macroeconomics

Forward guidance occurs when the Federal Reserve:

provides information about the future course of monetary policy in order to influence expectations about future interest rates.

If the output gap is positive, the Federal Reserve will _____ the real interest rate to _____.

raise; cool inflationary pressures

If the actual inflation rate is greater than the target inflation rate, then relative to the neutral interest rate, the Federal Reserve will _____ the real interest rate to drive _____ consumption and investment.

raise; down

A debt crisis occurs when:

a government cannot repay its loans.

Which of the following would be considered in a cost-benefit analysis to decide if a person should cycle to work or ride the subway? (i) The air pollution that the cyclist has to breathe. (ii) The cost of subway tickets. (iii) The time it takes to cycle to work versus the time it takes to ride the subway to work. (iv) The cost per gallon of gasoline.

(i), (ii) and (iii)

Which of the following will probably rise when the economy is in a recession?

Initial unemployment claims

Which of the following statements about economic surplus is FALSE?

Economic surplus is the area below the supply curve, above the demand curve, and to the right of quantity sold.

An economy's potential output level is:

the output that is possible when all resources are fully employed.

Which of the following is NOT a factor that can shift supply?

the price of the product

An example of a leading indicator is:

the stock market

A downward-sloping demand curve implies:

there is an inverse relationship between price and quantity demanded.

The CPI changes from 100 to 90. This means that:

there is deflation

If a store runs a sale on a product to clear out its stock, we can conclude that:

there was a surplus of the product in the store.

When there is a shortage of highly skilled workers in a particular region, the:

demand for skills education increases

In order to boost output, the federal government engages in _____ fiscal policy, which _____ government spending and _____ taxes.

expansionary; raises; lowers

A budget deficit occurs when:

government spending exceeds government revenue.

Suppose that the Federal Reserve has a 2% target on inflation. If actual inflation is 1%, then the Fed will want the new real interest rate to be:

lower than the neutral interest rate

Markets distribute production across companies in a way that:

minimizes costs

Which of the following claims reflects normative analysis?

The minimum wage should be higher so that workers earn a living wage.

An equilibrium price is a price where the

quantity supplied equals the quantity demanded.

When faced with a quantity decision, the economic surplus is always maximized by following the

rational rule

Dependencies between markets reflect the fact that

resources are spread across different markets

Suppose that an economy is in a recession. You would expect to see the unemployment rate:

rise above the equilibrium unemployment rate.

According to Okun's rule of thumb, for every 1% fall in the actual output below potential output, the unemployment rate:

rises by 0.5%

Public policy can assist in improving the matching of jobs to workers by:

running job search centers to help businesses identify unemployed people with the right skills.

The Philippines government provides retirement benefits, unemployment benefits, maternity leave benefits, death and funeral benefits, and other benefits. These are examples of:

social insurance

The __________ suggests, decisions about quantities are best made incrementally.

marginal principle

Which of the following will fall when the economy is expanding?

Applications for unemployment benefits

Which indicator is a cross-check on GDP?

Real GDI

What was the Fed's inflation target in 2019?

2%

Which of the following statements is TRUE?

Economically efficient outcomes hold the possibility of making everyone better off.

Which indicator tells you how fast wages and benefits are rising?

Employment cost index

If an economy has a positive output gap of 1.5%, this means:

GDP is 1.5% above potential GDP.

The difference between a centralized economy and a market economy is that

governments make production decisions in a centralized economy, and individuals make production decisions in a market economy.

Asking "One more?" allows the _____ principle to be analyzed as a simple question.

marginal

Efficient production decisions occur when _____ forces lead firms to produce the output level where ____.

market; price equals marginal cost

The GDP deflator is an index that tracks the:

price of all goods and services produced domestically.

Opportunity cost arises from the fundamental economic problem of

scarcity

Which of the following can be classified as technological progress?

the invention of the light bulb

Which of the following explains the shape of the aggregate production function?

the law of diminishing returns

Price takers

charge the prevailing prices and do not have any effect on the market price.

West Virginia experiences an economic boom. We would expect:

cyclical unemployment to fall.

Which of the following did the New Deal create?

unemployment benefits

What kind of data adjustment removes the effect of sales spikes due to the holiday season?

Seasonally adjusted data

Kia Motors announces a plan to produce Kia automobiles in Pakistan. How does this change economic growth in Pakistan?

Economic growth increases due to capital accumulation.

Why don't most tax expenditures help much if your federal tax bill is zero?

Most tax breaks reduce taxable income, but reducing taxable income below zero does not reduce the tax bill.

The government passes a new initiative to provide a tax credit on research and innovation by firms. What is the impact on the production function, and what is the effect on economic growth in the country?

Technological advancement occurs, and economic growth occurs.

What is the floor framework that the Federal Reserve uses to influence the federal funds rate?

The Fed's approach of setting other interest rates to put a lower bound on how low the federal funds rate can go

Fast food is a good example of

an inferior good

Surpluses always occur

at prices above the equilibrium price.

Joshua Murphy is planning on studying late into the night for his economics exam. He is contemplating how many coffees to buy tonight. Joshua should not buy an additional coffee during the evening if the marginal

benefit of purchasing one more coffee is less than the marginal cost.

With a progressive tax, those with _____ income tend to pay a _____.

more; higher share of their income in taxes

From an economic perspective, the outcome that yields the greatest economic surplus is the:

most efficient outcome

The real interest rate is the:

nominal interest rate minus the rate of inflation.

Analysis based on value judgments is called _____ analysis.

normative

Consider the following graph. One of the reasons that government spending rose during the 2007 to 2009 period was the introduction of:

the Affordable Care Act

The government's debt is:

the accumulation of all the deficits

The marginal benefit of consuming an item is

the additional benefit from buying one more unit of that item.

If the frictional rate of unemployment is 1.45%, the structural rate of unemployment is 2.3%, and the total unemployment rate is 6%, then we can conclude that:

the equilibrium rate of unemployment is 3.75%.

In 2014, the action movie John Wick made about $14.5 million in its opening weekend. In 2017, John Wick: Chapter 2 made about $30.5 million in its opening weekend. The consumer price index in 2014 was 236.7. If the consumer price index in 2017 was 245.1, how much did the first John Wick movie make in 2017 dollars?

$15 million

What is Eswatini's real GDP if its nominal GDP is $4.7 billion (in current US$) and the GDP deflator is 147.5?

$3.2 billion

In 2004, Canada's GDP was approximately $1.13 trillion, and its population was about 32 million. What was Canada's approximate GDP per person in 2004?

$35,290

In 1989, a four-year college degree would set you back $26,902. The consumer price index was 123.94 in January 1989. If the current consumer price index is 251.1, what is the cost of the four-year degree in current dollars?

$54,502.92

What is Botswana's real GDP if its nominal GDP is $18.6 billion (in current US$) and the GDP deflator is 196.7?

$9.5 billion

Why is literacy important for economic growth? (i) Literacy develops human capital. (ii) Innovation and the development of new ideas are enhanced by literacy. (iii) The transfer of new ideas is enhanced by literacy. (iv) Without a literate population, an economy will experience negative economic growth.

(i), (ii), and (iii)

On which of the following is there a tax incentive in the United States? (i) health insurance purchased through employers (ii) employer contributions for life insurance (iii) rental value on owner-occupied housing (iv) your mortgage

(i), (iii), and (iv)

Consider the following basket of goods: 50 bottles of milk, 100 avocadoes, 50 apples, and eight pineapples. Suppose that last year, each bottle of milk was $2.50, each avocado was $1.50, each apple was $0.75, and each pineapple was $4. This year, each bottle of milk is $2.50, each avocado is $1.80, each apple is $0.80, and each pineapple is $4.30. What is the inflation rate between last year and this year?

10.13%

Which of the following lists only factors that would cause an increase in the supply of an item?

A decrease in input prices; a technological innovation; a fall in the price of a substitute-in-production.

As a part of a market research project, you survey six random people to see how much gas per week they would buy at various prices. The data you collect is in the accompanying table. What is the change in the total demand for gasoline in your survey when the price changes from $2 per gallon to $2.50 per gallon?

The total quantity demanded in the market falls by 14 gallons.

Monetary policy is defined as the:

adjustment of interest rates to influence economic conditions.

Substitutes-in-production

allows a business to have alternative uses of its resources by manufacturing other products using the same inputs.

During the Great Recession, the United States Congress increased the length of time that unemployment benefits could be received from 52 weeks to 99 weeks. This change caused:

an increase in the costs for the government.

The cost-benefit principle evaluates _____ costs and benefits, and willingness-to-pay considerations evaluate _____ costs and benefits.

both monetary and nonmonetary; only nonmonetary

Which of the following services are provided by local government?

bus services

You buy two loaves of bread at a price set by the government. The price of the bread never changes, and it is the only kind of bread produced. This scenario is an example of a

centrally planned market

Rapid growth in poorer countries leads to:

convergence in real GDP per person between poorer countries and richer countries.

Charles McCoy is a manager at a coffee shop and he has to decide how many workers to hire. One worker can make 15 drinks that sell for $3 on average in a single hour. A second worker can make an additional 12 drinks in a single hour. The marginal benefit of each additional worker decreases by three drinks with each additional hire. Assuming that workers are paid $12 per hour and work eight hours, how many employees should Charles hire for each hour?

four

You have paid $100 for student season tickets to the football games at your university. It is halfway through the season, and the team has not won any games. You are considering whether you will attend any future games this season. All of the following are costs or benefits you should consider when making this decision EXCEPT the

frustration experienced from watching the team lose in previous games.

Spending on rebuilding an interstate highway connecting New York City and Hartford, Connecticut, is an example of:

government expenditure

The higher the minimum wage, as compared to the equilibrium wage, the:

higher the structural unemployment rate.

Fiscal policy works best when it is:

timely, targeted, and temporary.

The table shows the monthly individual supply schedules for the four firms in the packed-meals market. What is the market supply at $6.75 per meal?

895,000 meals

According to the rule of 70, if GDP per person is growing at a rate of roughly 7.9%, approximately how many years will it take for average income to double?

9 years

Why is the discount rate the upper bound for the federal funds rate?

It is set higher than the federal funds rate

Which of the following correctly describes the business cycle?

It is the fluctuations of GDP around the potential output.

Anderson windows and doors imports wood from Canada. What would happen to the supply curve of Anderson if the value of the U.S. dollar rises against the Canadian dollar?

The supply curve will shift to the right.

An equilibrium in a market occurs:

when the quantity supplied equals the quantity demanded.

An equilibrium price is:

determined by the intersection of the demand and supply curves.

The Affordable Care Act is an example of:

discretionary spending

A recent World Bank study found that in South Africa, the top 1% of the population have about 71% of the wealth in the economy, and the lowest 60% of the population have about 7% of the wealth in the economy. What shortcoming of GDP measurement does this finding reflect?

GDP ignores income distribution

Which of following people can be classified as frictionally unemployed?

Nancy, who is currently unemployed, lives in a town where telecommunications are poor, and cannot find proper information on available jobs

How does government regulation affect market efficiency?

Some regulations correct for market failure; other regulations cause inefficient outcomes.

A beach resort in Bali builds 24 villas with private pools. They also establish two restaurants using state-of-the-art equipment (such as multipurpose ovens, freezers, and food processors). Meals are prepared using organic, locally sourced vegetables and meat. The hotel also uses water from the town supplier. Based on this scenario, what are the fixed costs for the beach resort?

the construction of the villas

Which of the following is NOT a factor that can shift supply?

the market price of a product

In 2010, Canada's GDP was approximately $1,357 billion, and its population was about 34.12 million. What was Canada's approximate GDP per person in 2010?

$39,770

The United Kingdom plans to end the use of gas-powered and diesel-powered cars by the year 2040. At the same time, car manufacturers, such as General Motors and Nissan, are increasing the number of electric car models they produce. Based on this information, which of the following statements is/are correct?(i) If the supply of new electric cars is greater than the demand for new electric cars, then the price of electric cars will fall in the future.(ii) The demand for gasoline will fall in the future.(iii) The demand for electricity will rise in the future.(iv) The demand for diesel will rise in the future.

(i), (ii), and (iii)

In many parts of the world, mobile health clinics travel to villages to treat patients, teach about good nutrition and hygiene, and carry out immunizations. How does this contribute to economic growth?

It helps maintain a healthy population, which leads to development of the labor resource.

Which of the following scenarios illustrates the law of demand?

Kathleen eats more steak when the price is low, and less when the price is high.

Which of the following is a broad indicator?

Real gross domestic income

Which economic indicator tells you about the future expected profits of businesses?

S&P 500

If Canadian consumers expect the value of the Canadian dollar to depreciate against the US dollar (the Canadian dollar becomes weaker against the dollar), what impact would we expect this to have on Canadians' demand for American made products?

The demand for American-made items would fall.

If Canadian consumers expect the value of the Canadian dollar to rise against the US dollar, what impact would we expect this to have on Canadians' demand for American made products?

The demand for American-made items would rise.

The Federal Reserve was created after:

a series of bank runs and bankruptcies

Diane Jacobs is a student studying economics and currently working on her class schedule for next semester. When she considers taking another economics course rather than taking a math class in the same time slot, she is acknowledging that dependencies exist

between her own choices

Harry Watson is an engineering student taking an economics elective in his senior year. He has the option after college to work as a petroleum engineer or design rollercoasters. He is using concepts learned in his economics course to help with this decision. By considering that he cannot be both a petroleum engineer and a rollercoaster designer, he is acknowledging the dependencies that exist

between his own choices

The key to using the cost-benefit principle is to think about _____ aspects of a decision.

both financial and nonfinancial

The Great Moderation refers to the:

decreased volatility of the U.S. economy.

If the frictional rate of unemployment is 1.45%, the structural rate of unemployment is 2.3%, and the total unemployment rate is 6%, then we can conclude that the:

economy is experiencing an economic downturn.

A beach resort in Bali builds 24 villas with private pools. They also establish two restaurants using state-of-the-art equipment (such as multipurpose ovens, freezers, and food processors). Meals are prepared using organic, locally sourced vegetables and meat. The hotel also uses water from the town supplier. Based on this scenario, what are the variable costs for the beach resort?

organic vegetables and water

Harry Watson is an engineering student taking an economics elective in his senior year. He has the option to work as a petroleum engineer or to design rollercoasters after college. He uses concepts learned from his economics course to help with this decision. When he considers the increasing popularity of electronic vehicles and a decrease in demand for petroleum in the future, he is acknowledging the dependencies that exist

over time

Graphically, the equilibrium quantity can be identified as the:

quantity corresponding to the intersection of the demand and supply curves.

If inflation is 4% and a firm gives its workers a 1.5% nominal wage raise, then:

real wages have fallen by 2.5%.

Based on Okun's rule of thumb, if you forecast that the output gap will decline from 0% to -3%, the unemployment rate will:

rise by 1.5%

The order in which you should apply the four core principles of economics is:

the marginal principle, the cost-benefit principle, the opportunity cost principle, the interdependence principle.

Rose Riley's parents have booked a family trip to Aspen, Colorado, during her spring break. They have agreed to pay for everything except her plane ticket. Rose's friends recently decided to drive to Destin, Florida, for spring break. Rose must now decide whether to join her parents in Aspen or drive to the beach with her friends. The opportunity costs of joining her parents in Aspen include each of the following EXCEPT

the nonrefundable deposit her friends paid for the beach house in Destin.

Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $6. The price of the latte is $2. The cost to the coffee shop to produce the latte is $1. How much economic surplus does Kevin gain when he purchases the latte?

$4

During 2017 and 2018, nominal GDP in the United States grew by 4.3%, and the rate of inflation was 1.9%. What was the growth rate of real GDP between the two years?

2.4%

According to the rule of 70, if GDP per person is growing at a rate of roughly 3.4%, approximately how many years will it take for average income to double?

21 years

Which of the following lists only factors that would cause a decrease in the demand for a good?

A decrease in popularity of a good; a rise in income (if the good is an inferior good); a fall in the price of a substitute good.

The Federal Reserve's lender-of-last-resort function has been curtailed over time by the:

Dodd-Frank Act

Vincent Pearson makes dining tables, and he is trying to decide how many tables to produce. He can sell each dining table for $1,000. The cost of the first table is $900, for the second it's $1,100. For each additional table he produces, the marginal cost of each table increases by $200. How many dining tables should Vincent produce, and what is the total cost of his production?

He will produce one table at a cost of $900.

Which of the following is NOT a step in calculating the inflation rate from one period to the next?

Measure the change in quality of the products from one period to the other.

How will the demand for Gucci shoes change today, if the government decides to tax designer shoes next year?

The demand for Gucci shoes will shift to the right today.

You have saved $747. Where should you go if you want to open a checking account?

a commercial bank

A seller at a farmer's market wants $10 for a bag of 10 apples. You think his price is too high, so you counter with an offer of $6 for the bag. The seller then offers you a much smaller bag of five apples for $6. You bargain again, and the seller lets you buy the 10 apples for $8. This scenario is an example of:

a market in action

In May of 2019, the U.S. raised tariffs (import taxes) on a large variety of Chinese imports. In the U.S. market for these Chinese imports, we would see:

a rise in price

A product with a network effect is

a social media tool such as WeChat in China.

The marginal principle breaks quantity decisions into iterative decisions that use the

cost-benefit principle

The cost-benefit principle states that the full set of _____ should be evaluated when making any choice.

costs and benefits

Which of the following is an example of regulatory institutions that protect property rights?

courts of law

If inflation is 0%, and a firm wants to lower real wages by 1%, it will need to:

lower nominal wages by 1%.

Jonathan Mendez is deciding whether to study for his economics exam at a café or go to a concert with friends tonight. The cost of dinner at the fancy restaurant on the way to the concert is ____ in the calculation of his opportunity cost and represents a _____ cost.

included; financial

Jonathan Mendez is deciding whether to study for his economics exam at a café down the street or go to a concert a few cities over. The time spent commuting to the concert is ____ in his opportunity cost calculations and represents a _____ cost.

included; nonfinancial

The marginal principle says that decisions about quantities are best made

incrementally

Consider the decision to read your economics textbook. Which of the four core principles of economics applies to the notion that reading this textbook will help you to establish a solid foundation of understanding economics, which will be beneficial for future courses?

interdependence principle

Shifts in supply

lead to price and quantity to move in opposite directions.

On a market graph, economic surplus can be identified as the area that is to the:

left of the quantity and between the demand and supply curves.

If the output gap is negative, then relative to the neutral interest rate, the Federal Reserve will _____ the real interest rate to drive _____ consumption and investment.

lower; up

A bank run occurs when:

many people want to withdraw their savings from a bank at the same time, and the bank does not have enough cash on hand.

The four stages of the business cycle are:

peak, recession, trough, and expansion.

If the output gap is positive, then the Federal Reserve will use its floor framework to _____ the federal funds rate, influence short- and long-term interest rates _____, and _____ total spending in the economy.

raise; upward; decrease

Suppose a high-income person, a middle-income person, and a low-income person all purchase identical houses that are financed by similar mortgages. Who spends the most on tax-preferred goods?

the high-income person

Suppose a high-income person, a middle-income person, and a low-income person purchase identical houses that are financed by similar mortgages. Who gets the largest tax benefit?

the high-income person

The law of demand refers to

the inverse relationship between price and quantity demanded.

On a hot sweltering day, you feel thirsty and buy an ice-cold soft drink, which you gulp down. Whether you buy the second drink or not, will depend on

the marginal benefit from the second soft drink and if it will outweigh the price of the soft drink.

What is a reserve requirement?

the minimum amount of reserves that each bank must hold

Fiscal policy is increased in its effectiveness through:

the multiplier effect

You are the manager of a local bank. Due to unstable financial conditions, savers are worried that your bank may fail. When they show up in large numbers to withdraw their savings, you find that you do not have enough cash to meet the obligations. Where can you turn for a loan if no other bank will lend to you?

The discount window

Which economic indicator tells you how fast wages and benefits are rising?

The employment cost index

Which of the following is a narrow indicator?

The stock price for JPMorgan Chase & Co.

At the store, Hershey's Kit Kat candy bars are now cheaper than usual. Which of the following explains why Kit Kats are cheaper?

There is a surplus of Kit Kats

To maximize economic surplus, keep increasing output as long as

marginal benefits exceed marginal costs

Which of the following is a reason to worry about government debt?

High and rising debt slows economic growth.

Which of the following is a positive economic statement?

If the government raises taxes, people will have less income available for purchases and saving.

Equilibrium is the

point at which there is no tendency for change.

Along the same aggregate production function, the level of _____ is the same.

technology

Hedging against inflation means:

purchasing financial investments with returns that are protected against inflation.

Juan McDonald is willing to pay $800 for a new iPad. Apple (the producer of iPads) is selling a new iPad for $700. It costs Apple $400 to produce this iPad. A voluntary economic transaction between Juan and Apple _____ occur because ____ would be better off due to the transaction.

will; both Juan and Apple