Macro Exam 1-3 Questions
The figure shows the flows of expenditure and income in EuropaEuropa. In 2011, flow A was $860 billion, C was $192 billion, B was $440 billion, and E was $ 48 billion. Calculate investment.
$180 billion
In April 2014: The unemployment rate is _____ percent. The employment-to-population ratio is _____ percent. At the end of MayMay 2014: The number of people unemployed is ______ The number of people employed is ______ The unemployment rate is ______ percent
10.0; 69.2; 1,880; 18,000; 9.5
Amazon.com agreed to pay its workers $20 an hour in 1999 and $33 an hour in 2001. The CPI in 1999 was 166 and in 2001 it was 180. Calculate the real wage rate in each year (to the nearest cent). Did these workers really get a pay raise between 1999 and 2001? The real wage rate in 1999 was $_______ The real wage rate in 2001 was $_______ Because the real wage rate in 2001 is ______ the real wage rate in 1999, the workers _____ really get a raise between 1999 and 200
12.05; 18.33; greater than
The growth rate of real GDP in Pacifica in 2012 is ______ percent. The growth rate of real GDP per person in Pacifica in 2012 is _____ percent.
13; 10
What is the highest acceptable price for computers?
2 cheese
What is the lowest acceptable price for computers?
2/3 cheese
At which levels of production is Alice producing inefficiently?
200 units of lemonade and 50 units of pizza
To keep pace with a growing population, approximately _______ jobs must be created each month.
200,000
The number of people in the working dash age population in the working-age population is ________ million.
212.6
What is the lowest acceptable price for cheese?
3/2 computers
In Blogsville last month, ______ million people were in the labor force and ______ million people were in the working-age population.
39; 70
Eva runs a small bakery in the village of Roggerli. She is debating whether she should extend her hours of operation. Eva figures that her sales revenue will depend on the number of hours the bakery is open as shown in the table to the right. She would have to hire a worker for those hours at a wage rate of $12 per hour. Using marginal analysis, determine how many hours should Eva extend her bakery's hours of operations?
4 hours
Choose the statement that is incorrect.
A government budget surplus competes with investment for funds.
________ behavioral assumption about humans was that people usually act in a rational, self−interested way.
Adam Smith's
Who would be most likely to recommend to these two nations that they engage in trade?
Almost all economists
Which of the following correctly describes how price adjustments eliminate a shortage?
As the price rises, the quantity demanded decreases while the quantity supplied increases
Jeb makes the following four statements about peanuts. Which statement best describes his quantity demanded in the peanut market?
At a price of $1 per pack, I plan to buy 2 packs of peanuts per week.
Choose the statement that is incorrect.
At full employment, the unemployment is zero
Which of the following statements is true?
Both life-saving drugs and ice cream are examples of scarce goods.
Choose the correct statement.
Commercial banks are financial institutions that accept deposits, provide payment services, and make loans to firms and households.
Which of the following is an example of investment?
Continental buying Airbus planes
Economics promotes which of the following as the way to make the best decision?
Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost
Which of the following is an example of a final good or service?
Dan bought a Toyota Camry.
If Dani and Emily devote equal amounts of time and effort to making pretzels, Dani produces more units than Emily. This information tells us that
Dani has an absolute advantage in producing pretzels
Choose the correct statement.
Deposits are money, checks are not money, and credit cards are not money.
If it costs Hobie $900 to produce 5 lamps and $1,200 to produce 6 lamps, then the difference of $300 is the marginal cost of producing the 5th lamp.
False
The central bank of the United States is the ______.
Federal Reserve System
The liabilities of the Fed are ______, and these liabilities along with ______ make up the monetary base.
Federal Reserve notes held by households and businesses and reserves of depository institutions; coins issued by the Treasury
Which of the following statements describes a change in the quantity supplied and which describes a change in supply? I Farms are selling less chicken because the price of turkey has increased. II Farms are selling less chicken because the price of chicken has fallen. III Farms are selling more chicken because the price of chicken has risen. IV Farms are selling more chicken because the cost of chicken feed has fallen.
I and IV are changes in supply and II and III are changes in the quantity supplied.
Which of the following is TRUE regarding markets? I. Economists define a market as a geographic location where trade occurs. II. A market enables buyers and sellers to get information about each other and to buy and sell from each other. III. Markets coordinate decisions through prices.
II and III
Choose the statement that is incorrect.
If the demand for Treasury bonds increases, the interest rate on the Treasury bond rises.
What is an economic model?
It is a simplified version of some aspect of economic life used to analyze an economic issue.
The opportunity cost to produce 1 pretzel for James is 2 cookies. For Carolline, the opportunity cost to produce 1 pretzel is 3 cookies. From this information, we know that
James has a comparative advantage in pretzel production.
The components of the 787 Dreamliner that Boeing produces in Japan are part of ______ GDP. The aircraft that are assembled in the United States and sold to All Nippon Airways are part of ______ GDP.
Japan's; U.S.
Choose the statement about money that is incorrect.
Money in the United States today is made up of notes and coins held by individuals and businesses.
______ sees the economy as a perpetual motion machine.
New growth theory
1. Which country has the absolute advantage in computers?
Norway
Which country has the comparative advantage in computers?
Norway
In what product should Norway specialize?
Norway should produce 12,000 computers
Comparative advantage is based on what kind of economic costs?
Opportunity costs
Which of the following statements illustrates structural unemployment?
Outsourcing resulted in many job losses in the mid 2000s.
Assume that the graphs in this figure represent the demand and supply curves for tuna. Which panel best describes what happens in this market when there is a decrease in the productivity of commercial fishermen?
Panel (b)
Choose the statement that is incorrect.
Real GDP per person grows whenever real GDP grows.
Which of the following statements best reflects this situation?
Regardless of whether a country has one or two of the absolute advantages, both countries can benefit from trade.
Olive oil producers want to sell more olive oil at a higher price. Which of the following events would have this effect?
Research finds that consumption of olive oil reduces the risk of heart disease.
Choose the statements concerning neoclassical growth theory that are true. 1. As incomes increase both the birth rate and the death rate decrease.As incomes increase both the birth rate and the death rate decrease. nothing 2. Technological change results from chance.Technological change results from chance. nothing 3. Neoclassical growth theory states that growth in real GDP per person can persist indefinitely.Neoclassical growth theory states that growth in real GDP per person can persist indefinitely. 4. Neoclassical growth theory implies that growth rates and income levels per person around the globe will diverge.Neoclassical growth theory implies that growth rates and income levels per person around the globe will diverge.
Statements 1 and 21 and 2 are correct.
I = ______.
S + (T−G) + (M−X)
Choose the statement that is incorrect.
The Lucas wedge equals real GDP minus potential GDP.
Suppose the United States goes from a free-trade policy to a no-trade policy with other countries. Which of the following is a result of this new policy?
The U.S. no longer consumes outside its production possibilities frontier
In what product should the United States specialize?
The US should produce 20,000 cheese.
Choose the statement about growth in labor productivity that is incorrect.
The demand for labor increases, the production function does not change, but a movement occurs along the production function.
Russell studies instead of playing tennis. The opportunity cost to him of studying is
The forgone value of playing tennis.
Choose the correct statement. The CPI in 2009 was 214.5. The CPI in 2010 was 218.1. The inflation rate in 2010 was ______ percent.
The inflation rate is the annual percentage change in the price level. 1.7
Which of the following statements by Tom demonstrates that his buying plans obey the law of demand?
The only thing that's changed is the price of textbooks: they've become more expensive and now I'm not buying as many.
Choose the option that is an example of government expenditure.
The purchase of telephone service for the House of Representatives
Which of the following will hold true if the market for cameras is in equilibrium at a price of $40?
The quantity of cameras produced will equal the quantity of cameras bought in the market.
Which country has the absolute advantage in cheese?
United States
Which country has the comparative advantage in cheese?
United States
Fast food restaurants produce a range of menu items such as hamburgers, chicken sandwiches, salads, and french fries. What fundamental economic question are they addressing by offering this range of items?
What to produce?
When real GDP decreases, ______.
a decrease in the demand for money occurs
A changes in which of the following shifts the demand curve for hamburgers?
a fall in the price of french fries, a complement for hamburgers
A person is in the labor force if any one of the following statements is true except that he or she is ______.
aged 16 and over and not in jail, hospital, or some other form of institutional care
Mrs. Lovejoy decides to invest in companies which she believes are producing its goods based on the preferences of consumers. Mrs. Lovejoy is investing in companies that are
allocatively efficient.
What does the term "marginal" mean in economics?
an additional or extra
During the 100 years from 1914 to 2014, real GDP per person in the United States grew at ______.
an average of 2 percent a year
Consider the figure showing supply curves for soft drinks. Suppose the economy is at point a. A movement to point b could be the result of
an increase in technology.
The "law of demand" predicts that, other things being equal,
an increase in the price of pizza decreases the quantity of pizza demanded.
The bank's total assets ______, its reserves ______.
are the same; decrease
Ted quits his $60,000−a−year job to be a stay−at−home dad. What is the opportunity cost of his decision?
at least $60,000
Gross domestic product and gross investment are measured ______. Net domestic product and net investment are measured ______.
before the depreciation of capital; after the depreciation of capital
A depository institution creates liquidity by ______.
borrowing short and lending long;
As a result of financial innovation, ______ have become ______.
checking deposits at thrift institutions; an increasing percentage of M1
The income approach to measuring GDP sums together ______, which equals net domestic income at factor cost.
compensation of employees, net interest, rental income, corporate profits, and proprietors' income
The expenditure approach to measuring GDP sums together ______, and the largest component is ______.
consumption expenditure, investment, government expenditure on goods and services, and net exports; consumption expenditure
The main components of money in the United States today are ______.
currency and deposits at banks and other depository institutions
Suppose the Fed sells $50 million of government securities to the Bank of America. The Fed's total assets ______ and its total liabilities ______.
decrease by $50 million; decrease by $50 million
In 2015, the population increases and labor hours supplied increase by 2020 at each real wage rate. The economy's standard of living ______ in 2015 because ______.
decreased; real GDP per person is smaller in 2015 than in 2014
The monetary base ______ and the Fed's assets ______.
decreases; decrease
When the pace of job creation exceeds the increase in population, the unemployment rate sometimes increases because _______.
discouraged workers return to the labor force
Real GDP per person is real GDP _____.
divided by the population
The Bank of America's total assets ______ and its total liabilities ______.
do not change; do not change
Jane produces only corn and cloth. Taking account of her preferences for corn and cloth
does not affect her production possibilities frontier.
Marginal benefit curves generally slope
downward, but not because of increasing opportunity cost.
The Ricardo-Barro effect _______ crowding out.
eliminates
Normally when the pace of job creation exceeds the increase in population, the unemployment rate _______.
falls
Real GDP is the value of ______. Potential GDP is ______.
final goods and services produced in a given year when valued at the prices of a reference base year; the maximum level of real GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurial ability that would bring rising inflation
Gross domestic product (GDP) is the market value of all the _____ goods and services produced _____ a country in a given time period.
final; within
The real interest rate ______, household saving ______,
falls; decreases and investment increases
When the unemployment rate is less than the natural unemployment rate, real GDP is ______ than potential GDP and the output gap is ______.
greater; positive
The unemployment rate in May 2008 is ______ the estimated natural unemployment rate. This implies that real GDP is ______ potential GDP at this time.
greater than; less than
The quantity of labor demanded is the number of labor hours __________ during a given period. The quantity of labor supplied is the number of labor hours ___________ during a given period. The ________ wage rate adjusts to bring the labor market to equilibrium.
hired by all the firms in the economy; that all the households in the economy plan to work; real
The HDI might be better than real GDP as a measure of economic welfare because the HDI ______. The HDI includes measurements of ______, which are not measured in real GDP.
includes real GDP, but also includes other factors that influence our standard of living; health, life expectancy, and education
An economy produces at point a on the PPF shown in the figure. A drought reduces the amount of wheat produced and the economy produces at point b. The opportunity cost of a unit of wheat ________.
increases
If an economy experiences a decrease in the money supply, short-run unemployment
increases, and short-run output decreases.
Assuming that U.S. consumers buy the same number of Lexus RX models and Hondas regardless of where they are built, U.S. GDP ______ when Toyota builds the Lexus RX in the United States and Honda increases production in the United States because ______.
increases; net exports and investment increase
When the Federal Reserve Bank increases the federal funds rate, other
interest rates rise, and consumption, firms' private investment and net exports decrease.
A central bank performs all of the following functions except ______.
it acts as a bank to the Congress and Administration
If the HDI is expanded to include items such as pollution, resource depletion, and political freedom
it would be difficult to measure
The three main types of markets for financial capital are _______.
loan markets, bond markets, and stock markets
Depository institutions pool risk because they use funds obtained from ______ depositors to make loans to ______ borrowers.
many; many
In the figure, if 2 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources
marginal benefit of a computer exceeds the marginal cost of a computer, so more computers
The unemployment rate might underestimate the underutilization of labor resources because it does not include ______.
marginally attached workers and part-time workers who want full-time jobs
Real GDP ______ indicator of the standard of living because ______.
might be an unreliable; the standard of living depends on many factors, some of which are not part of real GDP
The key idea of classical growth theory that leads to the dismal outcome is that ______.
no matter how much technological change occurs, real GDP per person is always pushed back toward the subsistence level
The demand for money is the relationship between the quantity of real money demanded and the __________ when all other influences on the amount of money that people wish to hold remain the same
nominal intrest rate
Currency consists of _____.
notes (dollar bills) and coins
To increase the money supply, the Fed may conduct
open market purchases or decrease the discount rate.
Suppose the U.S. government encouraged new teachers to take jobs in underperforming schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying the economic idea that
people respond to economic incentives
Net domestic income at factor cost ___ indirect taxes less subsidies ____ depreciation gives GDP (income approach).
plus, plus
Assume that the preconditions for labor productivity growth are in place. The pace of labor productivity growth is influenced by all of the following except ______.
population growth
A substitute in production is a good that is _____ another good, and a complement in production is a good that is _____ another good.
produced in place of; produced together with
When economic growth occurs, the
production possibilities frontier shifts outward
Domestic product is _______. National product is _______.
production within a country; the value of goods and services produced anywhere in the world by the residents of a nation
Workers in developing Asian economies who work more hours than Americans are not the world's most productive workers because ______.
productivity depends on how much real GDP each hour of labor can produce
A central bank is a banks bank and a _____ authority that regulates a nation's depository institutions and conducts _____ policy, which means that it adjusts the _____ and influences _____.
public; monetary; quantity of money in circulation; interest rates;
Between 2006 and 2014, ______.
real GDP and potential GDP increased, but potential GDP increased at a steadier pace
In the short run, ______ and ______ adjusts to achieve equilibrium
real GDP determines the demand for money curve and the Fed determines the quantity of real money supplied; the nominal interest rate
Classical growth theory is the view that the growth of _____ is temporary and that when it rises above the subsistence level, a population explosion _____.
real GDP per person; eventually brings it back to the subsistence level
The demand for labor is the relationship between the quantity of labor demanded and the ______. The supply of labor is the relationship between the quantity of labor supplied and the ______.
real wage rate; real wage rate
If the price of a hot dog is $2 and the price of a hamburger is $4, then the
relative price of a hot dog is 1/2 of a hamburger.
How will the labor force participation rate change if Kevin starts creating football apps in his garage and they turn out to be very popular? The labor force participation will _____ Kevin starts creating football apps in his garage and they turn out to be very popular.
rise
How will the unemployment rate change if Sarah quits and starts to search for a full-time job? The unemployment rate will _____ if Sarah quits and starts to search for a full-time job.
rise
As output moves from point a to point b to point c along the PPF in the figure, the opportunity cost of one more unit of good X
rises. The opportunity cost of one more unit of good Y falls.
The demand for loanable funds increases and the supply of loanable funds decreases. As a result, the equilibrium real interest rate ______ and the equilibrium quantity of loanable funds ______.
rises; increases, decreases, or remains the same
A critical function of the government in facilitating the operation of a market economy is
setting up and enforcing private property rights.
People buy more of good 1 when the price of good 2 rises. These goods are
substitutes.
A government budget surplus occurs, which increases the ________ loanable funds.
supply of
According to the expenditure approach for calculating China's GDP, "each one percent drop in the U.S. economy will shave 1.3 percent off China's growth" because as the U.S. economy shrinks, ______. China's ______ and China's real GDP decreases.
the United States imports less from China; exports decrease
Comparative advantage is
the ability to perform an activity at a lower opportunity cost than anyone else.
Other influences on economic welfare that could be included in a comprehensive measure include all of the following except ______.
the beauty of local scenery
The velocity of circulation is the average number of times a dollar of money is used annually to buy ______. The formula used to measure the velocity of circulation, V, is ______, where P is the price level, Y is real GDP, and M is the quantity of money.
the goods and services that make up GDP; V = (P×Y)÷M
When the price of an asset rises, ______.
the interest rate falls
When cyclical unemployment increases and other things remain the same, ______.
the natural unemployment rate does not change
The supply of loanable funds is the relationship between _____ supplied and the _____ when all other influences on lending plans remain the same.
the quantity of loanable funds; real interest rate
The amount by which _____ is called net investment.
the value of capital increases
An economy is at full employment when ______.
there is no cyclical unemployment
After you graduate, you have decided to accept a position working at the Bureau of Labor Statistics for $45,000.00 a year. The two other offers you received were working for Walminus−Mart for $38,000 and working for Ernst and Young consulting for $42,000. Of these two offers, you would have preferred the job at Ernst and Young. What is the opportunity cost of accepting the position at the Bureau of Labor Statistics?
the $42,000 you would have been paid working for Ernst and Young
When the Fed buys securities from a bank, ______.
the bank's reserves increase but its deposits do not change
Depository institutions minimize the cost of monitoring borrowers by ______.
using specialized resources that have a much lower cost than what households would incur if they had to undertake the activity individually
Allocative efficiency is a situation in which the quantities of goods and services produced are those that people _____ - it is not possible to produce more of a good or service _____ some of another good that people _____.
value most highly; without giving up; value more highly
Nominal GDP is ______. Real GDP is ______.
a more precise name for GDP; the value of final goods and services produced in a given year when valued at the prices of a reference base year
Net worth is the total market value of what a financial institution has _____ minus the market value of what it has _____.
lent; borrowed
The demand for loanable funds increases and the supply of loanable funds increases. As a result, the equilibrium real interest rate ______ and the equilibrium quantity of loanable funds ______.
rises, falls, or remains the same; increases
When the nominal interest rate rises, the opportunity cost of holding money ______ and the quantity of real money demanded ______.
rises; decreases
