Macro-Economics Final Exam Review

A steel company sells some steel to a bicycle company for $100. The bicycle company uses the steel to produce a bicycle, which it sells for $150. Taken together, these two transactions contribute

$150 to GDP

If the interest rate is 7.5% , calculate the present value of $4,000 to be received in 6 years.

$2,597.40

Suppose you put $350 into a bank account today. Interest is paid annually and the annual interest rate is 6%. Calculate the future value of the $350 after 4 years

$441.87

Arlo is offered a job in Des Moines, where the CPI is 80, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $42,000. How much does the New York job have to pay in order for the two salaries to represent te same purchasing power?

$65,625

Suppose you put $500 into a bank account today. Interest is paid annually and the annual interest rate is 5.5%. The future value of the $500 is

$653.48 after 5 years and $854.07 after 10 years

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in 2001 and 221.25 in 2006. Ruben's salary in 2006 dolalrs is

$75,000; thus, Ruben's buying power increased between 2001 and 2006.

If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is

.75

If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of supply is about

.75, and the supply is inelastic

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about

1.20%

Suppose the price of potato chips decreases from $1.45 to $1.25 and, as a result, the quantity of potato chips demanded increases from 2000 to 2400. Using the midpoint method, the price elasticity of demand for potato chips in the given price range is

1.23

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about

1.60, and the supply is elastic

Over the last century, U.S. real GDP per person grew at a rate of about

2 percent per year, so that is now 8 times as high as it was a century ago.

Just after WWII, the labor-force participation rate of women was

33%

During the past century the average growth rate of U.S. real GDP per person implies that is doubled, on average, about every

35 years

If the nominal interest rate is 8% and the real interest rate is 3.5%, calculate the inflation rate.

4.5%

The slope of a line that passes through the points (10,15) and (20,7) is

4/5

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in

40% decrease in the quantity demanded

Which department measures unemployment?

Bureau of Labor Statistics

Robert Fogel focused on which of the following factors as one determinant of long-run economic growth

Health and Nutrition

Which of the following statements is correct about the relationship between inflation and interest rates?

In order to fully understand interest rates, we need to know how to correct for the effects of inflation

In the circular flow diagram, what are the factors of production

Land, labor, capital

The inputs into production of goods and services that are provided by nature, such as land, rivers, and mineral deposits are called?

Natural resources

What is an example of a nonrenewable resource?

Oil

Economics deals with primarily with the concept of:

Scarcity

In the equation, Y=C+I+G+NX, Y represents the economy's total income

True

Suppose the interest rate is 7%. 3 years from today it would be worth $600. Is this the lowest present value today?

True

On which of these bonds is the prospect of default least likely?

a bond issued by the federal government

Which of the following changes would not shift the supply curve for a good or service

a change in the price of the good or service

Elasticity is

a measure of how much buyers and sellers respond to changes in market conditions

Minimum wage laws dictate

a minimum wage that firms may pay workers

The primary purpose of measuring the overall level of prices in the economy is to

allow for the comparison of dollar figures from different points in time.

The primary advantage of mutual funds is that they

allow people with small amounts of money to diversify

Productivity is defined as the

amount of goods and services produced from each unit of labor input

The circular flow diagram is an example of

an economic model

If the demand for a product decreases, then we would expect equilibrium price

and equilibirum quantity both to decrease

The price elasticity of demand measures

buyer responsiveness to price changes.

A market includes

buyers and sellers

Macroeconomics is the study of

economy-wide phenomena

Demand is elastic if the price elasticity of demand is

greater than 1

Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?

gross domestic product (GDP)

In the circular flow diagram, the participants in the economy are

households and firms

Which of the following are residents of rich countries likely to have, rather than residents of poor countries?

housing, healthcare, life expectancy

In the CPI, goods and services are weighted according to

how much consumers buy of each good or service

Gross domestic product measures

income and expenditures

If the supply of a product decreases, then we would expect equilibrium price to

increase and equilibrium quantity to decrease

If muffins and bagels are substitutes, a higher price for bagels would result in an

increase in demand for the muffins

An increase in input costs to firms in a market will result in a

increase in equilibrium price and a decrease in equilibrium quantity

When the overall level of prices in the economy is increasing, economists say that the economy is in a state of

inflation

When the overall level of prices in the economy is increasing, economists say the economy is experiencing

inflation

Risk aversion helps to explain various things we observe in the economy including

insurance, "dont put all your eggs in one basket", and the risk-return trade-off.

Oil is considered to be a non-renewable energy source. Oil

is a scarce resource

The market demand curve

is the sum of all individual demand curves

Human capital is

knowledge and skills that workers have acquired

Compared to stocks, bonds offer the holder

lower risk and lower potential return

A group of buyers and sellers of a particular good or service is called a

market

In computing GDP, market prices are used to value final goods and services because

market prices reflect the values of goods and services

The sum of all the individuals supply curves for a product is called

market supply

What you give up to obtain an item is called your

opportunity cost

Economists compute the price elasticity of demand as the

percentage change in the quantity demanded divided by the percentage change in price

The supply curve for a good is a line that relates

price and quantity supplied

A legal maximum on the price at which a good can be sold is called a

price ceiling

A legal minimum on the price at which a good can be sold is called a

price floor

Productivity is the amount of goods and services

produced for each hour of a worker's time. It is linked to a nation's economic policies.

Which of the following terms is used to refer to the ability of people to exercise authority over the resources they own?

property right

A nation's standard of living is best measured by its

real GDP per person

The overriding reason why households and societies face many decisions it that...

resources are scarce

A decrease in quantity demanded

results in a movement upward and to the left along a demand curve

The law of supple states that, other things equal, when the price of a good

rises, the quantity supplied of the good rises

If the tax revenue of the federal government exceeds spending, then the government necessarily

runs a budget surplus

In a market economy, economic activity is guided by

self interest and prices

Suppose there is a decrease in the price level of steel. We would expect the supply curve for steel beams to

shift rightward

Who is not included in the labor force according to the BLS?

someone who is retired and not looking for work.

The forces that make market economies work are

supply and demand

A table that shows the relationship between the price of a good and the quantity supplied of that good is called a

supply schedule

Suppose chocolate dipped strawberries are currently selling for $30 a dozen, but the equilibrium price is $20 per dozen. We would expect a

surplus to exist and the market price of the strawberries to decrease

A COLA (cost of living allowance) automatically raises the wage when

the CPI increases

Which government entity computes U.S. GDP every three months?

the Department of Commerce

Which entity within the U.S. government is responsible for computing and reporting the CPI?

the Department of Labor

A surplus exists in a market if

the current price is above its equilibrium price

Suppose that over the past year, the real interest rate was 5% and the inflation rate was 3%. It follows that

the dollar value of savings increased at 8% and the purchasing power of savings increased at 5%

Who accepts all the risk associated with a mutual fund's portfolio of stocks and/or bonds?

the fund's shareholders

"Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises." This relationship between prices and quantity demanded is referred to as

the law of demand

A movement along the supply curve might be caused by a change in

the price of the good or service that is being supplied

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption when calculating GDP?

the purchase of a new house

The price elasticity of supply measures how much

the quantity supplied responds to changes in the price of the good

The demand for a good or service is determined by

those who buy the good or service

Unemployment data are collected

through a regular survey of about 60,000 households.

GDP is defined as the

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

The quantity demanded of a good is the amount that buyers are

willing and ale to purchase