Macroeconomics final exam

The inflation rate is calculated by comparing the percentage change in the CPI. If the base year is 1970 and the 2016 price index is 135, purchases of $6,500 of goods in the base year would cost $__________ for the same goods in 2016. A. $8,500 B. $9,000 C. $8,775 D. $8,885

C. $8,775

Deflation is ________________. A. the rate of decrease of the overall price level in the economy B. a decrease in the inflation rate C. a decrease in real GDP D. a decrease in nominal GDP

A. the rate of decrease of the overall price level in the economy

Recall the discussion in the chapter about the "quantity theory of money." The quantity theory of money assumes that ___________________. A. the ratio of money supply to nominal GDP grows over time B. the ratio of money supply to nominal GDP is exactly constant C. in the long run, velocity fluctuates with real GDP D. in the short run, velocity is stable

B. the ratio of money supply to nominal GDP is exactly constant

Productivity is ____________. A. an indicator of how hard workers apply themselves to their tasks B. the value of output that a worker generates for each hour of work C. a measure of the speed with which inputs can be transformed into productions D. the value of profit divided by the number of production workers

B. the value of output that a worker generates for each hour of work

Market demand is derived by _____________________. A. dividing each buyer's demand by the total number of consumers in the market B. fixing the quantity and adding up the prices that each buyer pays C. fixing the price and adding up the quantities that each buyer demands D. adding up both the prices each buyer pays and the quantities that each buyer demands

C. fixing the price and adding up the quantities that each buyer demands

Households play a role in physical capital accumulation because __________________. A. the interest rate on investment is determined by households B. the population growth rate determines the number of efficiency units of labor and therefore output C. it is households that determine their level of consumption and therefore the rate of saving D. households provide the human capital that produces the physical capital

C. it is households that determine their level of consumption and therefore the rate of saving

The subsistence level is the ________________. A. minimum level of the saving rate that is necessary to maintain the current level of physical capital B. rate at which an economy grows that keeps income per capita stable C. minimum level of income per person that is generally necessary for an individual to survive D. maximum level of saving that keeps consumption at the optimal rate

C. minimum level of income per person that is generally necessary for an individual to survive

How does a bank manage risk? A. It shifts the risk to stockholders which increases the value of stockholders' equity. B. It invests in a diverse set of assets. C. It holds a larger amount of long-term assets. D. All of the above.

D. All of the above.

Which of the following is an example of a normative economic statement? A. Relaxation in import duties will encourage imports. B. A cut in the tax rate will lead to an increase in consumption. C. An increase in subsidies to farmers will boost agricultural production. D. An increase in Social Security benefits will increase the welfare of all economic agents.

D. An increase in Social Security benefits will increase the welfare of all economic agents.

Which of the following factors does not cause a shift in the labor demand curve? A. Changing input prices. B. Changes in output prices. C. Changing technology. D. Changes in the wage rate.

D. Changes in the wage rate.

A change in the quantity demanded of a good is ____________________. A. represented by a shift to a new demand curve B. the outcome of a change in tastes and preferences C. the outcome of a change in income D. represented by movement along the demand curve

D. represented by movement along the demand curve

Which reasons might explain why unemployment is lower among workers with a relatively higher level of education? A. Workers with a higher level of education are in greater demand by firms. B. More educated workers have a higher opportunity cost of time. C. More educated workers have more human capital. D. The principle of optimization. E. All of the above.

E. All of the above.

Households and firms with savings lend money to banks and other financial institutions. The credit supply curve shows the relationship between the quantity of credit supplied and the real interest rate. The credit supply curve slopes upward because a _____________. A. higher real interest rate induces more investment B. higher real interest rate encourages more saving C. higher real interest rate discourages current consumption D. all of the above E. B and C only

E. B and C only

In which of the following areas will taking an economics course help benefit you throughout your life? A. It will instill the concept that what activity is given up by a decision plays an important role when making choices. B. It will help you analyze and predict human behavior in a variety of situations. C. It will give you the logic behind using cost-benefit analysis when evaluating decisions. D. All of the above.

D. All of the above.

Which of the following is an example of what economists refer to as job search? A. People that engage in the job hunt by sending out resumes. B. An individual that engages in the job hunt by determining who is hiring and how much they pay. C. A person who applies for a high-paying job but does not qualify, so she begins searching for an appropriate position. D. All of the above.

D. All of the above.

The period form 2007 to 2009 was a time of economic contraction that came to be known as the "Great Recession." During periods of recession, most firms experience a decline in demand for their product, as well as a decline in the product's equilibrium price. All other things being equal, macroeconomic theory predicts that the wage of most workers should decline in recessionary periods. However, this was not the case in the Great Recession, or during many other economic downturns throughout recent history. Based on the discussion in the chapter, explain why this might be so, and what the implications are for unemployment. A. During downturns workers are resistant to the lowering of wages and firms try to avoid doing so. This downward wage rigidity keeps the quantity of labor supplied greater than demand, causing unemployment. B. Since most workers in the economy earn at or near the minimum wage, it is not possible for firms to lower the wages of workers during downturns. This keeps unemployment artificially high. C. Since most workers in the economy earn at or near the minimum wage, it is not possible for firms to lower the wages of workers during downturns. This keeps the unemployment artificially low. D. During downturns firms do not have an incentive to lower wages since the lower price level throughout the economy already decreases the buying power of workers' wages.

A. During downturns workers are resistant to the lowering of wages and firms try to avoid doing so. This downturn wage rigidity keeps the quantity of labor supplied greater than demand, causing unemployment.

_______________ economics is analysis that generates objective descriptions or predictions about the world as it is or how it will be. A. Positive B. Normative C. Marginal D. Negative

A. Positive

Who bears the risk that a bank faces when stockholder's equity is greater than zero? A. Taxpayers B. Depositors with accounts greater than $250,000 C. The FDIC D. The bank's stockholders

A. Taxpayers

If the inflation rate is positive, what must be true? A. The growth rate of real GDP<the growth rate of money supply. B. The growth rate of real GDP>the growth rate of money supply. C. The growth rate of nominal GDP<the growth rate of money supply. D. The growth rate of nominal GDP>the growth rate of money supply.

A. The growth rate of real GDP<the growth rate of money supply.

What does it mean to say that an economic fluctuation involves the co-movement of many aggregate macroeconomic variables? A. These variables grow or contract together during booms and recessions. B. Economic fluctuations in one period lead to movement of these variables in the next period. C. Real variables move in the same direction as the economic fluctuations, whereas nominal variables move opposite. D. These variables grow during booms and contact during recessions.

A. These variables grow or contract together during booms and recessions.

Which of the following is an example of a topic studied by macroeconomists? A. Total output of an economy B. Price determination by a multinational corporation C. Savings of a single household D. Productivity of an agricultural farm

A. Total output of an economy

Which of the following is NOT included in GDP but probably should be? A. Transactions in the underground economy. B. Financial asset transactions. C. The value of intermediate goods used in the assembly of final products. D. The value of goods produced using machinery patented by the U.S. to produce a product developed by the Russians in Russia.

A. Transactions in the underground economy.

Which of the following is NOT an example of causation? A. Washing your car leads to rain showers that day. B. Smoking cigarettes will lead to lung cancer. C. Talking on the phone while driving will lead to car accidents. D. All of the above are examples of causation.

A. Washing your car leads to rain showers that day.

Household saving decisions impact investment in the economy by having ______________. A. a direct impact on investment, as saving as correlated with investment B. no impact on investment in the economy C. very little impact on investment, as banks are primarily involved with investment D. a direct impact on investment, as saving is inversely correlated with investment

A. a direct impact on investment, as saving is correlated with investment

During the oil shocks of the 1970s and 1980s, price controls were imposed to control rising fuel prices and slow down inflation. Price controls like these often resulted in _______________. A. an inefficient solution to inflation by creating disruptions in supply and a shortage of goods B. an efficient solution to inflation by controlling the prices of goods and thus slowing growth of the money supply C. a situation in which everyone wins; with a higher quantity demanded, firms sell more and consumers pay a lower price D. no clear overall impact on society, since the nominal wage is likely to increase at the same rate as the price level

A. an inefficient solution to inflation by creating disruptions in supply and a shortage of goods

The Federal Reserve conducts open market operations when it wants to ________________. A. influence the federal funds rate B. influence the discount rate C. change the liquidity levels of banks D. change the level of reserves it holds for banks

A. influence the federal funds rate

Factors of production are the _______________. A. inputs used to produce other goods and services in an economy B. items needed to reduce income inequality C. inputs that are used to redistribute income and this reduce technology D. resources needed to produce new techonology

A. inputs used to produce other goods and services in an economy

The federal funds rate is the ______________. A. interest rate in the federal funds market where banks obtain overnight loans of reserves from one another B. interest rate at the discounted window where banks obtain overnight loans of reserves from the Federal Reserve C. interest rate at the discount window where banks obtain overnight loans of reserves from one another D. interest rate in the federal funds market where banks obtain overnight loans of reserves from the Federal Reseve

A. interest rate in the federal funds market where banks obtain overnight loans of reserves from one another

According to the concept of persistence in the rate of growth, if the economy grows this quarter, it will _______________. A. likely grow next quarter B. definitely grow next quarter C. definitely contract next quarter D. likely contract next quarter

A. likely grow next quarter

Which one of the sets of terms given below would correctly complete the following definition of GDP? "Gross Domestic Product is the _______ value of the __________ goods and services produces __________ of a country during a particular period of time." A. market; final; within the borders B. market; final; by the resources C. intrinsic; final; within the borders D. social; final component; by the resouces

A. market; final; within the borders

Banks provide credit by ________________. A. matching people with savings to those who want to use those savings B. borrowing money from other banks and financial institutions C. directly connecting savers to borrowers D. borrowing money and lending to savers

A. matching people with savings to those who want to use those savings

Economic fluctuations are _____________. A. short-run changes in the growth of GDP B. economic shocks characterized by downward wage rigidity and multipliers C. changes to the trend line of GDP growth D. long-run changes in the growth of GDP

A. short-run changes in the growth of GDP

How do economists distinguish between models that work and those that don't? A. They publish their model results in academic journals. B. They test their models against real-world data. C. They have their models reviewed by other economists. D. They program their models into computers to test via simulation.

B. They test their models against real-world data.

For a market to be in equilibrium, three conditions must hold. The amount produced by sellers must be (1) _________________ the amount purchased by buyers. The costs of making a product must be (2) _________________ the final price at which the product sells. And, buyers must place a value on the uses of the product that is (3) ____________________ the cost of buying the product. A. (1) less than; (2) greater than; (3) equal to B. (1) equal to; (2) less than; (3) greater than C. (1) greater than; (2) less than; (3) equal to D. (1) greater than; (2) equal to; (3) equal to

B. (1) equal to; (2) less than; (3) greater than

This implies that if the money supply grows by 10 percent, then nominal GDP needs to grow by __________________. A. less then 10% B. 10% C. more than 10%

B. 10%

What is meant by "holding all else equal", or "ceteris paribus", and how is this concept used when discussing movements along the demand curve? A. Everything else in the economy is held constant, including the price of the good. B. All variables that can affect the demand for the good are held constant. C. All variables in the model are set to equal values. D. All of the above.

B. All variables that can affect the demand for the good are held constant.

GDP is estimated using expenditure-based accounting by using the equation ________________. A. GDP=C+I+G+X+M B. GDP=C+I+G+X-M C. GDP=C+I+G D. GDP=C+I+G+X

B. GDP=C+I+G+X-M

An example of catch-up growth is ________________. A. the change France made in 2008 by eliminating the 35-hour work week, which allowed workers to put in more hours B. South Korea, which by 1970 had become poorer relative to the United States, but over the last 40 years grew faster than the United States, closing the gap that had opened up previously C. Kenya, which has managed to maintain a steady growth rate over the last 50 years D. when you move your money from a bank account earning 2 percent simple interest to one that earns 2 percent compounded interest

B. South Korea, which by 1970 had become poorer relative to the United States, but over the last 40 years grew faster than the United States, closing the gap that had opened up previously

How would the equilibrium price in a market be affected if there were a small decrease in demand and a large decrease in supply? A. The equilibrium price decreases. B. The equilibrium price increases. C. The equilibrium price would remain the same. D. More information is needed. It may increase, decrease, or remain the same.

B. The equilibrium price increases.

Why is the rise in housing prices between the late 1990s and 2006 characterized as a bubble by some economists? A. Speculators had purchased houses strictly to sell later at a higher price. B. The large increase in the price housing assets did not reflect the true long-run value of the assets. C. Houses became too expensive for ordinary people to buy. D. The rate of home foreclosures increased over its long-run average.

B. The large increase in the price housing assets did not reflect the true long-run value of the assets.

Which of the following is not one of the four major factors that shifts the supply curve when it changes? A. Technology used in production. B. The price of the good itself. C. Sellers' beliefs about the future. D. The scale of sellers.

B. The price of the good itself.

What is the key difference between the Consumer Price Index (CPI) and the GDP deflator? A. The GDP deflator includes imports, while the CPI only includes domestically produces goods and services. B. The two indexes measure price changes for different "baskets" of products. C. The formula used to construct the indexes bear little resemblance to each other. D. The CPI is broader in coverage that is the GDP deflator.

B. The two indexed measure price changes for different "baskets" of products.

Is real income per capita more relevant in understanding differences in international living standards than real income per worker? A. Yes, as it is considered to be the "gold standard" of living standard measurements by the World Bank. B. Yes, as it conveys the conditions of the whole population including children and the elderly. C. No, since it does not account for the welfare of the nonworking population. D. No, since it obscures the magnitude of labor's productivity within a country.

B. Yes, as it conveys the conditions of the whole population including children and the elderly.

All of the following individuals would be negatively impacted by rising inflation except __________________. A. the shareholders of a company that deal mostly in exports B. a homeowner with a fixed-rate morgage C. a business owner who pays annual cost-of-living bonuses D. a retiree on a fixed person

B. a homeowner with a fixed-rate morgage

Firms, households, and governments use the credit market for borrowing. The credit demand curve shows the relationship between the quantity of credit demanded and the real interest rate. The credit demand curve slopes downward because _________________. A. households seek to borrow more when their outlook for the future improves B. a lower real interest rate raises a borrowing firm's profit and hence willingness to borrow C. government borrowing increases when budget deficits increases, and vice versa D. a lender's ability to make loans falls as the real interest rates rises

B. a lower real interest rate raises a borrowing firm's profit and hence its willingness to borrow

The definition of economic states that is the study of how ____________________. A. the problems related to existence and evolution of society B. agents choose to allocate scarce resources and the impact of those choices on society C. the mental functions and behavior of individuals and groups D. the state, nation, government, and politics and policies of governments

B. agents choose to allocate scarce resources and the impact of those choices on society.

An open market operation is _____________. A. an exchange between private banks where the banks buy or sell bonds to each other B. an exchange between a private bank and the Federal Reserve where the Fed buys or sells government bonds to private banks C. the process of selling Fed-issued IOUs between banks D. where a bank borrows reserves or bond from the Federal Reserve's discount window

B. an exchange between a private bank and the Federal Reserve where the Fed buys or sells government bonds to private banks

Economic reasoning implies that economic agents will make decisions ___________________. A. by random selection B. by comparing the costs and benefits of various options C. by replicating the costs and benefits of various options D. solely on the basis of tastes and preferences for various optins

B. by comparing the costs and benefits of various options

The duration of an economic fluctuation ______________. A. is predictable but only in developed economies with a good data B. has limited predictability C. is completely unpredictable D. is completely predictable

B. has limited predictability

According to the quantity theory of money, ________________. A. in the short run, the growth in the money supply is directly related to the inflation rate B. in the long run, the growth in the money supply is directly related to the inflation rate C. the inflation rate will stay constant over the long run D. the ratio of the money supply to nominal GDP is constantly fluctuating

B. in the long run, the growth in the money supply is directly related to the inflation rate

The relationship between the concept of total efficiency units of labor and human capital is described as: An increase in the average worker's level of human capital will, all else equal, _________________ the total efficiency units of labor in an economy. A. no alter B. increase C. decrease D. unable to determine

B. increase

You decide to hire a lawn care company rather than mow your own lawn. As a result, GDP estimates will _______________. A. decrease B. increase C. not change

B. increase

Two goods are said to be complements when a fall in the price of one good ____________. A. doesn't affect the demand for the other good B. leads to a right shift in the demand for the other good C. leads to a fall in price of the other good D. leads to a left shift in the demand for the other good

B. leads to a right shift in the demand for the other good

The value of the marginal product of labor is the ______________. A. cost to a firm of hiring an additional worker B. market value of a worker's additional output for a firm C. change in output from hiring an additional worker D. value that workers place on labor relative to leisure

B. market value of a worker's additional output for a firm

Suppose a new off-campus university apartment complex could rent its rooms on the open market for $900 a month. If, instead, the university chooses to cap the price of rooms to $500 a month for students, the result would be that _________________. A. quantity demanded would exceed the quantity supplied, resulting in a surplus B. quantity demanded would exceed the quantity supplied, resulting in a shortage C. quantity supplied would exceed the quantity demanded, resulting in a shortage D. quantity supplied would exceed the quantity demanded, resulting in a surplus

B. quantity demanded would exceed the quantity supplied, resulting in a shortage

Feasible options are options: A. that are affordable but not available. B. that are available and affordable. C. that are optimal for economic agent. D. that are available but not affordable.

B. that are available and affordable.

According to Keynes's view on animal spirits, _______________. A. technological breakthroughs could cause rapid increases in output B. the economy could fluctuate beyond the level that could be explained by the underlying economic fundamentals C. the economy will fluctuate in line with the underlying economic fundamentals D. downward wage rigidity could lead to pessimism in the economy, resulting in the self-fulfilling prophecy of a decline in economic output

B. the economy could fluctuate beyond the level that could be explained by the underlying economic fundamentals

Economic growth is _______________. A. the steady of income (GDP) per capita of an economy B. a period of time that excludes negative fluctuations, such as the "Great Recession" C. the increase in income (GDP) per capita of an economy D. the amount of constant dollars in the economy

B. the increase in income (GDP) per capita of an economy

The main reason income per capita varies across countries is due to _______________. A. the number of hours worked B. the productivity of workers C. exchange rates D. the number of people employed

B. the productivity of workers

Which of the following news stories (all published in early 2014) would typically be studied in macroeconomics? A. "Mothers allocate more time to house work than fathers." B. "5 Reasons Why Apple is Looking Like the Next Sony" C. "What if Economic Growth is No Longer Possible?" D. "Which College- and Which Major- Will Make You Richest."

C. "What if Economic Growth is No Longer Possible?"

A representative bundle of commodities costs $120 in the United States and 80 pounds in England. The purchasing power parity (PPP) conversion factor between U.S. dollars and British pounds is ____________. A. 1.43 B. 1.36 C. 1.50 D. 2.12

C. 1.50

Which of the following factors will NOT cause a shift in the demand for a good? A. A change in tastes and preferences. B. A change in the number of consumers. C. A change in the market price of the good. D. A change in consumer incomes.

C. A change in the market price of the good.

Which of the following cannot produce a shift in the credit demand curve? A. A change in government borrowing. B. A change in household preferences or expectations. C. A change in the real interest rate. D. A change in government tax policy on profits.

C. A change in the real interest rate.

__________________ is the optimization process of comparing a set of feasible alternatives and picking the best one. A. Likelihood estimation B. Statistical inference C. Cost-benefit analysis D. Normative analysis

C. Cost-benefit analysis

If sparkling wine producers expect the price of wine to decrease in the future, then the supply curve would? A. Remain unchanged B. Increase (shift right) C. Decrease (shift left)

C. Decrease (shift left)

If the number of sellers of sparking wine decreases significantly, then the supply curve for sparking wine would? A. Remain unchanged B. Increase (shift right) C. Decrease (shift left)

C. Decrease (shift left)

Which of the following statements is true of optimization? A. Economic agents can optimize only when they are able to perfectly estimate all future costs and benefits. B. Individuals who optimize do not consider costs when choosing the most feasible alternative. C. Economic agents who optimize attempt to choose the best feasible option, given the information that they have. D. Optimization analysis only relates to the financial budget of an economic agent.

C. Economic agents who optimize attempt to choose the best feasible option, given the information that they have.

If fiat money is intrinsically worthless, then why is it so valuable? A. It is the money useful type of money. B. The government earns seignorage revenue from it. C. Fiat money is used as legal tender by government decree and other people will accept it as payment for transactions. D. Fiat money is always convertible to gold or silver reserves.

C. Fiat money is used as legal tender by government decree and other people will accept it as payment for transactions.

Keynes's theory of multipliers involved an element of the self-filling prophecy. Which of the following illustrates the concept of a self-fulfilling prophecy? A. The Federal Reserve increases interest rates, which leads to lower business investment and hiring. B. The government expects a war to occur and so increases spending on military equipment, which leads to increased labor demand. C. Firms expect an increase in demand in the future and so hire additional workers now, which leads to an increase in consumption demand. D. Labor demand decreases due to a recession in Europe and a reduction in exports from the United States, which causes U.S. consumption to drop and thus leads to additional decreases in labor demand.

C. Firms expect an increase in demand in the future and so hire additional workers now, which leads to an increase in consumption demand.

What type of unemployment does job search lead to? A. Structural unemployment B. Cyclical unemployment C. Frictional unemployment D. Search unemployment

C. Frictional unemployment

Which of the following statements correctly describes the effects of price controls? A. Firms profitably sell goods and services at the prices set by the government. B. They cause demand disruptions and could lead to widespread unemployment. C. Imposing these in inflationary times is economically destructive. D. They cause the quantity supplied to exceed the quantity demanded.

C. Imposing these in inflationary times is economically destructive.

Which of the following is true regarding wage rigidity? A. It usually causes the quantity of labor demanded to be greater than the quantity of labor supplied. B. It results in frictional unemployment. C. It occurs when wages are held fixed above the competitive equilibrium level. D. All of the above.

C. It occurs when wages are held fixed above the competitive equilibrium level.

A simple economic model predicts that a fall in the price of bus tickets means that more people will take the bus. However, you observe that some people still do not take the bus even after the price of a ticket fell. Is the model incorrect? A. Yes, it's impossible that certain factors, such as the price of gas, were not included in the model. B. No, because it is based on an incorrect assumption. C. No, because it predicts the outcome of increased bus ridership on average. D. Yes, because it does not predict the outcome with 100 percent accuracy.

C. No, because it predicts the outcome of increased bus ridership on average.

Which of the following best describes scarce resources? A. Resources that most people cannot afford to buy. B. Resources that can only be distributed efficiently by the government. C. Resources for which the quantity that people want exceeds the quantity that is freely available. D. Resources for which the quantity demanded is the same for all economic agents.

C. Resources for which the quantity that people want exceeds the quantity that is freely available.

What is stockholders' equity? A. The difference between a bank's total reserves and total demand deposits. B. The appraised value of a bank's outstanding shares of stock. C. The difference between a bank's total assets and total liabilities. D. A bank's revenues less its operating costs.

C. The difference between a bank's total assets and total liabilities.

Let's say that you are trying to decide what to do on Friday at 11 am. You rank your possible options from the one you value most to the one that you value the least in the following order: going to class, sleeping in late, going to work early, getting lunch, going to the gym to exercise, and watching television. If you decide to go to class, then what do we know about the opportunity cost of your decision? A. The opportunity cost would be working, since it is the only option that can be put in a dollar amount. B. The opportunity cost would include sleeping in late, going to work early, getting lunch, going to the gym to exercise, and watching television. C. The opportunity cost would be sleeping in late since it was your next-best option. D. There would be no opportunity cost in this example.

C. The opportunity cost would be sleeping in late since it was your next best option.

Making generalizations about the welfare of a country's citizens based on its income per capita is problematic because ________________. A. goods and services are not valued B. a low per capita income could be poorly distributed C. a high per capita income could be poorly distributed D. non-monetary based sources of happiness are valued

C. a high per capita income could be poorly distributed

The aggregate production function describes the relationship between the ________________. A. gender pay gap and the growth of GDP per capita B. amount of discrimination and the level of income inequality C. aggregate GDP of a nation and its factors of production D. level of income inequality and the national fairness index

C. aggregate GDP of a nation and its factors of production

The concept of multipliers was one of the key elements of John Maynard Keynes's theory of fluctuations. A multiplier is _____________. A. a change in productivity that leads to increases in aggregate economic activity B. a factor that causes a change in the money supply to generate activity larger than the changes in the money supply C. an economic mechanism that causes an initial shock to be amplified by follow-on effects D. a change in expectations about the future economic activity

C. an economic mechanism that causes an initial shock to be amplified by follow-on effects

In a perfectly competitive market, sellers ______________ and buyers ______________. A. are able to charge more than the market price; are able to pay less than the market price B. cannot charge more than the market price; are able to pay less than the market price C. cannot charge more than the market price; cannot pay less than the market price D. are able to charge more than the market price; cannot pay less than the market price

C. cannot charge more than the market price; cannot pay less than the market price

A county's gross domestic product would exceed its gross national product when the _________________. A. county's residents own more assets abroad than foreigners own in the domestic economy B. production of domestically-owned factors operating abroad exceeds the production of foreign-owned factors operating in the domestic economy C. production of foreign-owned factors operating in the domestic economy exceeds the production of domestically-owned factors operating abroad D. amount of the national debt owed to foreigners is less than the amount of foreign debt owed to residents of the domestic economy

C. production of foreign-owned factors operating in the domestic economy exceeds the production of domestically-owned factors operating abroad

When the value of a bank's assets is greater than its liabilities, the bank is said to be ________________. A. profitable B. insolvent C. solvelt D. soluable

C. solvent

All of the following statements about means and medians are true except __________________. A. a median uses a mean with even number observations B. the mean is another term for average C. the median is more skewed by extreme value D. a mean sample would gain more accuracy with more observations

C. the median is more skewed by extreme value

Potential workers are classified as being unemployed when _____________. A. they want a full-time job and instead have a part-time job or are not working at all B. they do not have a paid job and are currently not available for work C. they do not have a paid job, have looked for work in the previous 4 weeks, and are available for work D. they do not have a paid job, have looked for work in the previous 4 months, and are available for work

C. they do not have a paid job, have looked for work in the previous 4 weeks, and are available for work

Anthony owns a landscaping business that has 4 employees. His company is able to earn revenue of $600 per day. He knows that if he hires another worker, he would have to pay that worker $50 per day and the company would earn revenue of $680 per day if the new worker is hired. Determine the value of the marginal product of labor of the employee that Anthony is considering hiring. A. $680 B. $50 C. $30 D. $80

D. $80

How do expansionary policies differ from contractionary policies? A. Expansionary policies seek to increase economic growth and increase employment, while contractionary policies seek to reduce the risk of excessive price inflation. B. Expansionary policies seek to shift the labor demand curve to the right, while contractionary policies seek to shift it to the left. C. Expansionary policies seek to reduce the severity of recessions, while contractionary policies seek to slow down the economy when it grows too fast. D. All of the above. E. Only A and C are correct.

D. All of the above.

Which of the following correctly defines the term "equilibrium"? A. It refers to analysis that uses data to arrive at conclusions. B. It refers to government intervention that efficiently allocates scarce resources. C. It refers to an optimizing decision made by an individual economic agent. D. It refers to a situation where all agents are simultaneously optimizing.

D. It refers to a situation where all agents are simultaneously optimizing.

There is a proverb "anything worth doing is worth doing well." Do you think an economist would agree with this proverb? A. Yes, because doing something to the best of your ability is optimizing behavior. B. No, because doing something well has no next best alternatives with which to compare. C. Yes, because the marginal benefit of extra effort is typically decreasing as effort increases. D. No, because the marginal cost of extra effort may be greater than the marginal benefit. E. No, because the total net benefit of extra effort is negative by definition.

D. No, because the marginal cost of extra effort may be greater than the marginal benefit.

Productivity varies across counties because ________________. A. the level of technology differs across counties B. the quantity of physical capital that workers can access varies greatly across countries C. human capital per worker varies substantially from county to country D. all of the above E. A and B only

D. all of the above

The factors that would shift the demand curve for reserves included __________________. A. anticipated liquidity shocks B. an economic expansion or contraction C. a changing deposit base D. all of the above

D. all of the above

The Industrial Revolution affected economic growth ______________. A. throughout the demographic transition, whereby families sustained lower fertility rates and broke the Malthusian cycle that kept per capita income close to subsistence levels B. by replacing the agricultural underpinnings of most economies with an urban one, which allowed children to go to school more easily and therefore increased human capital C. because better drug and basic sanitation improvements allowed workers to improve their knowledge base and increase efficiency and productivity, increasing the marginal product of labor and therefore overall economic growth D. because technological changes, such as new machinery and new methods of production, became more systematic and pervasive, underpinning economic growth

D. because technological changes, such as new machinery and new methods of production, became more systematic and pervasive, underpinning economic growth

It follows that the growth rate of money supply and the growth rate of nominal GDP will be the same. In this case, inflation is _______________. A. always zero B. equal to the growth rate of real GDP C. always greater than the growth rate of money supply D. equal to the gap between the growth rate of money supply and the growth rate of real GDP

D. equal to the gap between the growth rate of money supply and the growth rate of real GDP

Exponential growth is the _______________. A. growth rate that grows at an exponential rate greater than one (that is, g^n, where n>1) B. process by which the growth rate in the economy increases each year by a (roughly) constant rate C. rate differential between growth in a baseline period and growth in the current period D. process by which new growth builds on past growth, leading to a (roughly) constant growth rate

D. process by which new growth builds on past growth, leading to a (roughly) constant growth rate

A central bank is the government institution ____________. A. that lends money to the government B. that runs a county's fiscal system C. responsible for printing money D. that runs a county's monetary system

D. that runs a county's monetary system

The concept of diminishing marginal benefits states that _______________. A. the more you pay for a good, the greater the benefit you receive B. the more you pay for a good, the less benefit you recieve C. the more you consume of a good, the less benefit you receive D. the more you consume of a good, your willingness to pay for an additional unit declines

D. the more you consume of a good, your willingness you pay for an additional unit declines

The law of supply states that _______________. A. at the equilibrium price, there is always some excess supply in the market B. supply creates its own demand C. the quantity supplied of a good will always equal the quantity of the good demanded D. the quantity supplied of a good rises when the price rises

D. the quantity supplied of a good rises when the price rises

In the United States, recessions are usually defined as _________________. A. two consecutive months of negative growth in real GDP B. any period of negative growth in real GDP C. two consecutive quarters of negative growth in nominal GDP D. two consecutive quarters of negative growth in real GDP

D. two consecutive quarters of negative growth in real GDP

Firms should hire workers until the ________________. A. value of the marginal product of labor is at least as great as the price of the good B. marginal product of labor is at least as great as the wage paid C. marginal product of labor is at least as great as the price of the good D. value of the marginal product of labor is at least as great as the wage paid

D. value of the marginal product of labor is at least as great as the wage paid

Why is it essential to differentiate between real and nominal growth rates of GDP? A. The nominal growth rate is more informative than the real growth rate since it is broader in the sense that it captures both price and output changes. B. It is the real growth rate that is meaningful since it indicates the change in the production of goods and services, a very significant source of improved living standards. C. The nominal growth rate combines the effect of price changes along with changes in the production of goods and services and thus gives a less clear indication of the impact on living standards. D. All of the above. E. B and C only.

E. B and C only.

Optimization is the process that describes _______________. A. how to obtain relevant data B. the production of resources C. how to maximize revenue D. the budgeting process for governments E. the choices that businesses make

E. the choices that businesses make