Econ 207
Atlas Corporation is in sound financial condition. It sells a long-term bond. Which of the following make the interest rate on this bond lower than otherwise? a. Both Altas' sound finances and the long term of the bond. b. Atlas' sound finances but not the long term of the bond. c. The long term of the bond but not Atlas' sound finances. d. Neither Atlas' sound finances nor the long term of the bond.
b. Atlas' sound finances but not the long term of the bond.
The natural rate of unemployment
is the amount of unemployment that does not go away on it's own
Which of the following is included in the calculation of GDP? a. The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country. b. The purchase of a new edition of a foreign textbook that was produced in a different nation. c. The purchase of ink and paper supplies by a textbook company for the production of new textbooks. d. The purchase of a used textbook from a friend who took the same class last year.
A. The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country.
Which of the following is correct? a. The GDP deflator is better than the CPI at reflecting the goods and services bought by consumers. b. The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers. c. The GDP deflator and the CPI are equally good at reflecting the goods and services bought by consumers. d. The GDP deflator is more commonly used as a gauge of inflation than the CPI is.
B. The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers
Today's demand curve for gasoline could shift in response to a change in
The expected future price of gasoline
As a result of a successful attempt by the government to cut the economic pie into more equal slices
The pie gets smaller and there will be less pie overall
Rachel babysits for her sister for no pay. When she babysits for someone else she charges $8 an hour. When is Rachel's babysitting included in GDP?
When she babysits for someone else, but not when she babysits for her sister
The following table contains a supply schedule for a good: Price: Quantity Supplied $10 100 $20 Q1 If the law of supply applies to this good, then Q1 could be..
150
A dairy buys $50,000 worth of milk and spend $5,000 on cartons and utilities. It sells the cartons of milk to a grocery store for $60,000 that then sells all of the cartons to consumers for $65,000. How much do these actions add to GDP?
65,000
In the economy of Talikastan in 2015, exports were $200, GDP was $2000, government purchases were $200, imports were $270, and investment was $500. What was Talikastan's consumption in 2015? a. $830 b. $1230 c. $1370 d. $1770
C. $1370
Tim mows the yard for his neighbors. He spends $1 on gas and charges them $20 for each lawn he mows. What's the total contribution to GDP each time Tim mows a yard? a. $1 b. $19 c. $20 d. $21
C. $20
Jenna is searching for a job that suits her tastes about where to live. Mary is looking for a job that makes best use of her skills. a. Jenna and Mary are both frictionally unemployed. b. Jenna and Mary are both structurally unemployed. c. Jenna is frictionally unemployed, and Mary is structurally unemployed. d. Jenna is structurally unemployed, and Mary is frictionally unemployed.
a. Jenna and Mary are both frictionally unemployed.
A decrease in U.S. interest rates leads to a. a depreciation of the dollar that leads to greater net exports. b. a depreciation of the dollar that leads to smaller net exports. c. an appreciation of the dollar that leads to greater net exports. d. an appreciation of the dollar that leads to smaller net exports.
a. a depreciation of the dollar that leads to greater net exports.
All of the presidents of the regional Federal Reserve banks a. attend each FOMC meeting. b. have voting rights at each FOMC meeting. c. are appointed by the president of the U.S. and confirmed by the U.S. Senate. d. All of the above are correct
a. attend each FOMC meeting.
Which of the following can explain faster growth of real GDP in country A than in Country B? a. both greater population growth and greater productivity growth in Country A b. greater population growth in Country A, but not greater productivity growth in Country A c. greater productivity growth in Country A, but not greater population growth in Country A d. neither greater population growth nor greater productivity growth in Country A
a. both greater population growth and greater productivity growth in Country A
Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to a. both the classical dichotomy and the quantity theory of money. b. the classical dichotomy, but not the quantity theory of money. c. the quantity theory of money, but not the classical dichotomy. d. neither the classical dichotomy nor the quantity theory of money.
a. both the classical dichotomy and the quantity theory of money.
Public policy a. can reduce both frictional unemployment and the natural rate of unemployment. b. can reduce frictional unemployment, but it cannot reduce the natural rate of unemployment. c. cannot reduce frictional unemployment, but it can reduce the natural rate of unemployment. d. cannot reduce either frictional unemployment or the natural rate of unemployment.
a. can reduce both frictional unemployment and the natural rate of unemployment.
Aggregate demand shifts right when the government a. decreases taxes. b. cuts military expenditures. c. repeals an investment tax credit. d. None of the above is correct.
a. decreases taxes
During recessions investment a. falls by a larger percentage than GDP. b. falls by about the same percentage as GDP. c. falls by a smaller percentage than GDP. d. falls but the percentage change is sometimes much larger and sometimes much smaller.
a. falls by a larger percentage than GDP.
In which of the following cases is the after-tax real interest rate highest? a. inflation is 6%, the pre-tax real interest rate is 3%, and the tax rate is 20%. b. inflation is 6%, the pre-tax real interest rate is 3%, and the tax rate is 25%. c. inflation is 4%, the pre-tax real interest rate is 2%, and the tax rate is 20%. d. inflation is 4%, the pre-tax real interest rate is 2%, and the tax rate is 25%.
a. inflation is 6%, the pre-tax real interest rate is 3%, and the tax rate is 20%.
The model of aggregate demand and aggregate supply a. is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution of resources between markets to explain aggregate relationships. b. is different from the model of supply and demand for a particular market, in that we have to separate real and nominal variables in the aggregate model. c. is a straightforward extension of the model of supply and demand for a particular market, in which substitution of resources between markets is highlighted. d. is a straightforward extension of the model of supply and demand for a particular market, in which the interaction between real and nominal variables is highlighted.
a. is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution of resources between markets to explain aggregate relationships.
When inflation falls, people a. make less frequent trips to the bank and firms make less frequent price changes. b. make less frequent trips to the bank while firms make more frequent price changes. c. make more frequent trips to the bank while firms make less frequent price changes. d. make more frequent trips to the bank and firms make more frequent price changes.
a. make less frequent trips to the bank and firms make less frequent price changes.
Economic variables we are most interested in are a. real variables, but we usually observe nominal variables. b. nominal variables, but we usually observe real variables. c. real variables, which we usually observe. d. nominal variables, which we usually observe.
a. real variables, but we usually observe nominal variables.
The aggregate quantity of goods and services demanded changes as the price level rises because a. real wealth falls, interest rates rise, and the dollar appreciates. b. real wealth falls, interest rates rise, and the dollar depreciates. c. real wealth rises, interest rates fall, and the dollar appreciates. d. real wealth rises, interest rates fall, and the dollar depreciates.
a. real wealth falls, interest rates rise, and the dollar appreciates.
We would expect the interest rate on Bond A to be lower than the interest rate on Bond B if the two bonds have identical characteristics except that a. the credit risk associated with Bond A is lower than the credit risk associated with Bond B. b. Bond A was issued by the Apple corporation and Bond B was issued by the city of Houston. c. Bond A has a term of 20 years and Bond B has a term of 2 years. d. All of the above are correct
a. the credit risk associated with Bond A is lower than the credit risk associated with Bond B.
According to liquidity preference theory, a decrease in money demand for some reason other than a change in the price level causes a. the interest rate to fall, so aggregate demand shifts right. b. the interest rate to fall, so aggregate demand shifts left. c. the interest rate to rise, so aggregate demand shifts right. d. the interest rate to rise, so aggregate demand shifts left.
a. the interest rate to fall, so aggregate demand shifts right.
When the Consumer Price Index increases from 100 to 120 a.more money is needed to buy the same amount of goods, so the value of money falls. b.more money is needed to buy the same amount of goods, so the value of money rises. c.less money is needed to buy the same amount of goods, so the value of money falls. d.less money is needed to buy the same amount of goods, so the value of money rises.
a.more money is needed to buy the same amount of goods, so the value of money falls
Other things the same, if the U.S. price level falls, then a. U.S. residents want to buy more foreign bonds. The real exchange rate rises. b. U.S. residents want to buy more foreign bonds. The real exchange rate falls. c. U.S. residents want to buy fewer foreign bonds. The real exchange rate rises. d. U.S. residents want to buy fewer foreign bonds. The real exchange rate falls.
b. U.S. residents want to buy more foreign bonds. The real exchange rate falls.
If aggregate demand shifts right then in the short run a. firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the right. b. firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the left. c. firms will decrease production. In the long run increased price expectations shift the short-run aggregate supply curve to the right. d. firms will decrease production. In the long run increased price expectations shift the short-run aggregate supply curve to the left.
b. firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the left.
An increase in government spending a. increases the interest rate and so investment spending increases. b. increases the interest rate and so investment spending decreases. c. decreases the interest rate and so increases investment spending increases. d. decreases the interest rate and so investment spending decreases.
b. increases the interest rate and so investment spending decreases.
When the dollar depreciates, U.S. a. net exports rise, which increases the aggregate quantity of goods and services demanded. b. net exports rise, which decreases the aggregate quantity of goods and services demanded. c. net exports fall, which increases the aggregate quantity of goods and services demanded. d. net exports fall, which decreases the aggregate quantity of goods and services demanded.
b. net exports rise, which decreases the aggregate quantity of goods and services demanded.
By not taking into account the possibility of consumer substitution, the CPI a. understates the cost of living. b. overstates the cost of living. c. may overstate or understate the cost of living, depending on how quickly prices rise. d. may overstate or understate the cost of living, regardless of how quickly prices rise.
b. overstates the cost of living.
The sticky-wage theory of the short-run aggregate supply curve says that when the price level is lower than expected, a. relative to prices wages are higher and employment rise. b. relative to prices wages are higher and employment falls. c. relative to prices wages are lower and employment rises. d. relative to prices wages are lower and employment falls.
b. relative to prices wages are higher and employment falls.
A Korean steel company produces steel in the United States, with some of its steel being exported to other nations and some of it being sold within the United States. If the prices of this steel increase, then a. the GDP deflator and the CPI will both increase. b. the GDP deflator will increase and the CPI will be unchanged. c. the GDP deflator will be unchanged and the CPI will increase. d. the GDP deflator and the CPI will both be unchanged.
b. the GDP deflator will increase and the CPI will be unchanged.
According to the assumptions of the quantity theory of money, if the money supply increases 5 percent, then a. both the price level and real GDP would rise by 5 percent. b. the price level would rise by 5 percent and real GDP would be unchanged. c. the price level would be unchanged and real GDP would rise by 5 percent. d. both the price level and real GDP would be unchanged.
b. the price level would rise by 5 percent and real GDP would be unchanged.
In a certain economy, when income is $500, consumer spending is $375. The value of the multiplier for this economy is 5. It follows that, when income is $510, consumer spending is a. $381.67. b. $378. c. $383. d. $383.33.
c. $383.
Refer to Table 1. M1 and M2 are respectively a. 1,915 billion, $9,815 billion. c. 1,915 billion, $8,315 billion b. 1,900 billion, $9,815 billion. d. $2,665 billion, $8,315 billion
c. 1,915 billion, $8,315 billion
Which of the following is a financial-market transaction? a. A saver buys shares in a mutual fund b. A saver deposits money into a credit union. c. A saver buys a bond a corporation has just issued so it can purchase capital. d. None of the above is correct.
c. A saver buys a bond a corporation has just issued so it can purchase capital.
Given the following information, what are the values of M1 and M2? Small time deposits: $600 billion Demand deposits and other checkable deposits: $400 billion Savings deposits: $800 billion Money market mutual funds: $700 billion Traveler's checks: $30 billion Large time deposits: $400 billion Currency: $250 billion Miscellaneous categories in M2: $20 billion a. M1 = $650 billion, M2 = $2,830 billion. b. M1 = $400 billion, M2 = $3,080 billion. c. M1 = $680 billion, M2 = $2,800 billion. d. M1 = $680 billion, M2 = $3,200 billion.
c. M1 = $680 billion, M2 = $2,800 billion.
Which of the following is correct? a. In the U.S. the natural rate of unemployment is frequently near 2%. b. The natural rate of unemployment fluctuates more than the cyclical rate of unemployment. c. The cyclical rate of unemployment is sometimes below the natural rate of unemployment. d. None of the above is correct.
c. The cyclical rate of unemployment is sometimes below the natural rate of unemployment.
In 2009 Congress passed legislation providing states with funds to build roads and bridges. It also instituted tax cuts. Which of these shifts aggregate demand right? a. only the increased funding for states b. only the tax cuts c. both the increased funding for states and the tax cuts d. neither the increased funding for states nor the tax cuts
c. both the increased funding for states and the tax cuts
During recessions employment typically a. falls substantially. As the recession ends, employment rises rapidly. b. rises substantially. As the recession ends, employment declines gradually. c. falls substantially. As the recession ends, employment rises gradually. d. rises substantially. As the recession ends, employment declines rapidly.
c. falls substantially. As the recession ends, employment rises gradually.
In examining the national income accounts of the closed economy of Nepotocracy you see that this year it had taxes of $100 billion, transfers of $20 billion, and government purchases of goods and services of $70 billion. You also notice that last year it had private saving of $70 billion and investment of $50 billion. In which year did Nepotocracy have a budget deficit of $20 billion? a. this year and last year c. last year but not this year b. this year but not last year d. neither this year nor last year
c. last year but not this year
Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because a. monetary neutrality would mean that neither prices nor production should have risen. b. monetary neutrality would mean that production should have risen, but prices should not have. c. monetary neutrality would mean the prices should have risen, but production should not have changed. d. monetary neutrality would mean that prices and production should both have fallen.
c. monetary neutrality would mean the prices should have risen, but production should not have changed.
A decrease in the price of domestically produced industrial robots will be reflected in a. both the GDP deflator and the consumer price index. b. neither the GDP deflator nor the consumer price index. c. the GDP deflator but not in the consumer price index. d. the consumer price index but not in the GDP deflator.
c. the GDP deflator but not in the consumer price index.
As the price level rises, a. the exchange rate falls, so net exports fall. b. the exchange rate falls, so net exports rise. c. the exchange rate rises, so net exports fall. d. the exchange rate rises, so net exports rise.
c. the exchange rate rises, so net exports fall.
According to classical macroeconomic theory, changes in the money supply affect a. unemployment and the price level. b. unemployment but not the price level. c. the price level, but not unemployment. d. neither the price level nor unemployment
c. the price level, but not unemployment.
Which of the following statements about mutual funds is correct? a. A mutual fund is not a financial intermediary. b. A disadvantage of buying mutual funds is a lack of diversification c. People who buy shares from a mutual fund are guaranteed a minimum return. d. On average index funds outperform managed funds.
d. On average index funds outperform managed funds.
The money supply in Muckland is $100 billion. Nominal GDP is $800 billion and real GDP is $200 billion. What are the price level and velocity in Muckland? a. The price level and velocity are both 8. b. The price level is 2 and velocity is 8. c. The price level and velocity are both 4. d. The price level is 4 and velocity is 8.
d. The price level is 4 and velocity is 8.
Other things the same, continued increases in technology lead to a. continued increases in the price level and real GDP. b. continued decreases in the price level and real GDP. c. continued increases in real GDP and continued increases in the price level. d. continued increases in real GDP and continued decreases in the price level.
d. continued increases in real GDP and continued decreases in the price level.
Daniel owns a coffee kiosk. All of his employees work 8 hours per day. In 2011, he employed 6 people who produced a total of 912 cups of coffee each day. In 2012, he hired a seventh employee and production increased to 1008 cups of coffee each day. In Daniel's kiosk, productivity a. increased by about 10.5 percent b. increased by 9.5 percent c. decreased by about 5.6 percent d. decreased by about 5.3 percent
d. decreased by about 5.3 percent
The long-run aggregate supply curve would shift left if the amount of labor available a. increased or Congress made a substantial increase in the minimum wage. b. decreased or Congress abolished the minimum wage. c. increased or Congress abolished the minimum wage. d. decreased or Congress made a substantial increase in the minimum wage.
d. decreased or Congress made a substantial increase in the minimum wage.
Other things the same, an increase in wages above their equilibrium level a. increases frictional unemployment but leaves the natural rate of unemployment unchanged. b. increases frictional unemployment and increases the natural rate of unemployment. c. increases structural unemployment but leaves the natural rate of unemployment unchanged. d. increases structural unemployment and increases the natural rate of unemployment. Table 1. The information in the table pertains to an imaginary economy. Asset Amount Small time deposits: $750 billion Large time deposits: $1,500 billion Demand deposits: $480 billion Other checkable deposits: $350 billion Savings deposits: $4,700 billion Traveler's checks: $15 billion Money market mutual funds: $910 billion Currency: $1,070 billion Minor categories of M2: $40 billion
d. increases structural unemployment and increases the natural rate of unemployment.
