ECON 2301 FINAL STUDY

Which one of the following expressions best states the idea of opportunity cost?

"There is no such thing as a free lunch."

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially

"Those most willing and able to pay for them."

The market system's answer to the fundamental question "How will the system accommodate change?" is essentially

"Through the guiding function of prices and the incentive function of profits."

A statement that is often used to describe demand-pull inflation is:

"Too much money chasing too few goods".

Unanticipated inflation arbitrarily:

"taxes" those who receive fixed money incomes.

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10; each unit of raw materials, $4; and each unit of labor, $3. The per-unit cost of production in this economy is

$0.10.

In the United States, the money supply (M1) includes

coins, paper currency, and checkable deposits.

Countries engaged in international trade specialize in production based on

comparative advantage.

DVD players and DVDs are:

complementary goods.

The principal concept behind comparative advantage is that a nation should:

concentrate production on those products for which it has the lowest domestic opportunity cost.

In 2013, McDonald's introduced Fish McBites, which failed to catch on with the public and was subsequently dropped from the menu. This failure illustrates the idea of

consumer sovereignty.

Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum acceptable price to the seller, Nathan, was $30. Jennifer experiences a:

consumer surplus of $9 and Nathan experiences a producer surplus of $3.

"Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without markets and profits." This quotation best identifies the

coordination problem under central planning

Inflation caused by a rise in per-unit production costs is referred to as:

cost-push inflation

Studies show that

costs of trade barriers exceed their benefits, creating an efficiency loss for society.

The type of unemployment associated with recessions is called

cyclical unemployment

The relationship between quantity supplied and price is___, and the relationship between quantity demanded and price is__.

direct, inverse

The tools of monetary policy for altering the reserves of commercial banks are the:

discount rate, reserve ratio, interest on reserves, and open market operations.

The interest rate at which the Federal Reserve Banks lend to commercial banks is called the

discount rate.

Property rights are important because they

encourage cooperation by improving the chances of mutually agreeable transactions.

By free enterprise, we mean that:

individuals may obtain resources, organize production, and sell the resulting output in any legal way they choose.

College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are

inferior goods.

If the Federal Reserve authorities were attempting to reduce demand-pull inflation, the proper policies would be to

sell government securities, raise reserve requirements, raise the discount rate, and increase the interest paid on reserves held at the Fed banks.

"Excludability" means that:

sellers can restrict the benefits of a good to those who pay for it.

The Federal Open Market Committee (FOMC):

sets policy on the sale and purchase of government bonds by the Fed.

If the price of K declines, the demand curve for the complementary product J will:

shift to the right.

An increase in money income...

shifts the consumer's budget line to the right.

A commercial bank has checkable-deposit liabilities of $50,000 and a reserve ratio of 20 percent. What is the amount of required reserves?

$10,000. Required reserves = reserve ratio * checkable-deposit liabilities = 20% * $50,000= $10, 000.

Refer to the above graph, in which Dt is the transactions demand for money, Dm is the total demand for money, and Smis the supply of money. If the interest rate was 4 percent, then the asset demand for money in this money market is:

$200 Total demand for money=transactions demand + asset demand. Therefore, asset demand=total demand-transaction demand. When the interest rate was 4 percent, the total demand curve Dm interacts with supply curve Sm3, and generates the equilibrium quantity is $325. So $325 is the total quantity of money demanded in the economy, and transactions demand is $125, the asset demand is $200 ($325-$125).

When nominal GDP is $800 billion, and, on average, each dollar is spent four times in the economy over a year, the quantity of money demanded for transactions purposes will be:

$200 billion.Each dollar is spent four time over a year, therefore, $200 billion = $800 billion/4 times is needed to purchase that GDP.

If potential GDP is $400 billion and there is a negative GDP gap of $15 billion, actual GDP is

$385 billion.

Refer to the above graph, which shows an aggregate demand curve for a hypothetical economy. If the price level is 200, the quantity of real GDP demanded is:

$600 billion

GDP in an economy is $4600 billion. Consumer expenditures are $3500 billion, government purchases are $900 billion, and gross private domestic investment is $400 billion. Net exports are:

-$200 billion.

Suppose that an economy produces 500 units of outputs. It takes 10 units of labor at $15 a unit and 4 units of capital at $50 a unit to produce this output. The per-unit cost of production is:

.70 Per-unit production cost = total input cost/units of output = (10*15+4*50)/500=$0.70.

The following are hypothetical exchange rates: $1=140 yen; 1 Swiss franc=$0.10. We can conclude that:

1 Swiss franc=14 yen. f $1=140 yen, then $0.10=14 yen. Since 1 Swiss franc=$0.10, 1 Swiss franc also=14 yen.

The table contains data for a hypothetical single-product economy. Real GDP in year 3 is

150

if the Consumer Price Index was 166.6 in one year and 172.2 in the next year, then the rate of inflation from one year to the next year was:

3.4 percent. The rate of inflation for a certain year is found by comparing, in percentage terms, that year's Consumer Price Index with the index in the previous year. In this case, the inflation rate is (172.2-166.6)/166.6=0.034, or 3.4 percent.

Approximately what percentage of the U.S. public debt is held by foreign individuals and institutions (2015)?

34 percent

In the diagram, the economy's immediate-short-run AS curve is line ______, its short-run AS curve is _____, and its long-run AS curve is line ______.

3; 2; 1

If a consumer has an income of $200, the price of X is $5, and the price of Y is $10, the maximum quantity of X the consumer is able to purchase is:

40

SecurityAmount (in Billions) Treasury Bills $220 Corporate Bonds 140 Treasury Notes 80 Corporate Stock 200 US Savings Bonds 60 Treasury Bonds 100 The public debt for the economy is

460 Billion

A nation has a population of 260 million people. Of these, 60 million are retired, in the military, in institutions, or under 16 years old. There are 188 million who are employed and 12 million who are unemployed. What is the unemployment rate?

6 percent Calculating the unemployment rate requires dividing the number of unemployed into the labor force. In this case, there are 12 million unemployed and 200 million in the labor force, so unemployment is 12million/200 million, or 6 percent.

Assuming the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, the unemployment rate is:

8 percent

The economy of North Korea would best be classified as:

A command system

Refer to the above graph, which factor will shift AS1 to AS2?

A decrease in business taxes.

What function is money serving when you buy a ticket to a movie?

A medium of exchange.

Which of the following would NOT shift the demand curve for beef?

A reduction in the price of cattle feed.

A basic assumption used in most economic theories is that:

All other things remain the same.

Which is NOT a supply factor in economic growth?

An efficient allocation of resources

Which combination of factors would most likely increase aggregate demand?

An increase in consumer wealth and a decrease in interest rates.

Assuming competitive markets with typical supply and demand curves, which of the following statements is correct?

An increase in demand with no change in supply will result in an increase in sales.

Which of the following best describes the cause-effect chain of an expansionary monetary policy?

An increase in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP.

Which is an example of a positive externality?

An increase in the value of land you own when a nearby development is completed.

Excess reserves=Actual reserves - Required reserves. Required reserves=Required reserve ratio * Checkable-deposit liabilities= 15%*$120,000=$18,000. So excess reserves = $50,000-$18,000=$32,000.

Answer the question based on the following balance sheet for the First National Bank. Assume the reserve ratio is 15% percent. Refer to the above data. This commercial bank has excess reserves of:

8 percent

Based on the given table, the equilibrium interest rate is

The Federal Reserve System consists of which of the following?

Board of Governors and the 12 Federal Reserve Banks.

The law of increasing opportunity cost explains why the shape of the production possibilities curve is:

Bowed out (concave) from the origin of the graph.

What is one major measure of economic growth?

Changes in real GDP or change in real GDP per capita

With which of the following countries does the United States have its largest goods and services deficit?

China

What is the most important function of the Federal Reserve System?

Controlling the money supply

Which is an example of a negative externality?

Decreased property values in a neighborhood where several houses are burglarized.

The conduct of monetary policy in the United States is the main responsibility of the:

Federal Reserve.

The interest rate that banks charge one another on overnight loans is called the:

Federal funds rate.

Which statement is correct?

Freedom of choice and enterprise are essential elements of the market system.

Which is assumed to be most limited in scope under a market system?

Government

(Consider This) In 2008 and 2009, the United States experienced what has come to be known as the

Great Recession.

Refer to the above diagram. The economy is at equilibrium at point B. What fiscal policy would increase real GDP?

Increase aggregate demand from AD2 to AD3 by decreasing taxes

Which combination of fiscal policy would most likely be offsetting?

Increase in taxes and government spending

Which is an expansionary money policy?

Increase the money supply to shift the aggregate demand curve rightward. Remember the Cause-Effect Chain, the expansionary/contractionary monetary policy will affect the money market first by increasing/decreasing money supply, then money market will affect investment spending through interest rate, as part of GDP, investment spending will finally affect aggregate demand and shift the aggregate demand curve leftward/rightward.

Which of the following are contractionary fiscal policies?

Increased taxation and decreased government spending.

Huey has eaten two hamburgers and is considering the third. The marginal benefit in his decision is the pleasure from consuming...

Just the 3rd Hamburger

The French term "laissez-faire" means

Let It Be

Mike transfers $4000 from her savings account to her checking account. What effect is this change likely to have on M1 and M2?

M1 increases and M2 stays the same

"Near monies" are included in

M2 only

Capital is a factor of production. An example of capital as a factor of production is

Machines

Matt observes that "there is a high correlation between educational attainment and the level of income." Jean concurs and adds that "high school graduates should all proceed to college."

Matt's statement is positive, while Jean's statement is normative.

Which of the following is a land resource?

Natural Gas

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?

Nominal GDP would rise, but real GDP would be unchanged.

What are the two characteristics that distinguish public goods from private goods?

Nonrivalry and nonexcludability.

For every 1 percentage point that the actual unemployment rate exceeds the natural rate, a 2 percentage point negative GDP gap occurs. This is a statement of

Okun's law.

Economic systems differ according to what two main characteristics?

Ownership of resources and methods of coordinating economic activity

not change the size of the public debt.

Other things equal, an increase of corporate bonds from $140 billion to $150 billion in the economy would

Which of the following best describes the built-in stabilizers as they function in the United States?

Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises.

Which of the following best describes the idea of a political business cycle?

Politicians will use fiscal policy to cause output, real incomes, and employment to be rising prior to elections.

Suppose a small economy produces only MP3 players. In year one, 10,000 MP3 players are produce and sold at a price of $100 each. In year two, 12,000 MP3 players are produced and sold at a price of $80 each. Which of the following statements is true?

Real GDP increases, while nominal GDP decreases.

peak, recession, trough, expansion.

Refer to the above diagram, the phase of the business cycle from points A to D are, respectively:

1 percent

Refer to the above graph, if the supply of money was $250 billion, the interest rate would be:

$1236 billion. The M1 money supply includes currency and checkable deposits: $639 + 597 =$ 1236.

Refer to the above table. The size of the M1 money supply is

tax revenues vary directly with GDP, but government spending is independent of GDP.

Refer to the diagram, in which T is tax revenues and G is government expenditures. All figures are in billions. In this economy,

at any level of GDP below $400

Refer to the diagram, in which T is tax revenues and G is government expenditures. All figures are in billions. The budget will entail a deficit

D

Refer to the diagram, this economy will experience unemployment if it produces at point

shift from S2 to S1.

Refer to the diagram. A decrease in supply is depicted by a

land, labor, capital, and entrepreneurial ability.

Refer to the diagram. Flow 2 represents

$1.00 and 200.

Refer to the diagram. The equilibrium price and quantity in this market will be

Suppose the economy is at full employment with a high inflation rate. Which combination of government policies is most likely to reduce the inflation rate?

Sell government securities in the open market and decrease government spending.

The public debt is held as:

Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds

What two conditions must hold for a competitive market to produce efficient outcomes?

Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay.

Which of the following is not considered one of the factors of production?

Technology

What "backs" the money supply?

The U.S. government's ability to keep the value of money relatively stable.

Which of the following is correct?

The actual reserves of a commercial bank equal its excess reserves plus its required reserves.

Which is best considered a efficiency factor in economic growth?

The full employment of resources.

In which case would the quantity of money demanded by the public tend to increase by the greatest amount?

The interest rate decreases and nominal GDP increases.

Henry wants to buy a book. The economic perspective suggests that Henry will buy the book if:

The marginal benefit of the book is greater than its marginal cost.

Which varies directly with the interest rate?

The opportunity cost of holding money

Which of the following is a microeconomic statement?

The price of smartphones declined 2.8 percent last year.

Which statement best describes a capitalist economy?

The production and allocation of goods and services is determined primarily through markets.

Opportunity cost is best defined as:

The value of the best forgone alternative.

To economists, scarcity means that

Unlimited wants cannot be satisfied by the limited resources.

The satisfaction of pleasure one gets from consuming a good or service is called:

Utility

Which of the following statements best describes the study of economics? Economics studies how...

We make choices in the face of scarcity.

Which is NOT one of the five fundamental questions:

What goods and services should be produced by government?

Consumer sovereignty and "dollar votes" are most related to which fundamental question about a competitive market system?

What goods and services will be produced?

Which of the following is the correct way to calculate the unemployment rate?

[(unemployed)/(labor force)] × 100

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by:

a change in buyer tastes.

Which of the following is a private transfer payment?

a check for $250 sent by a parent to a daughter at college

A rightward shift in the demand curve for product C might be caused by:

a decrease in the price of a product that is complementary to C.

A bank has $2 million in checkable deposits. In the bank's balance sheet, this would be an example of:

a liability.

Net exports is a positive number when:

a nation's exports of goods and services exceed its import

Which of the following is an example of a public good?

a weather warning system

The 2010 Health Care Reform Law, also known as "Obamacare," includes a part known as universal coverage which requires everyone to have health insurance. One reason for this is to address the problem of

adverse selection.

Graphically, producers surplus is measured as the area:

above the supply curve and below the actual price.

If the GDP gap is negative, then:

actual GDP is less than potential GDP

The total quantity of money demanded is determined by:

adding the transactions demand for money to the asset demand for money.

If the dollar appreciates in value relative to foreign currencies:

aggregate demand decreases. The dollar appreciates in value relative to foreign currencies, means that the dollar becomes more expensive or increases the purchasing power when importing goods and services from other countries, therefore, the imports will be increased, however, the appreciation of dollar makes the export goods and services more expensive for other countries who importing them, therefore, the exports will be decreased. with decreased exports and increased imports, you can tell the net exports will be decreased, and as one of the factors locate the aggregate demand curve, will shift the demand curve to the left and decrease the aggregate demand.

Which of the following is demand factor in economic growth?

aggregate expenditures of households, businesses, and government

Other things equal, if the U.S. dollar were to depreciate, the

aggregate supply curve would shift to the left.

GDP is the market value of:

all final goods and services produced in an economy in a given year.

Specialization -the division of labor—enhances productivity and efficiency by:

all of the means identified in the other answers.

The assertion that "there is no free lunch" means that:

all production involves the use of scarce resources and thus the sacrifice of alternative goods.

Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)?

an appreciation of the U.S. dollar

A bank owns a 10-story office building. In the bank's balance sheet, this would be an example of:

an asset.

Which of the following is associated with macroeconomics?

an empirical investigation of the general price level and unemployment rates since 1990

Which of the following would not shift the aggregate supply curve?

an increase in the price level

A supply factor in economic growth would be:

an increase in the quantity of labor.

Menu costs

are the costs to firms of changing prices and communicating them to customers.

According to the Bureau of Labor Statistics, to be officially unemployed a person must

be in the labor force

Currency in circulation is part of

both M1 and M2.

The slope of the immediate-short-run aggregate supply curve is based on the assumption that:

both input and output prices are fixed.

The economy starts out with a balanced Federal budget. If the government then implements expansionary fiscal policy, then there will be a

budget deficit.

When government tax revenues change automatically and in a countercyclical direction over the course of the business cycle, this is an example of:

built-in stability.

In the circular flow, households:

buy products and sell resources.

The term "consumer sovereignty" means that:

buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.

A nation's gross domestic product (GDP)

can be found by summing C + Ig + G + Xn.

The 12 Federal Reserve Banks can best be characterized as:

central banks, bankers' banks, and quasi-public banks.

Differences in production efficiencies among nations in producing a particular good result from

different amounts of skilled labor. different levels of technological knowledge. different endowments of fertile soil. all of these

Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, the official unemployment rate would:

decline

A contractionary fiscal policy can be illustrated by a (n):

decrease in aggregate demand.

A decrease in government spending will cause a(n):

decrease in aggregate demand.

Countercyclical discretionary fiscal policy calls for:

deficits during recessions and surpluses during periods of demand-pull inflation.

Money functions as a store of value if it allows you to:

delay purchases until you want the goods

If Z is an inferior good, an increase in money income will shift the:

demand curve for Z to the left

If many people in a community get flu shots, the whole community benefits, including those who did not get flu shots. Therefore, not enough people may decide to get the shots. This is one illustration of:

demand-side market failure.

The above diagram is a flexible exchange market for foreign currency, other things equal, a rightward shift of the demand curve would:

depreciate the dollar

The short-run aggregate supply curve shows the:

direct relationship between the price level and real GDP produced.

A trough in the business cycle occurs when

employment and output reach their lowest levels.

The intersection of the aggregate demand and aggregate supply curves determines the:

equilibrium level of real domestic output and prices.

In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are:

excluded

If the Congress passes legislation to increase government spending to counter the effects of a recession, then this would be an example of a (n):

expansionary fiscal policy.

The two ways of looking at GDP are the

expenditures approach and income approach.

Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel. Assuming no transportation costs, the United States will

export wheat.

A trade surplus implies that:

exports of goods exceed imports of goods.

A federal budget deficit exists when:

federal government spending exceeds tax revenues.

Foreign exchange rates refer to the:

price of one nation's currency in terms of a second nation's currency.

When the federal government uses taxation and spending actions to stimulate the economy, it is conducting:

fiscal policy.

A market in which the money of one nation is exchanged for the money of another nation is a:

foreign exchange market.

Other things equal, economists would prefer:

free trade to tariffs and tariffs to import quotas.

A college graduate using the summer following graduation to search for a job would best be classified as

frictionally unemployed.

(Last Word) In a cap-and-trade program,

government fixes the maximum amount of a pollutant that firms can discharge and issues permits that firms can buy from and sell to each other.

The immediate-short-run aggregate supply curve is:

horizontal.

A trade deficit refers to an excess of:

imports of goods over exports of goods.

Other things equal, a reduction in personal and business taxes can be expected to

increase both aggregate demand and aggregate supply.

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect a decrease in the price of pizza to:

increase demand for soda, and reduce demand for tacos.

The combination of fiscal policies that would reinforce each other and be most expansionary would be a (n):

increase in government spending and a decrease in taxes.

If Congress passed new laws significantly increasing the regulation of business, this action will tend to:

increase per-unit production costs and shift the aggregate supply curve to the left.

The major purpose of the Federal Reserve buying government securities in open-market operations is to:

increase the excess reserve of banks and allow banks to increase their lending.

If the Board of Governors of the Federal Reserve System increases the legal reserve ratio, this change will:

increase the required reserve of commercial banks and thus decrease the money supply

Assume, in a competitive market, price is intitally below the equilibrium level. We predict that price will:

increase, quantity demanded will decrease, and quantity supplied will increase.

Refer to the above diagram, when AD1 shifts to AD2, real output:

increases from Q1 to Q2, while the price level rises

The crowding-out effect suggests that:

increases in government spending may raise the interest rate and thereby reduce private investment.

A decrease in the interest rate will cause a (n):

increases in the amount of money held as an asset.

A government subsidy to the producers of a product

increases product supply.

Other things being equal, an expansion of commercial bank lending:

increases the money supply

Money spent on the purchase of a new house is included in the GDP as a part of:

investment

Answer the question on the basis of the accompanying production possibilities tables for two countries, Latalia and Trombonia. In Latalia, what is the opportunity cost for pork?

is 5 tons of beans.

A peak in the business cycle:

is a temporary maximum point.

A market

is an institution that brings together buyers and sellers.

A normative statement is one that

is based on value judgments.

The best example of a "frictionally unemployed" worker is one who:

is in the process of voluntarily switching jobs.

U.S. currency has value primarily because it:

is relatively scarce, is legal tender, and is generally acceptable in exchange for goods and services.

Consumer surplus:

is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.

Producer surplus:

is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price.

The four factors of production are:

land, labor, capital, and entrepreneurial ability.

The annual rate of inflation can be found by subtracting

last year's price index from this year's price index and dividing the difference by last year's price index.

Graphically, cost-push inflation is shown as a

leftward shift of the AS curve.

Assume that there is a fixed rate of interest on contracts for borrowers and lenders. If unanticipated inflation occurs in the economy, then:

lenders are hurt, but borrowers benefit.

Growth is advantageous to a nation because it

lessens the burden of scarcity.

A major goal of the World Trade Organization is to:

liberalize international trade among nations

Which line in the above graph would best reflect the slope of the total demand for money curve?

line 1

Which line in the above graph would best reflect the slope of the transactions demand for money curve?

line 2

Appreciation of the Canadian dollar will:

make Canada's exports more expensive and its imports less expensive.

Fiscal policy refers to the:

manipulation of government spending and taxes to stabilize domestic output, employment, and the price level.

At the optimal quantity of a public good,

marginal benefit equals marginal cost.

From an economic perspective, when consumers leave a fast-food restaurant because the lines to be served are too long, they have concluded that the...

marginal cost of waiting is greater than the marginal benefit of eating in that restaurant.

Tariffs

may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs).

The transactions demand for money is most closely related to money functioning as a

medium of exchange.

An example of a final good in national income accounts would be a new:

microcomputer purchased by an executive for personal use.

Which of the following is a distinguishing feature of laissez-faire capitalism?

minimal government intervention

The most efficient combination of resources in producing a given output is the combination that

minimizes the cost per unit of output.

The primary gain from international trade is

more goods than would be attainable through domestic production alone.

Refer to the diagram. An increase in quantity supplied is depicted by a

move from point y to point x.

Smith deposits $200 in currency in his checking account at a bank. This deposit is treated as:

no change in the money supply because the $200 in currency has been converted to a $200 increase in checkable deposits.

GDP measured using current prices is called:

nominal GDP.

(Consider This) Credit card balances are

not a component of M1 or M2.

In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are

not counted

Banks lost money during the mortgage default crisis because

of all of these reasons.

The most frequently used monetary device for achieving price stability is:

open-market operations.

The Latin term "ceteris paribus" means

other things equal.

When producers do not have to pay the full cost of producing a product, they tend to

overproduce the product because of a supply-side market failure.

In the insurance business, the moral hazard problem arises when

people who have car-insurance coverage drive less carefully.

The law of demand states that:

price and quantity demanded inversely related.

The market system does not produce public goods because

private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them.

Which of the following is unique to the market system?

private ownership of property resources

The law of supply indicates that:

producers will offer more of a product at high prices than they will at low prices.

Other things equal, if the price of a key resource used to produce product X falls, the:

product supply curve of X will shift to the right

In terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____ market.

product; resource

The interest rate will fall when the:

quantity of money supplied exceeds the quantity of money demanded.

If the price of a product increases, we would expect:

quantity supplied to increase.

The time that elapses between the beginning of a recession or an inflationary episode an dthe identification of the macroeconomic problem is referred to as a (n):

recognition lag

The principle of comparative advantage indicates that mutually beneficial international trade can take place only when:

relative costs of production differ between nations

If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, its real GDP per capita will

remain constant.

Graphically, demand-pull inflation is shown as a

rightward shift of the AD curve along an upsloping AS curve.

Assume a drought in the Great Plains reduces the supply of wheat. Since wheat is a basic ingredient in the production of bread, and potatoes are consumer substitute for bread, we would expect the price of wheat to:

rise, the supply of bread to decrease, and the demand for potatoes to increase.

Private goods are characterized by:

rivalry and excludability

A leftward shift of a product supply curve might be caused by:

some firms leaving an industry.

The asset demand for money is most closely related to money functioning as a

store of value.

Which of the following constitute the types of unemployment occurring at the natural rate of unemployment?

structural and frictional unemployment

A worker who loses a job at a call center because business firms switch the call center to another country is an example of:

structural unemployment

If the government wishes to increase the level of real GDP, it might reduce:

taxes.

The single most important source of productivity for economic growth for the United States has been:

technological advance.

To say that "the U.S. public debt is mostly held internally" is to say that

the bulk of the public debt is owned by U.S. citizens and institutions.

Market failures occurs when:

the competitive market system under or overallocates resources to production of goods.

A normal good is one:

the consumption of which varies directly with incomes

The "invisible hand" refers to the:

the desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.

Macroeconomics approaches the study of economics from the viewpoint of

the entire economy

The public debt is the amount of money that

the federal government owes to holders of U.S. securities.

Suppose the government imposed a carbon tax on firms that emit pollution, then

the firm's marginal cost of production would increase, and the supply curves within the market would shift to the left.

Inflation is a rise in:

the general level of prices over time.

The difference between M1 and M2 is that

the latter includes small-denominated time deposits, noncheckable savings accounts, money market deposit accounts, and money market mutual fund balances.

The optimal level of pollution in society occurs whenever:

the marginal benefit of pollution control equals the marginal cost

GDP excludes

the market value of unpaid work in the home.

Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five million of the part-time workers switch to full-time work. As a result,

the official unemployment rate will remain unchanged.

In moving along a supply curve, which of the following is not held constant?

the price of the product itself.

Which of the following is an intermediate good?

the purchase of baseball uniforms by a professional baseball team

At the point where the demand and supply curves for a product intersect:

the quantity that consumers want to purchase and the amount producers choose to sell are the same.

An increase in aggregate demand would be most likely caused by a decrease in:

the tax rates on household income.

GDP tends to underestimate the productive activity in the economy because it excludes the value of output from:

the underground economy.

If there is no comparative advantage between two countries:

there are no gains from specialization and trade

Which condition will encourage competition:

there is free entry into and exit out of industries.

It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. Operators of hydroelectric generating plants on the river find they must clean up the river's water before it flows through their equipment. Refer to the above information, if nothing is done to correct the situation:

there will be overproduction of paper goods.

Per-unit production cost is

total input cost divided by units of output.

A consumer holds money to meet spending needs. This would be an example of the:

transactions demand for money

Camille is at the candy store with Grandma Mary, who offers to buy her $6 worth of candy. If lollipops are $1 each and candy bars are $2 each, what combination of candy can Camille's Grandma Mary buy her?

two lollipops and two candy bars

Graphically, if the supply and demand curves are linear, consumer surplus is measured as the triangle:

under the demand curve and above the actual price.

The functions of money are to serve as a:

unit of account, store of value, and medium of exchange.

A $70 price tag on a sweater in a department store window is an example of money functioning as a:

unit of account.

The long-run aggregate supply curve is:

vertical, and a graph of the short-run aggregate supply curve is upsloping.

The money income of households consists of the sum of

wages plus rent plus interest plus profits.

Wage contracts, menu costs, and the minimum wage are explanations for why:

wages tend to be inflexible downward.

"Rivalry" in consumption means that:

when one person buys a good, it is not available for another person to buy.

For the music industry, the rise of Internet file-sharing of music has

worsened the free-rider problem