Econ Final

In 2018, Kendall Ford, an automobile dealership, spent $20,000 on a new car lift for its repair shop, $2,000 on a new copy machine for its sales division, and $600,000 on Ford Motor company stock. Unsold cars and trucks were valued at $400,000 on January 1, 2018 and unsold cars and trucks were valued at $900,000 on December 31, 2018. What is Kendall Ford's total investment spending in 2018?

522,000

Consider the following statements: a.Consumers rent more kayaks from a vendor that rents kayaks at a lower price than other rival kayak vendors along Waikiki beach. b.Department stores take steps to increase security since they believe it is more costly to allow shoplifting than to install expensive security monitoring equipment. c.Farmers produce more cotton when its selling price falls. Which of the above statements demonstrates that economic agents respond to incentives?

A and B

The economic analysis of minimum wage involves both normative and positive analysis. Consider the following consequences of a minimum wage: a.The minimum wage law causes unemployment. b.Unemployment would be lower without a minimum wage law. c.Minimum wage laws benefit some workers and harm others. d.The minimum wage should be more than $7.25 per hour. Which of the consequences above are positive statements and which are normative statements?

A,B & C are positive D is normative

If, in a closed economy, real GDP is $30 billion, consumption is $20 billion, and government purchases are $5 billion, what is total saving in the economy? A. $5 billion B. $15 billion C. $45 billion D. $55 billion

A. $5 billion

If real GDP per capita doubles between 2005 and 2020, what is the average annual growth rate of real GDP per capita? A. 4.7% B. 10.5% C. 15% D. 21%

A. 4.7%

Which of the following is not a reason why the Industrial Revolution occurred when and where it did? A. The British government was able to more easily seize wealth. B. Institutional changes by the British government helped protect wealth. C. The British government was able to eliminate arbitrary increases in taxes. D. The British government was committed to upholding private property rights.

A. The British government was able to more easily seize wealth.

To increase the money supply, the Federal Reserve could A. conduct an open market purchase of Treasury securities. B. lower transfer payments. C. raise the discount rate. D. decrease income taxes. E. raise the required reserve ratio.

A. conduct an open market purchase of Treasury securities.

The largest source of federal government revenue in 2016 was A. individual income taxes. B. payroll taxes to fund Social Security and Medicare programs. C. corporate income taxes. D. sales taxes.

A. individual income taxes.

A financial intermediary's main function is to match ________ with excess funds to ________ with a shortage of funds. A. savers; borrower B. firms; insurance companies C. borrower; savers D. governments; households

A. savers; borrower

Which of the following is not a reason why low-income countries might experience low economic growth? A. The country has a low rate of saving and investment. B. The country has a good education system. C. The country has endured extended periods of war. D. The country fails to enforce a rule of law.

B. The country has a good education system.

Spending on the war in Afghanistan is essentially categorized as government purchases. How do increases in spending on the war in Afghanistan affect the aggregate demand curve? A. They will move the economy down along a stationary aggregate demand curve. B. They will shift the aggregate demand curve to the right. C. They will shift the aggregate demand curve to the left. D. They will move the economy up along a stationary aggregate demand curve.

B. They will shift the aggregate demand curve to the right.

If inventories decline by more than analysts predict they will decline, this implies that A. actual investment spending was greater than planned investment spending. B. actual investment spending was less than planned investment spending. C. actual investment spending was equal to than planned investment spending. D. there is no relationship between actual investment spending and planned investment spending.

B. actual investment spending was less than planned investment spending.

The aggregate demand curve will shift to the left ________ the initial decrease in government purchases. A. by less than B. by more than C. by the same amount as D. sometimes by more than and other times by less than

B. by more than

An increase in the price level results in a(n) ________ in the quantity of real GDP demanded because ________. A. increase; a higher price level reduces consumption, investment, and net exports. B. decrease; a higher price level reduces consumption, investment, and net exports. C. increase; a higher price level increases consumption, investment, and net exports. D. decrease; a higher price level increases consumption, investment, and net exports.

B. decrease; a higher price level reduces consumption, investment, and net exports.

Changes in the price level A. decrease the level of aggregate supply in the long run. B. do not affect the level of aggregate supply in the long run. C. increase the level of aggregate supply in the long run only at very high levels of output. D. increase the level of aggregate supply in the long run.

B. do not affect the level of aggregate supply in the long run.

Suppose real GDP is $13 trillion, potential real GDP is $13.5 trillion, and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP. Assuming a constant price level, Congress and the president would need to decrease taxes by A. $500 billion. B. less than $500 billion. C. more than $500 billion. D. None of these are correct. Congress should raise taxes in this case.

B. less than $500 billion.

Increases in the price level will A. raise consumption because real wealth increases. B. lower consumption because real wealth decreases. C. raise consumption because some goods and services are more affordable. D. lower consumption because goods and services are less affordable.

B. lower consumption because real wealth decreases.

Contractionary fiscal policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ________ and real GDP to be ________. A. higher; lower B. lower; lower C. higher; higher D. lower; higher

B. lower; lower

The majority of dollars spent by government prior to the Great Depression was spending at the ________. In the post World War II period, two-thirds to three quarters of all dollars spent by government in the United States are spent at the ________. A. state and local levels; state level B. state and local levels; federal level C. local level; state level D. federal level; state and local levels

B. state and local levels; federal level

Which of the following functions of money would be violated if inflation were high? A. medium of exchange B. store of value C. certificate of gold D. unit of account

B. store of value

Which of the following would result in GDP for an economy equal to $10 trillion? A. C = $7 trillionI = $2 trillionG = $4 trillionNX = $3 trillion B. C = $4 trillionI = $3 trillionG = $2 trillionNX = -$1 trillion C. C = $6 trillionI = $2 trillionG = $1.5 trillionNX = -$2 trillion D. C = $5 trillionI = $5 trillionG = $2 trillionNX = -$2 trillion

C = $5 trillionI = $5 trillionG = $2 trillionNX = -$2 trillion

Scenario 14-2Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%.Refer to Scenario 14-2. As a result of Kristy's deposit, checking account deposits in the banking system as a whole (including the original deposit) could eventually increase up to a maximum of A. $8,000. B. $10,000. C. $50,000. D. $100,000.

C. $50,000.

Suppose the equilibrium real federal funds rate is 2 percent, the target rate of inflation is 2 percent, the current inflation rate is 4 percent, and real GDP is 2 percent above potential real GDP. If the weights for the inflation gap and the output gap are both 1/2, then according to the Taylor rule the federal funds target rate equals A. 4 percent. B. 6 percent. C. 8 percent. D. 10 percent.

C. 8 percent.

Why does the short-run aggregate supply curve shift to the left in the long run, following an increase in aggregate demand? A. Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices. B. Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices. C. Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices. D. Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices.

C. Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices.

The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of A. discretionary monetary policy. B. automatic monetary policy. C. automatic stabilizers. D. discretionary fiscal policy.

C. automatic stabilizers.

Last week, 13 Mexican pesos could purchase one U.S. dollar. This week, it takes 11 Mexican pesos to purchase one U.S. dollar. This change in the value of the dollar will ________ exports from the United States to Mexico and ________ U.S. aggregate demand. A. decrease; decrease B. decrease; increase C. increase; increase D. increase; decrease

C. increase; increase

If a person withdraws $500 from his/her savings account and puts it in his/her checking account, then M1 will ________ and M2 will ________. A. not change; increase B. not change; not change C. increase; not change D. not change; decrease E. increase; decrease

C. increase; not change

If an increase in investment spending of $50 million results in a $400 million increase in equilibrium real GDP, then A. the multiplier is 0.125. B. the multiplier is 3.5. C. the multiplier is 8. D. the multiplier is 50.

C. the multiplier is 8.

Consumption spending is $5 million, planned investment spending is $8 million, unplanned investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million. What is GDP? A. $15 million B. $23 million C. $25 million D. $27 million

D. $27 million

The nominal GDP of the U.S. in 2016 was approximately $18.6 trillion. This means that A. the value of output in 2016 was around $18.6 trillion. B. total income in 2016 was around $18.6 trillion. C. total spending in 2016 was around $18.6 trillion. D. All of these are true.

D. All of these are true.

Which of the following accurately describes an effect of Hurricane Harvey on GDP? A. GDP would increase reflecting the decrease in production that occurred during the storm and the productive capacity lost in the storm. B. GDP would decrease reflecting the costs of cleanup. C. GDP would increase well-being. D. GDP would increase reflecting the costs of cleanup.

D. GDP would increase reflecting the costs of cleanup.

If inflation in the United States is lower than inflation in other countries, what will be the effect on net exports for the United States? A. Net exports will decrease as U.S. exports decrease. B. Net exports will rise as U.S. imports increase. C. Net exports will decrease as U.S. imports decrease. D. Net exports will rise as U.S. exports increase.

D. Net exports will rise as U.S. exports increase.

Paper currency is a A. barter money. B. commodity money. C. bond. D. fiat money.

D. fiat money.

Expansionary fiscal policy involves A. increasing taxes or decreasing government purchases. B. increasing the money supply and decreasing interest rates. C. decreasing the money supply and increasing interest rates. D. increasing government purchases or decreasing taxes.

D. increasing government purchases or decreasing taxes.

Stagflation occurs when A. inflation falls and GDP falls. B. inflation rises and GDP rises. C. inflation falls and GDP rises. D. inflation rises and GDP falls.

D. inflation rises and GDP falls.

Which of the following is not directly counted in GDP? A. government purchases B. investment expenditures C. consumer goods D. intermediate goods

D. intermediate goods

A commercial bank like Comerica creates money by A. earning profits. B. selling corporate bonds. C. printing paper money. D. making loans.

D. making loans.

In the long run, ________ differences in economic growth rates result in ________ differences in GDP per capita. A. large; no B. small; no C. large; small D. small; large

D. small; large

The discount rate is A. the interest rate banks charge each other for overnight loans. B. the interest rate banks charge their best customers. C. the interest rate the U.S. Treasury pays on Treasury Bills. D. the interest rate the Fed charges to banks for loans from the Fed.

D. the interest rate the Fed charges to banks for loans from the Fed.

If firms and workers could predict the future price level exactly, the short-run aggregate supply curve would be A. downward sloping. B. horizontal. C. upward sloping. D. vertical.

D. vertical.

Which of the following is correct about the economic decisions consumers, firms, and the government have to make? A. Each faces the problem of scarcity which necessitates trade-offs in making economic decisions. B. Only individuals face scarcity; firms and the government do not. C. Firms and the government face scarcity, individuals only face shortages. D. Governments may face the problem of shortages but not scarcity in making economic decisions.

Each faces the problem of scarcity which necessitates trade-offs in making economic decisions.

The basis for trade is absolute advantage, not comparative advantage. True False

False

Which of the following is a normative economic statement? A. With falling home prices and rising mortgage interest rates, the amount of foreclosures has increased. B. Fashion designers should be allowed to copyright designs to promote innovation. C. The federal government is considering raising the gasoline tax to promote the use of public transportation. D. Rising global demand for diesel and heating oil has led to increases in the price of crude oil.

Fashion designers should be allowed to copyright designs to promote innovation.

Which of the following is a true statement about real and nominal GDP? A. Nominal GDP is a better measure than real GDP in comparing changes in the production of goods and service year after year. B. Increases in average prices do not affect the calculation of nominal GDP. C. If real GDP increases from one year to the next, we know that production of goods and services has risen. D. If nominal GDP increases from one year to the next, we know that production of goods and services has risen.

If real GDP increases from one year to the next, we know that production of goods and services has risen.

The revenue received from the sale of an additional unit of a product

Is a marginal benefit to the firm

One reason some manufacturing companies began moving production to China in the early 2000s was due to lower wages that could be paid to Chinese workers. Moving manufacturing to China to take advantage of lower wages so goods could be produced at a lower cost than if produced in the United States exemplifies which key economic idea?

People respond to economic incentives

Cassie's Quilts alters, reconstructs, and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning, and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt "as is" now for $900. What should she do?

She should purchase the periodic fabric, complete the task and then sell the quilt

Which of the following is a positive economic statement? A. The government should subsidize solar power for homeowners. B. The minimum wage law causes unemployment. C. People should not buy imported fruits and vegetables. D. The number of work visas should not be limited by the government.

The minimum wage law causes unemployment.

If the demand for letters written by Abraham Lincoln is higher than the demand for letters written by John Wilkes Booth, what would have to be true for the market equilibrium prices for these letters to be equal? A. The supply of Lincoln letters would have to be less than the supply of Booth letters. B. The supply of Lincoln letters and the supply of Booth letters would have to be equal. C. If the demand for Lincoln letters is greater than the demand for Booth letters, the market equilibrium price for Lincoln letters will always be greater than the market equilibrium price for Booth letters. D. The supply of Booth letters would have to be less than the supply of Lincoln letters.

The supply of Booth letters would have to be less than the supply of Lincoln letters.

Which of the following is a macroeconomic question? A. What factors determine the price of iPhones? B. What determines the unemployment rate? C. How is the production quantity of digital cameras determined? D. What determines the wages and benefits of flight attendants?

What determines the unemployment rate?

If, in response to an increase in the price of pineapples, the quantity of pineapples demanded decreases, then economists would describe this as A. an decrease in demand. B. a decrease in quantity demanded. C. a decrease in consumers' taste for pineapples. D. a change in consumer income.

a decrease in quantity demanded.

The phrase "demand has increased" means that A. a demand curve has shifted to the right. B. there has been an upward movement along a demand curve. C. there has been a downward movement along a demand curve. D. a demand curve has shifted to the left.

a demand curve has shifted to the right.

Which of the following would cause a decrease in the supply of peanut butter? A. an increase the price of peanuts B. a decrease in the price of peanut butter C. a decrease in the price of jelly (assuming that peanut butter and jelly are complements) D. an increase in the technology used to produce peanut butter

an increase the price of peanuts

If a decrease in income leads to an increase in the demand for macaroni, then macaroni is A. a normal good. B. an inferior good. C. a necessity. D. a neutral good.

an inferior good.

The production possibilities frontier assumes all of the following except A. labor, capital, land and natural resources are fixed in quantity. B. the level of technology is fixed and unchanging. C. any level of the two products that the economy produces is currently possible. D. the economy produces only two products.

any level of the two products that the economy produces is currently possible.

Individuals who have never been the best at doing anything A. must have an absolute advantage in at least ones task. B. can still have a comparative advantage in producing some product. C. cannot have a comparative advantage in producing any product. D. perform all tasks at a higher opportunity cost than others.

can still have a comparative advantage in producing some product.

Investment, as defined by economists, would include the purchase of a A. corporate bond. B. share of stock in ExxonMobil. C. computer by an accounting firm. D. government bond.

computer by an accounting firm.

If firms are more pessimistic and believe that future profits will fall and remain weak for the next few years, then A. investment spending will remain unaffected. B. investment spending will rise. C. investment spending will fall. D. investment spending will rise and then fall.

investment spending will fall.

Y = $12 trillionC = $8 trillionI = $2 trillionG = $2 trillionTR = $2 trillionT = $3 trillionRefer to Scenario 10-1. Based on the information above, what is the level of public saving?

negative $1 trillion (a deficit of $1 trillion)

If the production possibilities frontier is linear, then A. opportunity costs are decreasing as more of one good is produced. B. opportunity costs are increasing as more of one good is produced. C. it is easy to efficiently produce output. D. opportunity costs are constant as more of one good is produced.

opportunity costs are constant as more of one good is produced.

Increasing opportunity cost along a bowed-out production possibilities frontier occurs because A. of ineffective management by entrepreneurs. B. of inefficient production. C. of the scarcity of factors of production. D. some factors of production are not equally suited to producing both goods or services.

some factors of production are not equally suited to producing both goods or services.

The substitution effect of a price change refers to A. the shift of a demand curve when the price of a substitute good changes. B. the movement along the demand curve due to a change in purchasing power brought about by the price change. C. the shift in the demand curve due to a change in purchasing power brought about by the price change. D. the change in quantity demanded that results from a change in price making a good more or less expensive relative to other goods that are substitutes.

the change in quantity demanded that results from a change in price making a good more or less expensive relative to other goods that are substitutes.

Which of the following is counted as "capital" in economics? A. the labor force B. the money people have C. the wealth people have D. the machines that workers have to work with

the machines that workers have to work with