Macro Final Prep
Consumption, investment, government spending, exports, and imports are:
all components of aggregate demand.
The local government is concerned about poverty so it institutes a minimum wage of $9 per hour. If the demand and supply for labor are given in the graph, there will be
a surplus of 6 workers.
If exports exceed imports, then __________ exists.
a trade surplus
In the neoclassical view, the economy has a ________ to move back to potential GDP.
self-correcting tendency
Jontel got a raise, which may help the economy since
she will likely consume more goods and services.
The Keynesian model focuses more on ________ and the neoclassical model focuses more on long-run determinants of output and employment.
short-term fluctuations caused by business cycles
Given the following information, what would the real growth in 2015 be?
2.5%
If the price per kilogram of oranges was $2.10, and the price went up to $2.50 per kilogram, how many fewer thousand kilograms will be demanded?
20,000
Which of the following assumptions is based on a Keynesian economic framework?
Changes in aggregate demand prices does not cause wages and prices to quickly adjust because they are both sticky.
After the death of the queen in the country of Chedeux, her daughter, Chantasia became the new queen and ruler. Chantasia is known to be a ruler of the people, but as she gains more power from the populus, she begins to instigate sweeping changes to the economy and government, all in the name of helping the 'most downtrodden among us'. One of her first actions is to enforce a command economy to control all aspects of the country and regulate its wealth. As one of the queen's subjects, you've seen the changes she made. Which of these actions would be in line with this new command economy she is creating?
Chantasia creates a new government body called the Ministry of Planning which will set wages, prices and production targets to reach each month.
Which country has characteristics of a command economy?
Cuba
A contraction in the business cycle is likely to result in which form of unemployment increasing?
Cyclical
Which of the following factors contribute to economic growth?
The discovery of a new technology.
Alice is calculating the durable goods value for 2012. She is calculating the value by using the quantity of each final durable good produced in 2012, multiplied by the price at which the durable goods were sold in 2007. What type of calculation is Alice creating?
The durable goods real values.
Consider the following schedule to find where the equilibrium occur. Where does real GDP supplied and equilibrium price level occur?
The equilibrium point occurs at a price level of 610 and an output level of 17.8
Identify the normative statement among the following statements.
The federal government spends too much.
All else equal, how would decreasing unemployment insurance affect the natural rate of unemployment?
The natural rate of unemployment is likely to decrease.
If Canada has a surplus of paper products produced but its consumers demand more cleaning solutions, and the US has an abundance of cleaning solutions but consumers are demanding more paper products, how would trade benefit both countries?
Trade would assist both countries to both reduce excess supply and satisfy market demand.
The United States will have a trade surplus in which of the following scenarios?
U.S. imports are less than U.S. exports.
Which of the following best describes a business cycle?
Which of the following best describes a business cycle?
If a Phillips curve shows that unemployment is high and inflation is low in the economy, then that economy:
Which of the following statement(s) about economic models is false?
Last year Hawaii did not received many rain storms and with eight months of little rain there was low demand for umbrellas. This year however, there have been three months of big rain storms and only a few weeks of sunny weather. If you were to draw a graph depicting the changing market for umbrellas from last year to this, how would the new equilibrium price and quantity demanded compare to last year's market?
With supply of umbrellas being constant, equilibrium price and quantity demanded increase for umbrellas compared to last year.
Which of the following is the name used to describe the price index that consists of raw materials and intermediate goods?
Producer Price Index
_________ is output per hour in the economy.
Productivity
When one nation can produce a product at lower cost relative to another nation, it is said to have a __________________ in producing that product.
absolute advantage
When describing consumer surplus, you would say it is the extra benefit consumers receive when they ________.
pay less than they would have been willing to pay
Concerning the four phases in the economic cycle, what is show by point B?
peak
An economy's rate of productivity growth is NOT linked to the following:
percentage of male population.
Investment, when calculating GDP, refers to the
purchase of new capital goods like real estate, equipment, and inventories.
In the neoclassical view, changes in ____________________ can only have a short-run impact on output and on unemployment.
aggregate demand
Over the long run, a surge in aggregate demand from a neoclassical perspective will most likely result in
an increase in price level.
According to growth accounting studies, a country would achieve better results by promoting
research and education.
The situation where the buying power of money in terms of goods and services increases is called:
deflation.
Which of the following would be classified in the M1 category of the money supply?
demand deposits
With respect to measuring the money supply, which of the following terms describes
demand deposits
A typical Keynesian aggregate supply (AS) curve _______________ and a typical Keynesian Phillips curve _____________.
slopes upward; slopes downward
When labor productivity increases over time, generally
so do average wages.
Scarcity is imposed on individual households in the form of income and
the prices of the goods that a person may purchase.
The statement, ________matches Keynesian theory.
"A typical business has sticky prices when aggregate demand fluctuates."
If a perfume store currently sells perfume for $30 a bottle and averages $2000 sales per month, what sales might they anticipate if they raise the price to $40 a bottle?
$1500
You are charged with setting the price for your company's lawn mower product that has been on the market for a year and is lagging in sales. After researching and discovering the needed data you create a supply and demand curve. Here is what you have discovered.What sales price should you select to meet the equilibrium price for the lawn mower?
$190
If the number of employed persons in a country equals 45 million, the number of unemployed persons equals 11 million, and the number of persons over age 16 in the population equals 55 million, the unemployment rate equals ________.
19.6%
If Pepsi goes on sale, what will happen to the demand for Coca-Cola?
Demand for Coca-Cola will decrease.
Which of the following statements is true.
Economic growth is a long-run process that occurs as a country's potential output increases.
Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude:
Germany has a comparative advantage in the production of maple syrup
If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:
Goods X and Y are complement goods.
Consider the Production Possibility Frontier for country X producing 2 groups of goods, MP3 players and watches. The opportunity cost of one additional watch is
Greater at B than at C
Cross-country comparisons of unemployment rates are difficult for all the following reasons except:
Higher government employment in developed countries.
An increase in consumer surplus is caused by
a price ceiling.
The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.
budget constraint
Macroeconomic policies that focus on government spending and taxes are considered
fiscal policies.
In the neoclassical model, the AS curve shifts to the right over time as ________ and potential GDP expands.
productivity increases
A decrease in aggregate demand (AD) can cause
a recession in the economy.
Which factor drives economic growth?
Improved technology.
Julie's entertainment budget for the next six months is $150 per month. She enjoys watching the latest movies and loves the ballet. A movie ticket costs $15 while a ballet ticket costs $35. This month Julie already attended one ballet show and three movies. If Julie decides she would rather see ballet shows for the remainder of this month, how many ballet shows can she attend and stay within her budget?
Two ballet shows.
Overall, free trade results in ________.
a decrease in price and an increase in quantity
One of the important factors supporting economic growth is
an effective system of laws.
Which is the smallest expenditure category in the US CPI?
apparel
The ________ is where quantity demanded and quantity supplied are equal at a certain price.
equilibrium
The definition of market equilibrium states that at the _______________, the quantity of labor demanded by employers will equal the quantity supplied.
equilibrium wage
The point at which quantity demanded equals quantity supplied is called
equilibrium.
A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle are:
expansion, peak, recession, trough
Economic growth is supported by
laws that build trust between parties.
Which of the following is an economic indicator that economists should use to understand the state of the U.S economy?
the inflation rate
In a planned economy, government determines what can be produced and
what prices will be charged.
If the economy for country Beta starts with a GDP of $350 billion and a growth rate of 3% per year, what will its GDP be after 15 years?
$545 billion
You own an auto dealership that has recently received many five star customer reviews at online review sites stating you sell quality cars and are very trustworthy. The diagram represents your demand curve before the online reviews. You find that the positive online reviews increase the demand by 20 cars at any given price. What two points will the new demand curve probably pass through?
($20,000, 120) and ($15,000, 220)
If the number of employed persons in a country equals 42 million, the number of unemployed persons equals 9 million, and the number of persons over age 16 in the population equals 60 million, the unemployment rate equals ________.
17.6%
Amanda can produce either 24 strawberries or 6 blueberries an hour, while Brenda can produce either 18 strawberries or 9 blueberries an hour. The opportunity cost of producing 1 strawberry for Amanda and Brenda, respectively, are:
0.25; 0.5 respectively
Suppose the European Union has a real GDP of 15 trillion Euros, and their GDP deflator is 155. What is the European Union's nominal GDP?
23.25 trillion Euros
In the fictional country of Alpha-land the economics statistics department has been busy calculating the price index for a basket of goods from 2013 to 2017. January 2013 is the standardized price index, at 100, for a basket of consumer goods in the country. The price index increased in 2014 to 105.7, in 2015 to 110.3, in 2016 to 114.1, and in 2017 it increased to 121.2. You have been called to the country to help establish the rate of inflation for those years. What is the inflation rate in Alpha-land for 2016 to 2017?
6.2%
The country of Bulgario has a GDP of $10 billion and will double to $20 billion in 10 years. What is the compound growth rate?
7.2%
If out of 450 people in the labor force, the number of employed workers is 415 and number of unemployed workers is 35, then the unemployment rate is ________
7.8%
In an AD/AS model, the point where the economy has excess capacity is called the:
Keynesian zone of the AS curve
Compare the following answers and select the one which is correct when it comes to comparative and absolute advantage.
A country producing products at a lower opportunity cost than other nations has comparative advantage with those products.
What is the Gross Domestic Product (GDP) designed to measure?
A nation's total production of final goods and services.
________ is the value of output per hour of labor input.
Labor productivity
Typically, if consumer and business confidence is low then ________ and if consumer and business confidence is high then ________.
AD shifts to the left; AD shifts to the right
The prices of which of the following items are included in the GDP deflator?
Consumption, Investment, Government Expenditures plus Exports minus Imports
______________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate.
Efficiency wage theory
________ is the idea that firms will get the most for their money when they pay wages higher than the equilibrium wage.
Efficiency-wage theory
Consider the graph of the production possibility frontier for country X. What is a combination of MP3 players and watches that would be inefficient production for country X?
F
Gustavo lives in New York City and gets to work on a 10 minute subway ride. He lives in NYC because of the variety of events, restaurants, museums, education and people to experience on a daily basis. Is Gustavo's NYC standard of living reflected in factoring the Gross Domestic Product and why or why not?
Gustavo's environmental quality is left out of GDP because GDP focuses on productivity rather than Gustavo's well being or standard of living.
If you are looking at an economy that is operating below its potential GDP, where cyclical unemployment is high, and it is in a recession, then which zone represents that in the graph above?
Keynesian zone
Which is a factor that drives economic growth?
Increased human capital.
Which of the following statements represents a Keynesian point of view of macroeconomics?
Increases in aggregate demand can reduce unemployment.
The ____________________ is based on the prices of merchandise that are exported or imported.
International Price Index
Cree industrial lighting company is looking to deepen its capital. Which one of these steps should the Cree company take to accomplish this?
Invest in additional education and advanced training programs for their employees.
The current competitive economy has caused the Doggie Dog Food company to brainstorm in their latest meeting on how to become more productive and efficient. Larry the VP of operations suggests that they deepen the company's capital. Which of the follow steps should the Doggie Dog Food company take to deepen its capital?
Invest in additional training for their dog food scientist and nutritionist updating with the latest dog food and health knowledge.
How may low inflation actually assist labor markets adjust towards equilibrium?
It allows for the gradual downward adjustment of real wages.
Which of the following describes inflation?
It is an increase in the cost of a given basket of goods.
Which of the following does NOT describe inflation?
It means that the price of every good and service is rising.
From the following examples, select the example illustrating frictional unemployment.
Justin works at an oil rig in Texas. He sees a better opening at a company in North Dakota and applies for the job. After he accepts their offer and quit his job, he takes a month to pack up and move to North Dakota.
_______________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________.
Neoclassical economists; long run
________ economists place an emphasis on ________-run economic performance.
Neoclassical; long
What is one of the reasons nations trade with each other?
No country can create or produce everything its citizens desire
The equilibrium price and quantity are:
Pe = $14, Qe = 31
Sarah lives in Montana and works remotely with a company in Portland. She lives in Montana because of the fresh air, clean water and wide open spaces to go hiking on her time after work. Is Sarah's environmental quality reflected in factoring the Gross Domestic Product and why or why not?
Sarah's environmental quality is left out of GDP because GDP focuses on productivity rather than Sarah's well being or standard of living.
Which of the following statements describe a competitive market?
There is a large number of buyers and sellers.
According to the Keynesian framework, which of the following may help a country reduce inflation, but will not help that country to get out of a recession?
a decrease in the tax rate on consumer income
Which of the following is most likely a topic of discussion in macroeconomics?
a decrease in the unemployment rate
In macroeconomics, the connection from inputs to outputs for the entire economy is called _______________.
an aggregate production function
Excess demand occurs when the actual price in some market is ________ the equilibrium price.
below
When tasks involved with producing a good or service are divided, workers and businesses
can produce a greater quantity of those goods or services.
According to the _____________________ argument, a market-oriented economy has no obvious way to implement a plan of systematic wage reductions.
coordination
Complete the following sentence: If people think that the price of televisions will decrease in the near future, that belief may cause a
decrease in the demand for televisions today.
Keynes believed that the government should ________ to get the economy out of recession:
decrease taxes and/or increase government spending.
Gross national product would include
final goods and services produced by American resources
Banks are financial intermediaries because they
link savers who deposit money and borrowers who seek loans.
The Keynesian model focuses more on short-term fluctuations caused by business cycles and the neoclassical model focuses more on ________.
long-run determinants of output and employment
The neoclassical model focuses more on long-term fluctuations caused by business cycles and also ________.
long-run determinants of output and employment
Trade allows each country to take advantage of ________ than the other country.
lower opportunity costs
Increased competition because of a greater number of producers will cause
lower prices due to an increase in the quantity supplied at every price.
If an economic decision is based on the Keynesian perspective, it proposes that the government should ________ in managing the macroeconomy when ________.
play a role; the aggregate demand has a significant gap with the aggregate supply
One benefit to falling aggregate demand is that
price levels go down.
Keynesian economics explains that recessions and depressions occur because:
the macroeconomy may adjust only slowly to shifts in aggregate demand because wages are sticky.
The difference between exports and imports is called the ___________.
trade balance
In calculating the GDP of the United States, if imports were found to be less than U.S. export this is known as a
trade surplus.
If aggregate demand decreases, neoclassical theory suggests that in the long-term, prices
will be flexible and adjust back to equilibrium along the aggregate supply curve.
The main reason price ceilings are set is so that consumer prices
will be lower.
The macroeconomy, according to neoclassical economists, ________.
will correct itself
A government decides to set a price ceiling on milk of $2.00 so that milk is affordable to the poor. The conditions of demand and supply are given in the table below. What will be the price and quantity of milk purchased?
$2.00; 5,500
The country of Wakanda for 2018 has a GDP of $650 billion, with a total of 2 million workers, each of which averages 1400 work hours a year. What is the value of the output per worker per hour of work?
$232
If Nominal GDP is $36,000 billion and the GDP deflator is 150, then Real GDP is ________.
$24,000 billion
The country of Wakanda in 2017 had a GDP of $400 billion, with a total of 1 million workers, each of which averages 1600 work hours a year. What is the value of the output per worker per hour of work?
$250
The country of Russia had a Gross Domestic Product of about $4 trillion in 2016 and a population of 142 million people, the GDP per capita would be ________.
$28,000
The country of Wakanda for 2016 has a GDP of $750 billion, with a total of 2 million workers, each of which averages 1300 work hours a year. What is the value of the output per worker per hour of work?
$288
The required reserve ratio for Morgan Bank is 8 percent. If the total deposits is $4,000, what is the maximum amount the bank can lend out as loans on its excess reserves?
$3680
If the economy for country Beta starts with a GDP of $300 billion and a growth rate of 7% per year, what will its GDP be after 5 years?
$421 billion
The required reserve ratio for a Bakers Bank is 15 percent. If the total deposit is $5,000, what is the maximum amount the bank can lend out as loans on its excess reserves?
$4250
If depreciation equals $45 billion, GNP equals $530 billion, and national income is $515 billion, then what is the Net National Product?
$485 billion
The country of Bolivia had a Gross Domestic Product of $82 billion in 2016 and a population of 11 million people, the GDP per capita would be ________
$7,455
The country of Bolivia had a Gross Domestic Product of $82 billion in 2016 and a population of 11 million people, the GDP per capita would be ________.
$7,455
If Nominal GDP is $22,000 billion and the GDP deflator is 250, then Real GDP is ________.
$8,800 billion
Stealth bank has deposits of $800 million. It holds reserves of $10 million and has purchased government bonds worth $200 million. The banks loans, if sold at current market value, would be worth $450 million. What is the total value of Stealth bank's liabilities?
$800 million
Use the figures in the table for the calculation. What is the GDP?
$812 billion
Your boss has asked you to calculate the needed figures for a government report. The figure you need to calculate is the GDP using the numbers in the table. What is the GDP?
$832 billion
Your boss has asked you to calculate the needed figures for a government report. The figure you need to calculate is the GDP using the numbers in the table. What is the GDP?
$931 billion
A new study shows that onions improve cognitive and heart health. This causes the demand curve to shift to the right, so that consumers demand 20 lbs more onions at any given price. What two points must the new demand curve pass through?
($3.00, 420 lbs) and ($2.10, 510 lbs)
Every day, 500 airplanes in San Francisco incur an additional 30 minutes of airport delays when flying into or out of the airport. In Chicago, the delays amount to 15 minutes for 1,200 airplanes. If the price of time is $30/hour in San Francisco and $20/hour in Chicago, which airport incurs the largest opportunity cost?
San Francisco i.e. 30 minutes delay in San Francisco is $15 (given $30/hour) for each airplane. There are 500 airplanes. Total value of time is: $15x500 = $7,500 15 minutes delay in Chicago is $5 (given $25/hour) for each airplane. There are 1,200 airplanes. Total value of time is: $5x1,200 = $6,00 Therefore, the largest opportunity cost is in San Francisco.
The country of Shellberry has an economy that will double in 4 years. According to what you've learned about compound growth, what type of economy does Shellberry have?
Shellberry has a thriving and rapidly growing economy growing over 18% per year.
The country of Shellberry has an economy that will double in 12 years. According to what you've learned about compound growth, what type of economy does Shellberry have?
Shellberry has a thriving and rapidly growing economy growing over 5% per year.
Consider the following scenario. If foreign goods are relatively more expensive than U.S. goods, exports from the U.S. rise. How would this scenario make the aggregate demand curve change?
The AD curve would shift to the right.
The mid-1990s saw a rise in the use of mobile phones in the general population. The technology continued to improve in the early 2000s and in the mid-2000s smartphones revolutionized the way people communicated. The technology has changed very rapidly and improved the lives of consumers. With these rapid changes, what would you suspect has happened to the CPI calculation?
The CPI has overstated the cost of living because of quality improvement bias.
Which of the following statements describes the macroeconomy?
The US unemployment rate has been under 5% annually over the last 5 years.
Suppose that the USA can make 15,000,000 cars or 30,000,000 bottles of wine with one year's worth of labor. France can make 10,000,000 cars or 30,000,000 bottles of wine with one year's worth of labor. From these numbers, we can conclude:
The USA has a comparative advantage in the production of cars.
Frank has plotted his supply schedule on a supply curve graph for the golf shoe market. He has also plotted two other competitor's supply schedules. Which of the following supply schedules accurately reflects Frank's golf shoe market supply schedule if his business is the yellow supply curve?
The correct supply schedule has the figures: $50,1 and $75,2 and $100,3 and $120,4 and $135,5 and $155,6 and $195,7.
What best explains the fluctuations in the unemployment rates over the past 50 years?
The cycles of economic recessions and expansions.
The country of Bratislaka hired Gudurn to assist with government policies regarding the macroeconomy. Gudrun is a neoclassical economist and makes all decisions based on those economic philosophies. What policies will Gudrun tell the government to enact in order to foster a health economy?
The government should keep inflation low and maintain low tax levels over the long run.
What is the formula with which to calculate the official unemployment rate?
The number of unemployed workers divided by the sum of employed and unemployed workers.
The owner of a national construction company has been watching current economic changes. They have gathered historical data from their company's business experiences through up and down markets and have decided on a plan to follow as demand changes over the next year, three years and five year plan, with alternative options based on past data. Why is the owner making these type of decisions for the long-run?
The owner is using adaptive expectation reasoning to change important aspects of the company to be ready for future demands as the long-term economy shifts.
Which of the following is counted as part of GDP?
The payments for a haircut at a hair salon.
Which of the following is an example of a tariff?
The tax on an imported good.
It is the end of the year and holiday sales are beginning. To remain competitive the manufacturers of ice scrapers for cars run a buy two get one free sale on Black Friday. What effect will this have on the ice scraper market?
This decrease in price will increase the quantity demanded.
Zenobia can manufacture 8 ships or 32 computers in a week. Meanwhile, in the neighboring country of Azarmidok, 5 ships or 15 computers are produced per week. Which country has the largest opportunity cost to produce a ship and what is the opportunity cost to that country
Zenobia; 4 computers
Zenobia can manufacture 8 ships or 32 computers in a week. Meanwhile, in the neighboring country of Azarmidok, 5 ships or 15 computers are produced per week. Which country has the largest opportunity cost to produce a ship and what is the opportunity cost to that country?
Zenobia; 4 computers
Using your understanding of economic history and inflation, which inflation target is most advisable?
1-2%
Given the following information, what would the real growth in 2015 be?
10.6%
Calculate the unemployment rate based on the following data for a country: Population: 300, Employed workers: 130, Labor Force: 150, Discouraged workers: 8.
13.3%
Calculate the unemployment rate based on the following data for a country: Population: 800, Employed workers: 170, Labor Force: 200, Discouraged workers: 12.
15.0%
In the table below there are three years of a basket of retail goods. From this information calculate the price index of 1990 if the base year in 1985? (Round your answer to the nearest whole number.)
160
Women composed __________ of the paid workforce in 1900 and 50% of the paid workforce in 2010.
18%
If the number of employed persons in a country equals 32 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 55 million, the unemployment rate equals ________.
20.0%
The following table indicates the CPI for the country of Applebee over the last four years. Using the information in the table, calculate the annual inflation rates. Which time frame had the HIGHEST annual inflation rate?
2015-2016
In the early 1980s, a new technology was introduced to banks where customers could withdraw their money without having to enter the bank or keep baking hours. As the first ATMs began to be introduced to more and more banks, it began to have an effect on bank personnel. Thinking about the bank environment, identify who would most likely be impacted by this technology change and suffer long term structural unemployment?
A bank teller with 4 years of relevant work experience and a high school diploma.
Which of the following statements are true if you are comparing a market that is operating at a quantity lower than equilibrium (ie. a price floor) with the same market operating at the equilibrium quantity?
A market operating below equilibrium will transfer some consumer surplus to producers.
Of the following, which is an example of a type of business investment expenditure?
A producer's durable equipment
When an economy's output increases and the price level decreases, the _________ curve has shifted to the ____________.
AS; right
With the introduction of robotics to automotive manufacturing, there have been sweeping changes to the automotive assembly line, management and operations at plants. As an example, in a truck manufacturing plant, identify who would most likely be impacted by this technology change and suffer long term structural unemployment?
An assembly line worker with 10 years of screwing together truck panels and a high school diploma.
The supply curve will shift to the right if which of the following occurs?
An improvement in technology.
Which of the following statements most likely lies within the realm of microeconomics?
An increase in labor costs will increase the additional cost of producing another bus.
Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:
Andy's demand for beer to increase
Angela's pay last year was $100,000. Her pay this year increased to $130,000. The consumer price index increased from 100 to 125 over the same time period. What has happened to Angela's real income from last year to this year?
Angela's real income increased.
According to the law of demand, assuming other factors are held constant
As the price of milk decreases, the quantity of milk demanded will increase.
Guatemala produces an excess supply of coffee but has consumers demanding electronics. Mexico generates a large supply of electronics but its market demands more coffee. What would happen if both countries traded?
Assist both countries in reducing excess supply and satisfying market demand.
Which of the following represents producer surplus?
B
Neoclassical economists have a tendency to put more emphasis on long-term growth than on fighting recession. Why is this the case?
Because over the long run, recessions end.
Silicon is used for the manufacturing of semiconductor chips. At the end of last year a large new source of silicon has been discovered this year and the price of silicon has decreased by 15%. Semiconductor chips are used in devices, cell phones, gaming systems, and this year many new devices are now using chips. If you were drawing a supply and demand graph to illustrate the changes to the semiconductor market since last year, what would you say has happened to the supply and demand curves and the equilibrium price and quantity this year?
Both the demand and supply of semiconductor chips will increase shifting the curves to the right with equilibrium quantity increasing but it is impossible to pinpoint the equilibrium price change.
The opportunity cost of producing a pair of pants in the USA is 5 bushels of wheat, while in China, it is 2 bushels of wheat. As a result:
China has a comparative advantage over the USA in the production of pants.
The natural rate of unemployment in the country of Cigan is 4.3% based off of its Department of Economic Statistics on unemployment. This year Cigan's economy began to improve dramatically and the actual unemployment rate decreased to 3.2%. What is the likely outcome for the economy of Cigan, assuming the unemployment percentages are accurate?
Cigan's growing economy will slow until real GDP is equal to potential real GDP and the unemployment rate equals 4.3%.
Which of the following distinct economic schools of thought is excluded from neoclassical style economics?
Keynesian economics
________ allows a country to seize the market opportunity and trade with other countries which have easier production and lower cost of certain goods in its marketplace.
Lower opportunity costs
Which source of money is most liquid, or available for consumers to use?
M1
Which of the following choices is a true statement about the roots of modern economic growth?
Modern economic growth finds its roots in technological progress and industrialization
If you lived in a country where literacy was high and 90% of the children completed their education with a high percentage going on to a higher education, what would probably be the results for the country?
More technological breakthroughs would happen in this country.
By the early 2000s, worker productivity growth spiked as more temporary workers were employed as they looked for more permanent work. How did this affect the natural unemployment rate?
Natural unemployment decreased as fewer workers were without jobs while looking for more permanent jobs.
The AD-AS model and the ________ are different ways of showing the same relationship between unemployment and inflation.
Phillips Curve
Under certain conditions, goats, coins, and checks can all be used as payments. In economic terms these things are all considered ________.
a medium of exchange
Considering the Neoclassical aggregate supply curve. If there is a rightwards shift of the AD curve along this AS curve, the result will be that
a price level increase.
Supply and demand for bushels of wheat (millions) are shown in the following table. A $10.00 price floor would result in:
a price of $10.00 and an excess supply of 4 million bushels.
An example of a tariff would be ________.
a tax on an imported good
If imports exceed exports, then __________ exists.
a trade deficit
The town of Franklin has an economy composed entirely of two equally sized specialized tire manufacturers. Both company X and company Z produce race car tires and airplane tires. Company X is better at producing race car tires than Company Z which is better at producing airplane tires. In order to maximize output, Company X should
abandon the production of airplane tires to fully specialize in the production of race car tires and then trade with Company Z for airplane tires.
The town of Chester has an economy composed entirely of two equally sized food companies. Both company Q and company R produce peanut butter and jam. Company Q is better at producing jam than Company R which is better at producing peanut butter. In order to maximize output, Company R should
abandon the production of jam to fully specialize in the production of peanut butter and then trade with Company Q for jam.
If a country can produce a good with fewer resources than another country, the first country is said to have a/an ________.
absolute advantage
Jane is an expert with lab experiments in her chemistry class. She is the fastest at reading and comprehending the experiment, setting up the equipment, conducting the experiment, writing notes, making observations, and in cleaning up an experiment. Jane has a(n) ________ in chemistry experiments.
absolute advantage
Jefferey has a(n) ________ in all aspects of cleaning the bathroom in his family: he is the fastest at getting the cleaning equipment in the utility room, fastest at scrubbing the sink and bathtub, and fastest at moping the bathroom floor.
absolute advantage
A vertical AS curve means that the level of aggregate supply (or potential GDP) will determine the real GDP of the economy, regardless of the level of:
aggregate demand.
In macroeconomics, ________ denotes the total quantity of output or the real GDP of what companies produce and sell.
aggregate supply (AS)
Supply and demand for bushels of wheat (millions) are shown in the following table. A $9.00 government mandated price floor would result in
an excess supply of 2 million bushels of wheat.
An increase in aggregate demand (AD) can cause
an expansion in the economy.
An increase in the quantity supplied can result from
an increase in price.
Which of the following are most likely classified by economists as consumer durable goods?
automobiles, furniture
Country A has great expertise in the production of planes and produces a large quantity of planes while country B has expertise in the production of automobiles and produces large quantities of cars. When the two countries trade planes for automobiles
both countries improve allocative efficiency because they can now consume a more desirable combination of goods and services (planes and cars) through trade.
Because of our limited money, time, and effort, we are best off when we allocate things
by constantly assessing the opportunity costs of our choices.
Marginal thinking is best demonstrated by:
choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.
Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.
circular flow diagram
In East Germany, back before the Berlin wall fell, there was one manufacturer of cars (VEB Sachsenring Automobilwerke Zwickau). They produced one type of car, the Trabant, with a maximum speed of 55 mph (26 horsepower lawnmower type engine). Anyone who wished to buy a car put their name on a list and waited for two or three years to be able to purchase a 'Trabbi'. Whatever was available when their name came up was what they got--no choice of color, style, or engine size. East Germans were living with what type of economy?
command
Benland is a small country with rich resources in minerals. In a work day it can produce 500 pounds of steel or 1000 pounds of aluminum. If Benland decides to produce steel instead of aluminum it is ignoring the fact that its steel production has a (n)________ to aluminum.
comparative advantage
When nations increase production in their area of _________________ and trade with each other, both sides can benefit.
comparative advantage
Due to the wealth effect, an increase in the price level will cause
consumer spending to decline.
During recessionary times it can be hard to coordinate lower wages for workers because of the ________.
coordination argument
If an economy falls into a recession, there is no way to coordinate lower wages across the economy for workers according to Keynes because of the ________.
coordination argument
Which type of depository institution is considered safest?
credit unions
Loan defaults are when ________.
customers do not repay their loans
The law of ____________________________ explains why people and societies rarely make all-or-nothing choices.
diminishing marginal utility
Country Able and Country Baker initially have the same real GDP per capita. Country Able experiences no economic growth, while Country Baker grows at a sustained rate of 7 percent. In 12 years, Country Baker's GDP will be approximately ___________ that of Country Able.
double
Market economies are based on private enterprise, which means
economic decision-making happens through markets.
A macroeconomist would study
economic policies designed to stimulate the country's economy out of a recession
A macroeconomist would study
economic policies designed to stimulate the country's economy out of a recession.
In the supply-demand diagram used to represent phenomenon such as cyclical unemployment, the demand (downward-sloping) curve represents ________.
firm demand for labor
What is money called if it has no significant non-monetary value?
flat money
The circular flow diagram of economic activity is a model of the:
flow of goods, services, and payments between households and firms.
The country of Zanabar produces computers and produces them in a large quantity while the country of Abathana expertly produces cell phones in large quantities. In order for both countries to consume more desirable combinations of goods and services (computers and cell phones) they should
freely trade computers and cell phones to meet improve allocative efficiency
A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be:
frictionally unemployed
Some recent economic research has suggested that African countries' economic growth may have been limited by __________________ .
geography and climate
In the ______________, households receive goods and services and pay firms for them.
goods and services market
In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.
government
Aggregate Demand (AD) is defined as C + I + G + (X-M). G refers to ________.
government spending
If Stan's Shoemaker Shop practices the division of labor and employees concentrate on one step of the shoe-making process, this will likely result in
greater production output.
Alternate Outputs from One Day's Labor Input: USA: 24 bushels of wheat or 4 yards of textiles. India: 4 bushels of wheat or 16 yards of textiles. From the data, the USA:
has an absolute advantage over India in the production of wheat.
Alternate Outputs from One Day's Labor Input: USA: 24 bushels of wheat or 4 yards of textiles. India: 4 bushels of wheat or 16 yards of textiles. From the data, the USA:
has an absolute advantage over India in the production of wheat.
Important sources that influence a nation's economic growth in the long run include(s):
high rate of labor force growth.
In calculating GDP, which component of spending must be subtracted from total spending to account for the fact that not all private or public spending by U.S. households is directed to U.S. businesses?
import
In calculating GDP, which component of spending must be subtracted from total spending?
import
Which of the following is most likely to contribute to economic growth as measured by GDP per capita?
increased stock of physical capital
What is a key component considered by businesses when determining the amount to take on with investment spending?
interest rates
When firms determine how much investment spending to make, they will strongly consider ________.
interest rates
As the aggregate price level in an economy rises, ____________________.
interest rates increase
Scarcity implies that:
it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.
Consider an economic graph where the aggregate supply curve is flatter than the market supply curve for services or labor or goods (micro) where price-levels don't fall. This graph is an example of a
macroeconomic externality.
Which of the following processes where banks create money?
making loans
The unemployment rate may underestimate the true extent of unemployment if:
many part-time employees would like to work fulltime, but are unable to get the additional work.
The unemployment rate may underestimate the true extent of unemployment if:
many people become discouraged and cease looking for work.
An example of ________ is when price changes cost a firm substantial resources.
menu costs
Price changes can cause substantial cost to company resources. An example of this is called ________.
menu costs
Macroeconomic policies that focus on banking and interest rates or controlling the money supply are called
monetary policies.
What serves as a medium of exchange, and is widely accepted as a means of
money
If trade between nations is prohibited,
nations will be unable to specialize in what they are good at and therefore end up consuming less.
Banks that go bankrupt have a ________ net worth.
negative
The ________ perspective tends to view inflation as a cost that offers no offsetting gains in terms of lower unemployment.
neoclassical
Which model is known to do a good job explaining long-term economic growth?
neoclassical
Rapid technological change is likely to increase which problem MOST for CPI as an accurate measure of cost of living changes?
new goods bias
The theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower ________________.
opportunity cost
Keynesian economics focuses on explaining why recessions and depressions occur, as well as offering a ______________________ for minimizing their effects.
policy prescription
Using the context of an economy's existing inputs, market and legal institutions, what term is used to describe the maximum quantity that an economy can produce?
potential GDP
In the long-run neoclassical view, when wages and prices are flexible, ________________________ determine the size of real GDP.
potential GDP and aggregate supply
The neoclassical perspective on macroeconomics emphasizes that in the long run, the economy seems to rebound back to its _____________ and its ____________________.
potential GDP; natural rate of unemployment
The Keynesian economic framework is based on an assumption that
prices and wages are sticky and do not adjust rapidly to changes in aggregate demand.
Keynes argued that the ________ was unable to keep the economy at full employment. As a result, ________ should take an active role in managing the economy.
private sector; government
Contractual laws, by establishing recourse (protection) for parties involved,
promotes economic transactions and growth.
GDP does not directly include:
raw materials that go into production
The difference between nominal GDP and real GDP is:
real GDP includes the effects of inflation.
In an AD-AS model:
real GDP is shown on the horizontal axis.
In the Keynesian model, the government can respond to a recessionary or inflationary gap by
relying on the spending multiplier to generate a change in real GDP that is a multiple of the change in autonomous spending.
In the neoclassical view, the economy has a ___________________________ to move back to potential GDP.
self-correcting tendency
Aggregate demand is more likely to _________________ than aggregate supply in the short run.
shift substantially
If U.S. goods are relatively cheaper compared with goods of foreign places, then U.S. exports are likely to rise. This would make the aggregate demand curve ________.
shift to the right
Economic production has fallen to less than full potential due to inadequate incentives for firms to produce. The duration of this economic condition will likely be:
short-term
Why do neoclassical economists tend to put relatively more emphasis on long-term growth than on fighting recession?
standard of living is ultimately determined by long-term growth
Which form of unemployment suggests workers need to seek education and training and to update their skill sets?
structural
When there is an excess supply of goods
suppliers lower prices, which encourages consumers to demand more.
A drought decreases the supply of agricultural products. This means that at any given price, a lower quantity will be supplied. Conversely, especially good weather would shift the
supply curve to the right.
Why do banks use a T-account?
the T-account separates assets on the left from liabilities on the right
Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:
the benefit to his grades from studying for an hour
As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good.
the production possibilities frontier
Macroeconomic topics do not usually include:
the profit maximizing decisions of an individual manufacturer.
Amka is the head analyst for the Alaska Department of Fish and Game Service. Recently the agency has become concerned about overfishing in the waters off Alaska. Amka is estimating the demand curve for salmon as part of the agency's mitigation efforts. From past statistics she knows that when the price of a freshly caught salmon is $400, the public will demand a quantity of 1 million fish. If the price is $200 then the public will demand 5.6 million fish. Finally, if the price was $125 consumers will demand a quantity of 8 million fish. Which curve below could be the correct demand curve for Alaskan salmon given these three data points?
the silver curve
The U.S is going through a recession. Which of the following is an economic indicator that would help economists understand the state of the U.S economy during this time?
the unemployment rate
Scarcity is a condition that is everywhere and always, since it is based upon two assumptions that reflect permanent universal conditions. The assumptions are that more output will satisfy more wants and
the world has limited productive resources.
Alpha can produce either 27 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 8 apples an hour. If the terms of trade are established as 1 apple for 4 oranges, then:
there are no incentives for Beta to engage in international specialization and trade of apples and oranges.
Frictional unemployment occurs because in a world of imperfect information, it takes ________ for people to find jobs.
time
Belinda loses her job as an office assistant. As a result, she is actively looking for another job and reports to the unemployment office every week. She is considered to be:
unemployed
The unemployment rate measures:
unemployed workers as a percentage of the labor force.
Frictional unemployment is:
unemployment that is due to normal turnover in the labor market.
When the macroeconomy is experiencing a higher than natural rate of unemployment, it must be because
wages cannot adjust downward quickly and easily.
Refer to the figure below. If the government set a price floor of $30, there would be
zero excess supply.
The house that Jeanne inherited from her mother can rent for $1500/month, but Jeanne decides to allow her brother to stay there for only $500 per month. This decision carried with it a
zero monetary cost but a $1000 per month opportunity cost.
Londonale has a working age population of 25 million. Of those, 15 million are employed and 3 million are unemployed. The participation rate is __________.
72.0%.
Looking at the graph, if price was $2.20 per gallon and decreased to $1.60 per gallon, how does quantity supplied of gasoline change?
720 million gallons to 640 million gallons
Yorkshire has a working age population of 24 million. Of those, 18 million are employed and 1 million are unemployed. The participation rate is __________.
79.2%.
Given the table above, what is the price index for 2012, with 2013 as the base year having a price index of 100 (round your answer to the nearest whole number).
85
A government decides to set a price ceiling on eggs so that eggs are affordable to the poor. The conditions of demand and supply are given in the table below. What will the excess supply or the shortage be if the price ceiling is set at $2.00?
3,000 shortage
China can produce 100 pounds of rice or 10 autos and the United States can produce 40 pounds of rice or 30 autos, what is the opportunity cost of producing one pound of rice in the United States?
3/4 of an auto.
With a Real GDP of $118 billion in 2016 and of $155 billion in 2017, the real growth would be ________.
31%
With a Real GDP of $110 billion in 2016 and of $145 billion in 2017, the real growth would be ________.
32%
Suppose, in the graph below, there is a price ceiling of $4. Then there is a shortage of:
4 units.
China produces 24 bags of rice OR 6 yards of textiles a day. Vietnam produces 6 bags of rice OR 24 yards of textiles a day. The opportunity cost of one bag of rice in Vietnam is ________.
4 yards of textiles
In the fictional country of Beta-land the economics statistics department has been busy calculating the price index for a basket of goods from 2009 to 2013. January 2009 is the standardized price index, at 100, for a basket of consumer goods in the country. The price index increased in 2010 to 110.3, in 2011 to 115.7, in 2012 to 120.5, and in 2013 it increased to 125.7. You have been called to the country to help establish the rate of inflation for those years. What is the inflation rate in Beta-land for 2011 to 2012?
4.1%
If out of 450 people in the labor force, the number of employed workers is 415 and number of unemployed workers is 35, then the unemployment rate is ________.
7.8%
In 2008 the price index was calculated at 137.9 with 2003 as the base year. In 2009 the price index increased to 148.7. What was the inflation from 2008-2009?
7.8%
