ECON FINAL
Suppose that a divided government—where one political party controls the legislature and the other controls the executive branch—wants to stimulate the economy but have a hard time agreeing on how to do it. Suppose they compromise on a deal in which both and taxes government spending decrease by $300 billion. Assume the marginal propensity to consume for the populace is 0.8. The net effect of the changes in government spending and taxes on real GDP is
$-300 billion
Suppose the Marginal Propensity to consume is 0.9, and the government has pledged to keep a balanced budget and has decided to cut government spending by $400 billion dollars. All else equal, by how much does output change? (Use positive numbers to indicate an increase in output and negative numbers to indicate a decrease in output)
$-400 billion
The market for the board game Oligopoly, can be described by P=2QS+3 and P=20-5QD, where quantity is measured in millions. Oligopoly is produced in Russia and because of trade tensions, a quota of 2 million units is set by the US government. What will the price of Oligopoly be?
$10
Consider the market for chipmunk sweaters, which has only three consumers: Alvin, Simon, and Theodore. Alvin is willing to pay up to $20 for a sweater, Simon is willing to pay up to $15 for a sweater, and Theodore is only willing to pay up to $10 for a sweater. If the market price of a sweater is $12, how much consumer surplus will be generated?
$11
Demand for Chef Ernie's sushi on a stick is represented by P=80-QD and supply by P=50+QS/2. The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units. The value of economic surplus in this market is
$300 thousand
Offerman Canoes makes canoes. It buys the shell of the canoe from another firm for $300 and uses its labor and capital goods to make the canoe. It sells the finished canoe to a retail canoe store for $800. The retail canoe store then sells the canoe to a consumer for $1,200. The value added of Offerman Canoes for each canoe equals
$500
Consider the market for chipmunk sweaters, which consists of only three firms that can each only produce one sweater: Forest Fashion, Streamside Sweaters, and Cartoon Clothing. Each firm will only sell chipmunk sweaters if they can cover their costs of production. Their costs of production are as follows: Forest Fashion- $5, Streamside Sweaters-$15, and Cartoon Clothing-$10. If the market price of a chipmunk sweater is $12, how much producer surplus will be generated?
$9
Leslie Knope would like to decrease the consumption of soda in Pawnee and is considering her options. She is considering a price floor of $X above the equilibrium price or a tax of $Y per ounce, where X and Y are set such that the new quantity bought and sold is the same. Assume that the market for soda before intervention is efficient and in equilibrium. Also assume that neither demand nor supply is perfectly elastic or inelastic. Which of the following statements is TRUE?
$Y must be greater than $X
Suppose the marginal propensity to save (MPS) is 0.2, and the government votes to increase taxes by $3 billion. All else equal, by how much does output change?
-$12 billion
Lejla and Cam'ryn are roommates. Lejla's demand for lattes can be represented by P=8 - 4Q and Cam'ryn's demand for lattes can be represented by P= 12 - 2Q. Sketch their room's demand curve for lattes. How many lattes are demanded at P= $10 and P= $4, respectively?
1 and 5
Given the following information: Bank reserves = $375,000, Currency in Circulation = $1,500,000, Checkable Deposits = $1,500,000, Money Supply = $3,000,000, and Reserve Ratio = 25%, what is the actual money multiplier?
1.6
California can produce 300 cases of wine per acre or 6000 pounds of blueberries per acre North Carolina can produce 500 cases of wine per acre or 7000 pounds of blueberries per acre CA has 4 million acres of farmland it can devote to wine or blueberry production and NC has 1 million acres of farmland it can devote to wine or blueberry production. Which of the following would be acceptable terms of trade for both states?
1/15 cases of wine/pounds of blueberries
Amalia and Sruthi both benefit from scientific research. Amalia's marginal private benefit from such research is given by the equation MPB = 200 - Q, where Q refers to the amount of research undertaken and MPB captures the marginal private benefit Amalia gets from different amounts of research. Meanwhile, Sruthi's marginal private benefit from such research is given by the equation MPB = 100 - Q. The marginal social cost of such research is constant at $100. What is the socially optimal amount of scientific research in this economy?
100 units of research
If Hong Kong's real GDP per capita in 2009 was $45,390.46 and $48,107.71 in 2010, how long will it take for real GDP per capita to double assuming that this growth rate continues indefinitely?
11.69 years
In a small town in the Midwest there are 600 employed people, 100 people not in the labor force, and the employment-population ratio is 75%. A company in that town needs employees and can't find any suitable workers locally, so they hire 100 recent UNC graduates to move there and work. After the UNC graduates move, what is the unemployment rate in the town? (round to two decimal places)
12.5%
Frenchie owns a nail salon. Frenchie's minimum average variable cost is $10 at a quantity of 100 manicures, and his minimum average total cost is $15 at a quantity of 200 manicures. His total fixed cost is $300. What is Frenchie's AVC when he sells 200 manicures, and is ATC increasing or decreasing at 250 manicures?
13.50; increasing
How many of the following are automatic stabilizers? I. An increased number of layoffs increases government spending on unemployment benefits II. The government increases tax rates to combat inflation III. The government cuts tax rates to increase consumer spending IV. Government outlays on welfare increase due to an increase in eligible applicants V. Congress passes a bill to increase unemployment benefit payments.
2
A farmer produces both beans and corn on her farm. If it takes 2 acres of land to grow 200 bushels of corn and 4 acres of land to grow 200 bushels of beans, then her opportunity cost of 1 bushel of beans is:
2 bushels of corn
If CPI in 2019 is 256 and the CPI in 2018 was 250, what was the inflation rate between 2018 and 2019?
2.4%
Assume banks hold no excess reserves and individuals hold no cash. If a deposit of $1000 leads to a total change in deposits of $40,000, what is the required reserve ratio?
2.5%
If CPI in 2015 was 175 and CPI in 2016 was 180, what is the inflation rate between 2015 and 2016?
2.86%
Suppose the city of Atlantis has a total working age population of 1,500,000 people and a labor force participation rate of 70%. If the unemployment rate for the city falls from 8% to 6% due to increased hiring, how many new workers were employed?
21,000 workers
The price elasticity of the supply of teenage labor services is approximately 1.36. Suppose the minimum wage rises from $7.25 per hour to $8.75. Using the midpoint formula, what is the approximate change in the quantity of teenage labor supplied?
25.5%
Spongebob and Squidward both love Krabby Patties. Spongebob's Demand function for them can be represented as QD=11-P, while Squidward's can be represented as QD=3.5-P/2. At a price of $8 per Krabby Patty, Spongebob and Squidward will purchase
3 Krabby Patties.
Sketch the market for cigarettes. Using the equations from the previous problem. What is the efficient quantity of cigarettes?
5
In Turkey the price of chicken is always $4 (supply is perfectly elastic) and demand is originally represented by the equation P=8 - (1/5)*Q. Then, due to an increase in the price of beef (which is a substitute for chicken), the demand for chicken shifts by two dollars (the willingness to pay of all consumers changes by two dollars). Calculate the change in consumer surplus after this change.
50
In evaluating the appreciation of the US dollar we find the situation is more nuanced: The Yen depreciates against the US dollar, and exchange rates go from 100 yen per USD to 150 yen per USD. Simultaneously the prices of everything in Japan doubles. Assuming that price indices in Japan and the US were 100 before the appreciation of the USD and that US prices remain constant, what is the real exchange rate after the event occurs:
75
Assume the exchange rate between Sweden and the US is 100 Swedish Kronor (SEK) per 1 US Dollar (USD) and the exchange rate between the Euro Zone countries and Sweden is 125 Swedish Kronor (SEK) per 1 Euro. If a book costs 10 USD, how much should that book cost in France (a Euro zone country) if purchasing power parity exists?
8 euros
Currently there is $4,000 of physical capital per worker in Staubsylvania (point A). Over the next 5 years, the government of Staubsylvania plans to increase physical capital per worker to $5,000 and also plans to invest in research and development in an effort to make technological advancements. What percentage of productivity growth over the next 5 years will be due to changes in technology?
80%
All of the following indicate a shift in the demand curve EXCEPT: A. In Queer Eye, KS, Antoni, a popular TV chef, teaches people how to make guacamole in every one of his shows, and sales of avocados soar as a result. B. Youths are moving away from Queer Eye, KS at a quicker rate than people are moving into Queer Eye, KS. Sales of avocados plummet as a result. C. Queer Eye, KS experiences a tech boom, which brings many higher paying jobs into the area and causes local companies to compete for talent. The resident's higher incomes allow them to purchase more avocado's and make more of Antoni's famous guacamole. D. The price of packages of pre-made guacamole falls and people in Queer Eye, KS buy fewer avocados as a result. E. A bad growing season causes the price of avocados to soar and sales in Queer Eye, KS to plummet.
A bad growing season causes the price of avocados to soar and sales in Queer Eye, KS to plummet.
Which of the following is an example of human capital?
A college education
Which of the following is FALSE regarding the relationship between monetary policy and AD? A. An increase in the money supply decreases interest rates, which increases consumption spending. B. An increase in the money supply decreases interest rates, which increases investment spending. C. A decrease in the money supply increases interest rates, which decreases government spending. D. A decrease in the money supply increases interest rates, which decreases net exports.
A decrease in the money supply increases interest rates, which decreases government spending.
Which of the following would NOT be considered technological change? A. A dry cleaner buys 2 more steam presses B. An accounting firm develops new software that cuts the time to complete an audit in half C. A dry cleaner adopts a more efficient and specialized production technique where they have one employee each sorting, cleaning, pressing, and organizing the garments, and one employee to deal with customers. D. All of the above would count as technological change
A dry cleaner buys 2 more steam presses
Which of the following is false in a situation with both variable and fixed costs of production? a. The marginal cost curve intersects with the minimum of the average variable cost curve b. Average fixed costs are always decreasing c. A firm should exit the industry in the long run when the average variable cost is higher than price d. A firm should shut down in the short run when the average variable cost is higher than marginal revenue e. A firm should leave the market in the long run when the marginal cost is higher than average total cost
A firm should leave the market in the long run when the marginal cost is higher than average total cost
Which of the following statements is FALSE? A. A full-time student would be counted as being out of the labor force. B. An economics major who has just graduated from college, but has not yet found a job is frictionally unemployed. C. Jen's company had to lay her off due to a downturn in sales. She is cyclically unemployed. D. As steel plants shut down in Pennsylvania, the workers become structurally unemployed. E. A housewife is unemployed.
A housewife is unemployed.
Which of the following sets of events would unambiguously raise the price of Gushers, the delicious gummy treat.
A new scientific report is published, suggesting that Gushers are a healthy treat AND A drought that reduces the production of corn, which is used to make the corn syrup in Gushers
When the price of a good is lower than the equilibrium price,
A shortage exists
Which of the following statements is TRUE? A. An increase in the nominal wage will increase potential output. B. If all prices, including the nominal wage rate, double in the long run, then aggregate output supplied will rise C. A simultaneous rise in productivity and nominal wages would shift the short-run aggregate supply curve to the left if the increase in nominal wages was greater than the increase in productivity. D. A positive demand shock would result from an increase in potential GDP. E. An increase in Social Security benefits will increase government purchases and shift AD to the right.
A simultaneous rise in productivity and nominal wages would shift the short-run aggregate supply curve to the left if the increase in nominal wages was greater than the increase in productivity.
Which of the following statements is TRUE? A. Tax incidence is determined by who actually remits tax payments to the government B. When taxes are imposed in markets, the quantity bought and sold will be inefficiently high. C. Buyers will end up paying a higher price if the tax is imposed on buyers (sales tax) than if the same tax is imposed on sellers (excise tax) D. A tax can distort incentives and create missed opportunities for mutually beneficial transactions
A tax can distort incentives and create missed opportunities for mutually beneficial transactions
The following figure shows the short run aggregate demand (SRAD) curve in the UK. In which direction do you think the AD curve shifted after the Brexit vote and subsequent drop in the value of the British pound (hold all else equal)?
AD will shift right
If the wage rate increases, which of the following curves do NOT change: a. AFC b. AVC c. MC d. ATC e. Both (a) and (c)
AFC
Before you leave to study abroad in France you change $1,000 into Euros. You only spend half of your money while you're gone, so when you return to the U.S. you need to change your remaining Euros back to dollars. While you're gone, the dollar depreciated against the Euro.
After you change your Euros back to dollars, you now have more than $500.
Which of the following is NOT a likely explanation for the increased levels of inequality since the 1980s? A. Changes in technology increased demand for skilled workers causing wages for skilled workers to rise faster than wages of unskilled workers B. Globalization has allowed many lower skilled jobs to be outsourced to countries where workers are willing to work for less. C. Since the 1970s the percentage of workers belonging to unions has decreased and thus their wages are no longer protected by collective bargaining agreements D. Despite increases in the nominal value of the minimum wage, the real value decreased greatly during the 1980s. E. Decreased competition/increased market concentration of firms has given firms more market power F. All of the above have played a role in increasing inequality in the US
All of the above have played a role in increasing inequality in the US
Economists have long debated whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive. Which of the following offers the best reason why some economists believe that monopolistically competitive markets benefit consumers despite any loss of well-being?
Although consumers may pay a price greater than marginal cost and the product is not produced at minimum average total cost, they benefit from being able to buy a differentiated product more closely suited to their tastes.
In January 2012, one US dollar was worth 50 Indian rupees. Suppose that over the next year the value of the Indian rupee decreases to 60 Indian rupees per one US dollar. Suppose also that the price level of all goods and services in India, as measured in rupees, falls 20%, so that the Indian price index falls from a value of 100 to 80. At the same time, suppose that the US price level increases by 6%, to 106. Which of the following statements is true? (Hint: begin by finding the percentage change in the value of the real exchange rate over this period with the exchange rate expressed as the number of Indian rupees per US dollar)
America's consumption of Indian goods and services will likely increase and India's consumption of American goods and services will likely decrease.
The US dollar appreciates against the Yen, ceteris paribus, which of the following would likely occur:
Americans consume fewer US products and more Japanese products & US GDP Decreases
Which of the following are most likely operate in a monopolistically competitive industry?
An Ice Cream Shop
Which of the following statements is FALSE? A. If the price elasticity of supply for blue jeans is 1.3, an increase of 10 percent in the price of blue jeans would increase the quantity supplied of blue jeans by 13 percent. B. An advance in technology that shifts the market supply curve to the right always increases total revenue received by producers. C. If the cross-price elasticity of demand between two goods is 1.4, the goods are likely to be substitutes. D. If the price elasticity of demand for a good is -0.7, an increase in its price will increase total revenue in that market.
An advance in technology that shifts the market supply curve to the right always increases total revenue received by producers.
If Ramen noodles are an inferior good, an increase in people's incomes will cause
An decrease in demand
Which of the following would NOT lead to a decrease in short-run aggregate supply? A. An increase in commodity prices B. An increase in interest rates C. An Ebola virus outbreak D. An increase in the minimum wage
An increase in interest rates
Which of the statements best describes why the aggregate demand curve is downward sloping?
An increase in the aggregate price level causes consumer and investment spending to fall, because consumer purchasing power decreases and money demand increases.
Staubsylvania has recently been experiencing both high unemployment and high inflation, which of the following events could have resulted is these conditions?
An increase in the price of electricity
Consider the production in Davisville in 2019. Which of the following would be counted in the GNP of Davisville?
Another library imports desks from a Davisian company in China
Which of the following is NOT a reason the Aggregate demand curve is downward sloping? A. The purchasing power of money held in savings accounts decreases as prices rise. B. As US prices rise, foreigners purchase fewer US goods. C. As prices rise, the people become more pessimistic about the economy and purchase fewer goods. D. As prices rise, the cost to businesses of financing new equipment rises, causing the quantity of RGDP demanded to fall.
As prices rise, the people become more pessimistic about the economy and purchase fewer goods
Which of the following is NOT one of the major economic rationales for the welfare state? A. Avoiding Recession by Increasing Transfer Payments B. Reducing Poverty C. Providing Access to Healthcare D. Alleviating Economic Insecurity E. Alleviating Income Inequality
Avoiding Recession by Increasing Transfer Payments
All else equal, which of the following will cause interest rates to increase?
Banks raise the interest rates paid on checkable deposits
The restaurant industry develops an exciting new technology, a robot that quickly prepares food in half the usual time of chefs. This increases supply (producers save costs on labor) and demand (consumers find it fun to watch the robot make a meal) such that price remains constant. However, the robot runs on coal and produces a lot of pollution, generating an external cost on production. How do consumer and producer surplus change as a result of this new technology?
Both producer and consumer surplus increase
_Dominic sells flowers, a perishable good that he harvested that morning and that will all be wilted and unsellable by the end of the day, and bronze statues, which he orders specially for each customer, paying for the statue after each order. Today has been rough for his shop, Petal to the Metal, and he still has a lot of flowers left in stock. He knows that if he lowers prices he will attract more customers. What should Dominic do?
Bring only the price of flowers down with a willingness to go below average total cost.
Suppose the economy has just entered a downturn due to a decrease in investment spending. While of the following actions could a central bank take to successfully counteract the downturn?
Buy back treasury bills in order to lower the interest rate.
The aggregate demand and aggregate supply for Aldovia are given by: P= 40 - 2Y, P= 30+ Y, and Yp= 7, where output is given in millions. Which of the following actions might the Fed take in this economy to push it towards long run equilibrium?
Buy government securities in the open market
Suppose the US government levies a tax on the producers of insulin. Which of the following statements is true?
Buyers will bear most of the tax burden since demand for insulin is inelastic
Which of the following statements is FALSE? A. Ceteris paribus, an increase in aggregate demand will cause real output to increase and the price level to increase. B. Ceteris paribus, a decrease in aggregate demand will cause real output to decrease and the price level to decrease. C. Ceteris paribus, an increase in aggregate supply will cause real output to increase and the price level to increase. D. Ceteris paribus, a decrease in aggregate supply will cause real output to decrease and the price level to increase.
Ceteris paribus, an increase in aggregate supply will cause real output to increase and the price level to increase.
Which word or phrase best identifies the fundamental focus of economics?
Choice
Which of the following will cause the Canadian dollar to appreciate relative to the Colombian peso?
Colombians want to buy more Canadian maple syrup
You are part of a market research team for a big tech company and you have been tasked with determining the relationship between two goods you are selling: tablets and computers. In compiling your research, you see that when the price of tablets decreases by 10%, certeris paribus, its quantity demanded increases by 15%. Additionally, you notice that the quantity demanded of computers increases by 25%. What is the relationship between these two products and what is the cross-price elasticity of demand between tablets and computers?
Complements, -2.5
Which of the following is an example of discretionary fiscal policy?
Congress authorized an additional $600 per week in unemployment benefits
Among a package of anti-smoking bills designed to lower California's health care costs by reducing the use of tobacco products is a bill sponsored by Dr. Richard Pan that would increase the tax on a pack of cigarettes by $2. California currently has a tobacco tax of 87-cents-per-pack, making California's tax 33rd in the nation and well below the New York state tax of $4.35 a pack. The state taxes are in addition to a $1.01 federal tax on cigarettes. The bill stipulates that the revenue collected must be used to increase the number of physicians in California as well as support existing health care programs managed by the state. A Field Poll taken one day following the announcement of the bill found that two-thirds of California voters support the increase in the cigarette tax. Source: Tracy Seipel and Jessica Calefati, "Cigarette tax: California voters overwhelmingly back $2-a-pack increase," San Jose Mercury News, August 27, 2015. The additional tax of $2 per pack of cigarettes being proposed by Senator Pan would have which of the following effects on the market for cigarettes in California?
Consumer surplus will decrease
Which of the following statements is FALSE: A. Contractionary monetary policy is normally used in economies that have faced deflation for prolonged time periods. B. While performing contractionary monetary policy, the monetary authority of an economy takes actions that decrease the money supply and increase interest rates. C. An increase in the interest rate shifts the aggregate demand curve of an economy to the left. D. Expansionary monetary policy is normally used in economies that have faced unemployment for prolonged periods of time
Contractionary monetary policy is normally used in economies that have faced deflation for prolonged time periods.
If the government increases spending, all of the following will occur in the short run EXCEPT A. Real GDP will increase B. Crowding in of investment C. Real interest rates will increase D. Aggregate demand will increase
Crowding in of investment
Which of the following statements is TRUE? A. Currency manipulation is generally conducted with the goal of maximizing a country's exports. B. The purchasing power parity means that exchange rates always indicate purchasing power. C. An increase in the US CPI relative to other countries' CPI causes the USD to appreciate. D. Consumers always prefer free trade as opposed to autarky.
Currency manipulation is generally conducted with the goal of maximizing a country's exports.
New Jersey is one of the few states left that still has full-service gas stations, where people pump your gas and clean your windows, it has been very successful in increasing NJ employment. Deaner, a manager at Byzantine Gasoline and Mezzanine, a luxury gas station in Atlantic City has noticed a significant decrease in the number of cars that come in to get gas refills, especially premium gas customers, since the market crashed. In lieu of this he has to fire Huston and Rick until gas sales improve. Huston and Rick's unemployment can be described as _______. Huston looks for a job but has trouble finding one he likes and decides to retire; he would be described by the BLS as a _______ who is no longer ______. Rick, on the other hand decides to use his engineering knowledge to become an Iron Worker, however manual labor for iron workers is needed less and less with modern automation, so he is unable to find a job that fits his skill set, he is now a victim of ______.
Cyclical, Discouraged Worker, In the labor force, Structural Unemployment
If money supply increases in the short run by 30%, then interest rates will__________, while in the long run if the aggregate price level rises by 30%, money demand__________:
Decrease; Increases by 30%, all else equal.
Buyers will bear more of the burden of a tax if
Demand is more elastic than supply
Which of the following scenarios is not consistent with a perfectly competitive market?
Each producer of backpacks can freely set the price, while consumers of backpacks take the price that is set
Which good would you expect to have the more elastic demand: Electricity over the next month or electricity over the next 5 years? Why?
Electricity over the next 5 years
Consider Staubovia's perfectly competitive market for snow shovels. Which of the following statements is the LEAST likely in this market?
Esther, the owner of So Long Snow Shovel Co., decides to set the price of her snow shovels slightly higher than her competitors to signal that her snow shovels are of higher quality.
Which of the following statements is FALSE? A. Free trade is generally harmful to US labor markets. B. US consumers can benefit from free trade through lower prices. C. Free trade can create jobs in the US. D. Free trade can destroy jobs in the US. E. Economists are generally in favor of removing barriers to trade.
Free trade is generally harmful to US labor markets.
Which of the following statements is TRUE? A. Government deficit spending can push interest rates up and crowd out private investment B. Credit Card balances are part of the M2 money supply C. The simple deposit multiplier is typically smaller than the real deposit multiplier D. The aggregate demand curve is downward sloping because the government purchases more goods and services when prices fall E. If you earn over $1 million per year, an economist would say you are wealthy
Government deficit spending can push interest rates up and crowd out private investment
Consider the market for sunflower seeds in Durham. Halima is a farmer who grows sunflowers. When the sunflowers are blooming, her fields are beautiful and people come from all over town to enjoy them. She can then choose whether to sell the sunflowers as bouquets or sell just the sunflower seeds. Halima sells the sunflower seeds to Bex. When Bex eats the sunflower seeds, they spit the shell of the seeds onto the ground, which grosses out other people near them. How would you describe the externalities that exist in the market for sunflower seeds in Durham?
Halima creates a positive externality in production and Bex creates a negative externality in consumption
Which of the following are NOT situations that would lead to inflation being overstated? A. Harrison buys the same pair of running shoes year after year even though the price rises. B. Olivia buys a new phone that costs the same as her old phone but has a much better camera, is water-resistant, and has more memory. C. Ethan's drinks coffee every morning, but coffee is becoming more expensive, so he switches to tea. D. Aly decides to stop buying her groceries at Harris Teeter and starts shopping at Walmart to save money.
Harrison buys the same pair of running shoes year after year even though the price rises.
Imagine two identical countries, Lowland and Highland, with identical money demand curves, interest rates, and money supply. The only difference between the two countries is their reserve ratio; Lowland has a reserve ratio of 10%, and Highland has a reserve ratio of 20%. A billionaire goes to both countries and deposits $1,000,000 dollars in a bank in each country. After those deposits are distributed throughout the banking system, which country will have a higher interest rate?
Highland will have a higher interest rate because the money supply will increase less in Highland.
If the value of Rick's time is $100/hr, and Rick spends 7 hours per week walking his dog Tyson, which of the following is true:
His implicit cost of walking Tyson is $700 per week
Which of the following questions is NOT a question that would be asked by a macro-economist? A. What will happen to US exports as the exchange rate falls? B. How will wages change at a manufacturing plant when its workforce unionizes? C. What is the relationship between a nation's unemployment rate and its inflation rate? D. What will happen to consumer expenditure when the economy enters a recession?
How will wages change at a manufacturing plant when its workforce unionizes?
If there is an increase in the firm's rent, which of the following curves would be affected (would shift)? I. ATC II. AVC III. AFC IV. MC
I and III
Who of the following will benefit from unexpectedly high inflation? I. Salem, who borrowed $10,000 to pay for her college education II. Cameron, who keeps his savings in his matress III. Jason, who loaned his brother $5,000 IV. Georgia, a retired firewoman, who relies on her fixed pension to pay her bills
I only
Consider the following information for the tiny island nation of Blueland: From the beginning of 2014 to the beginning of 2015, the Real GDP of Blueland increased from $100 billion to $115 billion. Blueland had a national debt of $60 billion at the start of the 2014. During the calendar year of 2014, the national government of Blueland had a budget balance of -$6 billion. Which of the following combinations of statements are all true? I.Blueland's debt increased in 2014 II. Blueland's debt-to-GDP ratio decreased in 2014 III. Blueland had a national debt of $54 billion by the start of 2015 IV. Blueland's government ran a budget deficit in 2014.
I, II, IV
If there is an increase in the wages paid to workers, which cost curves would be affected (would shift)? I. ATC II. AVC III. AFC IV. MC
I, II, and IV
Which of the following statements are true: 1. The Federal Reserve's goal is to keep inflation centered around 0% and unemployment at a low rate. 2. In our long run AS/AD model, monetary policy only affects the price level. 3. A recessionary output gap would cause the Fed to increase the federal funds rate..
II
Which of the following are examples of fiscal policy? I. The Fed purchases government securities II. The estate tax is repealed III. Public money is used to build a high-speed rail system IV. To help domestic firms, the government sets an import quota
II and III
Which of the following statements is false regarding interest rates? I . An increase in interest rates will shift aggregate demand to the left, ceteris paribus II. A decrease in interest rates will shift aggregate demand to the left, ceteris paribus III. The savings rate increases as interest rates increase, ceteris paribus IV. Banks are more inclined to lend out money as interest rates fall, ceteris paribus
II and IV only
Which of the following are reasons for why a monopoly might exist? I. Average total costs fall as output decreases II. High start up costs discourage market entry III. As the number of consumers for one firm's product increase, ease of use for the consumer and profit for the producer also increase IV. Firm specific processes are widely shared across the industry
II, III
Which of the following statements are true? I. Average product of labor will never change based on a change in capital. II. Assuming capital is constant, marginal product of labor is always constant. III. If marginal product of labor is positive, total product will always increase with more labor.
III
Which of the following are NOT part of the money supply (M2)? I. traveler's checks II. savings deposits III. credit cards IV. gold V. time deposits (certificates of deposit)
III and IV
Which good would you expect to have the more elastic demand: Epipens or Ibuprofen? Why?
Ibuprofen
Which of the following statements is FALSE? A. If average variable cost is decreasing, then marginal cost is also decreasing B. The slope of a PPF illustrates the concept of opportunity cost. C. In the short run a firm will shut down if it cannot cover its variable costs. D. If banks like to hold more of their deposits as reserves, an increase in deposits will cause less of an increase in the money supply.
If average variable cost is decreasing, then marginal cost is also decreasing
Which of the following statements is TRUE? A. If monopolies are able to charge different consumers different prices, they will have higher producer surplus than a monopolist that charges all consumers the same price. B. When regulating a natural monopoly, the government will always set the price equal to the firm's marginal cost of production C. The monopolists always make positive economic profits D. When marginal revenue is negative, profits are also negative, so the monopolist will not produce E. The Department of Justice would have no problem with a merger between AT&T and Verizon
If monopolies are able to charge different consumers different prices, they will have higher producer surplus than a monopolist that charges all consumers the same price.
Which of the following is a true statement about real and nominal GDP?
If real GDP increases from one year to the next, we know that production of goods and services has risen.
Which of the following statements is FALSE? We would expect the long-run supply curve for gasoline to be flatter than the short-run supply curve for gasoline. B. If supply is perfectly elastic, a change in demand will not affect the equilibrium market price. C. If supply is perfectly inelastic, a change in demand will not affect the quantity bought and sold in the market. D. If the demand for gasoline increases, consumers will be better off the more inelastic is the supply of gasoline.
If the demand for gasoline increases, consumers will be better off the more inelastic is the supply of gasoline.
Which of the following statements is true: A. If you cook some lasagna for yourself the value of the lasagna is not included in GDP, but if you buy it from a restaurant it is included in GDP. B. GDP does not include exports C. Sales of cocaine (an illegal drug) increase GDP in a country. D. A country with a high per capita GDP is better off than a country with a lower per capita GDP
If you cook some lasagna for yourself the value of the lasagna is not included in GDP, but if you buy it from a restaurant it is included in GDP.
Which of the following statements about perfectly competitive markets is TRUE?
In a perfectly competitive market a firm's average revenue is equal to the market price
Ceteris Paribus, which of the following situations might lead to an increase in the short run aggregate demand in the US?
Income in China is rising
Assuming an economy begins in long-run equilibrium, an advancement in production technology will:
Increase real GDP
The government reduces the money supply in response to concerns over inflation. In the short run, interest rates will __________________ and in the long-run interest rates will __________________ compared to the current interest rate.
Increase; Not change
The country of DropTopville is facing a period where aggregate output is higher than potential output. This is called a(n) _________ gap and is typically marked by ___________ unemployment and a __________ price level than a nation in long run equilibrium
Inflationary, low, higher
In the short-run, how will a decrease in the money supply affect interest rates and the aggregate price level?
Interest rates will increase and the price level will decrease
With the increased usage of cell phone services, what has happened to the price elasticity of demand for land-line telephone services?
It has become more price elastic.
_In the country of Qumar, the autarky price of crude oil is $56.82 per barrel. Currently, the world price is $60.25 per barrel. If Qumar decides to open its economy to international trade, how will domestic consumer surplus change?
It will decrease because Qumar will export crude oil
For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France can produce 1 bottle of wine for every 25 pounds of cheese it produces. Which of the following is true about the comparative advantage between the two countries?
Italy has the comparative advantage in wine.
Javed is a writer who works from his home. Javed lives next door to Tommen, the drummer for a local band. Tommen needs lots of practice to earn his share of the bands profits, $300. Javed gets distracted by Tommen's drumming but needs to get his writing done to earn $500 for his current article. Which of the following is an efficient solution?
Javed offers Tommen $301 to stop drumming. Tommen accepts and both are better off
Which good would you expect to have the more elastic demand: Popsicles in general or Locopops (gourmet popsicles in Durham)? Why?
Locopops
A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The price of each good is $10. Calculate the firm's short-run profit or loss.
Loss of $6,000
The economy is currently in a recessionary output gap because of a significant decrease in consumer confidence. What would the Federal Reserve most likely do to support the economy to return to its long-run output level?
Lower the interest paid on reserves
Which of the following statements is FALSE? A. AVC is the sum of all costs that change as output changes divided by the number of units produced B. MC is downward sloping because of diminishing marginal returns C. MPL intersects APL at the maximum APL D. MC is the amount by which total cost increases when output increases by one unit E. AFC is decreasing in q
MC is downward sloping because of diminishing marginal returns
Assume the supply of cigarettes is given by P=3.5+0.5Q. and the demand for cigarettes is given by P=21.5-2.5Q. Which of the following are feasible MSB curve and MSC curves for cigarettes?
MSC=3.5+0.5Q and MSB=18.5-2.5Q
In the short run, if marginal product is at its maximum, then
Marginal cost is at its minimum
Consider a perfectly competitive market for striped shirts, which is currently in LR equilibrium. Marine is a supplier in this market. If the market price of black blazers, a good often worn with striped shirts were to increase, what could be inferred of Marine's future in the market?
Marine will face losses in the short run and could potentially exit the industry in the long run
Which of the following programs is an in-kind transfer?
Medicaid
Which of the following would result in a positive externality?
Medical research results in a cure for malaria.
Which of the following programs is not means tested?
Medicare
Suppose that in 2011, Mexico's total government outlays were 523 billion pesos and total government revenue was 575 billion pesos. Which of the following statements is TRUE?
Mexico is running a budget surplus and their debt will fall
California can produce 300 cases of wine per acre or 6000 pounds of blueberries per acre North Carolina can produce 500 cases of wine per acre or 7000 pounds of blueberries per acre CA has 4 million acres of farmland it can devote to wine or blueberry production and NC has 1 million acres of farmland it can devote to wine or blueberry production. Draw the PPFs for California and North Carolina with pounds of blueberries on the horizontal axis and cases of wine on the vertical axis. Who has the Absolute Advantage in wine production
NC
California can produce 300 cases of wine per acre or 6000 pounds of blueberries per acre North Carolina can produce 500 cases of wine per acre or 7000 pounds of blueberries per acre CA has 4 million acres of farmland it can devote to wine or blueberry production and NC has 1 million acres of farmland it can devote to wine or blueberry production. Draw the PPFs for California and North Carolina with pounds of blueberries on the horizontal axis and cases of wine on the vertical axis. Who has the Comparative Advantage in wine production
NC
Based on the situation from question 6, what policy should the mayor implement in order to improve efficiency in this market?
Need more information
Eagleton has a total population of 1,000 people. 25% of that population is not of working age, and 80 of the total population are unemployed. How many people are in the labor force?
Need more information
Suppose you make $10/hr working at Starbucks. When your dad was in college in 1995, he also worked at Starbucks making $6/hr. If the CPI in 1995 was 150 and the CPI today is 250 (using 1982 as the base year). Who had the better paying first job?
Neither, your real wages are the same
Which of the following will cause the USD to depreciate relative to the Swedish Kronor (SEK)?
Netflix produces a documentary showcasing the beautiful Swedish countryside, which encourages US travelers to visit
Which of the following statements is FALSE? A. Alice is willing to spend $30 on jeans, and has a coupon for $10 off. She selects and purchases a pair of jeans which cost $35 pre-discount. Alice has a consumer surplus of $5. B. Jeff finds steaks for $16 for which he would have been willing to pay $20. The butcher notices the meat is near the expiration date and gives him an extra 75% off. Jeff has a consumer surplus of $16. C. Nicole has a hockey puck from the 2018 Olympics and puts it for sale on eBay. She will only sell the puck if the winning bid is greater than or equal to $500. After bidding closes, the last bid is $501. Nicole has a consumer surplus of $1. D. None of the above are false
Nicole has a hockey puck from the 2018 Olympics and puts it for sale on eBay. She will only sell the puck if the winning bid is greater than or equal to $500. After bidding closes, the last bid is $501. Nicole has a consumer surplus of $1.
The restaurant business in town is a monopolistically competitive industry in long-run equilibrium. One restaurant owner asks for your advice. She tells you that, each night, not all tables in her restaurant are full. She also tells you that she would attract more customers if she lowered the prices on her menu and that doing so would lower her average total cost. Should she lower her prices?
No
You and your Uncle Vance are talking about the price of college. When Uncle Vance went to college in 1985, he was able to pay for all of his tuition with the money he made from his part time job, and he doesn't understand why kids these days don't do the same. You remind him that his tuition was only $5,504, and tuition now is $26,593. He tells you that those numbers don't account for inflation and that he paid at least as much as you in 2019 dollars. Assume the CPI is 44.84 in 1985 using 2019 as the base year. Is Uncle Vance right?
No, because Uncle Vance's real tuition is $12,274
AMC Theaters is looking for ways to make up for lost revenue due to COVID-19. They've calculated that their price elasticity of demand for tickets is 1.6. They're considering increasing ticket prices by 15%. Would this increase their total revenue?
No, because the quantity of tickets purchased would decrease by 24%
Which of the following solutions could we expect to lead to the socially optimal (efficient) outcome in the market for cigarettes described in questions 1 and 2?
None of the above
If there is an increase in the number of workers hired, which of the following curves would be affected (would shift)? I. ATC II. AVC III. AFC IV. MC
None of the curves would shift
Which of the following events would increase the U.S. Gross Domestic Product for this year?
None of these would increase US GDP
The 70's were plagued with Stagflation, which of the following characteristics are accurate descriptors of that economy?
Oil Prices Increased, Unemployment Increased, Increasing Money Supply was not a successful remedy.
If marginal product of labor at a given level of output is 3 (and decreasing at a constant rate), and the average product of labor is 5, which of the following is necessarily true? a. O
One more unit of labor will decrease APL
The demand for six-packs of beer in Chapel Hill is given by QD = 100 - 10P and the supply of six-packs of beer is given by QS = 2P, where Q is measured in thousands of six-packs. Assume the price of hops decreases, decreasing the quantity supplied by 20 at each price. What will be the new price of a six-pack of beer in Chapel Hill?
P* = 10
The demand for six-packs of beer in Chapel Hill is given by QD = 100 - 10P and the supply of six-packs of beer is given by QS = 2P, where Q is measured in thousands of six-packs. Sketch the market for beer in Chapel Hill and calculate the equilibrium price and quantity.
P* = 8.33
When the expected future price of strawberries increases, what happens to the equilibrium price and quantity of strawberries today?
P* increases and Q* ?
Suppose the price for phasers on the planet of Vulcan is lower than the federation alliance (world) price. If the Vulcans were to engage in trade with the federation, what would occur and who would benefit?
Phasers would sell at the federation price and Vulcans would export to the federation; producers of phasers on Vulcan would benefit
The point at which the long-run aggregate supply curve touches the x-axis is known as:
Potential output
Which of the following events would not cause a shift right in the aggregate demand for the US?
Price Level in the US rises by 10%
Consider a simultaneous increase in the price of electricity and a decrease in income taxes. How will these events affect price level and output in the short run?
Price level increases, the change in output is uncertain
Jim and Pam are the two consumers of Michael's shoe store. Their demand can be written as P= 140 - 10Q. Michael's supply of shoes can be written as P= 50 + 5Q. If the price of shoes, which was initially at equilibrium, decreases by 10 dollars, how does producer surplus change?
Producer Surplus decreases by $50
The hypothetical city of Hogsmeade is trying to decide how many city beautification projects should be approved each year. These projects involve planting gardens, commissioning murals, and building fountains. What type of good are city beautification projects?
Public Good
Assume the US economy starts in LR equilibrium in summer 2008. In the fall of 2008, the stock market lost about half its value. Show the SR effects on an AD-AS graph labeling any output gaps that are created. What type of output gap is created, and how would we expect the economy to self-correct in the LR? Can you show these LR changes on your graph?
Recessionary output gap; nominal wages will fall
If the Fed wants to fight inflation, they could:
Sell bonds
Seth is the owner of a firm that produces good X. Producers of good X can freely enter and exit the market. Additionally, Seth's firm and the rest of the good X producers have only a small influence on the good's market price. As the owner of the firm, Seth is looking to increase production. While both increasing the number workers employed and adding machinery could increase production, currently Seth can only change the number of workers. Which of the follow is true?
Seth's firm is operating in the short-run
Initially, the exchange rate between the Euro and the Swedish Kronor is in equilibrium. Suppose there is an increase in demand for Swedish Kronor. Which of the following statements is TRUE?
Spotify, a Swedish company, will be better off if they were planning to purchase land in France for an office.
Suppose Chapel Hill has a booming natural gas industry. After a few years of extracting this material, the largest energy company discovers a new technology to extract natural gas with automatic machinery. As a result, thousands of workers lose their jobs and are unable to find other employment. This is an example of:
Structural Unemployment
Which of the following statements is FALSE regarding taxes and subsidies? A. Taxes make markets less efficient because they lead to lower production than the equilibrium quantity. B. Subsidies make markets more efficient because they encourage production above the equilibrium quantity. C. Producers will bear more of the tax burden if demand is more elastic than supply. D. If a subsidy is imposed in a market, then the price buyers pay will be lower than the price producers receive.
Subsidies make markets more efficient because they encourage production above the equilibrium quantity.
Which of the following is an example of an intermediate good for the Open Eye Café in Carrboro?
The Carrboro Coffee Roasters beans they use to make their coffee drinks
Suppose Toreroville produces only chips and salsa, and and the typical household in Toreroville consumes 5 bags of chips and 1 jar of salsa each year. In 2015, 100 bags of chips are produced and sold at $3 each and 50 jars of salsa are produced and sold at $4 each. In 2010, the base year, chips sold at $2 per bag and salsa sold at $1.50 per jar. Which of the following is TRUE?
The GDP deflator in 2010 is equal to 100
Which of the following statements about healthcare is TRUE? A. Universal healthcare systems are unpopular among high-income countries like the US. B. Health Care can be provided most efficiently without government intervention. C. The Affordable Care Act (aka Obamacare) has been unsuccessful at increasing health care coverage in America D. The United States has higher infant and maternal mortality rates and higher health care costs per person than other high-income countries.
The United States has higher infant and maternal mortality rates and higher health care costs per person than other high-income countries.
The country of Genovia recently implemented an import tariff on coffee. Which of the following would you not expect to see in the market for coffee? a. Surplus will decrease for Genovian consumers b. Coffee producers in Genovia will benefit from this tariff c. The quantity demanded of coffee will decrease in Genovia d. The autarky price of coffee will increase in Genovia e. The quantity of imports will decrease
The autarky price of coffee will increase in Genovia
Which of the following was the most likely cause of the Great Recession?
The collapse of the housing market shifted the AD curve to the left.
Consider Nicole's Wonky Widgets, a firm in the perfectly competitive market for widgets. Nicole faces a demand curve of P = 5 and has an upward sloping marginal cost curve. Under which of the following conditions could Nicole charge a price higher than $5 for their widgets?
The cost of rubber, a primary input to the production of widgets, increases.
Assume that many people like to eat candy while drinking milk. If the price of milk falls, what would happen to the demand curve for candy?
The demand curve would shift right
Suppose that the price elasticity of demand for Lady Gaga CDs is 2 and that quantity demanded of Lady Gaga CDs drops from 1,300 to 700, then:
The demand for Lady Gaga CDs is elastic
Which of the following statements is TRUE? A. A budget neutral tax cut policy will not change AD. B. If an economy is experiencing an inflationary output gap a tax cut is likely to push the economy back toward long-term equilibrium. C. If the government cuts taxes, the price level will fall and output will rise D. There is no reason we should be concerned about the rising national debt. E. The government purchases multiplier decreases as the MPC decreases.
The government purchases multiplier decreases as the MPC decreases.
The Santa Fe Spark Plug Company supplies spark plugs to automotive parts dealers. An increase in the demand for its product led Santa Fe to hire 150 new workers. Santa Fe also plans to expand the capacity of its plant but this project will take 2 years to complete. Which of the following statements is true?
The long run for Santa Fe is longer than 1 year.
If Tom and Jean-Ralphio were able to downsize their building within a month, what does that imply?
The long-run is less than a month for their firm
A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to the municipal pools this year to raise revenues. Who is correct?
The mayor would be correct if demand were price inelastic; the city manager would be correct if demand were price elastic.
If the price level increases, which of the following are true? A. The money demand curves shifts to the right B. The money supply curve shifts to the right C. The money demand curve shifts to the left D. We move along the money demand curve E. The quantity of money increases
The money demand curves shifts to the right
Which of the following statements is TRUE? A. Every US dollar is backed by gold held in a vault at the Federal Reserve. B. If total product is decreasing, the marginal product of labor must be decreasing. C. If the economy is producing at potential output, there is no unemployment D. The more inelastic the demand for a good, the larger the amount of a tax the buyer pays.
The more inelastic the demand for a good, the larger the amount of a tax the buyer pays.
Which of the following statements is FALSE? A. The number of outdoor murals provided with no regulation or intervention will be inefficiently low B. The number of Cable TV subscribers will be inefficiently low with no regulation or intervention C. The number of fish caught in the ocean will be inefficiently high without regulation or intervention D. The number of bananas sold with no regulation or intervention will be inefficiently high
The number of bananas sold with no regulation or intervention will be inefficiently high
What distinguishes the long-run from the short-run in terms of firm's decision-making?
The presence of fixed inputs
The Fed expects AD to increase over the next year. Which of the following is true? A. The Fed should sell bonds B. The Fed should implement expansionary monetary policy C. The price level will be higher if the Fed does not use contractionary monetary policy. D. Real GDP will be higher if the Fed uses contractionary monetary policy.
The price level will be higher if the Fed does not use contractionary monetary policy.
Suppose the government has imposed a price floor on smart phones. Which of the following events could transform the price floor from one that is binding to one that is not binding?
The rare earth metals used to produce smart phones become more expensive.
Assume the price level in Mexico has increased 6% since 2014 (the base year) and prices in the US have increased 2% since 2014. If the nominal exchange rate has increased from 10 pesos/USD in 2014 to 12 pesos/USD in 2016, what has happened to the real exchange rate?
The real exchange rate has increased from 10 pesos/USD to 11.55 pesos/USD
Which of the following statements is TRUE? A. The shortage created by a binding price ceiling is greater in the long run than in the short run. B. The minimum wage helps all teenagers because they receive higher wages than they would otherwise. C. The amount of unemployment generated by a minimum wage depends only on the elasticity of labor demand. D. Car manufacturers would prefer a price ceiling over a price floor in the market for cars. E. Car buyers would prefer a quota over a price floor in the market for cars.
The shortage created by a binding price ceiling is greater in the long run than in the short run.
Skim milk and cream are complements in production. If the price of skim milk rises, how will this affect the supply curves for skim milk and cream?
The supply curve for cream will shift right; no shift in supply curve for skim milk
In an effort to protect its domestic pear production, the Kingdom of Genovia decides to place an import tariff on pears. Which of the following correctly explains the tariff's effect on domestic demand?
The tariff will raise domestic prices and decrease the quantity demanded.
Which of the following statements is FALSE based on the scenario from question 4?
The total change in the money supply after all rounds will be about $32856
Which of the following statements is TRUE? A. The closest Federal Reserve branch to UNC is the Atlanta Fed B. If you make over $500,000 per year then you are very wealthy C. Bank runs are a big danger in the US because the amount of currency does not equal the amount of checkable deposits and there are few protections for depositors. D. The more money people hold in cash, the smaller the simple money multiplier will be. E. The two most commonly used monetary policy tools are open market operations and interest paid on reserves.
The two most commonly used monetary policy tools are open market operations and interest paid on reserves.
Economists at the non-partisan think tank, The US Economy Think Tank, publish a report stating that the growth in nominal GDP means people in the US are better off in 2015 than they were in 2014. Would you rate this claim as true or false?
There is too little information to answer this question.
The demand for six-packs of beer in Chapel Hill is given by QD = 100 - 10P and the supply of six-packs of beer is given by QS = 2P, where Q is measured in thousands of six-packs. If the current market price is $10 per six=pack, which of the following is true?
There will be excess supply of 20,000 six-packs
Suppose that in 1878, the United States' output was valued at $100 million. In 1879, Thomas Edison files a patent for the first commercially-viable light bulb. With consistent, reliable light now available at all hours of the day workers in the United States become vastly more productive. Which of the following answer choices most accurately describes the effect of the invention of the light bulb and best predicts what should happen to output in the coming years?
This represents a rightward shift in both the SRAS and LRAS curve. Barring any other shocks, output will rise in the coming years.
Suppose that the federal administration plans to fight a deep, ongoing recession with a nationwide plan of increasing infrastructure. Congress approves it and adjusts the budget accordingly to put the plan in motion immediately. How does this affect the Aggregate Demand curve?
This will increase G and lead to a shift right of AD
In Halloween Town, Jack designs a machine that can harvest pumpkins twice in half the time of previous designs. Which of the following statements is TRUE in the short-run? A. This would increase both real GDP and the aggregate price level. B. This would lead to a rightward shift of the SRAS curve and higher aggregate output. C. This is a positive supply shock that would increase the aggregate price level. D. This would lead to stagflation. E. This would decrease real GDP and increase the aggregate price level.
This would lead to a rightward shift of the SRAS curve and higher aggregate output.
Because of changing meteorological conditions, prices of an extensive group of commodities (e.g. corn, rice, wheat, cotton) are increasing in price. Show how this would affect and AD-AS model of the US economy in the short-run and choose the best assessment about the long-run implications.
This would lead to stagflation which can be difficult to control in the long-run in practice
Which of the following is not a barrier to entry?
Tinseltown Theatre shows almost all the most popular newly released movies
If the demand for a good is unit elastic and the price increases by 10 percent then:
Total expenditure by consumers will not change
The price elasticity of demand for sodas has been estimated to be 0.60. If Congress enacts an increase in the tax on sugar (a major ingredient in soda manufacturing), how will that affect total expenditures on sodas, all other things equal?
Total expenditures will rise.
What would have to be true about transaction costs in order for Tommen and Javed to be able to reach the efficient outcome?
Transaction costs would need to be less than $200
You and your Uncle Vance are talking about the price of college. When Uncle Vance went to college in 1985, he was able to pay for all of his tuition with the money he made from his part time job, and he doesn't understand why kids these days don't do the same. You remind him that his tuition was only $5,504, and tuition now is $26,593. He tells you that those numbers don't account for inflation and that he paid at least as much as you in 2019 dollars. Assume the CPI is 44.84 in 1985 using 2019 as the base year. Which rose faster between 1985 and 2019: the price of college or the prices of other goods and services consumers buy?
Tuition
Why is the shape of the production possibilities frontier (PPF) often curved instead of straight?
Typically, some resources are better suited for producing one good than another, which means that there are diminishing returns when moving such resources away from producing what they are best suited for.
What is the "Fed"?
U.S. Central Bank
If the value of a U.S. dollar changes from ¥120 to ¥110, it follows that:
U.S. goods become cheaper for Japanese consumers
Ford Motor Company produces 500 Escapes valued at $10,000 each in a factory in Missouri. Ford ships 200 of them to a car dealer in Shanghai, China, sells 200 of them this year, and is unable to sell the other 100. Which of the following accurately describes what happens to US GDP and each of its components?
US GDP increases by $5 million, net xports increase by $2 million, consumption increases by $2 million, and investment increases by $1 million
Which of the following statements is FALSE? A. We do not use bread as money because it is not a good store of value. B. US dollars are valuable because they are backed by gold. C. It is common for goods to take on the properties of money in places like prison where common money is not allowed. (e.g. cigarettes, ramen, etc.) D. Money is created through the process of banks loaning out portions of the deposits made in their branches.
US dollars are valuable because they are backed by gold.
Sylvia's annual salary increases from $100,500 to $109,500, and she decides to increase the number of vacations she takes per year from three to four. Calculate her income elasticity of demand for vacations using the midpoint method.
Vacations are a normal good with income-elastic demand
Changes in short-run aggregate supply can be caused by changes in:
Wages
Which of the following is a macroeconomics question?
What determines the unemployment rate?
Which of the following questions would be asked by a microeconomist?
What will happen to the price of textbooks this year?
Which of the following statements is TRUE? A. You decide to forgo partying for two hours to study for an upcoming economics exam. The enjoyment you would have received from partying is an example of an incentive. B. Your professor presents data showing that economics majors develop skills valuable in many sectors and argues that they earn a relatively higher income than other majors. Your professor is presenting you with the opportunity cost of majoring in economics. C. When economists assume people are rational, they are assuming that people do not make choices that knowingly make them worse off.
When economists assume people are rational, they are assuming that people do not make choices that knowingly make them worse off.
In the long-run, the government expenditure multiplier is
Zero
When every good or service is produced up to the point where the last unit provides ________, allocative efficiency occurs.
a marginal benefit to society equal to the marginal cost of producing it
Which of the following policies aimed at reducing the number of guns would gun manufacturers be the most likely to support?
a price floor
Which of the following is an example of a non-excludable product?
a public library
Which of the following is NOT one of the monetary policy tools the Federal Reserve has at its disposal? A. adjusting the discount rate B. adjusting the reserve requirement C. adjusting the federal funds rate D. adjusting the interest they pay on reserves E. conducting open market operations
adjusting the federal funds rate
A member of a cartel like OPEC has an incentive to
agree to a low cartel production level and then produce more than its quota.
Microsoft hires marketing and sales specialists to decide what prices it should set for its products, whereas a wealthy corn farmer in Iowa, who sells his output in the world commodity market, does not. Why is this so?
because Microsoft could potentially lose sales if it sets prices indiscriminately
Why does a monopoly cause a deadweight loss?
because it does not produce some output for which marginal benefit exceeds marginal cost
Oligopoly differs from perfect competition and monopolistic competition in that
because oligopoly firms often react when other firms in their industry change their prices, it is difficult to know what the oligopolist's demand curve looks like.
When two people trade voluntarily with each other:
both of them will be better off.
If consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI basket, then
changes in the CPI overstate the true rate of inflation
Suppose that when the price of Weebles decreases, the Jones family increases their purchases of Grumpalumps. To the Jones family, Weebles and Grumpalumps are __________
complements in consumption and the cross-price elasticity of demand between these two goods is negative.
Which of the following will cause interest rates to decrease, all else equal?
crime rates increase, increasing the likelihood that people will be robbed
If Japan levies tariffs on U.S. goods entering Japan, this will tend in the short run to _____ U.S. producers and _____ Japanese producers.
damage; benefit
The government proposes a tax on imported champagne. Buyers will bear the entire burden of the tax if the
demand curve for imported champagne is vertical.
What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone applications?
ease of entry
Theoretically, how will the economy in Staubsylvania self-correct in the long-run assuming the previously mentioned policies lead to a recessionary output gap?
excess supply in labor markets will force wages to fall and cause SRAS to rise
Parents who do not have their children immunized and attempt to benefit from other parents who did have their own children immunized are exhibiting an economic behavior known as
free riding
The natural rate of unemployment is the sum of
frictional unemployment and structural unemployment
Which of the following will NOT increase during an economic expansion caused by increased consumer confidence? A. Consumer income B. tax revenues C. government spending D. output E. budget surplus
government spending
Assume the nominal exchange rate between South Africa and Switzerland is 15 South African Rand per Swiss Franc. If the nominal exchange rate doubles and the price level in Switzerland goes from 100 to 200, while the price level in South Africa doesn't change, what happens to the real exchange rate?
has risen
Ben's Peanut Shoppe suffers a short-run loss. Ben will not choose to shut down if
his Shoppe's total revenue exceeds his variable cost
In the nation of Trubiskiland, the total population is 500,000. 80% of the population is of working age, and of the working age population, 75% is employed. Additionally, 50,000 people of working age are not currently looking for work. Which of the following MUST be true: i. The unemployment rate is 25%. ii. The labor force participation rate is 87.5%. iii. The economy is not operating at full employment.
ii
When economists talk about the crowding‑out effect, they are talking about a scenario in which federal deficit spending causes:
increased interest rates, which reduces private investment spending.
A 10% increase in the minimum wage will cause employment to fall by 13% if _______ and result in a(n)________ in total wage payments to workers.
labor demand is elastic; decrease
If inflation increases unexpectedly, then
lenders receive a lower real interest rate than they expected.
An early freeze wipes out much of the year's apple crop causing the price of apples to rise. Despite this price increase apple farmers report increased revenues. We can conclude that the price elasticity of demand for apples is:
less than one
One year after the base year, deflation occurs. In this year, nominal GDP is ______ real GDP, and the GDP deflator is _________.
less than; less than 100
Draw an AD-AS model of the US economy in 2007 assuming that the US is in LR equilibrium in 2007. First, Show the effect of the housing market crash in 2008 on the economy in the SR. Then, Show the effect of the Fiscal and Monetary policies implemented by the federal government and the Fed throughout 2009, respectively. Additionally, show the effects of long-run adjustments in the labor market that were happening during at the same time assuming that after all of these adjustments the economy ends in LR equilibrium. Finally, Answer the following question: After these adjustments the price level was____________ and output was _____________ compared to 2007.
lower; the same
The data in the diagram indicates that DVDs are
luxury goods
Suppose a decades‑long civil war in Staubsylvania stifles technology and capital stock, show the short-run effects of this assuming that the nation started in LR equilibrium. Which of the following could push the nation back towards LR equilibrium?
need more information
Which of the following would be directly counted in GDP in 2016?
new kitchen cabinets purchased from Home Depot in 2016 to be installed in a house built in 1997
Which example best represents perfectly inelastic supply?
original paintings made by Leonardo Da Vinci
If Congress imposes a tax in a market with a supply curve that is perfectly inelastic, the tax burden will fall completely on _____, and the DWL (deadweight loss) will be equal to _____.
producers; zero
Which of the following is NOT one of the functions of money? A. standard of deferred payment B. purchase agent C. store of value D. medium of exchange E. unit of account
purchase agent
The aggregate production function gives the relationship between
real GDP per hour of labor and capital per hour of labor, with technology held constant.
Since the 1970s, poverty rates in the US have ____________ while income inequality has _____________.
remained fairly constant ; risen
Assume that the price for lawn care has fallen and quantity of lawn care services sold have also fallen. One can conclude that
the demand for lawn care service has decreased.
Which of the following markets is the LEAST likely to be perfectly competitive?
the market for fast food in Chapel Hill
The supply of beachfront property is inelastic and the supply of new cars is elastic. Suppose population growth causes demand for both goods to double (i.e. at each price the quantity demanded doubles). Which of the following is TRUE?
the price of beachfront property will increase more than new cars.
Which of the following is NOT counted as a part of GDP?
the purchase of 100 shares of AT&T stock by your grandmother.
Real GDP per capita is NOT an adequate measure of:
the well-being of each person in a country
When people determine the quantity of education they will undertake, they ____ the external benefits. As a result, if education were left to an unregulated market, people would undertake too ______ education.
undervalue; little