

A family building a new home

When using supply and demand to analyze trade, one can assume that the domestic market being small relative to the world market leads to:

A horizontal world supply curve.

A sound system produced by a supplier to Ford Motor Company, who installs it in one of its trucks, is an example of:

An intermediate good

Which statement is TRUE?

Arbitrage ensures that equally risky assets earn equal returns.

What area represents the wasted resources if a tariff large enough to eliminate trade is imposed on imports?

B

Which statement is TRUE?

Capital growth equals investment minus depreciation.

When investment is equal to depreciation, the:

Capital stock remains constant.

When using supply and demand to analyze trade, one can assume that a horizontal world supply curve implies that the:

Domestic market is small relative to the world market.

Which statement MOST accurately describes GDP?

GDP is the market value of all finished goods and services produced within a country in a given year.

Which statement is TRUE?

GDP is the market value of all finished goods and services produced within a country in a year.

Which statement is TRUE?

GDP per capita is GDP divided by population

Imitators don't have to pay the costs of development, but they:

Get the benefit of new ideas

Each of these institutions is an institution that fosters economic growth except:

an erratic legal system

Suppose there was initially free trade in this market, but then a $20-per-unit tariff was levied on this good. How many units of this good would be consumed domestically after the tariff?

300

The MOST important and influential part of the Fed system is the:

Open Market Committee

The amount of U.S. currency held by people and nonbank firms is enough for every man, woman, and child in the United States to have approximately how much currency?

$3,000 -$900 billion ÷ 300 million = $3,000.

According to the rule of 70, if GDP per capita grows at an annual rate of 4 percent, then it will double in approximately _____ years.

17.5 70/4=17.5

If GDP for a certain economy is $1,200 billion at the end of year 1 and $1,440 billion at the end of year 2, the economy's growth rate between the two years is:

20% [($1,440 − $1,200) ÷ $1,200] × 100 = ($240 ÷ $1,200) × 100 = 20 percent.

If the reserve ratio is 5 percent and the change in reserves is $10 billion, then the money multiplier is _______and the change in the money supply is _________.

20; $200 billion -With a reserve ratio of 5 percent, the money multiplier is 1 ÷ .05 = 20 and the change in the money supply is thus 20 × $10 billion or $200 billion.

Falling housing prices and rising default rates might not have led to a financial crisis if:

Banks had not been highly leveraged.

When other countries grow rich, people in the United States:

Benefit because this means the market for goods such as pharmaceuticals is larger and more innovations take place.

Which statement is TRUE?

GDP does not count the underground economy.

The market value of the output produced in another country by a permanent U.S. resident would be included in:

U.S. GNP only

What is true about area B?

Under conditions of free trade, this area is part of domestic consumer surplus.

Which statement is TRUE?

Using the national spending approach to GDP, paying college tuition is counted as consumption.

Both U.S. GDP and U.S. GNP include output produced:

Within the United States by permanent U.S. residents. For a large nation like the United States, GDP and GNP are very similar, but GDP is the more commonly used concept.

Trade:

moves jobs from import- competing industries to export industries

Suppose and economy produces only the three final goods shown in the table. The tables given information on the quantities produced and price of goods sold in 2008 and 2009. What is the nominal GDP in 2009?

$31,400

Suppose the government enacts a $2 tariff; the total deadweight loss, from distortions of consumption and production that result from the tariff, is:

$350 million

Suppose that banks want to maintain a reserve ratio of 1/10. If the Fed increases reserves by $5,000, by how much must the money supply increase?

$50,000 The money multiplier is 1/RR, or 10. So $5,000 × 10 = $50,000.

If banks want to maintain a reserve ratio of 1/5 and the Fed increases reserves by $10,000, by how much must the money supply increase?

$50,000 The money multiplier is 1/RR, or 5. So, $10,000 × 5 = $50,000.

Suppose the local government is going to borrow 90 billions of dollars from the public. What will be the growth rate of the private investment:

-24%

Suppose that a $20-per-unit tariff is levied on imports. What is the total dollar value of the gains from trade lost due to under-consumption?

$1,500 1/2*20*150

In the textbook, it is estimated that sugar quotas cost the U.S. economy about:

$1.32 billion/ year

If you buy a used house for $300,000 and the real estate agents and brokers earn $18,000 in commission, this transaction will contribute $_____ to GDP.

$18,000

Suppose that a $20-per-unit tariff is levied on imports. What is the total dollar value of the gains from this restricted trade (compared to a no-trade equilibrium)?

$3,000 ½ × $30 × 200

Protectionism is the economic policy of restraining trade though quotas, tariffs, or other regulations that heavily burden _____ producers.

Foreign Protectionism heavily burdens foreign producers.

The Federal Reserve does all of these activities EXCEPT:

-Oversee the IRS -Print money to finance government spending. -Print money to pay federal employee salaries. -Set marginal tax rates

If the Fed increases bank reserves by $5,000 and the banking system has a reserve ratio of 1/10, what is the change in the money supply?

50,000 The multiplier is 10, thus 10 × $5,000 = $50,000.

If the Fed acts to reduce interest rates today, it may take _____ before aggregate demand and economic growth begin to respond significantly.

6-18 months

Which activity would not be counted in the investment category of national spending?

A household purchasing stock in Apple

Which statement is TRUE?

A mortgage loan that has been "securitized" is one that has been bundled together and sold on the market as different financial assets.

The economy was in a steady state prior to period 7. What could have happened at the time to produce the changes shown in output, consumption and investment after period 7?

A natural disaster destroyed part of the capital stock.

Which event would definitely cause the equilibrium quantity of savings to increase?

A simultaneous increase in the demand for loanable funds and an increase in the supply of loanable funds

Which industry is not mentioned in the textbook as having been protected in the name of national security?

Accordions & Aluminum

Sometimes the government can help domestic firms _____ when they sell to international buyers. This is an example of strategic trade protectionism.

Act like a cartel By restricting output, these firms can raise prices and revenue.

What is meant by a nonrivalrous good?

Additional people can consume a good without diminishing another's consumption.

What effect does an increase in reserves have on the money supply?

An increase in reserves increases both M1 and M2.

Discount window lending sets _____, and then the Fed _____.

An interest rate; waits to see how many banks want to borrow

Which statement is TRUE?

One reason for the difficulty involved with defining a recession is that the government often makes significant changes in GDP estimates between the original estimate and the final estimate.

A sophisticated IOU that documents who owes how much interest and principal payments must be made is a(n):

Bond

In the figure representing the market for leather, domestic suppliers are the high- cost producers of leather. However, import restrictions push the domestic price up to $100. Which area represents the value of wasted resources in production?

C

Refer to the bond price table, which bond yields the highest rate of return?

C

The amount that people save for retirement:

Can be affected by simple psychological factors and effective marketing.

Suppose two assets are equally risky but have different prices. In this case, demand for the _____ asset would increase and its price would _____.

Cheaper; rise

One problem with the specific example given in the claim that "it's better to produce computer chips than potato chips" is that:

Computer chips are cheap, mass-manufactured commodities.

Recent research on the 2018 U.S. import tariffs estimated, "... complete pass- through of tariffs today- (tariff-) inclusive prices." This finding is:

Consistent with the model studied in class, in which consumers bear the burden when import supply is perfectly elastic.

Which statement demonstrates the importance of honest government as an institution to promote economic growth?

Corruption is like a heavy tax that bleeds resources away from productive entrepreneurs.

Which statement is TRUE?

Crowding out is the decrease in private consumption and investment that occurs when

M1 Includes:

Currency and checkable deposits.

M2 includes:

Currency, checkable deposits, savings deposits, money market mutual funds, and small-time deposits

In the figure representing the market for leather, domestic suppliers are the high- cost producers of leather. However, import restrictions push the domestic price up to $100. Which area represents the deadweight loss of consumption that results?

D

Increased government borrowing, shifts the _____ curve in the market for loanable funds to the right, causing the equilibrium interest rate to _____.

Demand; rise

Cleaning your own home is not included in GDP because it:

Does not include a market transaction

Child care conducted in the home is not included in GDP because it:

Does not involve a market transaction

Tariffs on products like sugar benefit _____ and harm domestic consumers.

Domestic Producers

Which factor is NOT one of the four major factors that economists believe determine the supply of savings?

Exchange Rates

The overnight lending rate from one major bank to another is known as the:

Federal Funds Rate

A solvent, illiquid bank is one whose short-term liabilities are:

Greater than its short-term assets, but whose overall assets are greater than its liabilities.

To determine how rapidly a country's production is rising or falling over time, we would have to calculate the:

Growth rate of GDP

The _____ the interest rate, the smaller the quantity of funds demanded for _____.

Higher; Investment

What will the Fed try to predict and monitor in order to estimate the effect of its actions on aggregate demand?

How quickly increases in the monetary base translate into new bank loans

What is NOT something that the Fed will try to predict and monitor in order to estimate the effect of its actions on aggregate demand?

How quickly new technology can increase the Solow growth rate

Ceteris paribus, if government spending increases by $50 billion and consumption increases by $200 billion, then GDP:

Increases by $250 billion As noted in the chapter, Y = C + I + G + NX, so increasing C and G by $50 billion and $200 billion would lead to a total $250 billion increase.

Which condition could break the bridge between savers and borrowers?

Insecure property rights, inflation and controls on interest rates, politicized lending, and massive bank failures and panics

When a bank has liabilities that are greater than its assets, the bank is:

Insolvent

What is NOT one of the reasons that banks keep their accounts at the Federal Reserve?

Interest paid by the Federal Reserve exceeds the returns from any other type of investment.

The higher the _____ rate, the _____ the quantity of funds demanded for investment.

Interest; Smaller The demand curve for borrowing is downward sloping.

The lower the _____ rate, the _____ the quantity of funds demanded for investment.

Interest; greater

Suppose a business expands by acquiring new machines and equipment to reach higher production levels. Economists define this activity as:

Investment

What happened to the worldwide income distribution during the last 40 years or so?

It has shifted to the right ("richer") and become more equal

AIDS has dramatically reduced life expectancies in Africa. What impact would this have on saving rates?

It would reduce the rate of saving, because many Africans expect to die young.

An asset that can be quickly converted so that it can be used for payments is:

Liquid Asset

All else equal, _____ interest rates usually result in less _____.

Lower, savings

The _____ the interest rate, the greater the quantity of funds demanded for _____.

Lower; investment

Which is one of the services that the Federal Reserve performs for the U.S. government?

Maintaining the U.S. Treasury's bank account

Money is a widely accepted:

Means of payment

The factor of increase in the money supply that occurs with each dollar of increase in reserves is called the:

Money Multiplier

The product (2010 prices × 2010 quantities) is equal to:

Nominal GDP in 2010

Suppose your weekly earnings (the number on your paychecks) decrease by 2 percent over the course of a year and prices in the economy fall by 3 percent. In this case, your _____ earnings have decreased and your _____ earnings have increased.

Nominal; real

For calculating GDP, the purchase of a used car is:

Not included

What is given in the textbook as a factor leading to new ideas that will be important for future economic growth?

Population A(ideas) = population × incentives × ideas

On the supply curve for savings, the vertical axis represents the interest rate as a percent rather than the price expressed in dollars, as on other supply curves. This is because:

Prices are expressed as dollars per unit, but in the market for savings the unit is dollars, so it's dollars per dollar, which is most easily expressed as a percentage. In fact, an interest rate, if expressed as a decimal, is really a number of dollars per dollar.

Which is NOT one of the services that the Federal Reserve performs for the U.S. government?

Printing money to finance government spending

A profit-maximizing firm invests in research and development so long as the _____ is greater than the marginal cost.

Private marginal benefit

Which is not a function of the Federal Reserve?

Providing loans to small businesses

If the Fed wants to increase the money supply, it will typically:

Purchase additional government bonds.

Financial int

Reduce the costs of moving savings from savers to borrowers and investors

According to the life cycle theory of savings, people tend to:

Save during prime working years. Dissave during retirement

Which is typically the largest means of payment in the United States?

Savings Deposits

Which statement is TRUE?

Shareholders benefit directly if the firm pays out its profits in dividends or indirectly if profits are used to increase the value of the stock.

The Fed has MOST influence over _____ interest rates. Investment spending depends on _____ interest rates.

Short-term; long-term

Which factor is one of the four major factors that economists believe determine the supply of savings?

Smoothing Consumption

During the financial crisis, when investment banks were highly leveraged and asset prices fell slightly, the banks:

Suffered tremendous losses, forcing the sale of assets, which drove asset prices even lower.

Which activity BEST describes how GDP is calculated?

Summing the market value of all finished goods and services Gross domestic product is the market value of all finished goods and services produced within a country in a year.

The market for loanable funds is the market where:

Suppliers of funds trade with demanders of funds.

All else equal, if consumer preferences changed so that they generally decided to save less, what would occur?

Supply in the market for loanable funds would decrease, and the interest rate would rise.

All else equal, if consumers decide to save less, the:

Supply of funds in the loanable funds market will decrease.

All else equal, if consumers decide to save more, the:

Supply of funds in the loanable funds market will increase.

Refer to the figure of the loanable funds market. At an interest rate of 6% in this market, there is a ____ of loanable funds of ____.

Surplus, $320 (500-180)

A ___ is a tax on imports

Tariff

If a government wants to encourage its population to increase investment and entrepreneurship, it should do all of the following except:

Tax the returns on investment

In order to counteract the decrease in investment demand during a recession, the government sometimes offers a:

Temporary investment tax credit

If the government offers an investment tax credit during a recession in order to stimulate investment demand, it will probably make the tax credit:

Temporary, to encourage firms to invest quickly.

Which statement is TRUE?

The 2007-2008 crisis was brought about by high leverage and falling asset prices that created a panic in the shadow banking system and hence sharply reduced the amount of lending in the economy.

Borrowing plays a valuable role in the economy, because:

The ability to borrow greatly increases the ability to invest.

Growth in real GDP per capita is:

The best reflection of changing living standards.

Which statement is TRUE?

The deposits of commercial banks are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.

The Fed has direct control over:

The monetary base only

The panic in the shadow banking system that led to the financial crisis of 2007-2008 was exacerbated by all of these conditions except:

The overregulation of the shadow banking system.

Which statement is TRUE?

The rate of return on a zero-coupon bond currently selling for $850 that will pay $900 one year from now is 5.9 percent. This is the correct statement: ($900 − $850) ÷ $850

Which statement is TRUE?

The shadow banking system includes investment banks, hedge funds, and money market funds, as well as a variety of other complex financial entities.

Which statement is TRUE?

The shadow banking system includes investment banks.

Which of the following functions is NOT performed by commercial banks?

They organize initial public offerings for firms

What is one of the reasons that banks keep their accounts at the Federal Reserve?

They want a convenient place to hold their money.

In today's economy, if the people with the best ideas are not also the people with the most savings:

They will have to borrow funds to bring their ideas to fruition.

It has been said that consumers often want immediate satisfaction and therefore must be compensated for saving their money. Which preference best captures this phenomenon?

Time preference

Which of the four towns in this table has the lowest standard of living?

Town C (Real GDP/ Population)

Banks use reserves held at the Fed for:

Trading with other major banks.

Why are transfer payments not counted as part of GDP?

Transfer payments do not involve the purchase of a final good or service

A car produced by the American company GM in a plant located in Canada would be included in:

U.S GNP, but not U.S GDP

Lehman Brothers, one of the largest investment banks in the United States, was one of the largest companies to go bankrupt in the 2008 financial crisis. Economists have identified that one of the main reasons it went bankrupt was because it

Was ultra- leveraged.

The term auction facility sets _____, and then the Fed _____.

a certain quantity of reserves; reduces the interest rate until banks borrow the money

Which event would definitely cause the equilibrium quantity of savings to decrease?

a simultaneous decrease in the demand for loanable funds and a decrease in the supply of loanable funds

Which event would cause the supply curve to shift rightward and the equilibrium interest rate in the market for loanable funds to decrease?

an increase in the amount of the population working full time

Which event would cause the equilibrium quantity of savings to decrease?

an upward shift in the supply of loanable funds

The theory of comparative advantage, recommending specialization in goods at which you have lower opportunity cost, applies to gains from trade:

at both the international level and the local level.

After a certain time, most ideas should be shared, if possible, because they:

can be shared at low cost, and sharing maximizes the benefits from ideas.

Crowding out occurs because the government increases the demand for loanable funds, drives up interest rates, and causes:

consumption and investnemnt to fall

Higher interest rates typically _____ borrowing, ceteris paribus

decrease

As. a city rebuilds after a hurricane destroys most of its physical capital, the Solow model would predict growth in this region to be:

higher than average in the short run, but return to normal levels in the long run.

Larger markets for pharmaceuticals will lead to:

increased incentives to invest in research and development.

A real dollar value, e.g., in GDP calculations, is one that corrects for:

inflation

Equilibrium in the market for loanable funds determines the:

interest rate and the quantity of loanable funds.

A bank is considered illiquid if

it has short-term liabilities greater than its short-term assets, but overall assets greater than liabilities

Technological knowledge has:

made farmers more productive over time

The market where savers of funds trade with borrowers of funds is called the:

market for loanable funds

The factors of production include all of these examples except:

monetary capital

According to the Solow model, a higher saving- and investment rate leads to:

more capital and more output

In a steady state, the capital stock:

neither increases nor decreases

A tractor built in 2001 and still in operation today is:

part of today's national wealth but no part of today's GDP

The primary reason that children are employed as labor worldwide is:

poverty in the child's family

A profit-maximizing firm invests in research and development so long as the:

private marginal benefit is greater than the marginal cost.

Under communal property, effort is divorced from payment, so there is little incentive to work. This demonstrates the importance of _____ as an institution.

property rights

Economic growth and improved standards of living are best measured by the growth rate of:

rea GDP per capita

The standard of living in a country could be measured by the change in:

real GDP per capita

Relative to Japan, Argentina was _____ in 1950 and _____ in 2000.

rich; poor

When a person's income is greater than her spending on consumption goods, then she is:

saving

To say that research and development generate spillovers is to say that the:

social benefits exceed the private benefits.

When individuals become more willing to save, the:

supply of loanable funds shifts outward

The Def loaned money to (investment bank) J.P. Morgan and (Insurance company) AIG in 2008 bc it was concerned about:

systematic risk, should these banks fail

Protectionism tends to create a society:

that pits one interest group against another.

Suppose the production function for an economy is Y = √K, and that Γ = 0.25 and Δ = 0.05. If the present capital stock is equal to 25:

the economy is in a steady state. In this case, investment is equal to 0.25 × √25 = 1.25, and depreciation is equal to 0.05 × 25 = 1.25, so investment equals depreciation.

Commercial banks make profits primarily through:

the interest differential between deposits and loans

In economics, investment refers to:

the purchase of capital goods

When the Federal Reserve changes the money supply by changing reserves, which formula can be used to calculate the change in the money supply?

ΔMS = ΔReserves × MM

When using supply and demand to analyze trade, one can show a tariff as a(n) _____ shift of the horizontal world supply curve.

Upward

_____ is the economic policy of restraining trade though quotas, tariffs, or other regulations that burden foreign producers but not domestic producers. Please choose the correct answer from the following choices, and then select the submit answer button.

Protectionism

The best reflection of changing living standards is probably growth in:

Real GDP per capita

Which statement is TRUE?

Real variables have been adjusted for changes in prices.

Suppose there was initially free trade in this market, but then a $20-per-unit tariff was levied on this good. How much tax revenue would this tariff generate?

$4,000 $20*(300-100)

Suppose there was initially free trade in this market, but then a $20-per-unit tariff was levied on this good. By how much has this tariff increased the revenue of domestic producers?

$4,500 $45*100

Assume that the Seedland economy produced approximately 100 packets of sunflower seeds and 75 packets of pumpkin seeds. If the average price of sunflower seed packets was $2 and the average price of pumpkin seed packets was $5, the GDP for Seedland's economy is $:

$575 This is GDP for the Seedland economy: $2 × 100 + $5 × 75 = $200 + $375 = $575.

Between 1918 and 1920, _____ population died of flu.

2.5% to 5% of the world's

Real GDP growth is:

Probably the best single indicator of current economic performance

It is easier for OPEC nations to use strategic trade protectionism to increase oil revenues than it is for the United States to use strategic trade protectionism to increase revenues from computer sales because there are fewer substitutes for:

OPEC-produced oil than there are for U.S.-produced computers.

Which industry mentioned in the textbook has yielded very important technological spillovers that warrant trade protection?

The textbook does not give any examples of this type of industry.

If GDP in year 1 is $11,000 and GDP in year 2 is $11,165, then the growth rate of GDP between the two years is:

1.5% Use the formula [(GDPyear 2 − GDPyear 1) ÷ GDPyear 1] × 100: [($11,165 − 11,000) ÷ $11000] × 100 = 1.5.

Suppose that in a certain economy, the real GDP growth rate is 4 percent and the real GDP growth per capita is 2.4 percent. The growth rate of the population must be equal to:

1.6% 4% − 2.4% = 1.6%

Suppose the production function for an economy is Y = √K, and that Γ = 0.25 and Δ = 0.05. If the present capital stock is equal to 36, depreciation of the capital stock will be equal to:

1.8 ΔK = 0.05 × 36 = 1.8.

If nominal GDP in 2006 for the United States was $13,377.2 billion and real GDP in 2006 (using 2005 as the base year) was $12,958.5 billion, what is the value of the GDP deflator between 2005 and 2006?

103.2 ($13,377.2 billion ÷ $12,958.5 billion) × 100 = 103.2.

Suppose there was initially free trade in this market, but then a $20-per-unit tariff was levied on this good. By how much would this tariff reduce the quantity of imports?

150 350-200

Suppose the production function for an economy is Y = √K, and that Γ = 0.25 and Δ = 0.05. If the present capital stock is equal to 36:

the economy is shrinking. In this case, investment is equal to 0.25 × √36 = 1.5, and depreciation is equal to 0.05 × 36 = 1.8, so investment falls short of depreciation.

The OECD's "Better Life Index," a social welfare measure studied in class, weight is put on all the following factors EXCEPT,

Income equality

Which statement is TRUE?

-The M2 money supply includes M1 plus savings deposits, money market mutual funds, and small-time deposits. -Quantitative tightening occurs when the Fed sells longer-term government bonds or other securities. -There are 12 members of the Federal Open Market Committee. -Moral hazard occurs when banks and other financial institutions take on too much risk, hoping that the Fed and regulators will later bail them out. -The money supply will increase by more than the initial change in reserves. -Banks hold reserves according to the law and the Federal Reserve as well as to meet ordinary depositor demands for currency and payment services. -The reserve ratio is determined primarily by how liquid banks wish to be. -Systemic risk is the risk that the failure of one financial institution can bring down other institutions as well. -An insolvent bank has liabilities that are larger than its assets. -The discount rate is the interest rate banks pay when they borrow directly from the Fed. -If depositors start visiting the ATM a lot more often, banks will want to have a higher reserve ratio. -When banks are worried that depositors might want to withdraw their cash or when loans don't seem profitable, they want a reserve ratio that is relatively high.

Suppose the production function for an economy is Y = √K, and that Γ = 0.25 and Δ = 0.05. If the present capital stock is equal to 16, new investment in capital will be equal to:

1. ΓY = 0.25 × √16 = 0.25 × 4 = 1.

Suppose the production function for an economy is Y = √K, and that Γ = 0.25 and Δ = 0.05. If the present capital stock is equal to 25, new investment in capital will be equal to:

1.25 ΓY = 0.25 × √25 = 0.25 × 5 = 1.25. ΔK = 0.05 × 25 = 1.25.

According to the rule of 70, if GDP per capita grows at an annual rate of _____ percent, then it will double in approximately 7 years. Please choose the correct answer from the following choices, and then select the submit answer button.

10 70/10=7

If per capita GDP is $1,000 and government officials want to increase it to $8,000 within 21 years, at what approximate rate does it have to grow?

10% -Getting from $1,000 to $8,000 requires doubling three times. To do this in 21 years, it must double every 7 years: 70 ÷ x = 7 gives x = 10 percent.

If the reserve ratio is 8 percent and the change in reserves is $15 billion, then the money multiplier is _______and the change in the money supply is _________.

12.5; $187.5 billion With a reserve ratio of 8 percent, the money multiplier is 1 ÷ .08 = 12.5 and the change in the money supply is thus 12.5 × $15 billion or $187.5 billion.

If the production function in a country follows Y= K^2/3, the investment rate equals 0.20, and the depreciation rate is 0.05, then the steady- state level of output is equal to

16

Which statement(s) is (are) TRUE? I. In India, residents who purchase land must do so two or three times, from different parties, and developers cannot get good titles to land in order to build things like supermarkets. This demonstrates the importance of a dependable legal system as an institution. II. In India, residents who purchase land must do so two or three times, from different parties, and developers cannot get good titles to land in order to build things like supermarkets. This demonstrates the importance of honest government as an institution. III. In India, residents who purchase land must do so two or three times, from different parties, and developers cannot get good titles to land in order to build things like supermarkets. This demonstrates the importance of political stability as an important institution.

I only

Which statement(s) is (are) TRUE? I. In the United States, if GDP per capita was around $45,000, then not every American earned that amount. II. Japan is an example of a growth disaster. III. Economic growth refers to the growth rate of nominal per capita GDP.

I only

Which statement(s) is (are) TRUE? I. For most of human history, people were poor and there was no economic growth. II. South Korea is an example of a growth miracle. III. Despite being a relatively recent phenomenon, economic growth has quickly transformed the world.

I, II, and III

Which statement(s) is (are) TRUE? I. In the United States, if GDP per capita was around $45,000, then all Americans earned that amount. II. Japan is an example of a growth miracle. III. Economic growth refers to the growth rate of real per capita GDP.

II & III only

Which statement is TRUE?

If profits are high, shareholders benefit, but if profits are low or negative, shareholders suffer losses.

Which statement is TRUE?

If the current interest rate is below the equilibrium interest rate, a shortage will be created, pushing the interest rate up.

Which statement is TRUE?

If the current rate of return on a zero-coupon bond is 11 percent and a current price of $1,801.80, then the face value must be $900. This is not correct: 11 percent = ((face value − $1,801.80) ÷ $1,801.80) × 100, solve for face value to get $2,000.

Refer to the graph. Which statement is true?

If the demand for loanable funds decreases by $100 billion dollars at every interest rate, then the equilibrium interest rate will fall to 5 percent.

Which statements are TRUE?

If the demand for loanable funds increases, the equilibrium interest rate will rise.

Which statement is true?

In the factor income approach to measuring GDP, money received by owners of capital is known as interest.

Which statement is True

In the factor income approach to measuring GDP, money received by workers is employee compensation, which equals the sum of wages and benefits.

Using GDP per capita to measure standard of living is:

Inaccurate because our standard of living does not depend only on goods and services. Although GDP per capita is a rough measure of the standard of living in a country, not everyone's income grows by the same amount, nor can we assume income is evenly distributed.

The United States would have difficulty using strategic trade protectionism to increase revenues because there are:

Many substitutes for most U.S.-produced goods.

What is given in the textbook as a factor leading to new ideas that will be important for future economic growth?

Incentives The equation A(ideas) = population × incentives × ideas per hour summarizes the factors that cause A to increase.

Spending money on fishing rods to take on a camping trip is:

Included in GDP because it involves a market transaction.

In regard to distribution of income, GDP:

Is a poor measure

Human capital _____ included in the Solow model, because _____.

Is; it represents the skills and knowledge of labor

Suppose the real GDP growth rate is 3.5 percent and the growth rate of the population is 1.4 percent. The real GDP growth per capita must be equal to:

2.1% 3.5%-1.4%

Suppose there was initially free trade in this market, but then a $20-per-unit tariff was levied on this good. How many units of this good will be imported after the tariff?

200 - At a price of $45, domestic quantity demanded will be 300 units, but domestic quantity supplied will be only 100 units.

Suppose that in a certain economy, the growth rate of the population is 1.2 percent and the real GDP growth per capita is 2.1 percent. The real GDP growth rate must be equal to:

3.3% 1.2 percent + 2.1 percent = 3.3 percent.

Suppose the production function for an economy is Y = √K, and that Γ = 0.25 and Δ = 0.05. If the present capital stock is equal to 25, the current level of output is:

5 Y = √25 = 5.

To incorporate the effect of ideas on economic growth, holding labor constant, we can write the production function as:

Y = A√K.

If the most intelligent portion of the labor force leaves the country to seek opportunity elsewhere, the decrease in human capital will lead to:

a decrease in economic growth.