Econ Final

CH 8 A loaf of bread cost $0.18 in 1955 and the CPI was 26.8. The CPI in 2013 was 233. The cost of a loaf of bread in 1955 using 2013 dollars would be?

$1.56

If healthcare costs make up 8% of total consumer expenditures and they rise by 15% while the other components in the consumer price index remain constant, by how much will the price index rise?

1.2%

Real per capita GDP in China in 1959 was about $350, but it doubled to about $700 by 1978, when Deng Xiao Ping started market reforms. What was the average annual economic growth rate in China over the 20 years from 1959 to 1978?

3.5%

This graph portrays the production function of a castaway's economy. The marginal product of the second ladder is _________, and diminishing marginal product sets in with ladder number ________.

6; 2

CH 13 Which of the following statements is true?

According to modern economy theory, there are 3 sources of economic growth

______ will most likely increase the economy's long-run aggregate supply.

Advances in technology

Which of the following statements is consistent with what happened during the Great Recession?

Aggregate demand and long-run aggregate supply decreased, causing unemployment to rise to 10%.

Look at the provided figure. What area(s) represent the tax revenue after the tax?

B + C

Look at the provided figure. What area(s) represent producer surplus before the tax?

C + D + F

Consider these four graphs. Graph ____ depicts the conditions of the Great Recession, and graph _____ depicts the conditions of the Great Depression.

C; D

The local city council passes a law that establishes a maximum rent for apartments in your city. Which of the following is likely to happen?

Current renters will sublet to others at prices above the legal maximum.

Look at the provided figure. What area(s) represent producer surplus after the tax?

D

Suppose you have two economies in recession. Economy A has workers with long term contracts that guarantee high nominal wages for the next five years. Economy B has workers with annual contracts that are indexed to changes in the price level. Based on this information, which of the following statements is true?

Economy B will return to the natural rate of output sooner

Businesses across the country are starting to install extra insulation in their buildings and warehouses. Households are now deciding to install more insulation as well. Which of the following outcomes would you predict will happen to the market for oil?

Equilibrium price and quantity of oil will decrease.

Which of the following led to the Great Recession?

a decline in both AD and LRAS

You find out that the local Walmart is having a huge sale on Mountain Dew. You rush down with the intent of buying as much Mountain Dew as you can. This would be shown as

a movement along the demand curve for Mountain Dew.

If a Keynesian economist was offering policy advice to stimulate an economy, which of the following would apply?

create a program that would fix and repair existing infrastructure and highways

Imagine that local suburban leaders decide to enact a minimum wage, and soon after, a nearby city votes to increase the minimum wage to the same rate. As a result

firms will not have an incentive to move to the nearby city and the suburb may or may not lose jobs depending on the elasticity of labor demand.

In the short run, which of the following does not explain why real GDP falls when the price level falls:

flexible input prices

The shift in aggregate demand depicted above is due to a(n):

increase in income taxes.

In the long run with regard to price ceilings, we can expect

more elastic demand curve and more elastic supply curve.

CH 14 According to Keynesian economists, prices tend to be ______________. As a result, Keynesian economists focus on _____________ changes and aggregate ____________.

sticky; short-run; demand

Suppose an employer can hire four low-skilled workers to move dirt with shovels at $5 an hour, or can hire one skilled worker at $24 an hour to move the same amount of dirt with a skid loader. What will the employer do if the minimum wage increases from $5 per hour to $6.50 per hour?

Hire the one skilled worker.

Suppose you sign a two- year job contract with Wells Fargo stipulating that you will receive an annual salary of $93,500 plus an additional 2% over that in the second year to account for expected inflation. Based on this scenario, which of the following statements is true?

If the inflation rate turns out to be 3% rather than 2%, you will be worse off.

Which of the following explains why technological innovations are often clustered in particular locations?

Institutions

Which of the following countries has almost no natural resources and agriculture of its own, has one of the world's lowest unemployment rates, a literacy rate of 96%, a per capita GDP of over $35,000, and one of the densest populations per square mile on the planet?

Singapore

You advise the owner of a local restaurant to lower the prices of his burgers. Which of the following is a consequence of this price change?

There is an increase in demand for fries.

Determine whether the following statement is consistent with the Solow model, modern growth theory, neither, or both. The U.S. government is hoping to increase GDP growth by building a dam on the Mississippi River. Funding construction for the dam is dependent upon efficient taxes and the rule of law.

This is consistent with both the Solow model and modern growth theory

The ______________ effect helps explain why an increase in the price level causes a decrease in real gross domestic product.

international trade

If farmers adhered to the Solow growth model, which items would they not view as most important to economic growth?

their time and knowledge

In 1991, the Barenaked Ladies released their hit song "If I Had a Million Dollars." How much money would the group need to have a million dollars' worth of purchasing power in 2012 rounded to the nearest cent? Note that the consumer price index in 1991 was 136.2 and in 2012 it was 230.0.

$1,688,693.10

Let's say you plan to retire 40 years from now, and you decide you could live on $40,000 per year if you retired today. If the average annual inflation rate is 3% between now and your retirement date, how much money per year would you need to have saved?

$130,400

Andrew paid $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Andrew's friend Nick learns that Andrew bought a potato cannon, he asks Andrew if he will sell it for $60, and Andrew agrees, since he would have sold it for $45. Nick is thrilled, since he would have paid Andrew up to $80 for the cannon. Andrew is also delighted. What is Andrew's producer surplus from the resale?

$15

CH 4. Andrew paid $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Andrew's friend Nick learns that Andrew bought a potato cannon, he asks Andrew if he will sell it for $60, and Andrew agrees, since he would have sold it for $45. Nick is thrilled, since he would have paid Andrew up to $80 for the cannon. Andrew is also delighted. What is Andrew's original consumer surplus?

$15

Andrew paid $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Andrew's friend Nick learns that Andrew bought a potato cannon, he asks Andrew if he will sell it for $60, and Andrew agrees, since he would have sold it for $45. Nick is thrilled, since he would have paid Andrew up to $80 for the cannon. Andrew is also delighted. What is Nick's consumer surplus from the resale?

$20

The table shown here gives a cost-of-living index for 14 different cities. If you are living and working in Phoenix and earning $100,700 per year, to have the same standard of living in Manhattan you would need

$216,700

Andrew paid $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Andrew's friend Nick learns that Andrew bought a potato cannon, he asks Andrew if he will sell it for $60, and Andrew agrees, since he would have sold it for $45. Nick is thrilled, since he would have paid Andrew up to $80 for the cannon. Andrew is also delighted. What is the total surplus generated from Andrew's sale to Nick?

$35

Austin and Erin are willing to pay $10 and $9, respectively, for a ticket to a screening of a new movie. What is the total consumer surplus for both Austin and Erin if the market price of a ticket is $6?

$7

For each of the following policies, select the type of resource that is the primary focus of the policy. (i) Aid from the IMF for the education for technology workers. (ii) A piece of legislation that bans drilling for oil in Alaska. (iii) Laws mandating school attendance for children younger than 18. (iv) State tax credits for the construction of new company headquarters within the state.

(i) human capital; (ii) natural resources; (iii) human capital; (iv) physical capital

Use the data in the table to compute economic growth rates for the United States from 2008 to 2009. Note that all data is from the end of the year specified.

-3.52%

Real per capita GDP in China in 1959 was about $350, but it doubled to about $700 by 1978, when Deng Xiao Ping started market reforms. Chinese per capita real GDP doubled again in only seven years, reaching $1,400 by 1986. What was the average annual economic growth rate between 1979 and 1986?

10%

Looking at the following graph, consider a price floor at $5. The deadweight loss from the imposition of this price floor is?

105

The table shown here indicates world economic growth rates for specific historical eras. During which of the following time periods will it take real per capita GDP approximately 109 years to double?

1800-1900

Ch3. A recent study shows the benefits of using public transportation. Government officials have hired your consulting firm to increase the demand for public transportation. They come to you with three of their suggestions. Suggestion 1. Reduce the price of public transportation. Suggestion 2. Increase the price of private transportation by increasing tolls. Suggestion 3. Offer monthly and yearly passes that reduce the price paid per ride of public transportation. Which suggestion(s) does your firm recommend?

2 Increase the price of private transportation by increasing tolls

The Bureau of Labor Statistics reported the consumer price index as 211.4 in December 2007, and 231.1 in December 2012. By what percentage did the index increase from the end of 2007 to the end of 2012 (rounded to one decimal place)?

9.3%

Look at the provided figure. What area(s) represent consumer surplus after the tax?

A

Look at the provided figure. What areas represent consumer surplus before the tax

A + B + E

Suppose that the demand for low-skill labor, QD, is represented by the following equation, QD = 56,000,000 - 3,000,000 x W, where W is the wage rate. The supply of low-skill labor, QS, is represented by the equation QS = -8,000,000 + 5,000,000 x W. If the minimum wage is $9, there will be ______________ of labor in the market.

A surplus

Which of the following will cause an increase in the supply of yogurt?

An increase in tax on the sale of yogurt

As the owner of a hotel, you have decided to lower the price for all rooms in the month of October. What should you expect to happen?

As the price is lowered, the quantity demanded of rooms will increase

Identify which of the following graphs will be drawn by classical and Keynesian economists, respectively, for an economy experiencing a decrease in wealth. Note that E1 and E2, respectively, are the initial and final equilibrium points before and after the wealth decrease.

Classical: Fig 4; Keynesian: Fig 1

Which of the following scenarios will cause a higher price level in the long run?

Consumer wealth increases due to a rise in housing prices

Look at the provided figure. What area(s) represent the deadweight loss after the tax?

E + F

Refer to the figure below. It is apparent that between 1992 and 2000 the U.S. economy went through the _________ phase of the business cycle.

Expansionary

In order to ensure that as many individuals as possible install a smoke detector, the government recently decided to subsidize the production of smoke detectors.

Graph B

Candy makers face high prices for cocoa butter, the special ingredient that gives chocolate its melt-in-the-mouth texture. This event will be shown in

Graph C

Use the rule of 70 to determine which of the following is not true

If hyperinflation causes a country's price level to double every 2 years, average yearly inflation is 140%.

The price level falls in the United States. Ceteris paribus, which of the following occurs?

Import purchases decrease

Suppose that the federal government places a binding price floor on chocolate. To help support the price floor, the government purchases all chocolate that consumers do not buy. If the price floor remains in place for a number of years, what do you expect to happen to the quantity of chocolate purchased by the government compared to the quantity of chocolate purchased by the government when the price floor is first imposed?

It will Increase

Suppose that the federal government places a binding price floor on chocolate. To help support the price floor, the government purchases all chocolate that consumers do not buy. If the price floor remains in place for a number of years, what do you expect to happen to the quantity of chocolate demanded by consumers compared to the quantity of chocolate demanded before the price floor?

It will decrease.

Suppose that the federal government places a binding price floor on chocolate. To help support the price floor, the government purchases all chocolate that consumers do not buy. If the price floor remains in place for a number of years, what do you expect to happen to the quantity of chocolate supplied by producers compared to the quantity of chocolate supplied before the price floor?

It will increase.

Which of the following is not a characteristic of an efficient market?

Only consumer surplus is maximized

The equation of exchange is helpful for determining the effect of money supply changes on the price level. Using this concept, which of the following statements is true?

Real GDP falls by 3% and there is no inflation, but the money supply grew by 5%.Therefore the change in velocity would be negative 8 percent

The market for breakfast cereal is currently in equilibrium. Suddenly there is a storm that destroys the wheat that farmers had been growing for the cereal manufacturer. What will happen to the cereal market after the storm?

Supply will decrease.

There are a number goods that over time, for a variety of reasons, transition from being a normal good to an inferior good or from being an inferior good to a normal good. One such example of a good is the Toyota Camry. In the 1980s, more income for a household usually resulted in more Camrys being purchased. However, today more Toyota Camrys are purchased by households that have experienced a reduction in income. How could this happen?

The Camry becomes an inferior good because the good is now perceived as lower in quality than a Lexus.

Which of the following explains why the Great Depression was so much worse than the Great Recession?

The Great Recession lasted only 18 months, whereas the Great Depression lasted about four years

Growth theory began with _____________, which was introduced in _____________.

The Solow growth model; the 1950s

Which of the following statements is false?

The difference between 1% growth and 2 % growth is insignificant over time

Suppose university officials felt that football tickets at your school are too expensive and decide to limit the price the athletic department can charge for a ticket to a single game. What will result from this decision if resale is not permitted and this rule is enforceable?

The quality of facilities will decrease.

Which of the following statements is consistent with what happened during the Great Depression?

The unemployment rate was over 25% at the height of the Great Depression. This spike in unemployment was caused by the large decrease in aggregate demand.

You're an entrepreneur and had a great idea to sell shoes that have springs installed in them to make walking easier. However, the development costs were so high that the shoes are priced 15 times higher than shoes without springs. As a result, many of the shoes have gone unsold. What possible event could eliminate the disequilibrium in the market for shoes?

There is an increase in income and "spring shoes" are a normal good.

Which of the following is a reason the 2007-2009 recession came to be known as the Great Recession?

There was noticeable stress in financial markets,

If your boss calls you into her office and offers you a promotion, which will include a 5% pay increase, how would you evaluate the value of your raise?

Very good, since the rate of inflation is 6%.

You are a producer of tortillas. In the market for tortillas, two events happen simultaneously: there is a decrease in the price of corn used to make your tortillas, and there are headlines that promote the link between eating tortillas and reducing heart attacks. Which of the following is a consequence?

We know the quantity will increase, but we don't know what will happen to the price unless we know the size of the shifts.

Which of the following statements are NOT true about inflation?

When in the 2-4% range, it can be the sign of a weak economy.

CH 11 All of the following can lead to economic growth except

an increase in the quantity of money.

Consider the case of long-distance telephone service. In country X, there are 20 providers of long-distance telephone service in a highly competitive market environment. On the other hand, in country Y, long-distance telephone service is largely regulated by the government, with the firm Horizon as the sole provider of this service. Under these circumstances, it is expected that

country X will have higher growth potential than country Y.

According to classical economics, a decrease in aggregate demand causes the price level to _____________ in the long run. On the other hand, an increase in aggregate demand causes the price level to _____________ in the long run. These changes occur because of _____________.

decrease; increase; price flexibility

Suppose OPEC members met and decided to increase their oil production (and thus lower prices) for six months. This change will cause many firms' input prices in the U.S. to __________. This change in input prices will cause a _____________ aggregate supply curve.

decrease; shift in the short-run

Suppose stock markets in the U.S. have a very successful month, and the indices increase by 10%. As a result, we can expect aggregate ______ to ______.

demand; increase

If the government wants to minimize the deadweight loss of taxation, which of the following items is a good candidate for an excise tax?

emergency plumber services

Countries A and B are exactly similar in terms of resources and technology. However, country A reported a higher growth rate than country B last year. Which of the following could not explain this anomaly?

favorable climate in country A

You work for Dr. Zhang, the autocratic dictator of Zhouland. After taking an economics course, you decide that devaluing your currency (Zhoullars) is the way to increase GDP. Following your advice, Dr. Zhang orders massive increases in the supply of Zhoullars, which reduces the value of Zhoullars in world markets. Use the AD-AS model and assume the economy was in long-run equilibrium before this change. Remember to consider only this change as you determine your answers. In the short run, the policy will cause the price level to ___________, real GDP to___________, and the unemployment rate to___________.

increase; increase; decrease

Deadweight loss can be thought of as surplus that is transferred from producers or consumers and given to whom?

no individual or group

Consider the Solow growth model. When the economy has reached the point of ____________ it is said to have achieved _______________.

no new net investment; a steady state

Which of the following do not provide the right incentives for economic growth?

political instability

Which of the following institutions will most accurately explain the impact of corruption on economic growth?

political stability and the rule of law

Many local governments use parking meters on crowded downtown streets. However, the parking spaces along the street are typically hard to find because the metered price is often set below the market price. This represents a ___________, which results in a ___________ of parking spots.

price ceiling; shortage

Which of the following provides the correct interplay between the real world and economic theory?

real-world observations lead to economic theory, which then leads to policy

According to the Food and Drug Administration, "...the ultraviolet (UV) radiation from these devices [sunlamps and tanning beds] poses serious health risks." As a result of reading this, the local mayor decides to introduce legislation that will put a 10% excise tax on tanning consumers. From an economic point of view, this will

shift the demand curve leftward for tanning.

Suppose that the economy is in long-run equilibrium. A sudden shift in the ____ curve will eventually result in a new long-run equilibrium where the price level is exactly the same as it was initially. aggregate demand

short-run aggregate supply

CH 5 A large group of fans are upset about the high price of tickets to many events. As a result of their lobbying efforts, a new law caps the maximum ticket price to any sporting event at $50. Assume there are a fixed amount of seats in the stadium, all seats are available to be sold, and the price of tickets before the ceiling was at an equilibrium point above $50.The price ceiling will create a ___________ of tickets, which will be greater if demand is more _______________, and _________ people will attend the events.

shortage; elastic; the same number of

You have been hired as an economic consultant to the mayor. He is considering putting a tax on several products. You are worried about the impact of deadweight loss on the market for these products. You tell the mayor that the deadweight loss will be lower when

supply is inelastic and demand is inelastic.

When looking at modern growth theory, how does it look at technology and technological change

technological change in a country is endogenous and occurs due to factors that will currently exist in that country

Some economies grow faster for reasons particular to those economies. This statement refers to an economy's:

technological innovation and endogenous growth.

Consider this version of the equation for a production function: Y = A × F (natural resources, human capital, physical capital). In the Solow model, the letter A in this equation represents:

technology, an exogenous change.

Suppose the prices of homes go up by 10 % and the prices of concert tickets rise by 20%, which will have the larger impact on the CPI?

the change in house prices

CH 12 Based on the graph, which of the following statements is correct?

the difference in output from the increase in capital from K1 to K2 is larger than the change in output from a change in capital from K3 to K4.

Suppose the economy is in long run equilibrium and the new President decides to cut income taxes. With this sudden increase in aggregate demand, which of the following statements is true?

the price level will rise in the short run and will continue to rise in the long run

Refer to the graph. Some buyers will offer sellers $10 per unit instead of the $6 price ceiling because

they want to increase their chances of buying a good that is in shortage.