Econ Final

Which of the following could cause an increase in the demand for gasoline? a. The resolution of a civil war in one of the world's biggest oil-producing nations b. The expectation that the price of gasoline will decrease in the future c. A new technology that makes the production of gasoline significantly less expensive d. An approaching hurricane that threatens a major oil refinery in Texas

An approaching hurricane that threatens a major oil refinery in Texas

When the U.S. Treasury borrows, the borrowing is managed by the:

Federal Reserve

In what way are monetary and fiscal policies similar?

They both target aggregate demand to overcome business fluctuation.

An increase in uncertainty will lead to:

a decrease in both the growth rate of velocity and the growth rate of money.

A real price is:

a price that has been corrected for inflation

Which of the following choices contains only factors that cause the supply curve to shift to the right? a. a fall in production costs, a rise in technology, an increase in taxes on output b. a decrease in taxes on production, a fall in subsidies on production, a rise in costs of production c. a fall in tastes and preferences for the product, economic growth, a rise in technology d. a rise in technology, a fall in the costs of production, a fall in taxes on output

a rise in technology, a fall in the costs of production, a fall in taxes on output

Which statement is TRUE regarding active investing? a. Active investments typically have higher fees and lower returns on average than passive investments. b. Active investing has been shown to be the only type of investing that can consistently "beat the market." c. Active investing and passive investing typically have equal returns on average. d. Active investing typically has higher average returns than passive investing.

a. Active investments typically have higher fees and lower returns on average than passive investments.

In the Solow model with constant technological knowledge (A), if the economy is initially below its steady-state capital stock:

catching-up growth will occur.

In a free market in which an equilibrium price and quantity prevail: a. consumer surplus is the same as producer surplus. b. consumer surplus is less than producer surplus. c. consumer surplus and producer surplus are maximized. d. consumer surplus is greater than producer surplus.

consumer surplus and producer surplus are maximized.

The national spending approach to calculating GDP states that GDP is equal to:

consumption + investment + government purchases + net exports.

When GDP is calculated, goods are valued using:

current market price

Which statement explains why China experienced a dramatic increase in agricultural productivity after the 1970s? a. China's government took control of Chinese banks. b. China lifted the import restrictions on agricultural products. c. China started exporting its agricultural products to other countries. d. China changed its institutions from collective farming to individual farming.

d. China changed its institutions from collective farming to individual farming.

High and volatile inflation:

destroys the ability of market prices to send signals about the value of resources and opportunities.

Which of the following can explain the shift of the long-run aggregate supply curve from A to B?

development of new technology

At the steady-state level of capital, capital investment:

equals depreciation.

If spending grows by 2%, real GDP is 5%, and velocity is stable, then prices will be ___________ at a rate of __________ according to the aggregate demand curve. a. rising; 3% b. falling; 2% c. falling; 3% d. rising 2%

falling; 3%

Gross domestic product is the market value of all:

final goods and services produced within a country in a year.

The AD-AS model is most useful for explaining what causes:

fluctuations in GDP growth around its trend.

Politicians worry about recession because of:

high unemployment.

When the government monetizes its debt, the results are:

higher inflation and losses for holders of government bonds.

When there is a recession, the price of oil tends to fall because

incomes fall during a recession, and oil is a normal good.

Property rights are important institutions for encouraging investment because:

people won't invest if they feel their property is at risk and that they may not realize a return on their investment.

If the market for iPads experiences a surplus, then the:

price of iPads will fall.

Human capital is:

productive knowledge and skills that workers acquire through education, training, and experience.

Wage rates are primarily based on the:

productivity of labor.

Higher levels of unemployment benefits and employment protection:

raise structural unemployment.

Using a graph of the AD and LRAS curves, the Internet revolution of the 1990s caused:

real growth to increase and inflation to decrease

When using the quantity theory of money to analyze the relation between inflation, money, real output, and prices, we typically assume:

real output and velocity of money are constant.

When a person's income is greater than her spending on consumption goods, then she is:

saving.

Other things held constant, an increase in the velocity of money will cause the aggregate demand curve to:

shift outward

Frictional unemployment is best defined as

short-term unemployment causes by difficulties matching employees to employers.

If the federal government's budget is balanced for a year, then the debt level

stays the same

The persistent, long-term unemployment caused by long-lasting shocks or permanent features of an economy is called

structural unemployment.

A rural village in a developing country has an economy based on agriculture. Then the government of the country provides the village with newly developed hybrid seeds that more than double the agricultural yield per acre. This story illustrates the growth of per capita GDP in the village through which factor(s) of production?

technological knowledge.

Businesses will take out additional loans only if

the interest rate is less than the expected rate of return on their investment

Two countries that may be considered examples of growth miracles are:

South Korea and Japan.

If initially, money supply growth is 5%, velocity growth is 3%, inflation is 2%, and the growth rate of real GDP is 6%, and then velocity falls to 1% because of uncertainty, what should the Fed do? Select one: a. Quietly raise the growth rate of real GDP to 8%. b. Publicly demonstrate a commitment to raise the growth rate of money to 7%. c. Publicly lower the growth rate of money to 3%. d. Quietly increase the growth rate of money without telling anyone because only unexpected inflation is expansionary

b. Publicly demonstrate a commitment to raise the growth rate of money to 7%.

The two types of economic growth are:

cutting-edge and catching-up.

A nominal variable is one that:

has not been adjusted for inflation

The long run is a period of time

long enough that prices and wages are fully flexible.

Institutions:

structure economic incentives.

A higher leverage ratio means that

the firm is at a greater risk for becoming insolvent.

Refer to the figure. Calculate the dollar amount of consumer surplus being earned in this market when the price is $30 and there are 300 units consumed.

$4,500

To produce 30 million barrels of oil per day, the minimum price per unit that producers in the diagram require is:

$60

Use the table. The total cost of purchasing 20 gallons of gas at the free market price and the price ceiling are ________ and ________, respectively.

$80; $90

f the nominal interest rate is 8% while the inflation rate is 10%, then the real rate of return for lenders is:

-2%

Refer to the figure. How many tons of textiles does Australia give up to produce one ton of nickel?

1/3

Using the data in the table, what is the natural unemployment rate for this country in the year 2005?

2.9%

An economy with production function Y = F(K) = K1/2 that has 400 units of capital will produce _____ units of output.

20

Using the inflation data in the table, assume that all loan contracts have fixed nominal interest rates of 10% and mature after 1 year. Which year did the borrowers gain relative to lenders?

2002

Refer to the CPI values in the table. In which year was the inflation rate the highest?

2008

Based on the table, the equilibrium quantity is:

250

Based on the data in the figure, living standards in the United States are how many times higher than the world average?

3

Equilibrium in this market for loanable funds occurs when the interest rate is:

4%

Point B on the aggregate demand curve represents an inflation rate of :

4%

Refer to the figure. What is the number of people who are employed at the market wage? How many people end up unemployed due to the implementation of a $10 minimum wage?

60, 20?

Refer to the table. What is the labor force participation rate in this country in 2009?

77%

Countries that have been bombed extensively in a war typically have _____ marginal product of capital in the aftermath of conflict.

A higher

The production function can shift upward because of:

Better Ideas

Why do people specialize?

Specialization increases productivity.

In many universities, graduate students are employed to teach introductory undergraduate courses, even though the full professors at these universities have more experience and could potentially teach these courses better. Which of the following best explains why universities choose to hire graduate students instead of full professors to teach their introductory courses?

The opportunity cost of teaching an introductory course is higher for full professors than for graduate students.

If bond prices fall, what happens to interest rates?

They will rise.

Which of these production functions exhibits diminishing returns?

D

All else equal, an increase in savings will cause capital stock to:

Increase

In general, increases in a country's wealth will cause infant survival rates to:

Increase

People will usually save more if the interest rate:

Is Higher

The main reason specialization can raise productivity is that:

Knowledge in human brains is limited.

How might changes in marginal tax rates on married couples affect labor force participation rates?

Lower marginal tax rates on married couples encourage higher labor force participation rates by the secondary income earner.

Why did 36,000 travel agents lose their jobs between 1999 and 2006?

More people started making their travel arrangements online.

This table shows actual inflation data for different periods in Poland. Which year was deflationary?

No year was deflationary

If quantity supplied equals 85 units and quantity demanded equals 80 units under price control, then it is a: a. binding price floor. b. binding price ceiling. c. nonbinding price floor. d. nonbinding price ceiling.

a. binding price floor.

An efficient stock market means that: a. it is difficult to outperform the market, since stock prices convey all relevant public information about a company. b. traders with inside information cannot even outperform market averages. c. new information is slowly reflected in stock prices. d. All of the answers are correct.

a. it is difficult to outperform the market, since stock prices convey all relevant public information about a company.

For most of recorded human history, real GDP per capita has: a. remained about the same. b. increased at a modest rate. c. increased at a rapid rate. d. decreased at a modest rate.

a. remained about the same.

Inflation is painful to stop because stopping it: Select one: a. requires lower growth in the short run. b. is virtually impossible. c. involves decreasing people's nominal wages. d. requires raising interest rates, which hurts savers.

a. requires lower growth in the short run.

The BEST type of negative shock for fiscal policy is to respond to is a negative shock to:

aggregate demand.

According to the AD-AS model, if the economy is initially at its long-run potential growth rate, then a temporary increase in the growth rate of investment spending will cause:

an increase in both the inflation and real growth rates in the short run.

One of the problems with investment advice that claims you should buy stock in a certain company or sector of the economy is that:

asset prices likely reflect that information already.

Which of the following chains of logic explain the functions of banks in the process of economic growth? a. Firms borrow from stock and bond markets issued through banks. These funds are used for investment, which leads to the capital accumulation that furthers economic growth. b. Savers deposit their savings in banks. Banks direct these funds to firms that invest and engage in capital accumulation that furthers economic growth. c. The demand for loanable funds is determined by banks and that demand fuels investment that in turn furthers economic growth. d. Savers deposit their savings in banks. Banks engage in capital accumulation, which plays an important role in economic growth.

b. Savers deposit their savings in banks. Banks direct these funds to firms that invest and engage in capital accumulation that furthers economic growth.

Which of the following government outlays is a transfer payment that would NOT be included in GDP? a. The Defense Department buys a new aircraft carrier. b. The Social Security program sends a monthly payment to a senior citizen. c. The Veteran's Administration pays a doctor to care for a wounded veteran. d. The National Security Agency builds a new building for its headquarters.

b. The Social Security program sends a monthly payment to a senior citizen.

The September 11 terrorist attacks turned many people away from flying. The demand and supply model would predict which of the following events in the airline travel market? a. The supply and demand for airline travel would decrease, resulting in a higher equilibrium price and higher equilibrium quantity. b. The demand for airline travel would decrease, resulting in a lower equilibrium price and lower equilibrium quantity. c. The supply of airline travel would increase, resulting in a lower equilibrium price and higher equilibrium quantity. d. The supply of airline travel would decrease, resulting in a higher equilibrium price and lower equilibrium quantity.

b. The demand for airline travel would decrease, resulting in a lower equilibrium price and lower equilibrium quantity.

Which of the following is NOT a factor that can increase structural unemployment? Select one: a. globalization b. early employment bonuses c. fundamental technology d. oil shock

b. early employment bonuses

An increase in ____________ will shift the SRAS curve. a. both actual inflation and expected inflation. b. expected inflation, but not actual inflation. c. neither actual nor expected inflation. d. actual inflation, but not expected inflation.

b. expected inflation, but not actual inflation.

In the Solow model, an increase in the capital stock with all other variables held constant will _____ the country's real GDP but at a(n) _____ rate. a. decrease; increasing b. increase; decreasing c. decrease; decreasing d. increase; increasing

b. increase; decreasing

Considering the incentives for the private market to conduct research and development, we expect that the amount of research and development conducted by the private sector would be _____ the efficient level because of the _____ property of new knowledge. a. more than; rivalrous b. less than; nonrivalrous c. equal to; rivalrous d. more than; nonrivalrous

b. less than; nonrivalrous

If the figure depicts a market for an inferior good, which of the following statements describes what could have happened? a. Consumer income increased, causing an increase in demand and an increase in supply. b. The price of a substitute good increased, causing an increase in quantity demanded and an increase in quantity supplied. c. Consumer income decreased, causing an increase in demand and an increase in quantity supplied. d. Consumers expect lower future prices, causing an increase in demand and an increase in supply.

c. Consumer income decreased, causing an increase in demand and an increase in quantity supplied.

If the GDP of country X is 4 times the GDP of country Y and if the GDP of country X remains constant while GDP of country Y grows at a rate of 7% per year, which of the following statements is true? a. Country Y's GDP will never catch up with country X's GDP. b. Country Y's GDP will be equal to country X's GDP in 40 years. c. Country Y's GDP will be equal to country X's GDP in 20 years. d. Country Y's GDP will be equal to country X's GDP in 10 years.

c. Country Y's GDP will be equal to country X's GDP in 20 years.

If the government decides to drastically increase spending (and by extension the budget deficit) during an economic recession, it will increase the _____ loanable funds and _____ equilibrium interest rates. a. supply of; increase b. supply of; decrease c. demand for; increase d. demand for; decrease

c. demand for; increase

According to the consumption-smoothing theory, people with a longer life expectancy:

c. have higher savings rates in their lifetimes than those with shorter life expectancy.

To diversify, an engineer working in an electric-power-generating plant should invest in: a. stocks of his own company. b. a mutual fund that consists of only electric-power-generating companies. c. stocks of wind-power-generating companies. d. nothing.

c. stocks of wind-power-generating companies.

If spending in an economy increases by 3% and real GDP increases by 1%, the result will be:

inflation

As a result of a positive shock to the growth rate of consumption spending:

inflation and output growth increase in the short run

The textbook uses the no-free-lunch priciple in financial investment to indicate that :

investment opportunities with high expected returns come with higher risk.

Quantity demanded:

is the amount that buyers are willing and able to buy at a particular price.

A bank is considered illiquid but solvent if:

it has short-term liabilities greater than its short-term assets, but overall assets greater than liabilities.

In 1972-1973, the swimming pools in California were heated but homes in New Jersey were cold is an example of a(n):

misallocation of resources caused by price controls.

The quantity theory of money predicts that the main cause of inflation is:

money supply.

The demand curve for oil has a _____ slope because a _____ price of oil signals consumers to use oil in _____ valuable uses. a. positive; higher; more b. negative; lower; more c. negative; higher; less d. negative; lower; less

negative; lower; less

Two of the challenging factors faced by the U.S. Bureau of Labor Statistics when computing the consumer price index are:

new goods and better quality goods.

In the long run, real output is caused by increases in Select one: a. the money supply. b. velocity. c. both the money supply and velocity. d. none of the above.

none of the above