Econ final review (1-60)
The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. The cost of a basket in 2006 was
B. $130
The adage, "there is no such thing as a free lunch," means
people face tradeoffs
In 2013, ABC corporation had total earnings of $200 million and 40 million shares of the corporation's stock were outstanding. If the price-earnings ratio for ABC is 20, then what is the price of a share of its stock?
B. $100
In the context of decision making, the word "marginal" is most closely associated with the word
A. "Edge"
The information in the table pertains to an imaginary economy. What is the M2 money supply?
A. $880 billion
If 2012 is the base year, then the inflation rate for 2012 equals
A. (CPI in 2013 - CPI in 2012)/(CPI in 2012) x 100
The price index was 136 in one year and 142 in the next year. What was the inflation rate between the two years?
A. 4.41 percent
A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reverse ratio of
A. 5 percent
Inflation is defined as
A. An increase in the overall level of prices in the economy
When the Fed decreases the discount rate, banks will
A. Borrow more from the Fed and lend more to the public. The money supply increases
Which of the following is a store of value?
A. Cash and stocks
Financial intermediaries are
A. Financial institutions through which savers can indirectly provide funds to borrowers
Suppose an economy produces only eggs and ham. In 2009, 100 dozen eggs are sold at $3 per dozen and 50 pounds of ham sold at $4 per pound. In 2010, the base year, eggs sold at $1.50 per dozen and ham sold at $5 per pound. For 2009,
A. Nominal GDP is $500, real GDP is $400, and the GDP deflator is 125
A bond that never matures is known as a
A. Perpetuity
The nominal exchange rate is the
A. Rate at which a person can trade the currency of one country for another
To decrease the money supply, the Fed can
A. Sell government bonds or increase the discount rate
When the Fed buys government bonds,
A. The money supply increases and the federal funds rate decreases
Based on past experiences, if a country is experiencing hyperinflation, then which of the following would be a reasonable guess?
All of the above are correct (Inflation is acting like a tax on everyone who holds money, The country has high money supply growth, The government is printing money to finance its expenditures)
The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. What is the consumer price index for May?
B. 166
In the United States, the overall level of prices more than doubles during the
B. 1970s
In the first few years of the Great Depression, unemployment rose to about
B. 25 percent, and prices fell about 22 percent
All of the following are examples of a nondurable good except
B. A queen-size bed
An increase in the money supply
B. And an investment tax credit both cause aggregate demand to shift right
When a union raises the wage above the equilibrium level,
B. Both the quantity of labor supplies and unemployment rise
Darin grows and sells marijuana to Jennifer. Thomas is an organic farmer who sells broccoli to Jennifer. Marijuana is an illegal good and broccoli is a legal good. Assume that if Jennifer marries either, they giver her what they used to sell her. Which of the following statements is consistent with the way GDP is computed?
B. GDP will fall is Jennifer marries Thomas but not if she marries Darin
"Other things equal, when the price of a good rises, the quantity supplies of the good also rises, and when the price falls, the quantity supplies falls as well." This relationship between price and quantity supplies
B. Is referred to as the law of supply
The price of milk increases dramatically, causing a 0.5 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by
B. Less than 0.5 percent
Which of the following increases when the Fed makes open-marker sales?
B. Neither currency nor reserves
According to the theory of liquidity preference,
B. The demand for money is represented by a downward-sloping line on a supply-and-demand graph
The primary argument against active monetary and fiscal policy is that
B. These policies affect the economy with a long lag
It is claimed that a secondary advantage of mutual funds is that
B. They give ordinary people access to the skills of professional money managers
Which of the following is an example of using the scientific method with a natural experiment?
B. Tracking the price of oil when a war in the Middle East interrupts the flow of crude oil
At which interest rate is the present value of $35 two years from today equal to about $30 today?
C. 8 percent
Which of the following would be included as investment in the GDP accounts?
C. A firm increases its capital stock
In a closed economy, national saving is
C. Equal to investment
Factors of production are
C. Inputs into the production process
When the Fed conducts open-market sales,
C. It sells treasury securities, which decreases the money supply
In medieval Europe an important technological advance was the use of the padded horse collar for plowing. Once this idea was though of, other people used it. This illustrates that knowledge is generally a
C. Public good
A country produces only ice cream and pie. Quantities and prices of these goods for the last several years are shown below. The base year is 2008. In 2009, this country's
C. Real GDP was $250, and the GDP deflator was 120
Which of the following shifts aggregate demand to the right?
C. The Federal Reserve buys bonds
The self-interest of the participants in an economy is guided into promoting general economic self-interest by
C. The invisible hand
If the reserve ratio is 12.5 percent, then $5,600 of money can be generates by
D. $700 of new reserves
The table below contains date for the country of Batterland, which produces only waffles and pancakes. The base year is 2013. In 2011, this country's GDP deflator was
D. 57.9
Which of the following is a decision that economists study?
D. All of the above (How much people work, what people buy, how much money people save)
As chief financial officer you sell newly issued bonds on behalf of your firm. Your firm is
D. Borrowing directly
Which of the following statements is correct?
D. Buyers determine demand, and sellers determine supply
Suppose aggregate demand shifts to the left and policymakers want to stabilize output. What can they do?
D. Institute an investment tax credit or increase the money supply
After a corporation issues stock, the stock
D. None of the above are correct (Can be resold only if the corporation wants to buy it back, can be resold on exchanges; the resale will raise additional funds for the corporation, cannot be resold)
A bond buyer is a
D. Saver. Long term bonds have more risk than short term bonds
As the price level rises, the interest rate
D. rises, so the supply of dollars in the market for foreign currency exchange shifts left
An assistant manager at a restaurant gets a $100 a month raise. He figures that with his new monthly salary he cannot buy as many goods and services as he could buy last year.
His real salary has fallen and his nominal salary has risen
Grapes are considered intermediate goods
If the purchaser uses them to make wine to sell others but not if the purchaser eats them
Students have found which of the following economic terms mentioned most often in U.S. news paper?
Inflation
Use the graph; which of the following is correct?
It is possible that either fiscal or monetary policy might have caused the shift from AD1 to AD2
According to the definitions of private and public saving, if Y, C, and G remained the same, an increase in taxes would
Lower private saving and raise public saving
Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickers to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that
People face tradeoffs
The Fed's control of the money is not precise because
The amount of money in the economy depends in part on the behavior of depositors and bankers
Suppose that the new tires of a certain tire manufacturer are discovered to be defective. Other things the same, this news would cause
The demand for this company's stock to decrease, so the price would fall
Which of the following will both make people buy more?
Wealth rises and interest rates fall
An understanding of the best ways to produce goods and services is called
technology