Econ Quiz

The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. The cost of the basket

increased by $7 from 2004 to 2005.

Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, has

increased measured GDP by the value added by the restaurant's preparation and serving of the meals.

The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2015. In 2017, this country's

real GDP was $900, and the GDP deflator was 138.9.

If the government institutes policies that diminish incentives to save, then in the loanable funds market

the supply of loanable funds shifts leftward.

In the long run, money demand and money supply determine

the value of money but not the real interest rate.

GDP is defined as the

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

Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes

your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage also increased.

If the demand for loanable funds shifts to the left, then the equilibrium interest rate

and quantity of loanable funds falls.

When the money market is drawn with the value of money on the vertical axis, as the price level decreases the quantity of money

demanded decreases.

If the reserve ratio is 12.5 percent, then $2,000 of additional reserves can create up to

$16,000 of new money.

James owns two houses. He rents one house to the Johnson family for $10,000 per year. He lives in the other house. If he were to rent the house in which he lives, he could earn $12,000 per year in rent. How much do the housing services provided by the two houses contribute to GDP?

$22,000

Suppose there are only two firms in an economy: Rolling Rawhide produces rawhide and sells it to Chewy Chomp, Inc., which uses the rawhide to produce and sell dog chews. With each $1 worth of rawhide that it buys from Rolling Rawhide, Chewy Chomp, Inc. produces a dog chew and sells it for $2.50. Neither firm had any inventory at the beginning of 2014. During that year, Rolling Rawhide produced enough rawhide for 2000 dog chews. Chewy Chomp, Inc. bought 90% of that rawhide for $1800 and promised to buy the remaining 10% for $200 in 2015. Chewy Chomp, Inc. produced 1800 dog chews during 2014 and sold each one during that year for $2.50. What was the economy's GDP for 2014?

$4,700

David earned a salary of $43,500 in 1994 and $89,000 in 2010. The consumer price index was 148.2 in 1994 and 215.3 in 2010. David's 1994 salary in 2010 dollars is

$63,195.34

The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, and 2 shirts. In 2005, bread cost $1.00 per loaf, milk cost $1.50 per gallon, and shirts cost $6.00 each. In 2006, bread cost $1.50 per loaf, milk cost $2.00 per gallon, and shirts cost $7.00 each. Using 2005 as the base year, what was Aquilonia's inflation rate in 2006?

28 percent

Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier?

9.1

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Bond A has a term of 20 years and Bond B has a term of 2 years.

Which of the following activities would increase the current US GDP?

Debbie spends $300 to buy her husband dinner at the finest restaurant in Boston

GDP is not a perfect measure of well-being; for example,

GDP fails to account for the quality of the environment.

Which of the following is correct?

If the Fed purchases bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve.

Which of the following does the Federal Reserve not do?

It makes loans to any qualified business that requests one.

Janet bought flour and used it to bake bread she ate. ABC Bakery bought flour which it used to bake bread that customers purchased. In which case will the flour be counted as a final good?

Janet's purchase but not ABC Bakery's purchase.

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,000, consumption equals 7,500, and government purchases equal 2,000. What is national saving?

None of the above is correct.

When an American household purchases a bottle of Italian wine for $100,

U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does not change.

Suppose the government ran a budget surplus in 2010 and a larger surplus in 2011. The loanable funds model would predict that, as a result of the increase in the surplus,

both the government debt and interest rates decreased between 2010 and 2011

As real interest rates fall, firms desire to

buy more new equipment and buildings. This response helps explain why the demand for loanable funds is downward sloping

From the table it follows that the Bank of Pleasantville operates in a

fractional-reserve banking system, since its reserves are less than its deposits.

Which of the following items is included in U.S. GDP?

goods produced by foreign citizens working in the United States

Wealth is redistributed from debtors to creditors when inflation was expected to be

high and it turns out to be low.

An increase in the price of imported coffee shows up

in the consumer price index, but not in the GDP deflator.

The discount rate is

the rate at which the Fed lends to banks.