Econ Quiz 1-4 Review

If you are estimating your total expenses for school next semester, you are using money primarily as:

a unit of account.

GDP is the market value of:

all final goods and services produced in the economy in a given year

The total demand for money curve will shift to the right as a result of:

an increase in nominal GDP.

Inflation is defined as:

an increase in the overall level of prices

The amount by which government expenditures exceed revenues during a particular year is the:

budget deficit.

The recurring ups and downs in the level of economic activity extending over time are referred to as:

business cycle

The multiplier is useful in determining the:

change in GDP resulting from a change in spending.

In the United States, the M1 money supply is comprised of:

coins, paper currency, and checkable deposits.

A headline states "Real GDP Falls Again as the Economy Slumps." This condition is most likely to produce what type of unemployment?

cyclical

If the MPC in an economy is .8, government could shift the aggregate demand curve rightward by $100 billion by:

decreasing taxes by $25 billion.

If the United States wants to increase its net exports in the short term, it might take steps to:

depreciate the dollar compared to foreign currencies.

In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are:

excluded from the labor force

If, in the market for loanable funds, the amount of money supplied exceeds the amount of money households and businesses want to hold, the interest rate will:

fall, causing households and businesses to borrow more.

Overnight loans from one bank to another for reserve purposes entail an interest rate called the:

federal funds rate.

Core inflation refers to the inflation picture after stripping away the:

food and energy prices

The crowding-out effect of expansionary fiscal policy suggests that:

government borrowing raises interest rates for firms.

The circular flow model helps us to see a visual representation of the economic transactions between which groups of the economy?

households, firms, government and international trade

If the MPC is .70 and investment increases by $3 billion, the equilibrium GDP will

increase by $10 billion

If government increases its purchases by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to:

increase by $45 billion.

In a certain year, the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases. Full-employment GDP is $120 billion. To stabilize the economy under these conditions, the government should:

increase tax rates and/or reduce government spending.

If the price of Gatorade increases, the equilibrium price of Powerade, a substitute good, will ________ because of a shift in ________.

increase; demand

Something is an inferior good if the demand for the good

increases as the consumer's income decreases

If a person's nominal income increases by 5% while the price level increases by 2%, then that person's real income:

increases by 3%

The prime interest rate usually:

rises when the federal funds rate rises.

An economist who favors smaller government would recommend:

tax cuts during recession and reductions in government spending during inflation.

If the price of a good decreases, holding all else constant,

the demand for that good's substitutes will increase.

The U.S. public debt is the amount of money that:

the federal government owes to holders of U.S. securities.

A nation's real GDP was $250 billion in 2013 and $265 billion in 2014. It's population was 122 million in 2013 and 125 million in 2014. What was the growth rate in real GDP per capita?

3.4%

In the 1920s, Germany after the First World War experienced an economic condition which can best be described as:

Hyperinflation

Why does the short run aggregate supply curve become increasingly steeper as it crosses to the right of long run aggregate supply?

the marginal costs of production rise, such as paying overtime to employees

Suppose you have four choices—go to a movie, read a book, watch television, or go to a concert. You choose to go to a movie. The opportunity cost of the movie is

the value of the activity that you would have selected if you hadn't gone to the movie

Before the Industrial Revolution, living standards in the world:

were relatively stagnant for long periods of time

As a good economist, you calculated the economic cost of getting a four-year college degree. Suppose that at your university, you will pay $12,000 each year for tuition, $2,000 each year for textbooks, and $8,000 per year for room and board. Before you left for college, your boss from your high-school job offered to pay you $20,000 per year for full-time work. Assume that if you decided not to go to college, your parents would not let you live at home. What is the total economic cost of this college degree?

$136,000

If 40,000 worker-hours produced a total output of $600,000 in the economy, then the labor productivity is:

$15/worker-hour

A nation's real GDP was $250 billion in 2017 and $265 in 2018. Its population was 120 million in 2017 and 125 million in 2018. What is its real GDP per capita in 2018?

$2,120 per person

Suppose the reserve requirement is 20 percent. If a bank has checkable deposits of $4 million and actual reserves of $1 million, it can safely lend out:

$200,000.

The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320); imports ($35); exports ($22); personal consumption expenditures ($2,460); and, government purchases ($470). What is GDP for this economy?

$3,237 billion

If real GDP in a year was $3,668 billion and the price index was 112, then nominal GDP in that year was approximately:

$4,108 billion

The XYZ Commercial Bank has $5,000 in excess reserves and the reserve ratio is 30 percent. This information is consistent with the bank having:

$90,000 in checkable deposit liabilities and $32,000 in reserves.

Answer the question on the basis of the following consumption schedule: C = 50 + .75Y. The level of disposable income is $400. What is the MPC of this economy?

.75

Answer the question on the basis of the following sequence of events involving fiscal policy: (1) The composite index of leading indicators turns downward for three consecutive months, suggesting the possibility of a recession. (2) Economists reach agreement that the economy is moving into a recession. (3) A tax cut is proposed in Congress. (4) The tax cut is passed by Congress and signed by the president. (5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover. Refer to the information. The recognition lag of fiscal policy is reflected in events:

1 and 2

Your Career Research project introduced you to the research process. Which of the following represents the correct steps to the research process? *1)Survey the literature, 2) Identify the research question, 3) Analyze the problem, 4) Test the analysis, 5) Interpret the results; and, 6) Communicate the results. *1)Analyze the problem, 2) Survey the literature, 3) Identify the research question, 4) Test the analysis, 5) Interpret the results; and, 6) Communicate the results. *1)Identify the Research Question, 2) Survey the literature, 3) Analyze the problem, 4) Test the analysis, 5) Interpret the results; and, 6) Communicate the results. *1)Test the analysis, 2) Survey the literature, 3) Analyze the problem, 4) Identify the research question, 5) Interpret the results; and, 6) Communicate the results. *1)Identify the Research Question, 2) Communicate the results, 3) Analyze the problem, 4) Test the analysis, 5) Interpret the results; and, 6) Survey the literature.

1)Identify the Research Question, 2) Survey the literature, 3) Analyze the problem, 4) Test the analysis, 5) Interpret the results; and, 6) Communicate the results.

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%. But if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate of:

10%

The Federal Reserve System was created in:

1913

Jane has $10 to buy on organic apples. Organic apples cost $2.50 per pound. Jane values the first pound of apples at $10, the second pound of apples at $5, the third pound of apples at $1.50. All additional pounds of apples she values at $1. How many pounds of apples will Jane buy?

2

Answer the question on the basis of the following consumption schedule: C = 20 + .9Y. What is autonomous consumption for this economy?

20

The economy has an annual inflation rate of 3.5%. It will take approximately how many years for the price level to double?

20 years

Use the information below to determine the equilibrium point in this market. Quantity Demanded: 50,40,30,20 Price: 10,20,30,40 Quantity Supplied: 20,40,60,80

20$

A nation's average annual real GDP growth rate is 2.5%. Based on the "rule of 70", the approximate number of years it would take the nation's real GDP to double is:

28 years

Answer the question on the basis of the following consumption schedule: C = 20 + .9Y. If disposable income totals $300, what is the level of consumption in the economy?.

290

If the natural rate of unemployment is 4.5 percent and the actual unemployment rate is 6.5 percent, then Okun's Law indicates that the GDP gap would be:

4%

A nation has a population of 260 million people. Of these, 60 million are retired, in the military, institutionalized or under 16 years of age. There are 188 million people who are employed and 12 million who are unemployed. what is the unemployment rate?

6.0

Which of the following represents the most expansionary fiscal policy?

A $10 billion increase in government spending.

Which of the following would reduce GDP by the greatest amount? *A $20 billion decrease in government spending *$20 billion decreases in both government spending and taxes. *A $20 billion increase in net taxes. *A decrease in interest rates causing changes in C and I by $10 billion each. *A $20 billion decrease in government spending *$20 billion increases in both government spending and taxes.

A $20 billion decrease in government spending

If government were to set a minimum price which may be charged in this market at $30, what would happen? Quantity Demanded: 50,40,30,20 Price: 10,20,30,40 Quantity Supplied: 20,40,60,80

A binding price floor

Which of the following would not have an impact on the supply of auto tires? *A decline in the price of the large tires used for semi trucks and earth-hauling rigs *A technological advance in the method used for producing tires *A tax applied to car tires *An increase in the price of rubber used in the production of tires *A decrease in household incomes

A decrease in household incomes

An economy experiences an MPC of 0.75. Interest rates rise in the economy causing initial change(s) in spending of $5 billion. Simultaneously, net taxes fall by $7 billion. What is the net change to real GDP as a result of these initial impacts on the economy?

A decrease of $19 billion in real GDP

The long-run aggregate supply curve is:

A depiction of the economy's full employment output

A temporary disruption of oil supplies to the United States caused by geopolitical events would have which of the most likely impacts?

A short-run adverse supply shock

The e-cigarette company, Juul, has been criticized for misrepresenting their target audience. What evidence is there that the "number and composition" of consumers aged 40 and above is not their only target audience? *Youth-preferring flavors such as watermelon *Sleek packaging *Marketing campaign depicting teens and young adults *Tech product" design *All of the listed items are evidence

All of the listed items are evidence

The change in Juul vaping products occurring between the years 2015 to 2019, can best be described as:

An increase in demand caused by number and composition of consumers

Which of the following best describes the cause-effect chain of a expansionary monetary policy?

An increase in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP.

Which of the following best describes the cause-effect chain of a contractionary/restrictive/tight monetary policy?

An increase in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP.

Which of the following is included in GDP? *Annual service fees received by stock brokers *Cash gifts from relatives during the holidays *Payments received from selling shares of stock from one's portfolio *Welfare payments received by households in poverty

Annual service fees received by stock brokers

Which of the following is an example of the law of demand? *At a price of $1, I'll buy 10 units, but at a price of $2, I'll buy 20 units *At a price of $1, I'll buy 20 units, but at a price of $2, I'll buy 10 units *At a price of $1, I'll supply 10 units, but at a price of $2, I'll supply 20 units *At a price of $1, I'll supply 20 units, but at a price of $2, I'll supply 10 units

At a price of $1, I'll buy 20 units, but at a price of $2, I'll buy 10 units

Bev says that "An increase in the tax on beer will raise its price." Polly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that

Bev's statement is normative, but Polly's is positive

The National Income Product Accounts reporting Gross Domestic Product and the sub-accounts are compiled by the:

Bureau of Economic Analysis

The term indicating that all other influences, other than the observed determinants of a model, will be held as constant is known as:

Ceteris paribus

Households change their spending by $10 billion due to a decrease in net wealth. The country's marginal propensity to consume is 0.8. What impact will this have on real GDP?

Consumption spending will decrease by $50 billion

Inflation caused by a rise in the prices of inputs used in production is referred to as:

Cost Push Inflation

Which of the following would cause Investment to decline? *declining value of the dollar *Higher interest rates *lower consumer expectations *increases in government spending *lower stock price values

Higher interest rates

The ability to read, work with, analyze, and argue with data is known as

Data literacy

Inflation caused by an increase in aggregate demand spending is referred to as:

Demand pull inflation

Which of the following is a tool of monetary policy?

Discount window

As it relates to Federal Reserve Bank activities, the acronym FOMC describes the:

Federal Open Market Committee.

The paper money used in the United States is:

Federal Reserve Notes

In order to ensure that you stay up to date in this course, and study to the appropriate level, which of the following best represents what you should do?

Follow the weekly To Do list on Canvas, work on metacognition, focus on cognitive load when studying

Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer. What type of unemployment is Mollie experiencing?

Frictional

A friend is weighing the costs and benefits of going to college. She shows you the list of direct costs for her education and data regarding the possible salary earned from employment requiring the college degree she'll earn. From an economic perspective, what would be the best thing to say to her?

Great start but you should also include the opportunity cost of your education for a more accurate analysis. This is the earnings you'll give up by going to school rather than working

Monetary policy is expected to have its greatest impact on:

Investment

How is a reduction in the national unemployment rate (more people employed) represented in a nation's production possibilities frontier (PPF)?

It will move production outward, to a point closer to or on the PPF.

"Near-monies" are included in:

M2 only.

If a $20 billion increase in government expenditures increases equilibrium GDP by $50 billion, then

MPC for this economy is .6

The GDP deflator (aka GDP price index) equals:

Nominal GDP divided by Real GDP

The largest spending component of GDP is:

Personal Consumption Expenditures

Which factor of production does AutoCAD software represent?

Physical capital

The aggregate expenditures model depicts short run aggregate supply (SRAS) as horizontal to the left of long run aggregate supply. What does this shape of SRAS convey?

Prices are "flexible" when the economy produces less than potential output

Which of the following actions by the Fed most likely increase commercial bank lending?

Reducing the interest paid on reserves held at the Fed.

If contracts for employee wages are renegotiated so that employees receive a raise, what happens initially to the aggregate expenditures model?

SRAS shifts leftward

As new technologies are invented and experience widespread use by businesses in their production of goods and services, what changes would we make to the Aggregate Expenditures model?

SRAS, then LRAS shift rightward

Government purchases in national income accounts would include payments for:

Salaries for current U.S. military officers

Kevin has lost his job in an automobile plant because the company switched to robots for its welding step in the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:

Structural

Select the best analogy representing the relationship of Microeconomics to Macroeconomics. *Studying specific species vs. creating new genetic versions of species *Studying all birds vs. studying the pigeon *Studying factors of the environment vs. studying factors within the core of the earth *Studying a species of tree vs. studying the forest ecosystem *Studying ocean fish species vs. studying lake fish species

Studying a species of tree vs. studying the forest ecosystem

What would happen to the equilibrium price and quantity of new cars if there is a recession where many people lose their jobs?

The equilibrium price and quantity would both fall as demand shifts to the left.

An economist observes that a fan is willing to pay $1000 for Taylor Swift concert tickets, but was able to purchase them on StubHub.com for $200. The economist would be able to state that

The fan's consumer surplus is $800

Which statement is correct? *The production of nondurable consumer goods is more stable than the production of durable consumer goods *Real output and employment generally show little variance over the business cycle *Recessions are fairly predictable in their occurrence and intensity with accuracy *All sectors of the economy are affected to similar degrees by business fluctuations

The production of nondurable consumer goods is more stable than the production of durable consumer goods

When inflation occurs:

The purchasing power of money decreases

A binding price ceiling will have which of the following consequences?

The quantity demanded will be larger than the quantity supplied.

Which one of the following is true about the U.S. Federal Reserve System?

There are 12 regional Federal Reserve Banks.

Government increases spending by $50 billion and raises taxes by $50 billion to fund the spending. The economy's MPC is 0.75. What is the impact on the economy of these actions?

There is a $50 billion increase in real GDP

When price falls, which of the following happens? *There is a decrease in the supply. *There is an increase in the supply. *There is an increase in the quantity supplied. *There is a decrease in the quantity supplied.

There is a decrease in the quantity supplied.

If the price of solar panels decreases, what would you expect would happen in the market for solar panels?

There would be a movement to the right downward along the demand curve.

One of the key differences between the neoclassical viewpoint and Keynesian viewpoint for the economy is:

Wages are flexible to neoclassical economists and sticky to Keynesian economists

You are given the opportunity to invest in mobile dog washing units. The initial investment per unit is $5,000. After expenses, employee costs, etc. you estimate a profit of $400 for the first unit, $350 for the second unit, $300 for the third unit, and $200 for the next two units available. Your local bank offers a small business loan market rate of interest of 9% annually. What is your decision on this opportunity?

You will not invest in a dog washing unit

In a command economy ________ make the decisions regarding what gets produced, how it gets produced, for whom it gets produced, and how to accommodate change. In a capitalistic society these decisions are made by ________.

a central authority; markets

A movement along a consumption function is caused by:

a change in disposable income

An appropriate fiscal policy for a severe recession is:

a decrease in tax rates.

Which of the following would cause a decrease in consumption spending? *a decrease in transfer payments *a decrease in spending on public education *a decrease in the value of the dollar *a decrease in expected rates of return *a decrease in interest rates

a decrease in transfer payments

Net exports are a positive number when:

a nation's exports of goods and services exceed its imports

the three statistics that are the main focus for those measuring maceconomic health are:

real GDP, inflation and unemployment

Supply factors in economic growth include the following, except: *increases in purchases of output *expansion of capital stock *better education and training *improvements in technology

increases in purchases of output

A contraction of the money supply:

increases the interest rate and decreases aggregate demand.

Neoclassical economists believe that manipulation of the economy with interest rates, net taxes and government spending may work in the short run, but ultimately only causes

inflation

Discretionary fiscal policy refers to:

intentional changes in taxes and government expenditures made by Congress

Which of the following has become the most frequently used tool of monetary policy in recent times?

interest on excess reserves

Expansionary fiscal policy is so named because it:

is designed to expand real GDP.

Which of the following represents one of the factors of production? *services and goods *exports *labor force participation rate *government regulation *supply and demand

labor force participation rate

What is the technical name for the monetary policy tool known as "quantitative easing"?

large scale assets purchases

Which of the following shows the greatest level of confirmation through testing, observation and/or experimentation? *hypothesis *theory *model *law

law

A contractionary fiscal policy is shown as a:

leftward shift in the economy's aggregate demand curve.

Assume there is a fixed rate of interest on contracts for borrowers and lenders. If unanticipated inflation occurs in the economy, then:

lenders are worse off, and borrowers better off

A bank that has assets of $85 billion and a net worth of $10 billion must have:

liabilities of $75 billion

Money is decreased when:

loans are repaid.

What type of assets are purchased through the LSAP program?

long-term assets

The purchase of Large Scale Asset Purchases by the Fed will cause:

long-term interest rates to fall

The model used in this unit of study mainly depicts the fine tuning of the economy through the "Keynesian perspective." Neoclassical economists, on the other hand, believe that government policies to support the economy should primarily focus on:

low inflation and low taxes

The Federal Reserve Banks conducts "reverse repos". As a result, the federal funds rate:

lower bound increases when the supply of reserves decreases

If the Fed were to reduce the legal reserve ratio, we would expect:

lower interest rates, an expanded GDP, and a lower rate of unemployment.

When the interest rate on excess reserves is ______; the federal funds rate ________.

lowered; decreases

The transactions demand for money is most closely related to money functioning as a:

medium of exchange.

Business inventories increase when firms produce:

more than they sell, and the inventory increase is added to GDP

In annual percentage terms, investment spending in the United States is:

more variable than real GDP.

The full employment rate of unemployment is also called the:

natural rate of unemployment

Credits cards are:

not money, as officially defined as M1 or M2.

A major advantage of automatic stabilizers is that they:

once enacted, require no legislative action by Congress to be made effective.

What is the technical name of the short-term open market operations conducted by the New York federal reserve district bank?

overnight repurchase agreements

If the Fed wants to raise the federal funds rate, it should:

raise the interest rate paid on reserves

If the monetary authorities want to reduce the monetary multiplier, they should:

raise the required reserve ratio.

The discount rate is the interest:

rate at which the Fed lends to commercial banks.

Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to real GDP?

real GDP doesn't change

Which of the following is a measure of growth that is most useful for comparing living standards?

real GDP per capita