Economics Final (Camille's Review)

$32.7 billion ; $29.2 billion

31. Based on the information in the table, the total amount of bank deposits decreased from _____ to _____ over the course of 1932

The principle will be repaid

32. The maturation date of a bond is the date at which:

Increase; reduces

33. An increase in interest rate results in a(n) ______ in the required rate of return to hold stocks and _____ current stock prices.

are unchanged; is unchanged

34. When a U.S. oil company purchases oil from Saudi Arabia and the Saudi Arabian firm uses the proceeds from the sale to buy transportation services from the U.S., U.S. net exports ______ and the capital inflow to the United States _______.

Trade deficit; inflows

35. If domestic saving is less than investment, then a country will have a ____ and positive net capital _____.

Expansion

36. A period which the economy is growing at a rate significantly above normal is called a(n):

B to C

37. Refer to the figure below. In the figure, which interval represents a business cycle recession?

recessionary gap

38. If potential output for an economy equals $5 billion, and actual output equals $4.5 billion, then this economy has a(n):

9 percent

39. If the cyclical rate of employment equals -1 percent and the actual rate of unemployment equals 8 percent, then the natural rate of unemployment must equal:

$10

4. Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the seller's surplus from this transaction was:

4/3 of a pie

12. Refer to the table below. Martha's opportunity cost of making a cake is:

borrow the book from the library if the cost of doing so (in terms of the extra time it takes) is less than $13.

1. You are trying to decide whether to purchase the latest Harry Potter book online or borrow from the library no charge for borrowing a book from the library, but going to the library takes more time than ordering a book online Regardless of how you get the book, its benefit to you is the same. If the cost of buying the book online is $13, then you should

Inefficient because Steven and Ingrid could have made a mutually beneficial trade

10. Ingrid has been waiting for the show "Mamma Mia!" to come to town. When it finally does come, tickets cost $60. Ingrid's reservation price is $75. But when Ingrid tries to buy a ticket, they are sold out. Suppose Steven was able to purchase a ticket at the box office for $60. Steven's reservation price for the ticket is $65. If Steven attends "Mamma Mia!" and Ingrid does not, then this situation is:

Reduce total economic surplus

11. Subsidies are most likely to:

Take 75 tons from Middle Drift and 25 tons from Mother Lode

13. Earth Movers & Shakers operate 3 iron ore mines. The table below shows each mine's total daily production and the current number of miners at each mine. All miners work for the same wage, and each miner in any given mine produces the same number of tons per day as every other miner in that mine. Suppose Earth Movers & Shakers needs to fill an order for 100 tons of ore in a single day. If it has no other orders to fill that day, and it's not possible to transfer miners from one mine to another, it should:

$3

14. If this is a closed economy, how much will a bushel of corn cost?

$33,333

15. The country of Southland produced $2,000 billion of output in one year. The population of Southland was 100 million, of whom 60 million were employed. What was the average labor productivity in Southland?

Increases

16. If the average labor productivity increases while population and the number of employed workers remain constant, then total output:

How do monopoly firms set prices and determine quantities to produce?

17. Major macroeconomics questions include all of the following EXCPET:

Government budget surplus

18. When government revenue exceeds government spending , the nation has a:

positive; normative

19. "U.S. exports will increase as a result of joined CAFTA," is an example of a _____ statement, while "The U.S. should join CAFTA," is an example of a _____ statement.

Is more likely to take an action if its benefits increases

2. The cost-benefit principle predicts that a person:

Aggregation

20. The adding up of individual economic variables to obtain economy wide totals is called:

This economy produces $7 worth of food

21. Suppose that the total production of an economy consists of 10 oranges and 5 candy bars, each orange sells for $0.20, and each candy bar sells for $1. Which expression of this economy is most consistent with the concept of GDP?

$200,000

22. In 2015, Pete Rich purchases a 1642 painting by Rembrandt for $20 million. He also pays a one percent commission to the auction house that sold the painting. What is the contribution of these transactions to GDP in the year 2015?

20

23. The following table provides data for an economy in a certain year. Given the data in the table, compute the government purchases component of GDP.

Leisure time

24. GDP excludes important factors that affect people's well-being, such as the value of:

economic; social

25. Income lost by the unemployed is an example of the _____ cost of unemployment, while the additional spending to control crime is an example of the ______ cost of unemployment

Measured in terms of purchasing power

26. The real wage is the wage:

Decrease

27. Inflation makes it difficult to distinguish relative price changes from changes in the general level of prices. Consequently, inflation ______ the efficiency of the market system.

A medium of exchange

28. If you use $1,000 to purchase silver bullion, which you plan to keep in a safe, you are using money as:

Cash and similar assets held to meet depositor withdrawals or payments

29. Bank reserves are:

greater than $4

3. Refer to the figure below. If the price is $4 today and there is no change in either supply or demand, one would expect the price in the future to be:

Decrease

30. If banks' desired reserve ratio increases from 0.10 to 0.15, the public still desires to hold the same amount of currency, and the Fed takes no actions, the money supply will:

Firms meet the demand for their products at the present prices

40. The basic Keynesian model is built on the key assumption that:

Disposable income

41. In the Keynesian model, consumption depends on:

5,000

42. Data on out and aggregate expenditure in Macroland are given below. Based on these data, the short-run equilibrium level of out is:

Reduces short-run equilibrium output

43. In the basic Keynesian model, a decrease in government purchases:

Recessionary; increasing government purchases

44. If short-run equilibrium output equals 20,000 and potential output (Y*) equals 25,000 then this economy has a(n) _____ gap that can be closed by ____

The nominal interest rate

45. Any value of the money supply chosen by the Federal Reserve implies a specific value for ____

Decreases; increases

46. Higher nominal interest rates _____ the amount of money demanded and higher real income _____ the amount of money demanded.

The aggregate quantity of money demanded; nominal interest rate

47. The money demand curve relates _____ to the _____

Decrease; 300

49. Refer to the figure below. If the Federal Reserve wants to raise the interest rate to 7%, it must ____ the money supply to ______.

become more elastic

5. Satellite TV is a close substitute for cable TV. In the 1990's small satellite TV units were developed that made it more practical for individual consumers to subscribe to Satellite TV service. This caused the price elasticity of demand for cable TV service to:

Fewer; increase

50. If the Federal Reserve is currently paying 1% interest on bank reserves, but then reduces that interest rate to 0.5%, banks may decide to hold ____ reserves, and the money supply may _____.

The line labeled A; the line labeled B

6. Suppose that a new drug has been approved to treat a life-threatening disease. The demand for that drug is shown on the graph below. Prior to approval of this drug, the only treatment for this condition was any one of several non-prescription, or over-the-counter, pain relievers. The demand for one brand of the several non-prescription pain relievers is also shown on the graph. Demand for the new drug is ________ while demand for one brand of the over-the-counter pain reliever is ______

Price of the good is greater than its marginal cost

7. The Cost-Benefit Principle tells us that a firm should continue to expand production as long as:

The percentage change in quantity supplied divided by the percentage change in price.

8. The price elasticity of supply at a point is:

There is no incentive for firms to enter or exit the industry

9. If all firms in a perfectly competitive industry are earning a normal profit then:

Increase

During the Christmas shopping season, the demand for money increases significantly. If the Fed takes no action to offset the increase in money demand, then nominal interest rates will: