Econ test 2 quizlet

A circular-flow diagram is a model that a. helps to explain how the economy is organized. b. helps to explain how consumers and the government interact with one another. c. incorporates all aspects of the real economy. d. explains how countries trade with each other.

a

A competitive market is a market in which a. no individual buyer or seller has any significant impact on the market price. b. the forces of supply and demand do not apply. c. an auctioneer helps set prices and arrange sales. d. there are only a few sellers.

a

A tax affects a. buyers only. b. buyers, sellers, and the government. c. sellers only. d. buyers and sellers only.

b

unemployment rate formula

number of unemployed/number in labor force x 100

real interest rate formula

real interest rate = nominal interest rate - inflation rate

Inflation Rate Formula

(Current year CPI ) - (Earlier Year CPI) / (Earlier Year CPI) x100

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute A) $250 to GDP B) $150 to GDP C) between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle. D) $400 to GDP

A

A transfer payment is a payment made by A) government, but not in exchange for a currently produced good or service. B) firms, but not in exchange for capital equipment. C) foreigners, but not in exchange for a domestically produced good or service. D) consumers, but not in exchange for a tangible product.

A

Disposable personal income is A) the income that households and businesses have remaining after satisfying their obligations to the government. B) the total income earned by a nation's residents in the production of goods and services. C) the income that households and non-corporate businesses receive. D) the total income earned by a nation's permanent residents.

A

If the consumer price index was 96 in Year 1, 100 in Year 2, and 102 in Year 3, then the base year must be A) Year 2. B) Year 3. C) Year 1. D) the base year cannot be determined from the given information.

A

Meredith is looking for work as a computer programmer. Her prospects are good but so far she has not taken a job. Julie is looking for work in a steel mill. Every time Julie shows up for an interview, there are more people looking for work than there are openings. She realizes that it has been that way for a long time. A) Meredith is frictionally unemployed, and Julie is structurally unemployed. B) Meredith is structurally unemployed, and Julie is frictionally unemployed. C) Meredith and Julie are both structurally unemployed. D) Meredith and Julie are both frictionally unemployed.

A

Minimum wages create unemployment in markets where they create a A) shortage of labor. Unemployment of this type is called structural. B) surplus of labor. Unemployment of this type is called structural. C) surplus of labor. Unemployment of this type is called frictional. D) shortage of labor. Unemployment of this type is called frictional.

A

Most goods and services produced at home A) and most goods and services produced illegally are excluded from GDP. B) and most goods and services produced illegally are included in GDP. C) are included in GDP while most goods and services produced illegally are excluded from GDP. D) are excluded from GDP while most goods and services produced illegally are included in GDP.

A

Of the following groups, who is eligible for unemployment insurance benefits? A) The unemployed who were laid off because their previous employers no longer needed their skills B) The unemployed quit their jobs C) D)

A

The real interest rate tells you A) how fast the purchasing power of your bank account rises over time. B) the number of dollars in your bank account today. C) the purchasing power of your bank account today. D) how fast the number of dollars in your bank account rises over time.

A

When the consumer price index rises, the typical family A) has to spend more dollars to maintain the same standard of living. B) can spend fewer dollars to maintain the same standard of living. C) finds that its standard of living is not affected. D) can offset the effects of rising prices by saving more.

A

Which of the following is an example of an efficiency wage? A) An above-equilibrium wage paid by a firm to reduce turnover costs B) A wage tied to participation in a government-sponsored job training program C) A higher wage paid to a more experienced worker D) A below-equilibrium wage paid by a small business exempt from minimum-wage laws

A

Which of the following is included in the calculation of GDP? A) The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country. B) The purchase of a used textbook from a friend who took the same class last year. C) The purchase of a new edition of a foreign textbook that was produced in a different nation. D) The purchase of ink and paper supplies by a textbook company for the production of new textbooks.

A

An increase in household saving causes consumption to: a. fall and aggregate demand to increase. b. fall and aggregate demand to decrease. c. rise and aggregate demand to decrease. d. rise and aggregate demand to increase.

B

For any given year, the CPI is the price of the basket of goods and services in the A) base year divided by the price of the basket in the given year, then multiplied by 100. B) given year divided by the price of the basket in the base year, then multiplied by 100. C) previous year divided by the price of the basket in the given year, then multiplied by 100. D) given year divided by the price of the basket in the previous year, then multiplied by 100.

B

Tatiana is waiting to be recalled to a job from which she was laid off. Ivan was fired but has not looked for work during the last two months. Who does the Bureau of Labor Statistics count as "unemployed"? A) Neither Ivan nor Tatiana B) Tatiana but not Ivan C) Both Ivan and Tatiana D) Ivan but not Tatiana

B

The labor force equals the A) number of people employed. B) number of people employed plus the number of people unemployed. C) number of people employed plus the number of people unemployed plus teenagers between ages 14 and 16 who work at least 10 hours a week. D) adult population.

B

The price index was 120 in Year 1 and 126 in Year 2. What was the inflation rate? A) 5% B) 6% C) 7% D) 8%

B

Which of the following is an example of human capital? A) The amount you get paid each week to work at the library B) The things you have learned this semester C) The comfortable chair in your dorm room where you read economics texts D) Any capital goods that require a human to be present to operate

B

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate? A) The real interest rate is the nominal interest rate plus the rate of inflation. B) The real interest rate is the nominal interest rate minus the rate of inflation. C) The real interest rate is the nominal interest rate divided by the rate of inflation. D) The real interest rate is the nominal interest rate times the rate of inflation.

B

Collective bargaining refers to A) the process by which the government sets exemptions from the minimum wage law. B) firms colluding to set the wages of employees below equilibrium. C) the process by which unions and firms agree on the terms of employment. D) setting the same wage for all employees to prevent conflict among workers.

C

GDP is defined as the: A) Value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. B) value of all goods and services produced within a country in a given period of time. C) value of all final goods and services produced within a country in a given period of time. D) value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.

C

Gross domestic product measures: A) Expenditures but not income B) Income but not expenditures C) Income and expenditures D) Neither income nor expenditures

C

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily, A) Quantities purchased by a typical urban household B) Values of goods and services based on surveys on consumers C) Market prices D) Profits from producing goods and services.

C

Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his backyard. Regarding these two practices, which of the following statements is correct? A) Joe's and Jim's grocery store purchases are included in GDP. The vegetables from Jim's backyard garden are included at their market value, if Jim provides this information. B) Joe's and Jim's grocery store purchases are included in GDP. The vegetables from Jim's backyard garden are included at their market value. C) Only Joe's and Jim's grocery store purchases are included in GDP. D) Only Joe's grocery store purchases are included in GDP.

C

The CPI is a measure of the overall cost of the goods and services bought by A) a typical consumer, and the CPI is computed and reported by the Department of the Treasury. B) typical consumers and typical business firms, and the CPI is computed and reported by the Department of the Treasury. C) a typical consumer, and the CPI is computed and reported by the Bureau of Labor Statistics. D) typical consumers and typical business firms, and the CPI is computed and reported by the Bureau of Labor Statistics.

C

The inflation rate you are likely to hear on the nightly news is calculated from the A) GDP deflator. B) unemployment rate. C) CPI. D) Dow Jones Industrial Average.

C

Which of the following is not correct? A) Most people who become unemployed will soon find jobs. B) In an ideal labor market, wages would adjust to ensure that all workers are always fully employed. C) The unemployment rate occasionally falls to zero. D) There are always some workers without jobs, even when the overall economy is doing well.

C

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption? A) Spending on education B) The purchase of stocks and bonds C) The purchase of a new house D) The purchase of durable goods such as stoves and washing machines

C

One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called A) relative bias. B) price-change neglect. C) unmeasured quality change. D) substitution bias.

D

The discount rate is: a. one divided by the difference between one and the reserve ratio. b. the interest rate banks receive on reserve deposits with the Fed. c. the interest rate that banks charge on overnight loans to other banks. d. the interest rate the Fed charges banks.

D

The natural rate of unemployment is the A) unemployment rate that would prevail with zero inflation. B) rate associated with the highest possible level of GDP. C) difference between the long-run and short-run unemployment rates. D) amount of unemployment that the economy normally experiences.

D

Which of the following is an explanation for the existence of frictional unemployment? A) Minimum-wage laws B) Unions C) Efficiency wages D) Job search

D

A goal of monetary policy and fiscal policy is to a. offset shifts in aggregate demand and thereby stabilize the economy. b. offset the shifts in aggregate demand and thereby eliminate unemployment. c. enhance the shifts in aggregate demand and thereby increase economic growth. d. enhance the shifts in aggregate demand and thereby create fluctuations in output and employment.

a

A tax on an imported good is called a a. tariff. b. supply tax. c. trade tax. d. quota.

a

If the reserve ratio is 5 percent, then $500 of additional reserves would ultimately generate a. $10,000 of money. b. $2,500 of money. c. $9,500 of money. d. $10,500 of money.

a

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that a. the nation is not using all available resources or is using inferior technology or both. b. there will be a large opportunity cost if the nation tries to increase production of any good. c. the nation is producing an efficient combination of goods. d. the nation is producing beyond its capacity, so inflation will occur.

a

The classical dichotomy and monetary neutrality are represented graphically by a. a vertical long-run aggregate-supply curve. b. an upward-sloping long-run aggregate-supply curve. c. an upward-sloping short-run aggregate-curve. d. a downward-sloping aggregate-demand curve.

a

The effect of an increase in the price level on the aggregate-demand curve is represented by a a. movement to the left along a given aggregate-demand curve. b. shift to the right of the aggregate-demand curve. c. movement to the right along a given aggregate-demand curve. d. shift to the left of the aggregate-demand curve.

a

When two variables have a positive correlation, a. they tend to move in the same direction. b. the variables' values are never negative. c. one variable will move while the other remains constant. d. they tend to move in opposite directions.

a

Which of the following areas of study typifies macroeconomics as opposed to microeconomics? a. The effect on the economy of changes in the nation's unemployment rate b. The economic impact of tornadoes on cities and towns in Oklahoma c. How tariffs on shoes affects the shoe industry d. The effects of rent control on the availability of housing in New York City

a

Which of the following would not be directly included in aggregate demand? a. Government's tax collections b. An increase in firms' inventories c. Firms' purchases of newly produced machinery d. Purchases of goods by households

a

Aggregate demand includes a. neither the quantity of goods and services the government, households, nor firms want to buy nor the quantity of goods and services customers abroad want to buy. b. the quantity of goods and services the government, households, firms, and customers abroad want to buy. c. the quantity of goods and service the government wants to buy, but not the quantity of goods and services households, firms, or customers abroad want to buy. d. the quantity of goods and services households and firms want to buy, but not the quantity of goods and services the government wants to buy.

b

An increase in household saving causes consumption to a. rise and aggregate demand to decrease. b. fall and aggregate demand to decrease. c. rise and aggregate demand to increase. d. fall and aggregate demand to increase.

b

From 2001 to 2005 there was a dramatic rise in the value of houses. If this rise made homeowners feel wealthier, then it would have shifted aggregate a. supply right. b. demand right. c. supply left. d. demand left.

b

If a seller in a competitive market chooses to charge more than the going price, then a. other sellers would also raise their prices. b. buyers will make purchases from other sellers. c. the owners of the raw materials used in production would raise the prices for the raw materials. d. the sellers' profits must increase.

b

If expected inflation is constant and the nominal interest rate decreases by 2 percentage points, then the real interest rate a. increases by 2 percentage points. b. decreases by 2 percentage points. c. increases, but by less than 2 percentage points. d. decreases, but by less than 2 percentage points.

b

In the circular-flow diagram, which of the following is not a factor of production? a. Capital b. Money c. Labor d. Land

b

Investment is a. a large part of real GDP, so it accounts for a large share of the fluctuation in real GDP. b. a small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP. c. a large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP. d. a small part of real GDP, so it accounts for a small share of the fluctuation in real GDP

b

Net exports of a country are the value of a. goods imported minus the value of goods exported. b. goods and services exported minus the value of goods and services imported. c. goods and services imported minus the value of goods and services exported. d. goods exported minus the value of goods imported

b

Recessions come at a. regular intervals. During recessions investment spending falls relatively more than consumption spending. b. irregular intervals. During recessions investment spending falls relatively more than consumption spending. c. irregular intervals. During recessions consumption spending falls relatively more than investment spending. d. regular intervals. During recessions consumption spending falls relatively more than investment spending.

b

The economic boom of the early 1940s resulted mostly from: a. an increase in the growth rate of the money supply. b. increased government expenditures. c. falling prices of oil and other natural resources. d. rapid developments in transportation, electronics, and communication.

b

The most obvious benefit of specialization and trade is that they allow us to a. spend more money on goods that are beneficial to society, and less money on goods that are harmful to society. b. consume more goods than we otherwise would be able to consume. c. work more hours per week than we otherwise would be able to work. d. consume more goods by forcing people in other countries to consume fewer goods.

b

The quantity demanded of a good is the amount that buyers are a. willing to purchase. b. willing and able to purchase. c. able to purchase. d. willing, able, and need to purchase.

b

What must be given up to obtain an item is called a. comparative worth. b. opportunity cost. c. out-of-pocket cost. d. absolute value.

b

When conducting an open-market purchase, the Fed: a. sells government bonds, and in so doing increases the money supply. b. sells government bonds, and in so doing decreases the money supply. c. buys government bonds, and in so doing increases the money supply. d. buys government bonds, and in so doing decreases the money supply.

b

Which of the following is an example of a capital input? a. A share of stock b. A computer c. $50,000 d. An hour of a worker's time

b

An increase in the price of a good will a. decrease demand. b. increase demand. c. decrease quantity demanded. d. increase quantity demanded.

c

Another term for factors of production is a. output. b. services. c. inputs. d. goods.

c

In the short-run an increase in the costs of production makes a. both output and prices rise. b. both output and prices fall. c. output fall and prices rise. d. output rise and prices fall.

c

Other things the same, if reserve requirements are increased, the reserve ratio a. decreases, the money multiplier increases, and the money supply increases. b. increases, the money multiplier increases, and the money supply increases. c. increases, the money multiplier decreases, and the money supply decreases. d. decreases, the money multiplier decreases, and the money supply increases.

c

Other things the same, if technology increases, then in the long run a. both output and prices are lower. b. both output and prices are higher. c. output is higher and prices are lower. d. output is lower and prices are higher.

c

Ryan produces hair clips and earrings. Celia also produces hair clips and earrings, but Ryan is better at producing both goods. In this case, trade could a. benefit Celia, but not Ryan. b. benefit Ryan, but not Celia. c. benefit both Celia and Ryan. d. benefit neither Celia nor Ryan.

c

The Federal Open Market Committee is ​ a. ​the group that sets the amount of government spending. b. ​in charge of tax collection. c. ​the group at the Federal Reserve that sets monetary policy. d. ​the group that reviews income assistance programs.

c

The bowed-outward shape of the production possibilities frontier can be explained by the fact that a. the only way to get more of one good is to get less of the other. b. economic growth is always occurring. c. the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing. d. all resources are scarce.

c

The supply of money increases when a. money demand increases. b. the price level falls. c. the Fed makes open-market purchases. d. the interest rate increases.

c

The use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in a. formulating theories about economic events. b. applying mathematical methods to economic analysis. c. performing an experiment in an economic system. d. analyzing available data.

c

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for a. the slope of short-run aggregate supply. b. shifts in the aggregate-demand curve. c. the slope of the aggregate-demand curve. d. the slope of long-run aggregate supply.

c

The x-coordinate of an ordered pair specifies the a. diagonal location of the point. b. vertical location of the point. c. horizontal location of the point. d. quadrant location in which the point is located.

c

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 chair is a. 1/6 tables for Ken and 3 tables for Traci. b. 6 tables for Ken and 1/3 tables for Traci. c. 1/6 tables for Ken and 1/3 tables for Traci. d. 6 tables for Ken and 3 tables for Traci.

c, remember what's lost / what's gained

A group of buyers and sellers of a particular good or service is called a. a competition. b. an economy. c. a coalition. d. a market.

d

According to the circular-flow diagram, if Jalyssa is a worker who delivers flowers for Happy Day Flower Company, she participates a. in the markets for goods and services exchanging labor for income. b. in the markets for factors of production exchanging flowers for revenue. c. in the markets for goods and services exchanging flowers for wages, rent, and profit. d. in the markets for factors of production exchanging labor for income.

d

Suppose Brazil has an absolute advantage over other countries in producing almonds, but other countries have a comparative advantage over Brazil in producing almonds. If trade in almonds is allowed, Brazil a. would have nothing to gain either from exporting or importing almonds. b. will either import almonds or export almonds, but it is not clear from the given information. c. will export almonds. d. will import almonds.

d

The federal funds rate is the a. percentage of deposits that banks must hold as reserves. b. interest rate at which the Federal Reserve makes short-term loans to banks. c. percentage of face value that the Federal Reserve is willing to pay for Treasury Securities. d. interest rate at which banks lend reserves to each other overnight.

d

The law of demand states that, other things equal, when the price of a good a. rises, the demand for the good falls. b. falls, the demand for the good rises. c. rises, the quantity demanded of the good rises. d. falls, the quantity demanded of the good rises.

d

What is the fundamental basis for trade among nations? a. Misguided economic policies b. Shortages or surpluses in nations that do not trade c. Absolute advantage d. Comparative advantage

d

When an economist points out that you and millions of other people are interdependent, she is referring to the fact that we all a. have similar tastes and abilities. b. are concerned about one another's well-being. c. rely upon the government to provide us with the basic necessities of life. d. rely upon one another for the goods and services we consume.

d

Which of the following is most commonly used to monitor short-run changes in economic activity? a. Interest rates b. Value of the U.S. dollar in the foreign exchange market c. The inflation rate d. Real GDP

d

Which of the following is not a determinant of the long-run level of real GDP? a. Available technology b. Available stock of human capital c. The amount of capital used by firms d. The price level

d

Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram? a. A farmer hires a teenager to help with harvest b. A construction company rents trucks for its business c. A landowner leases land to a farmer d. A woman buys corn for dinner

d