Econ 110 Final

in the short run, an increase in the money supply is likely to lead to

lower unemployment and higher inflation

For a self-sufficient producer, the production possibilities frontier

is the same as the consumption possibilities frontier

An economy's production of two goods is efficient if

it is impossible to produce more of one good without producing less of the other

On which of these bonds is the prospect of default most likely

junk bonds

The term used to describe a situation in which markets do not allocate resources efficiently is

market failure

At the broadest level, the financial system moves the economy's scarce resources from

savers to borrowers

Fundamentally, economics deals with

scarcity

In a market economy, economic activity is guided by

self-interest prices

which of the following events would increase producer surplus

sellers' costs stay the same and the price of the good increases

rent control

serves as an example of a price ceiling

Refer to the figure above. At a price of $10, there would be a

shortage of 600 units

Economists make assumptions to

simplify the complex world and make it easier to understand

a baker recently has come to expect higher prices for bread in the near future. We would expect

the baker to supply less break now than she was supplying previously

the production possibilities frontier illustrates

the combinations of output that an economy can produce

To say that a price ceiling is nonbinding is to say that the price ceiling

is set above the equilibrium price

the movement from point A to point B on the graph is caused by

a decrease in price

If the government imposes a price ceiling of $55 in the market, then total surplus will be

$250

what is the amount of the tax per unit

$4

If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by

$600

A bank's reserve ratio is 7% and the bank has $1,000 in deposits. It has reserves amount to

$70

if the nominal interest rate is 5% and the real interest rate is 7% then the inflation rate is

-2%

In the special case of the 100-percent-reserve banking, the money multiplier is

1 and the banks do not create money

Which of the following will help to prevent bank runs

100% reserve banking

Refer to the figure above. The opportunity cost of this economy moving from point B to point C is

20 knives

If the reserve ratio is 4 percent, then the money multiplier is

25

If the consumer price index was 100 in the base year and 103 in the following year, then the inflation rate was

3%

For which of the following individuals would the opportunity cost of going to college be highest?

A famous, highly-paid actor who wants to take time away from show business to finish college and earn his degree.

Which of the following events would explain the shift of the production possibilities frontier from A to B?

A general technological advance

Which of the following statements best represents the principle represented by the adage, "there ain't no such thing as a free lunch"?

Benjamin must decide between going to Florida or Brazil for summer vacation

Chloe receives her first paycheck for working as a pretzel vendor. To which of the arrows does this transaction directly contribute?

C and D only

which of the following does the Federal Reserve not do?

Conduct fiscal policy

Which list ranks assets from most to least liquid?

Currency, stocks, houses

the president of the United States relieves tax policy advice from economists in the

Department of Treasury

Trade between countries

allows each country to consume at a point outside its production possibilities frontier

If China decides to trade with France, we know that

France and China can both benefit

Which of the following observations was made famous by Adam Smith in his book: The Wealth of Nations

Households and firms interacting in markets are guided by an 'invisible hand' that leads them to desirable market outcomes

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then

Iowa has a comparative advantage in the production of corn

Total surplus can be measured as the area

JNL

Which of the following movements would illustrate the effect of an increase in the incomes of parents which school-aged children on the market for soccer lessons?

Point C to Point B

Which of the following is not a function of money?

Protection against inflation

In a closed economy, what does the difference between tax revenue and government purchases (T-G), represent

Public saving

which of the following countries benefited significantly from the catch-up effect in the last half of the twentieth century

South Korea

Which of the following would likely be studied by a macroeconomist rather than a macroeconomist?

The effect on the economy of changes in the nation's unemployment rate

Which is the most accurate statement about trade?

Trade can make every nation better off.

Economists often find it worthwhile to make assumptions that do not necessarily describe the real world. t/f

True

an organization that tries to encourage the flow of investment from advanced countries to poor countries is the

World Bank

which of the following changes would not shift would not shift the demand curve for a good or service

a change in the price of the good or service

Other things the same, as the maturity of the bond becomes longer, the bond will pay

a higher interest rate because it has more risk

When we move along a given supply curve,

all nonprice determinants of supply are held constant.

GDP per person tells us the incomes and expenditure of the

average person in the economy

Suppose producer surplus is larger than C but smaller than A+B+C. The price of the good must be

between P1 and P2

Two of the economy's most important financial intermediaries are

banks and mutual funds

Which of the following statements about models is correct?

because economic models omit many details, they allow us to see what is truly important

A budget deficit

changes the supply of loanable funds.

making rational decisions at the margin means that people

compare the marginal costs and marginal benefits of each decisions

Which of the following steps does an economist not take when studying in the economy?

conduct a laboratory experiment in order to generate data

the Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as

consumption of services

If the government removes a binding price floor from a market, then the price paid by buyers will

decrease, and the quantity sold in the market will increase

Refer to the figure above. the price ceiling causes quantity

demanded to exceed quantity supplied by 90 units

In the actual economy households

divide their income among spending, taxes, and saving

Economists sometimes give conflicting advice because

economists have different values and scientific judgements

The property of society getting the most it can from its scarce resources is called

efficiency

If total spending rises from one year to the next then

either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both

Refer to the figures above. The rate of trade-off between producing chairs and producing couches is constant in

graph b only

other things the same, a country that increases its savings rate will have

higher future capital and future real GDP per person

By far the largest category of goods and services in the CPI basket is

housing

In the CPI, goods and services are weighted according to

how much consumers buy of each good or service

a gardener has the ability to grow either apples or pears or some combination of the two. Given no other information, it follows that the gardner's opportunity cost of a pound of apples multiplied by his opportunity cost of a pound of pears

is equal to 1

which of the following statements is correct about the roles of the economists

in trying to improve the world, economists are policy advisors

The term economists use to describe a situation in which the economy's overall price level is rising is

inflation

absolute advantage is found by comparing different producers

input requirements per unit of output

the business cycle is the

irregular fluctuations in economic activity

The GDP deflator is the ratio of

nominal GDP to real GDP multiplied by 100

unemployment compensation is

not part of GDP because it is a transfer payment.

In the circular flow diagram, which of the following is not a factor of production

output

Where can an economy not produce?

outside its production possibilities frontier

the production possibilities frontier provides an illustration of the principle that

people face trade offs

If the supply for loanable funds shifts to the left, then the equilibrium interest rate

rises and the quantity of loanable funds falls

the income that households and non corporate business receive is called

personal income

An increase in the governments budget surplus means public saving is

positive and increasing

Which of the following is an example of a positive, as opposed to a normative, statement?

prices rise when the government prints too much money

the ability of an individual to own and exercise control over scarce resources is called

property rights

In order to promote growth in living standards, policymakers must

protect property rights and maintain political stability

If real GDP doubles and the GDP deflator doubles, then nominal GDP

quadruples

a recession has traditionally been defined as a period during which

real GDP declines for two consecutive quarters

which of the following policies can the Fed follow to increase the money supply

reduce the interest rate on reserve

other things being constant, when a firm sells new shares of stock the

supply of the stock increases and the price decreases

In this market, a minimum wage of $6 creates a labor

surplus of 4,000 worker hours

an understanding of the best ways to produce good and services is called

technology

Social security payments are indexed for inflation using

the CPI

the primary determinant of a country's standard of living is

the country's ability to produce goods and services

the term tax incidence refers to

the distribution of the tax burden between buyers and sellers

Which of the following would likely be studied by a macroeconomist rather than a microeconomist

the effect on the economy of changes in the nation's unemployment rate

the discount rate is

the interest rate the Fed charges banks.

Money is

the most liquid asset but an imperfect store of value.

The slope of the demand for loanable funds curve represents the

the negative relation between the real interest rate and investment

when computing the opportunity cost of attending a professional football game as a spectator, you should include

the price you pay for the ticket and the value of your time

a production possibilities frontier is bowed outward when

the rate of trade-off between the two goods being produced depends on how much of each good is being produced

Who gets scarce resources in a market economy?

whoever is willing and able to pay the price