Econ Final
If two countries start with the same real GDP per person, and one country grows at 2 percent while the other grows at 4 percent,
the standard of living in the country growing at 4 percent will start to accelerate away from the slower growing country due to compound growth
which of the following statements is normative?
the unemployment rate should be lower
Producer surplus directly measures
the well-being of sellers
producer surplus directly measures
the well-being of sellers
It is claimed that a secondary advantage of mutual funds is that
they give ordinary people access to the skills of professional money managers
Economist Arthur Laffer made the argument that tax rates in the US were so high that reducing the rates would increase tax revenue
true
One of the affects of gas prices rising from about 2 to about 4 per gallon was airlines ordering new, fuel-efficiant aircraft
true
Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls
true
The demand for computer programmers is inseparably ties to the supply of computer software
true
The economic field of industrial organization examines how firms' decisions about prices and quantities depend on the market conditions they face
true
The labor-force participation rate tells us the fraction of the population that has chosen to participate in the labor market
true
trade allows a person to obtain goods that are less than that person's opportunity cost because each person specializes in the activity for which he or she has the lower opportunity cost
true
The quantity demanded of a good is the amount that buyers are
willing and able to purchase
taxes on labor income tend to encourage
workers to work fewer hours, second earners to stay home, elderly to retire early, and the unscrupulous to enter the underground economy
Example of external benefit:
An. elderly woman plants a flower garden on the vacant lot next to her house
Trade does not benefit a nation if that nation has a comparative advantage in the production of that good
False
Political leaders are always aiming for an optimal combination of efficiency and equality
false
Some economists, called supply-siders, argue that changes in the money supply exert a strong influence on aggregate supply
false
while the scientific method is applicable to studying natural sciences, it is not applicable to studying a nation's economy
false
In recent decades, Americans have increased their purchase of stocks of foreign-based companies. The Americans who have bought these stocks were engaged in
foreign portfolio investment
to improve living standard, policymakers should
formilate policies designed to increase productivity
When the consumer price index rises, the typical family
has to spend more dollars to maintain the same standard of living
the "invisible hand" refers to
how the decisions of households and firms lead to desirable market outcomes
A policy that increases saving will
improve economic growth and health outcomes
Josiah installed a metal sculpture in his front yard. A positive externality arises if the sculpture
increases the value of other properties in the neighborhood
Private decision about consumption of common resources and production of pubic goods usually lead to an
inefficient allocation of resources and external effects
If a nation has a comparative advantage in the production of a good,
it can produce that good at a lower opportunity cost than its trading partner
If a nation has an absolute advantage in the production of a good,
it can produce that good using fewer resources than its trading partner
A result of welfare economics is that the equiibrium price of a product is considered to be the best price because it
maximizes the combined welfare of buyers and sellers
a result of welfare economics is that the equilibrium price of a product is considered to be the best price because it
maximizes the combined welfare of buyers and sellers
A decrease in the price of baseball bats will decrease the demand for baseballs
false
Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?
As the price level increases, the interest rate rises, so spending falls
Which of the following provide benefits to society at large and not just to the person(s) who pursue it?
Both technological knowledge that is a public good and education
If scientists discover that steamed milk, which is used to make lattes, prevents heart attacks, what would happen to the equilibrium price and quantity of lattes?
Both the equilibrium price and quantity would increase
All else equal, what happens to consumer surplus if the price of a good increases
Consumer surplus decreases
in which of the following cases is the Coase theorem most likely to solve the externality
Ed is allergic to his roommate's cat
Banks and mutual funds are examples of financial markets
False
Other things the same, domestic investment will increase a country's real GDP by more than foreign investment
False
Which of the following is not an example of a market
In the US, a sick person cannot legally purchase a kidney
Which of the following statements is true about a market economy?
Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being
If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?
One year after the price increase
Which if the following is correct concerning stock market irrationality
Speculative bubbles could arise, in part, because the price that people pay for stock depends on what they think someone else will pay for it in the future
What will happen in the market for shotgun-shell ammunition now if buyers expect higher shotgun-shell prices in the near future
The demand for shotgun-shell ammunition will increase
Bob's Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is a monopolist and maximizing his profit, which of the following statements is true?
The price of Bob's bison burgers will exceed Bob's marginal cost.
Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires
True
Opportunity cost measures the trade-off between two goods that each producer faces
True
People who are risk averse dislike bad outcomes more than they like comparable good outcomes
True
People who report being not in the labor force but who want to work but have given up trying to find a job after an unsuccessful search cause the reported unemployment rate to be lower than it would otherwise be
True
Permanent tax cuts have a larger impact on consumption spending than temporary ones
True
The present value of any future sum of money is the amount that would be needed today, at current interest rates, to produce that future sum
True
Which of the following events would cause both the equilibrium price and equilibrium quantity of number two grade potatoes to increase if number two grade potatoes are an inferior good?
a decrease in consumer income
Which of the following statements about a tariff is true?
a tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus
If US workers can produce everything in less time than Mexican workers, it is not possible for the US to gain from trade with Mexico
false
When the governemtn prevents prices from adjusting naturally to supply and demand, it
adversely affects the allocation of resources
Foreigns trade
allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home
Japan is
an advanced economy, and over the past century its rate of economic growth has been higher that that of the United States
A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a new store. On their respective balance sheets, the loan is
an asset for the bank and a liability for Kellie's Print shop. The loan increases the money supply
Which of the following would shift the demand curve for gasoline to the right?
an increase in consumer income, assuming gasoline is a normal good
which of the following would shift the demand curve for gasoline to the right
an increase in consumer income, assuming gasoline is a normal good
which of the following correctly explains the crowding-out effect?
an increase in government expenditures increases the interest rate and so reduces investment spending
If muffins and bagels are substitutes, a higher price for bagels would result in
an increase in the demand for muffins
In order for antitrust laws to raise social welfare, the government must
be able to determine which mergers are desirable and which are not
producer surplus is the area
below the demand curve and above the supply curve
The producer price index measures the cost of a basket of goods and services
bought by firms (NOT producer!)
For the purpose of calculation GDP, investment is spending on
capital equipment, inventories, and structures, including household purchases of new housing
if the cross-price elasticity between two goods is negative, the two goods are likely to be
complements
all else equal, what happens to consumer surplus if the price of a good increases?
consumer surplus decreases
The Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as
consumption of services
According to the principle of comparative advantage
countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners
Which of the following increase when the Fed makes open mark3et purchases?
currency and reserves
Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is intended to reduce
externalities
An inferior good is one for which an increase in income causes a
decrease in demand
Studies show that a 10 percent increase in the minimum wage
decreases teenage employment by about 1 to 3 percent
The price of a stock will rise if the
demand for the stock rises
If consumers think that there are very few substitutes for a good, then
demand would tend to be price inelastic
suppose two economists are arguing about policies that deal with unemployment. One economist says, "The government could be lower unemployment by one percentage point if it would just increase government spending by 50 billion dollars." The other economist responds, "That's ridiculous. If the government spent an additional 50 billion dollars, it would reduce unemployment by only one-tenth of 1 percent, and that effect would only be temporary!" These economists
disagree because they have different scientific judgements
when a country allows trade exports a good,
domestic producers are better off, domestic consumers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers
points of the production possibilities frontier are
efficient
If total spending rises from one year to the next, then
either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both
If demand is linear (a straight line), then price elasticity of demand is
elastic in the upper portion and inelastic in the lower portion
it is likely that a constitutional amendment that required the government always to run a balanced budget would
eliminate the economy's automatic stabilizers
Both public goods and common resources are
nonexcludable
If the demand for a good falls when income falls, the good is called a
normal good
Minimum wage laws dictate
only a minimum wage that firms may pay workers
What must be given up to obtain an item is called
opportunity cost
what must be given up to obtain an item is called
opportunity cost
While pollution regulations yield the benefit of a cleaner enviroment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that
people face tradeoffs
The amount of money today needed to produce a particular sum in the future, given prevailing interest rates, is known as
present value
In general, a flatter demand curve is more likely to be
price elastic
if a small percentage increase in the price of a good greatly reduces the quntity demanded for that good, the demand for that good is
price elastic
a new government takes steps toward improving the court system and reducing governemtn corruption. The citizens of Eurnesia find these efforts credible and outsiders believe these changes will be effective and long lasting. The changes will probably raise
real GDP per person and productivity in Eurnesia
A free rider is a person who
recieves the benefit of a good but avoids paying for it
In a market economy, economic activity is guided by
self-interest and prices
If the federal reserve decided to raise internet rates, it could
sell bonds to lower the money supply
A price floor
sets a legal minimum on the price at which a good can be sold
positive statements are
statements of description that can be tested
within the supply-and-demand model, a tax collected from the sellers of a good shifts the
supply curve upward by the size of the tax per unit
In a closed economy, public saving is the amount of
tax revenue that the governemtn has left after paying for its spending
A baker recently has come to expect higher prices for bread in the near future. We would expect
the baker to supply less bread now than she was supplying previously
Which of the following is not a commonly-advanced argument for trade restrictions
the efficiency argument
Which of the following statements is not correct
the government may break up a natural monopoly to lower the price of charged customers
Which of the following is not part of the opportunity cost of going on vacation?
the money you spent on food
The price elasticity of demand is defined as
the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good
Aggregate demand includes
the quantity of goods and services the government, households, firms, and customers abroad want to buy